RNS Number : 3633Y
London Security PLC
12 May 2021
London Security plc
Final Results for the Year Ended 31 December 2020
Chairman's statement
J.G. Murray, Chairman
Financial highlights
Financial highlights of the audited results for the year ended 31 December 2020 are as follows:
• revenue of £152.7 million (2019: £146.9 million);
• operating profit of £24.7 million (2019: £24.2 million);
• profit for the year of £18.0 million (2019: £16.8 million);
• cash of £37.5 million (2019: £27.1 million);
• earnings per share for the year of £1.46 (2019: £1.36); and
• a dividend per share of £0.60 (2019: £0.80).
Trading review
The financial highlights illustrate that the Group's revenue increased by £5.8 million (3.9%) to £152.7 million and operating profit increased by £0.5 million (2.1%) to £24.7 million. These results reflect:
· the positive impact of acquisitions in 2019 and 2020 in the United Kingdom, Belgium, and Germany.
· a good response to the impact of Covid-19. Many of our businesses were severely hampered by Covid-19 particularly in the Spring, but most were able to recover quickly through active management of the situation.
· improved performance from our service business in continental Europe.
· continued improvement from newer service offerings (e.g. emergency lights and passive fire protection); and
· the movement in the Euro to Sterling average exchange rate, which had a favourable effect of £1.1 million on reported revenue and £0.3 million on operating profit. A more detailed review of this year's performance is given in the Financial Review and the Strategic Report.
Acquisitions
It remains a principal aim of the Group to grow through acquisition. Acquisitions are being sought throughout Europe and the Group will invest at prices where an adequate return is envisaged by the Board. In the year under review the Group acquired one established security business and grew its presence in Germany and the UK with the acquisition of service contracts from smaller well-established businesses for integration into the Group's existing subsidiaries.
Management and staff
2020 was a year in which the staff were required to operate under challenging conditions, and on behalf of the shareholders, I would like to express thanks and appreciation for their contribution as essential service providers. The Group recognises that we can only achieve our aims with talented and dedicated colleagues who provide outstanding customer service in every area of the business.
Dividends
A final dividend in respect of 2019 of £0.20 per ordinary share was paid to shareholders on 10 July 2020. An interim dividend in respect of 2020 of £0.40 per ordinary share was paid to shareholders on 27 November 2020. The Board is recommending the payment of a final dividend in respect of 2020 of £0.40 per ordinary share to be paid on 9 July 2021 to shareholders on the register on 11 June 2021. The shares will be marked ex-dividend on 10 June 2021.
Covid-19 impact assessment
The Group is responsible for maintaining, manufacturing and supplying fire protection and fire suppression equipment throughout Europe and has been designated as essential contractor status by a number of our clients including care, health, housing and food production services. It was essential that we continued to meet our obligations and continued to operate from our factories and that our field -based service engineers continued to visit our customers' sites for essential responsive and planned maintenance.
Many of the components which we are reliant on are sourced from China and we therefore suffered some delays in the delivery of such components in the first quarter of 2020. The Chinese government's response to the outbreak meant that capacity returned over the course of March 2020. Our strategic stockholding meant our production impact was minimised.
With a return to relative normality on the supply side, we focused on customer demand. By the middle of March, the virus had impacted all our European trading territories. Throughout Europe, governments responded to the pandemic by applying severe restrictions on movement and introducing social distancing measures which forced many of our customers to temporarily close. We prepared the business for varying levels of sales declines by temporarily reducing staff levels in some locations. We took advantage of government job retentions schemes to finance this approach in order that staff were available to return to work as restrictions were lifted and non-essential businesses reopened. A claim of £1.5 million was made under the UK Coronavirus Job Retention Scheme and £0.4 million under a similar scheme in Austria. In Belgium we took advantage of their temporary unemployment scheme which resulted in employee cost savings in 2020.
During this period of uncertainty, we stayed in constant contact with our staff, customers, banks and advisers to ensure clear and concise communication. Our priority was to do all we could to ensure that our offices, depots and services were kept as safe as possible, in order to protect our employees and business partners at all times. Many of our employees and customers are experiencing very difficult circumstances and we continue to support them in many ways. The health and wellbeing of our people is our highest priority. We are thankful and proud of our team members who continue to respond as essential service providers.
During the third and fourth quarters of 2020 the Group traded strongly despite the interruptions caused by varying levels of temporary restrictions imposed by the governments of the countries in which we operate. This reflects the essential nature of the services we provide. Temporary restrictions are still in place across Europe and are subject to change at short notice. However, at the date of this report we have almost a full service force in the field and have experienced a strong start to 2021. The experience of 2020 shows the resilience of our business.
Future prospects
As the situation continues, cash management will be a key consideration; the London Security Group has a healthy balance sheet, strong cash reserves and a track record for good cash generation. The Board therefore considers that the Group is well placed to navigate through the impact of the Covid-19 outbreak and capitalise on the rebound in the economy created by the vaccine programmes as they gain momentum through 2021.
Annual General Meeting
The Annual General Meeting ("AGM") will be held at 2 Jubilee Way, Elland, West Yorkshire HX5 9DY, on 30 June 2021 at 11.30 am. Under the UK government's roadmap, it is possible that the prohibition on non-essential travel and public gatherings will have ended and it will be possible for shareholders to attend the AGM in person. However, we strongly encourage shareholders to vote on all resolutions by completing the enclosed form of proxy for use at that Meeting, which you are requested to return in accordance with the instructions on the form.
J.G. Murray
Chairman
11 May 2021
Consolidated income statement
for the year ended 31 December 2020
2020
2019
Notes
£'000
£'000
Revenue
152,723
146,920
Cost of sales
(37,387)
(36,293)
Gross profit
115,336
110,627
Distribution costs
(56,281)
(54,140)
Administrative expenses
(33,027)
(31,991)
Net impairment losses on financial assets
1
(1,328)
(342)
Operating profit
24,700
24,154
EBITDA*
33,547
32,503
Depreciation and amortisation
(8,847)
(8,349)
Operating profit
24,700
24,154
Finance income
78
142
Finance costs
(201)
(254)
Finance costs - net
(123)
(112)
Profit before income tax
24,577
24,042
Income tax expense
(6,536)
(7,229)
Profit for the year
18,041
16,813
Profit is attributable to:
Equity shareholders of the Company
17,853
16,653
Non-controlling interest
188
160
18,041
16,813
Earnings per share
Basic and diluted
2
145.6p
135.8p
* Earnings before interest, tax, depreciation and amortisation.
The above results are all as a result of continuing operations.
Consolidated statement of comprehensive income
for the year ended 31 December 2020
2020
2019
£'000
£'000
Profit for the financial year
18,041
16,813
Other comprehensive (expense)/income:
Items that may be reclassified subsequently to profit or loss:
- currency translation differences on foreign currency net investments
2,396
(2,389)
Items that will not be reclassified subsequently to profit or loss:
- actuarial (loss)/gain recognised in the Nu-Swift Pension Scheme
(4,554)
414
- movement on deferred tax relating to the Nu-Swift Pension Scheme surplus
1,594
(145)
- actuarial loss recognised in the Ansul Pension Scheme
(17)
(412)
- movement on deferred tax relating to the Ansul Pension Scheme deficit
5
103
Other comprehensive expense for the year, net of tax
(576)
(2,429)
Equity shareholders of the Company
17,465
14,224
Non-controlling interest
188
160
Total comprehensive income for the year
17,653
14,384
Consolidated statement of changes in equity
for the year ended 31 December 2020
Share
Share premium
Capital redemption
Non-controlling
Merger
Other
Retained
Total
capital
account
reserve
reserve
reserve
earnings
interest
equity
£'000
£'000
£'000
£'000
£'000
£'000
£'000
£'000
At 1 January 2019
123
344
1
2,033
8,831
100,078
302
111,712
Total comprehensive income for the year
Profit for the financial year
-
-
-
-
-
16,653
160
16,813
Other comprehensive (expense)/income:
- exchange adjustments
-
-
-
-
(2,389)
-
-
(2,389)
- actuarial gain on pension schemes
-
-
-
-
-
2
-
2
- net movement on deferred tax relating to pension asset
-
-
-
-
-
(42)
-
(42)
Total comprehensive (expense)/income for the year
-
-
-
-
(2,389)
16,613
160
14,384
Contributions by and distributions to owners of the Company:
- dividends
-
-
-
-
-
(9,809)
-
(9,809)
Distribution to non-controlling interest
-
-
-
-
-
-
(113)
(113)
At 31 December 2019 and 1 January 2020
123
344
1
2,033
6,442
106,882
349
116,174
Total comprehensive income for the year
Profit for the financial year
-
-
-
-
-
17,853
188
18,041
Other comprehensive (expense)/income:
- exchange adjustments
-
-
-
-
2,396
-
-
2,396
- actuarial loss on pension schemes
-
-
-
-
-
(4,571)
-
(4,571)
- net movement on deferred tax relating to pension deficit
-
-
-
-
-
1,599
-
1,599
Total comprehensive (expense)/income for the year
-
-
-
-
2,396
14,881
188
17,465
Contributions by and distributions to owners of the Company:
- dividends
-
-
-
-
-
(7,356)
-
(7,356)
Distribution to non-controlling interest
-
-
-
-
-
-
(160)
(160)
At 31 December 2020
123
344
1
2,033
8,838
114,407
377
126,123
The merger reserve is not a distributable reserve. The other reserve relates entirely to the effects of changes in foreign currency exchange rates.
Consolidated statement of financial position
as at 31 December 2020
2020
2019
£'000
£'000
Assets
Non-current assets
Property, plant and equipment
13,046
12,164
Right of use assets
3,254
2,360
Intangible assets
66,311
67,504
Deferred tax asset
790
683
Retirement benefit surplus
445
4,959
83,846
87,670
Current assets
Inventories
14,953
13,434
Trade and other receivables
33,174
27,822
Cash and cash equivalents
37,456
27,143
85,583
68,399
Total assets
169,429
156,069
Liabilities
Current liabilities
Trade and other payables
(27,582)
(23,158)
Income tax liabilities
(2,074)
(987)
Borrowings
(2,518)
(2,048)
Lease liabilities
(1,451)
(1,134)
Provision
(16)
-
(33,641)
(27,327)
Non-current liabilities
Trade and other payables
(941)
(850)
Borrowings
(3,170)
(5,122)
Lease liabilities
(1,851)
(1,256)
Derivative financial instruments
(36)
(47)
Deferred tax liabilities
(1,146)
(2,909)
Retirement benefit obligations
(2,349)
(2,215)
Provision
(172)
(169)
(9,665)
(12,568)
Total liabilities
(43,306)
(39,895)
Net assets
126,123
116,174
Shareholders' equity
Ordinary shares
123
123
Share premium
344
344
Capital redemption reserve
1
1
Merger reserve
2,033
2,033
Other reserves
8,838
6,442
Retained earnings
114,407
106,882
Equity attributable to owners of the Parent Company
125,746
115,825
Non-controlling interest
377
349
Total equity
126,123
116,174
Consolidated statement of cash flows
for the year ended 31 December 2020
2020
2019
£'000
£'000
Cash flows from operating activities
Cash generated from operations
32,862
32,363
Interest paid
(118)
(160)
Income tax paid
(5,524)
(7,639)
Net cash generated from operating activities
27,220
24,564
Cash flows from investing activities
Acquisition of subsidiary undertakings (net of cash acquired)
(516)
(2,264)
Purchases of property, plant and equipment
(5,063)
(3,974)
Proceeds from the sale of property, plant and equipment
462
329
Purchases of intangible assets
(1,244)
(2,068)
Interest received
27
27
Net cash used in investing activities
(6,334)
(7,950)
Cash flows from financing activities
Repayments of borrowings
(2,121)
(2,091)
Payment of lease liabilities
(2,036)
(1,750)
Dividends paid to the Company's shareholders
(7,356)
(9,809)
Distribution to non-controlling interest
(160)
(113)
Net cash used in financing activities
(11,673)
(13,763)
Net increase in cash in the year
9,213
2,851
Cash and cash equivalents at the beginning of the year
27,143
26,110
Effects of exchange rates on cash and cash equivalents
1,100
(1,818)
Cash and cash equivalents at the end of the year
37,456
27,143
Notes to the financial statements
for the year ended 31 December 2020
1 Net impairment losses on financial assets
This charge relates entirely to additional expected credit losses in respect of trade receivables.
2 Earnings per share
The calculation of basic earnings per ordinary share ("EPS") is based on the profit on ordinary activities after taxation of £17,853,000 (2018: £16,653,000) and on 12,261,477 (2018: 12,261,477) ordinary shares, being the weighted average number of ordinary shares in issue during the year.
For diluted EPS, the weighted average number of shares in issue is adjusted to assume conversion of all dilutive potential 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.
2019
2018 Restated - see note 32
£'000
Pence
£'000
Pence
Profit on ordinary activities after taxation
17,853
145.6
16,653
135.8
3 This financial information within this preliminary announcement does not constitute the Company's statutory accounts within the meaning of Section 434 of the Companies Act 2006. The results for the year ended 31 December 2020 have been extracted from the full accounts of the Group for that year which received an unmodified auditor's report, and which have not yet been delivered to the Registrar of Companies. The financial information for the year ended 31 December 2019 is derived from the statutory accounts for that year, which have been delivered to the Registrar of Companies. The report of the auditor on those filed accounts was unmodified and does not include a statement under section 498(2) or (3) of the Companies Act 2006.
This preliminary announcement has been prepared in accordance with the recognition and measurement principles of International Accounting Standards in conformity with the requirements of the Companies Act 2006 and in accordance with the AIM rules. The financial information included in this preliminary announcement does not include all the disclosures required in accounts prepared in accordance with International Accounting Standards in conformity with the requirements of the Companies Act 2006 and accordingly it does not itself comply with International Accounting Standards in conformity with the requirements of the Companies Act 2006. The accounting policies used in the preparation of this preliminary announcement have remained unchanged from those set out in the statutory accounts for the year ended 31 December 2019. They are also consistent with those in the full accounts for the year ended 31 December 2020, which have yet to be published.
The Group will post its annual report and accounts to shareholders on 24 May 2021. A copy of the annual report and accounts can be found on the company's webpage (www.londonsecurity.org).
Enquiries
London Security plc
Richard Pollard Company Secretary
Tel: 01422 372 852
WH Ireland Limited
Chris Fielding
Tel: 0207 220 1666
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