London Security PLC 05 May 2005 LONDON SECURITY PLC ("the Company) 5 May 2005 Preliminary results for the year ended 31 December 2004 London Security presents its results for the year ended 31 December 2004. Financial highlights of the results for the year ended 31 December 2004: • Turnover of £52.3million • Operating profit of £9.5million • Earnings before interest, taxation, depreciation and amortisation ("EBITDA") of £14.2 million • Profit on ordinary activities before taxation of £9.2million Chairman's statement Trading Review The changes in the results are primarily due to marketing cost increases and slightly less buoyant market conditions in some European countries. During 2002 and 2003 the Company benefited from a number of market opportunities which are now levelling. Operating profit at 18.1% of turnover and EBITDA at 27.1% of turnover continue to be industry leading results. We aim to continue to acquire companies in the fire and security sectors to complement and build upon the organic growth demonstrated in recent times. Acquisitions In December 2004 we acquired MK Fire Limited and TVF (UK) Plc. Both companies are very well represented in fire extinguisher service, fire alarm service and fire alarm installation and operate on a nationwide scale whilst having the majority of the UK business in the more prosperous south of England. These acquisitions will substantially increase turnover in our alarms division, fulfilling our objective to provide a one-stop shop for customers' fire protection needs. Future prospects The outlook for 2005 is cautiously optimistic. MK Fire and TVF have immediately contributed to the Group's profits. We are continuing to expand the alarm operations in the UK and Belgium. The Group is actively developing new improved ranges of extinguishers and plans to launch these products in 2005. As well as being better extinguishers, we expect to achieve cost efficiencies from implementation of these new ranges. Management and Staff 2004 was a year in which the staff performed well and, on your behalf, I would like to express thanks and appreciation for their contribution. Tender Offer Your Board has been examining ways of returning value to Shareholders and it is pleased to announce that it now proposes, subject to approval of Shareholders and confirmation of the High Court of the Capital Reduction, to return to Shareholders by way of a Tender Offer up to £30.1million. Subject to the consent of Shareholders, your Board intends that each Shareholder be given the opportunity to sell to Brewin Dolphin Securities Limited, Ordinary Shares held by him/her on the Record Date at a price of £13.75 per Ordinary Share. A circular has been posted to Shareholders explaining this proposal in more detail. Dividends In view of the Tender Offer no final dividend is proposed (2003: 10.0p). On 8 July 2004 the Company announced a special dividend of 42.0p (2003: 0.0p) per ordinary share. The Company had accumulated cash comfortably beyond its short to medium-term operational requirements and the Board of Directors felt it was in the best interest of Shareholders to distribute a part of this surplus. An interim dividend of 3.0p (2003: 3.0p) per Ordinary Share was also paid to Shareholders, giving a total dividend for the year of 45.0p (2003: 13.0p) per share. Consolidated Profit and Loss Account For the year ended 31 December 2004 Year ended Year ended 31 December 31 December 2004 2003 £'000 £'000 Turnover 52,332 53,760 Cost of sales (7,901) (8,201) Gross profit 44,431 45,559 Distribution costs (20,740) (20,546) Administrative expenses (14,220) (14,086) Operating profit 9,471 10,927 EBITDA** 14,160 15,510 Depreciation (1,903) (1,838) Amortisation of goodwill (2,786) (2,745) Operating profit 9,471 10,927 Income from fixed asset investments 114 117 Net interest payable and similar charges (418) (665) Profit on ordinary activities before taxation 9,167 10,379 Taxation (3,777) (4,587) Profit on ordinary activities after taxation 5,390 5,792 Dividends (6,508) (1,882) (Sustained loss)/retained profit (1,118) 3,910 Basic and diluted earnings per ordinary share 37.3p 40.0p Adjusted earnings per ordinary share 56.5p 59.0p Dividend per ordinary share 45.0p 13.0p All of the above results arose from continuing operations. Turnover, operating profit and cash flow attributable to acquisitions have not been separately disclosed on the face of the profit and loss account and the cash flow statement on the grounds of materiality. ** Earnings Before Interest, Taxation, Depreciation and Amortisation Consolidated Balance Sheet As at 31 December 2004 2004 2003 £'000 £'000 Fixed assets Intangible assets 49,684 45,082 Tangible assets 8,408 7,791 Investments 70 70 58,162 52,943 Current assets Stocks 4,052 3,643 Debtors 14,929 11,666 Cash at bank and in hand 7,723 13,486 26,704 28,795 Creditors: amounts falling due within one year Finance debt (5,489) (4,161) Other creditors (16,854) (15,232) (22,343) (19,393) Net current assets 4,361 9,402 Total assets less current liabilities 62,523 62,345 Creditors: amounts falling due after more than one year Finance debt (9,912) (8,100) Provisions for liabilities and charges (1,662) (1,841) Net assets 50,949 52,404 Capital and reserves Called up share capital 1,447 1,447 Share premium 27,476 27,476 Capital redemption reserve 117 117 Merger reserve 2,033 2,033 Profit and loss account 19,876 21,331 Total equity shareholders' funds 50,949 52,404 Consolidated Cash Flow Statement For the year ended 31 December 2004 Year ended Year ended 31 December 31 December 2004 2003 £'000 £'000 Net cash inflow from operating activities 14,884 14,295 Return on investments and servicing of finance Interest received 218 231 Interest paid (505) (694) Dividends received 114 117 Net cash outflow from return on investments and (173) (346) servicing of finance Taxation Corporation tax paid (4,710) (3,696) Capital expenditure Payments to acquire intangible fixed assets (54) (79) Payments to acquire tangible fixed assets (2,208) (2,239) Receipts from sales of tangible fixed assets 644 237 Net cash outflow for capital expenditure (1,618) (2,081) Acquisitions and disposals Payments to acquire subsidiary undertakings (9,185) (359) Payment of deferred consideration on prior year acquisitions - (679) Net cash/(overdraft) acquired with subsidiary undertakings 412 (112) Net cash outflow for acquisitions (8,773) (1,150) Equity dividends paid to shareholders (7,955) (1,159) Net cash (outflow)/inflow before use of (8,345) 5,863 financing Financing Purchase of own shares (120) (171) New long-term loans 7,146 600 Repayment of long-term loans (4,444) (3,109) Net cash inflow/(outflow) from financing 2,582 (2,680) (Decrease)/increase in cash in the year (5,763) 3,183 1 Earnings per Share The calculation of basic earnings per ordinary share (EPS) is based on the profit on ordinary activities after taxation of £5,390,000 (2003 : £5,792,000) and on 14,469,566 (2003 : 14,481,066) ordinary shares, being the weighted average number of ordinary shares in issue during the year. For diluted earnings per ordinary share, the weighted average number of shares in issue is adjusted to assume conversion of all dilutive potential ordinary shares. The revised weighted average number of shares is 14,482,899 (2003 : 14,488,332). After taking into account the effect of dilutive securities, the basic EPS and adjusted EPS figures are unaltered. The calculation of adjusted earnings per ordinary share is based on 14,469,566 (2003 : 14,481,066) ordinary shares in issue prior to 31 December 2004 and on adjusted earnings which comprise: 2004 2003 £'000 pence £'000 pence Profit on ordinary activities after taxation 5,390 37.3 5,792 40.0 Eliminate effect: Amortisation of goodwill 2,786 19.2 2,745 19.0 Adjusted profit on ordinary activities after taxation 8,176 56.5 8,537 59.0 Adjusted earnings per share figures are given in order that shareholders may understand the importance of goodwill amortisation on the results for the year. 2 This preliminary announcement does not constitute statutory accounts within the meaning of section 240 of the Companies Act 1985. The results for the year ended 31 December 2004 have been extracted from the full accounts of the Group for that year which received an unqualified auditors' report and which have not yet been delivered to the Registrar of Companies. The results for the year ended 31 December 2003 have been extracted from the Group's statutory accounts which received an unqualified auditors' report and have been filed with the Registrar of Companies. The accounts for the year ended 31 December 2004 and 31 December 2003 did not contain a statement under s237(2) or s237(3) of the Companies Act 1985. The preceding statements have been prepared in accordance with applicable accounting standards on a basis which is consistent with that applied in previous periods. Enquiries: London Security plc Richard Pollard, Company Secretary 01422 372852 This information is provided by RNS The company news service from the London Stock Exchange