London Security PLC
(the "Group" or "Company")
Interim results for the six months ended 30 June 2023
Chairman's statement
J.J. Murray, Chairman
Financial Highlights
• Revenue £108.8m (2022: £88.6m)
• Operating profit £13.7m (2022: £10.9m)
• Earnings per share 81.0p (2022: 68.3p)
Trading
The financial highlights illustrate that the Group's revenue increased by £20.2 million (22.8%) to £108.8 million.
Operating profit increased by £2.8 million (25.7%) to £13.7 million. This increase is partly attributed to the Group being able to recruit more direct staff. This enabled us to address delayed inspections in the period, in turn delivering a non-recurring benefit to the business' revenue and profit.
These results reflect the favourable movement in the Euro to Sterling average exchange rate, which has decreased from 1.19 to 1.14. If the 2023 results from the European subsidiaries had been translated at 2022 rates, revenue would have been £105.2 million instead of £108.8 million, which would have represented an increase of 18.7% on the prior year. On the same basis, operating profit would have been £13.1 million instead of £13.7 million, an increase of 20.2% compared to 2022.
The period under review also reflects the impact from upward input price pressures in all of the countries in which we operate. These increases are being driven by worldwide supply chain disruption and energy and wage inflation following the recovery from the coronavirus pandemic and the war in Ukraine. These supply price increases have been passed on to our customers where possible.
Acquisitions
In the six months to the end of June, at an aggregate cost of £2.5 million, the Group acquired two companies in Belgium, and it strengthened its presence in Germany and the United Kingdom through the acquisition of service contracts which have been integrated into the Group's existing subsidiaries.
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.
Cash and financing
The Group's cash balance as at 30 June 2023 was £33.2 million. This is a decrease of £0.8 million on the 31 December 2022 balance of £34.0 million.
Prospects
Cash management is a key consideration in difficult economic times. 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 with its strong balance sheet and material net cash position the Group is well placed to cope with any economic downturn.
Dividends
A final dividend in respect of 2022 of £0.42 per ordinary share was paid to shareholders on 7 July 2023.
J.J. Murray
Chairman
22 September 2023
Consolidated income statement
for the six months ended 30 June 2023
| | | Unaudited | Unaudited | Audited |
| | | six months | six months | year |
| | | ended | ended | ended |
| | | 30 June | 30 June | 31 December |
| | | 2023 | 2022 | 2022 |
|
| Note | £'000 | £'000 | £'000 |
| Revenue | | 108,845 | 88,613 | 188,898 |
| Cost of sales |
| (29,452) | (23,380) | (49,748) |
| Gross profit | | 79,393 | 65,233 | 139,150 |
| Distribution costs | | (41,304) | (33,937) | (70,565) |
| Administrative expenses |
| (24,357) | (20,394) | (41,420) |
| Operating profit |
| 13,732 | 10,902 | 27,165 |
| EBITDA* | | 19,009 | 15,742 | 37,269 |
| Depreciation and amortisation |
| (5,277) | (4,840) | (10,104) |
| Operating profit |
| 13,732 | 10,902 | 27,165 |
| Finance income | | 5 | 1 | 31 |
| Finance costs |
| (110) | (100) | (242) |
| Finance costs - net |
| (105) | (99) | (211) |
| Profit before income tax | | 13,627 | 10,803 | 26,954 |
| Income tax expense |
| (3,692) | (2,423) | (6,742) |
| Profit for the period |
| 9,935 | 8,380 | 20,212 |
| Profit is attributable to: | | | | |
| Equity shareholders of the Company | | 9,935 | 8,374 | 20,203 |
| Non-controlling interest |
| - | 6 | 9 |
|
|
| 9,935 | 8,380 | 20,212 |
| Earnings per share | | | | |
| Basic and diluted | 3 | 81.0p | 68.3p | 164.8p |
| Dividends | | | | |
| Dividends paid per share |
| Nil | Nil | 84p |
* 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 2023
| Unaudited | Unaudited | Audited |
| six months | six months | year |
| ended | ended | ended |
| 30 June | 30 June | 31 December |
| 2023 | 2022 | 2022 |
| £'000 | £'000 | £'000 |
Profit for the financial period | 9,935 | 8,380 | 20,203 |
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 | (2,851) | 1,087 | 3,602 |
- actuarial gain recognised in the Nu-Swift pension scheme | - | - | (111) |
- movement on deferred tax relating to the Nu-Swift pension scheme | - | - | 38 |
- actuarial loss recognised in the Ansul pension scheme | - | - | 1,249 |
- movement on deferred tax relating to the Ansul pension scheme | - | - | (285) |
Other comprehensive income for the period, net of tax | (2,851) | 1,087 | 4,493 |
Equity shareholders of the Company | 7,084 | 9,467 | 24,696 |
Non-controlling interest | - | - | 9 |
Total comprehensive income for the period | 7,084 | 9,467 | 24,705 |
Consolidated statement of changes in equity
for the six months ended 30 June 2023
| Share | Share | Capital | Merger | Other | Retained | Non-controlling | |
| capital | premium | redemption | reserve | reserve | earnings | interest | Total |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 |
At 1 January 2022 | 123 | 344 | 1 | 2,033 | 5,056 | 124,072 | 118 | 131,747 |
Comprehensive income for the period: | | | | | | | | |
- profit for the period | - | - | - | - | - | 8,374 | 6 | 8,380 |
- exchange adjustments | - | - | - | - | 1,087 | - | - | 1,087 |
Total comprehensive income for the period | - | - | - | - | 1,087 | 8,374 | 6 | 9,467 |
At 30 June 2022 | 123 | 344 | 1 | 2,033 | 6,143 | 132,446 | 124 | 141,214 |
Comprehensive income for the period: | | | | | | | | |
- profit for the period | - | - | - | - | - | 11,829 | 3 | 11,832 |
- exchange adjustments | - | - | - | - | 2,515 | - | - | 2,515 |
- actuarial gain on pension schemes | - | - | - | - | - | 1,138 | - | 1,138 |
- movement on deferred tax relating to pension schemes | - | - | - | - | - | (247) | - | (247) |
Total comprehensive income for the period | - | - | - | - | 2,515 | 12,720 | 3 | 15,238 |
Contributions by and distributions to owners of the Company: | | | | | | | | |
- dividends | - | - | - | - | - | (10,298) | - | (10,298) |
Purchase of own shares | - | - | - | - | - | (13) | - | (13) |
Reduction in non-controlling interest | - | - | - | - | - | (158) | (127) | (285) |
At 31 December 2022 | 123 | 344 | 1 | 2,033 | 8,658 | 134,697 | - | 145,856 |
Comprehensive income for the period: | | | | | | | | |
- profit for the period | - | - | - | - | - | 9,935 | - | 9,935 |
- exchange adjustments | - | - | - | - | (2,851) | - | - | (2,851) |
Total comprehensive income for the period | - | - | - | - | (2,851) | 9,935 | - | 7,084 |
Purchase of own shares | - | - | - | - | - | (30) | - | (30) |
At 30 June 2023 | 123 | 344 | 1 | 2,033 | 5,807 | 144,602 | - | 152,910 |
Consolidated statement of financial position
as at 30 June 2023
| Unaudited | Unaudited | Audited |
| as at | as at | as at |
| 30 June | 30 June | 31 December |
| 2023 | 2022 | 2022 |
| £'000 | £'000 | £'000 |
Assets | | | |
Non-current assets | | | |
Property, plant and equipment | 16,430 | 14,186 | 14,940 |
Right-of-use assets | 5,531 | 5,297 | 5,975 |
Intangible assets | 77,848 | 73,643 | 77,076 |
Deferred tax asset654 | 654 | 814 | 694 |
Retirement benefit surplus | 276 | 380 | 276 |
| 100,739 | 94,320 | 98,961 |
Current assets | | | |
Inventories | 22,934 | 18,326 | 22,260 |
Trade and other receivables | 43,907 | 37,800 | 40,699 |
Cash and cash equivalents | 33,206 | 35,256 | 33,962 |
| 100,047 | 91,382 | 96,921 |
Total assets | 200,786 | 185,702 | 195,882 |
Liabilities | | | |
Current liabilities | | | |
Trade and other payables | (35,902) | (30,336) | (36,431) |
Income tax liabilities | (1,448) | (564) | (1,440) |
Borrowings | (344) | (2,437) | (1,598) |
Lease liabilities | (1,228) | (1,722) | (2,040) |
Derivative financial instruments | - | (20) | - |
Provision for liabilities and charges | (9) | (14) | (10) |
| (38,931) | (35,093) | (41,519) |
Non-current liabilities | | | |
Trade and other payables | (1,016) | (1,033) | (936) |
Borrowings | (228) | (431) | (236) |
Lease liabilities | (4,417) | (3,627) | (4,033) |
Deferred income tax liabilities | (2,213) | (1,982) | (2,211) |
Retirement benefit obligations | (921) | (2,180) | (953) |
Provision for liabilities and charges | (150) | (142) | (138) |
| (8,945) | (9,395) | (8,507) |
Total liabilities | (47,876) | (44,488) | (50,026) |
Net assets | 152,910 | 141,214 | 145,856 |
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 | 5,807 | 6,143 | 8,658 |
Retained earnings | 144,602 | 132,446 | 134,697 |
Equity attributable to owners of the Parent Company | 152,910 | 141,090 | 145,856 |
Non-controlling interest | - | 124 | - |
Total equity | 152,910 | 141,214 | 145,856 |
Consolidated statement of cash flow
for the six months ended 30 June 2023
| Unaudited | Unaudited | Audited |
| six months | six months | year |
| ended | ended | ended |
| 30 June | 30 June | 31 December |
| 2023 | 2022 | 2022 |
| £'000 | £'000 | £'000 |
Cash flows from operating activities | | | |
Cash generated from operations | 14,608 | 13,501 | 30,489 |
Interest paid | (39) | (50) | (111) |
Income tax paid | (4,737) | (5,617) | (7,055) |
Net cash generated from operating activities | 9,832 | 7,834 | 23,323 |
Cash flows from investing activities | | | |
Acquisition of subsidiary undertakings | (2,522) | (3,058) | (4,078) |
Purchases of property, plant and equipment | (4,164) | (1,923) | (4,626) |
Proceeds from sale of property, plant and equipment | 273 | 380 | 730 |
Purchases of intangible assets | (902) | (1,661) | (3,193) |
Interest received | 5 | 1 | 4 |
Net cash used in investing activities | (7,310) | (6,261) | (11,163) |
Cash flows from financing activities | | | |
Repayments of borrowings | (1,173) | (1,332) | (2,312) |
Payment of lease liabilities | (1,250) | (1,057) | (2,356) |
Dividends paid to Company's shareholders | - | - | (10,298) |
Purchase of own shares | (30) | - | (13) |
Reduction in non-controlling interest | - | - | (285) |
Net cash used in financing activities | (2453) | (2,389) | (15,264) |
Net (decrease)/increase in cash in the period | 69 | (816) | (3,104) |
Cash and cash equivalents at the beginning of the period | 33,962 | 35,681 | 35,681 |
Effects of exchange rates on cash and cash equivalents | (825) | 391 | 1,385 |
Cash and cash equivalents at the end of the period | 33,206 | 35,256 | 33,962 |
Notes to the financial statements
for the six months ended 30 June 2023
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 2023 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 2022. The principal 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 2022 have been extracted from the statutory accounts for the year ended 31 December 2022, 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 or 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 and 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 £9,935,000 (2022: £8,374,000) and on 12,260,684 (2022: 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 |
| 2023 | 2022 | 2022 |
| £'000 | £'000 | £'000 |
Profit on ordinary activities after taxation | 9,935 | 8,374 | 20,212 |
Basic earnings per ordinary share | 81.0p | 68.3p | 164.8p |
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 2023. In accordance with IAS 19 such a valuation will be prepared for the purposes of the Group's Annual Report and Accounts 2023.
The person responsible for arranging the release of this announcement on behalf of the Company is Richard Pollard, Company Secretary of London Security plc.
This announcement contains inside information for the purposes of Article 7 of the UK version of Regulation (EU) No 596/2014 which is part of UK law by virtue of the European Union (Withdrawal) Act 2018, as amended ("MAR"). Upon the publication of this announcement via a Regulatory Information Service, this inside information is now considered to be in the public domain.
For further information, please contact:
London Security plc
Richard Pollard
Company Secretary Tel : 01422 372852
WH Ireland Limited
Chris Fielding Tel : 0207 220 1666
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