Half Yearly Report

RNS Number : 8721S

London Security PLC

30 September 2014

London Security PLC

Half Yearly Report

Unaudited Interim Statement for the six months ended 30 June 2014

Chairman's statement

Financial highlights:

Revenue

£51.3 million

2013: £47.8 million

Operating profit

£9.4 million

2013: £9.0 million

TRADING

The financial highlights illustrate that the Group's revenue increased by £3.5 million (7.3%) to £51.3 million and operating profit increased by £0.4 million (4.4%) to £9.4 million. This growth is despite the movement in the Sterling to Euro average exchange rate (1.18 to 1.22) which has reduced like for like revenue by £1.3 million and operating profit by £0.3 million.

These increases reflect the contribution from two new subsidiaries within the Group:

- Noris Feuerschitzgerate G.m.b.H. acquired in May 2013 achieved sales of £2.3 million in the 6 months to June 2014 and contributed an operating profit of £0.2 million.

- GC Fire Protection Ltd commenced operations in July 2013 and this year has recorded sales of £0.9 million and operating profit of £0.1 million.

The operating profit margin of these two new subsidiaries is below that achieved in the Group's other more established businesses. As these companies are integrated into the Group's operations your Directors are confident of improving returns.

ACQUISITIONS

In the six months to the end of June the Group has acquired a total of five well established businesses at a cost of £0.6 million (2013: five businesses at a cost of £3.3 million). The integration of these businesses into the Group has, so far, been successful and results are in line with expectations. In July a further acquisition was made in the UK at a cost of £0.5 million. It remains a principal aim of the Group to grow through acquisition. Acquisitions are being sought throughout Europe and the Group will invest at the upper end of the price spectrum where an adequate return is envisaged by the Board.

PENSION SCHEME SURPLUS

As at 30 June 2013 the Nu-Swift pension scheme valuation calculated in accordance with IAS 19 resulted in a surplus of £1.8 million. This asset was not recognised in the prior year's Interim Statement as it was considered that there was no unconditional right for the Group to recover the surplus. Following further consultation of the trust deeds and external advice sought in the year to 31 December 2013, the Directors have reconsidered the guidance in IAS19 and IFRIC 14 and concluded that because of the rights upon wind-up it was now appropriate to recognise this asset in the financial statements. The surplus in this scheme as at 31 December 2013 calculated in accordance with IAS 19 was £2.4 million. This has been recognised as a non-current asset in this Interim Statement.

PROSPECTS

Economic growth in the Group's market has been depressed but our business remains strong, cash generative and well developed, with positive net funds. As a leading provider in this market with a well-diversified and loyal customer base, the Board is optimistic for further success in 2014.

DIVIDENDS

A final dividend in respect of 2013 of £0.31 per ordinary share was paid to shareholders on 8 July 2014.

J.G. Murray

Chairman

30 September 2014

Consolidated income statement

for the six months ended 30 June 2014

		Unaudited	Unaudited	Audited
		six months	six months	year
		ended	ended	ended
		30 June	30 June	31 December
		2014	2013	2013
	Note	£'000	£'000	£'000
Revenue		51,279	47,782	101,362
Cost of sales		(9,840)	(9,280)	(19,785)
Gross profit		41,439	38,502	81,577
Distribution costs		(19,585)	(18,196)	(37,894)
Administrative expenses		(12,430)	(11,346)	(23,729)
Operating profit		9,424	8,960	19,954
EBITDA*		11,544	10,842	24,059
Depreciation and amortisation		(2,120)	(1,882)	(4,105)
Operating profit		9,424	8,960	19,954

Finance income		93	73	377
Finance costs		(435)	(242)	(475)
Finance costs - net		(342)	(169)	(98)
Profit before income tax		9,082	8,791	19,856
Income tax expense		(2,907)	(2,842)	(6,148)
Profit for the period attributable to equity shareholders of the Company		6,175	5,949	13,708
Earnings per share
Basic and diluted	3	50.4p	48.5p	111.8p
Dividends
Dividends paid per share		Nil	Nil	76.0p

* Earnings before interest, taxation, depreciation, amortisation and impairment charges.

The above are all as a result of continuing operations.

Consolidated statement of comprehensive income

for the six months ended 30 June 2014

	Unaudited	Unaudited	Audited
	six months	six months	year
	ended	ended	ended
	30 June	30 June	31 December
	2014	2013	2013
	£'000	£'000	£'000
Profit for the financial period	6,175	5,949	13,708
Other comprehensive income/(expense):
Items that will not be reclassified subsequently to profit or loss
- currency translation differences on foreign operation consolidation, net of tax	(1,108)	1,001	331
- actuarial loss recognised in the Nu-Swift pension scheme	-	-	(72)
- movement on deferred tax relating to Nu-Swift pension scheme surplus	-	-	(485)
- Nu-Swift pension surplus recognised	-	-	1,794
- actuarial loss recognised in the Ansul pension scheme	-	-	(381)
- movement on deferred tax relating to the Ansul pension scheme	-	-	166
Other comprehensive income/(expense) for the period, net of tax	(1,108)	1,001	1,353
Total comprehensive income for the period	5,067	6,950	15,061

Consolidated statement of changes in equity

for the six months ended 30 June 2014

						Profit
	Share	Share	Capital	Merger	Other	and loss
	capital	premium	redemption	reserve	reserve	account	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000
At 1 January 2013	123	344	1	2,033	5,382	69,136	77,019
Comprehensive income for the period
Profit for the period	-	-	-	-	-	5,949	5,949
Exchange adjustments	-	-	-	-	1,001	-	1,001
Total comprehensive income for the period	-	-	-	-	1,001	5,949	6,950
At 30 June 2013	123	344	1	2,033	6,383	75,085	83,969
Comprehensive income for the period
Profit for the period	-	-	-	-	-	7,759	7,759
Exchange adjustments	-	-	-	-	(670)	-	(670)
Actuarial loss on pension schemes	-	-	-	-	-	(453)	(453)
Movement on deferred tax relating to pension schemes	-	-	-	-	-	(319)	(319)
Net pension surplus recognised	-	-	-	-	-	1,794	1,794
Total comprehensive income for the period	-	-	-	-	(670)	8,781	8,111
Contributions by and distributions to owners of the Company:	-	-	-	-	-
Dividends						(9,319)	(9,319)
Release of provision for unclaimed dividends	--	-	-	-	-	50	50
Total contributions by and distributions to owners of the Company	-	-	-	-	-	(9,269)	(9,269)
At 31 December 2013	123	344	1	2,033	5,713	74,597	82,811
Comprehensive income for the period
Profit for the period	-	-	-	-	-	6,175	6,175
Exchange adjustments	-	-	-	-	(1,108)	-	(1,108)
Total comprehensive income for the period	-	-	-	-	(1,108)	6,175	5,067
At 30 June 2014	123	344	1	2,033	4,605	80,772	87,878

Consolidated statement of financial position

for the six months ended 30 June 2014

	Unaudited	Unaudited	Audited
	as at	as at	as at
	30 June	30 June	31 December
	2014	2013	2013
	£'000	£'000	£'000
Assets
Non-current assets
Property, plant and equipment	9,751	9,947	9,973
Intangible assets	57,468	57,539	58,325
Deferred tax asset	604	509	632
Retirement benefit surplus	2,469	-	2,424
Derivative financial instruments	-	-	92
	70,292	67,995	71,446
Current assets
Inventories	9,221	9,637	8,826
Trade and other receivables	20,117	21,497	21,153
Cash and cash equivalents	26,203	24,645	20,565
	55,541	55,779	50,544
Total assets	125,833	123,774	121,990
Liabilities
Current liabilities
Trade and other payables	(17,617)	(17,606)	(16,992)
Income tax liabilities	(383)	(631)	(866)
Borrowings	(1,823)	(1,968)	(1,878)
Provision for liabilities and charges	(4)	(4)	(4)
	(19,827)	(20,209)	(19,740)
Non-current liabilities
Trade and other payables	(535)	(494)	(509)
Borrowings	(14,890)	(17,373)	(16,261)
Derivative financial instruments	(86)	(99)	-
Deferred income tax liabilities	(987)	(394)	(991)
Retirement benefit obligations	(1,630)	(1,236)	(1,678)
	(18,128)	(19,596)	(19,439)
Total liabilities	(37,955)	(39,805)	(39,179)
Net assets	87,878	83,969	82,811
Shareholders' equity
Ordinary shares	123	123	123
Share premium	344	344	344
Capital redemption reserve	1	1	1
Merger reserve	2,033	2,033	2,033
Other reserves	4,605	6,383	5,713
Retained earnings	80,772	75,085	74,597
Total shareholders' equity	87,878	83,969	82,811

Consolidated statement of cash flow

for the six months ended 30 June 2014

	Unaudited	Unaudited	Audited
	six months	six months	year
	ended	ended	ended
	30 June	30 June	31 December
	2014	2013	2013
	£'000	£'000	£'000
Cash flows from operating activities
Cash generated from operations	11,764	10,455	22,913
Interest paid	(239)	(212)	(418)
Income tax paid	(2,676)	(3,195)	(5,625)
Net cash generated from operating activities	8,849	7,048	16,870
Cash flows from investing activities
Acquisition of subsidiary undertakings	-	(3,095)	(3,002)
Purchases of property, plant and equipment	(1,126)	(1,212)	(2,537)
Proceeds from sale of intangible assets	39	-	33
Proceeds from sale of property, plant and equipment	133	156	275
Purchases of intangible assets	(667)	(482)	(2,575)
Interest received	48	43	96
Net cash used in investing activities	(1,573)	(4,590)	(7,710)
Cash flows from financing activities
Repayments of borrowings	(914)	(13,718)	(16,610)
New borrowings	-	17,373	19,187
Dividends paid to Company's shareholders	-	-	(9,319)
Net cash generated from/(used in) financing activities	(914)	3,655	(6,742)
Effects of exchange rates on cash and cash equivalents	(724)	671	286
Net increase in cash in the period	5,638	6,784	2,704
Cash and cash equivalents at beginning of the period	20,565	17,861	17,861
Cash and cash equivalents at end of the period	26,203	24,645	20,565

Notes to the financial statements

for the six months ended 30 June 2014

1 Nature of information

The financial information contained in this Interim Statement has been neither audited nor reviewed by the auditor and does not constitute statutory accounts within the meaning of Section 434 of the Companies Act 2006. The financial information for the six months ended 30 June 2014 has been prepared applying the accounting policies and presentation that were applied in the preparation of the Group's published consolidated financial statements for the year ended 31 December 2013. The principle risks and uncertainties as disclosed in the year end accounts are considered to be consistent with those that are still applicable now.

Comparative figures for the year ended 31 December 2013 have been extracted from the statutory accounts for the year ended 31 December 2013 which have been delivered to the Registrar of Companies. The Independent Auditor's Report on those accounts was unqualified and did not contain an emphasis of matter paragraph and did not contain any statement under Section 498 of the Companies Act 2006.

2 Basis of preparation

The preparation of interim financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.

3 Earnings per share

The calculation of basic earnings per ordinary share is based on the profit on ordinary activities after taxation of £6,175,000 (2013: £5,949,000) and on 12,261,477 (2013: 12,261,477) ordinary shares, being the weighted average number of ordinary shares in issue during the period.

For diluted earnings per ordinary share, the weighted average number of shares in issue is adjusted to assume conversion of all potentially dilutive ordinary shares. There was no difference in the weighted average number of shares used for the calculation of basic and diluted earnings per share as there are no potentially dilutive shares outstanding.

	Unaudited	Unaudited	Audited
	six months	six months	year
	ended	ended	ended
	30 June	30 June	31 December
	2014	2013	2013
	£'000	£'000	£'000
Profit on ordinary activities after taxation	6,175	5,949	13,708
Basic earnings per ordinary share	50.4p	48.5p	111.8p

4 Actuarial valuation of the pension scheme

As permitted under IAS 19 the Group has not prepared an actuarial valuation of the pension scheme assets and liabilities for the Interim Statement 2014. In accordance with IAS 19 such a valuation will be prepared for the purposes of the Group's Annual Report and Accounts 2014.

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