RNS Number:7877S
Reliance Security Group PLC
03 December 2003
3 DECEMBER 2003
PRESS RELEASE
Reliance Security Group plc
Interim Results for the six months to
31 October 2003
*Robust organic growth and continuing investment in new growth markets and
segments
*Turnover up 14.9% to #148.9m (2002: #129.6m)
*Profit before tax up 15.6% to #6.0m (2002 (before exceptional item):
#5.2m)
*Earnings per share up 15.8% to 18.3p (2002 (before exceptional item):
15.8p)
*Dividend per share up 10.1% to 3.80p (2002: 3.45p)
*Net cash #5.4m (2002: #1.7m)
*Non-core investment in Chesterton sold for cash consideration of #1.6m.
Brian Kingham, Chairman, commenting on the results said:
"We have achieved solid organic growth in turnover and profit and won major
contracts, which have positioned the Group for further growth. Our business is
well placed to satisfy our customers' requirement for higher value added support
services that improve their competitiveness."
Notes to Editors
Reliance is an established market leader in the provision of contract security,
facilities management, support services, and business process outsourcing.
Reliance employs over 12,000 people from a network of offices throughout the UK.
For further information:
Brian Kingham Chairman 020 7730 9716
Neil French Group Finance Director 01895 205 002
Chairman's interim statement
for the six months ended 31 October 2003
In the first half, we have achieved solid organic growth in turnover and profit
and won major contracts, which have positioned the Group for further growth. We
have continued to benefit from sustained investment in the Group's businesses
and in new growth markets and segments.
Results
Turnover for the six months to 31 October 2003 increased by 14.9% to #148.9
million (2002: #129.6 million). Pre-exceptional, pre-tax profit was 15.6% higher
at #6.0 million (2002: #5.2 million) and profit after tax was #4.1 million
(2002: #0.5 million). There were no exceptional items in the first half of this
year (2002: #3.0 million charge). Excluding exceptional items, earnings per
share rose by 15.8% to 18.3p (2002: 15.8p) and we ended the half year with net
cash of #5.4 million (2002: #1.7 million).
Security services
Turnover was up 13.6% at #108.4 million (2002: #95.4 million), reflecting solid
organic growth in all businesses. Segment profit rose by 32.0% to #4.8 million
(2002: #3.6 million), reflecting increases in all businesses other than Command
Security Corporation, which has been adversely affected by federalisation of its
US airport pre-board screening activities. Good control over working capital
resulted in an increase in operating assets of only 4.8% to #14.9 million (2002:
#14.2 million), notwithstanding the much greater increase in turnover.
Market conditions for security services in the UK have been difficult,
characterised by slowing demand and pressure on margins. Helped by calls for
better and more comprehensive standards of private security, now enshrined in
Government regulation to take effect in 2005, we have defended our margins and
grown our business. Our recently commissioned, enlarged remote surveillance
centre has made good progress, further enhancing our capability to deliver
security solutions employing the latest technologies.
Facilities management
Turnover was up 18.5% at #40.6 million (2002: #34.2 million), reflecting the
provision of additional services within existing contracts and a full six
months' contribution from several contracts mobilised in the second half of last
year. Segment profit of #1.5 million (2002: #1.8 million) included, as expected,
start-up losses of #(0.2) million (2002: nil) in the Group's new mechanical and
electrical engineering services business and reflected further significant
investment in business development and management resources to provide for
continuing growth. Operating assets increased by 20.7%, broadly in line with
turnover growth, to #2.0 million (2002: #1.6 million).
We have enjoyed success in winning significant new business. We have been
awarded a 30-year PFI contract to provide a fully serviced headquarters building
for the Health and Safety Executive in Bootle, Liverpool and several smaller
facilities management contracts. In November, we announced that we had been
awarded a 7-year, #150 million contract to provide the infrastructure and
operation of prisoner escorting and court services to the Scottish Prison
Service. This contract, which covers the whole of Scotland, is the largest of
its type yet awarded in the UK, confirming our leading position as a provider of
outsourced business processes to the UK Criminal Justice Sector. We have been
selected, in partnership with others, as the preferred bidder to finance,
design, build and operate a new Police Headquarters for Gloucester Constabulary,
under a 30-year PFI contract. None of these new contracts will contribute
materially to this year's results.
The mechanical and electrical engineering services business which we started at
the end of last year, providing engineering expertise for managing the workplace
environment, is developing in line with our expectations.
Non-core investments
In July, we completed the disposal of our 16.1% investment in Chesterton
International plc for a cash consideration of #1.6 million, as expected. We have
already announced our intention to dispose of our 25.7% investment in Command
Security Corporation and we are in discussions with several potential acquirers.
Dividend
The directors have decided to pay an interim dividend of 3.80p per share (2002:
3.45p), payable on 23 January 2004 to shareholders on the register on 5 January
2004.
Outlook
In Security Services, we expect continuing restrained demand for manpower
security but some growth in electronic surveillance in the months ahead.
We believe that the market for facilities management and outsourced business
processes will continue to grow strongly and we are investing in management and
infrastructure for future growth.
Our business is well positioned to satisfy our customers' requirement for higher
value added support services, enabling change and the introduction of
streamlined business processes that improve their competitiveness.
The Group remains on course to achieve further growth.
Brian Kingham
Chairman
December 2003
Independent review report
to Reliance Security Group plc
Introduction
We have been instructed by the Company to review the financial information for
the 27 weeks ended 31 October 2003 which comprises the profit and loss account,
the statement of total recognised gains and losses, the balance sheet, the cash
flow statement and related notes 1 to 10. We have read the other information
contained in the interim report and considered whether it contains any apparent
misstatements or material inconsistencies with the financial information.
This report is made solely to the Company in accordance with Bulletin 1999/4
issued by the Auditing Practices Board. Our work has been undertaken so that we
might state to the Company those matters we are required to state to them in an
independent review report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to anyone other than
the Company, for our review work, for this report, or for the conclusions we
have formed.
Directors' responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by, the directors. The directors
are responsible for preparing the interim report in accordance with the Listing
Rules of the Financial Services Authority which require that the accounting
policies and presentation applied to the interim figures are consistent with
those applied in preparing the preceding annual accounts except where any
changes, and the reasons for them, are disclosed.
Review work performed
We conducted our review in accordance with the guidance contained in Bulletin
1999/4 issued by the Auditing Practices Board for use in the United Kingdom. A
review consists principally of making enquiries of group management and applying
analytical procedures to the financial information and underlying financial data
and based thereon, assessing whether the accounting policies and presentation
have been consistently applied unless otherwise disclosed. A review excludes
audit procedures such as tests of controls and verification of assets,
liabilities and transactions. It is substantially less in scope than an audit
performed in accordance with United Kingdom auditing standards and therefore
provides a lower level of assurance than an audit. Accordingly, we do not
express an audit opinion on the financial information.
Review Conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the 27 weeks ended
31 October 2003.
Deloitte & Touche LLP
Chartered Accountants
London
Reliance Security Group plc
Group profit and loss account
for the 27 weeks ended 31 October 2003
Unaudited Audited
-------------------------
27 weeks to 26 weeks to Year to
31 October 25 October 25 April
2003 2002 2003
Notes #'000 #'000 #'000
----------------------- ----- ---------- ----------- ----------
Turnover 2 148,905 129,628 268,142
Cost of sales (122,688) (107,164) (217,063)
----------------------- ----- ---------- ----------- ----------
Gross profit 26,217 22,464 51,079
Administrative expenses (21,197) (18,664) (40,327)
----------------------- ----- ---------- ----------- ----------
Group operating profit 5,020 3,800 10,752
Share of associates'
operating profit 3 1,241 1,637 (951)
----------------------- ----- ---------- ----------- ----------
Profit on ordinary
activities before
finance charges and
amounts written off
investments 2 6,261 5,437 9,801
Exceptional write down
of investment 4 - (3,041) (3,314)
----------------------- ----- ---------- ----------- ----------
Profit on ordinary
activities before
finance charges 6,261 2,396 6,487
Interest receivable
Group 35 9 28
Associates - 11 1
Interest payable
Group (190) (187) (407)
Associates (85) (62) (110)
----------------------- ----- ---------- ----------- ----------
Profit on ordinary
activities before
taxation 6,021 2,167 5,999
Tax on profit on
ordinary activities 5 (1,894) (1,636) (3,903)
----------------------- ----- ---------- ----------- ----------
Profit on ordinary
activities after
taxation 4,127 531 2,096
Dividends paid and
proposed (865) (803) (3,469)
----------------------- ----- ---------- ----------- ----------
Retained profit/(loss) for the
period 3,262 (272) (1,373)
----------------------- ----- ---------- ----------- ----------
Earnings per share
----------------------- ----- ---------- ----------- ----------
Basic 6 18.3p 15.8p 38.4p
Effect of exceptional
items - (13.4)p (29.1)p
----------------------- ----- ---------- ----------- ----------
Adjusted basic 18.3p 2.4p 9.3p
----------------------- ----- ---------- ----------- ----------
Diluted 6 18.2p 15.7p 38.2p
Effect of exceptional
items - (13.4)p (29.0)p
----------------------- ----- ---------- ----------- ----------
Adjusted diluted 18.2p 2.3p 9.2p
----------------------- ----- ---------- ----------- ----------
Dividend per share 3.80p 3.45p 15.4p
----------------------- ----- ---------- ----------- ----------
Shares issued and fully
paid 23,305,592 23,287,592 23,287,592
----------------------- ----- ---------- ----------- ----------
All material operations in the Group continued throughout all financial periods.
Reliance Security Group plc
Group statement of total recognised gains and losses
for the 27 weeks ended 31 October 2003
Unaudited Audited
------------------------
27 week to 26 weeks to Year to
31 October 25 October 25 April
2003 2002 2003
#'000 #'000 #'000
-------------------------------------------- ----------- ------------- ---------
Profit/(loss) for the period
- Group 3,329 (617) 3,742
- Associates 798 1,148 (1,646)
-------------------------------------------- ----------- ------------- ---------
4,127 531 2,096
Loss arising on foreign currency translation (50) (40) (74)
-------------------------------------------- ----------- ------------- ---------
Total gains recognised since last financial
statements 4,077 491 2,022
-------------------------------------------- ----------- ------------- ---------
Reliance Security Group plc
Group balance sheet
as at 31 October 2003
Unaudited Audited
------------------------
31 October 25 October 25 April
2003 2002 2003
Notes #'000 #'000 #'000
---------------------------- ----- ---------- ---------- --------
Fixed assets
Intangible assets - Goodwill 1,779 1,402 1,969
Tangible assets 9,306 7,001 9,245
Investments 6,602 11,737 6,464
---------------------------- ----- ---------- ---------- --------
17,687 20,140 17,678
Current assets
Stocks and work in progress 2,901 2,236 2,561
Debtors 33,301 32,644 37,408
Investments - - 1,637
Cash at bank and in hand 9 9,213 5,490 8,849
---------------------------- ----- ---------- ---------- --------
45,415 40,370 50,455
Creditors: amounts falling
due within one year
Borrowings (3,588) (3,271) (3,614)
Creditors (32,229) (32,834) (38,430)
Corporation tax (2,087) (1,830) (2,098)
Proposed dividend (859) (803) (2,694)
---------------------------- ----- ---------- ---------- --------
(38,763) (38,738) (46,836)
---------------------------- ----- ---------- ---------- --------
Net current assets 6,652 1,632 3,619
---------------------------- ----- ---------- ---------- --------
Total assets less current
liabilities 24,339 21,772 21,297
Creditors: amounts falling
due after more than one year
Borrowings (208) (492) (412)
Provisions for liabilities
and charges (1,155) (420) (1,155)
---------------------------- ----- ---------- ---------- --------
Net assets 22,976 20,860 19,730
---------------------------- ----- ---------- ---------- --------
Capital and reserves
Called up share capital 1,165 1,164 1,164
Share premium account 2,318 2,280 2,285
Revaluation reserve 152 152 152
Profit and loss account 19,341 17,264 16,129
---------------------------- ----- ---------- ---------- --------
Equity shareholders' funds 7 22,976 20,860 19,730
---------------------------- ----- ---------- ---------- --------
Reliance Security Group plc
Group cash flow statement
for the 27 weeks ended 31 October 2003
Unaudited Audited
-------------------------
27 weeks to 26 weeks to Year to
31 October 25 October 25 April
2003 2002 2003
Notes #'000 #'000 #'000
------------------------------ ----- ----------- ----------- --------
Net cash inflow from operating
activities 8 3,945 5,226 13,906
------------------------------ ----- ----------- ----------- --------
Returns on investment and
servicing of finance
Interest received 35 9 27
Interest paid (125) (119) (363)
Interest element of finance
lease repayments (20) (24) (45)
Dividends received from
associates 490 480 923
------------------------------ ----- ----------- ----------- --------
Net cash inflow from returns
on investment and servicing
of finance 380 346 542
------------------------------ ----- ----------- ----------- --------
Taxation
UK corporation tax paid (1,547) (1,281) (2,932)
------------------------------ ----- ----------- ----------- --------
Capital expenditure and
financial investment
Purchase of tangible fixed
assets (1,305) (1,518) (4,842)
Investment in special
purpose vehicle - (266) (267)
Sale of listed investment 1,637 - -
Purchase of ESOP shares - (296) (296)
Sale of shares by ESOP 120 - 66
Sale of tangible fixed assets 30 14 23
------------------------------ ----- ----------- ----------- --------
Net cash inflow/(outflow) from
capital expenditure and
financial investment 482 (2,066) (5,316)
------------------------------ ----- ----------- ----------- --------
Acquisitions
Deferred consideration paid - (251) (251)
Investment in associates - - (13)
------------------------------ ----- ----------- ----------- --------
Net cash outflow from
acquisitions - (251) (264)
------------------------------ ----- ----------- ----------- --------
Equity dividends paid (2,700) (2,354) (3,131)
------------------------------ ----- ----------- ----------- --------
Net cash inflow/(outflow)
before financing 560 (380) 2,805
------------------------------ ----- ----------- ----------- --------
Financing
Issue of ordinary share
capital 34 14 21
Increase in short term
borrowings - 1,529 1,844
Capital element of
finance lease repayments (230) (166) (314)
------------------------------ ----- ----------- ----------- --------
Net cash(outflow)/inflow from
financing (196) 1,377 1,551
------------------------------ ----- ----------- ----------- --------
Increase in cash in the period 364 997 4,356
------------------------------ ----- ----------- ----------- --------
Reconciliation of net cash
flow to movement in net cash
Increase in cash in the
period 364 997 4,356
Cash outflow/(inflow) from
decrease/(increase) in debt
and lease financing 230 (1,363) (1,530)
------------------------------ ----- ----------- ----------- --------
Change in net cash resulting
from cash flows 594 (366) 2,826
New finance leases - - (96)
------------------------------ ----- ----------- ----------- --------
Movement in net cash in the
period 594 (366) 2,730
Opening net cash 4,823 2,093 2,093
------------------------------ ----- ----------- ----------- --------
Closing net cash 9 5,417 1,727 4,823
------------------------------ ----- ----------- ----------- --------
Reliance Security Group plc
Notes
1 Preparation of interim report
The financial information for the 27 weeks ended 31 October 2003 and 26 weeks ended 25
October 2002 is unaudited and does not constitute full accounts within the meaning of
the Companies Act 1985. The financial information for the year ended 25 April 2003 has
been extracted from the full accounts for that year which has been delivered to the
Registrar of Companies. The auditors' report was unqualified and did not contain a
statement under Section 237(2) or (3) of the Companies Act 1985.
The financial years of all Group companies are the 52 or 53 weeks up to the Friday
immediately preceding, or falling on, the accounting reference date of 30 April.
2 Segmental information
Turnover Segment profit Operating assets
31 October 25 October 31 October 25 October 31 October 25 October
2003 2002 2003 2002 2003 2002
#'000 #'000 #'000 #'000 #'000 #'000
----------------- ---------- ---------- ---------- ---------- ---------- ----------
By activity
Security services 108,352 95,400 4,809 3,642 14,930 14,249
Facilities
management 40,553 34,228 1,452 1,795 1,954 1,619
----------------- ---------- ---------- ---------- ---------- ---------- ----------
148,905 129,628 6,261 5,437 16,884 15,868
----------------- ---------- ---------- ---------- ---------- ---------- ----------
Segment profit is profit on ordinary activities, including share of associates'
operating profits, before amounts written off investments and finance charges,
excluding the exceptional goodwill impairment referred to in note 3.
Operating assets are those net assets controlled by the Group's operating companies
and reconcile with net assets as follows:-
31 October 25 October
2003 2002
#'000 #'000
----------------------------------------- ---------- ----------
Operating assets 16,884 15,868
Items excluded:-
Net cash 5,417 1,727
Listed and unlisted investments and loans 267 2,176
Investment in own shares 3,059 3,244
Taxation payable (2,087) (1,830)
Deferred taxation 362 560
Dividends payable (859) (803)
Interest payable (67) (82)
----------------------------------------- ---------- ----------
Net assets 22,976 20,860
----------------------------------------- ---------- ----------
3 Share of associates' operating profit
Included within share of associates' operating profit in the year ended 25 April 2003
is an exceptional charge of #3,250,000 in respect of the impairment of goodwill in the
Group's associated undertaking, Command Security Corporation, on the basis of a
directors' valuation.
Goodwill amortisation included within share of associates' operating profit was #5,000
(26 weeks to 25 October 2002: #99,000, year ended 25 April 2003: #200,000).
4 Exceptional item
The exceptional write down of investment in the 26 weeks to 25 October 2002 and the
year ended 25 April 2003 relates to a reduction in the carrying value of the Group's
investment in Chesterton International plc, to reflect the open market price of the
shares held at 25 October 2002 and 25 April 2003.
5 Taxation
Corporation tax for the 27 weeks to 31 October 2003 has been calculated at the rate of
30% (26 weeks to 25 October 2002: 30%, year ended 25 April 2003: 30%).
6 Earnings per share
The basic and diluted earnings per share for the 27 weeks to 31 October 2003 have been
calculated in accordance with FRS 14, based on profit after tax and the weighted
average number of ordinary shares in issue during the period, less shares held by the
ESOP trust. The number of shares used to calculate basic earnings per share is
22,574,407 (26 weeks to 25 October 2002: 22,538,414, year ended 25 April 2003:
22,538,574). The number of shares used to calculate diluted earnings per share is
22,711,996 (26 weeks to 25 October 2002: 22,706,429, year ended 25 April 2003:
22,684,032).
7 Reconciliation of movement in equity shareholders' funds
31 October 25 October 25 April
2003 2002 2003
#'000 #'000 #'000
-------------------------------------------- ---------- ---------- --------
Opening equity shareholders' funds 19,730 21,156 21,156
Profit on ordinary activities after tax 4,127 531 2,096
Dividends (excluding ESOP dividends) (865) (803) (3,469)
Shares issued net of expenses 34 16 21
Loss arising on foreign currency translation (50) (40) (74)
-------------------------------------------- ---------- ---------- --------
Closing equity
shareholders' funds 22,976 20,860 19,730
-------------------------------------------- ---------- ---------- --------
8 Reconciliation of operating profit to net cash inflow from operating activities
31 October 25 October 25 April
2003 2002 2003
#'000 #'000 #'000
-------------------------------------------- ---------- ---------- --------
Operating profit 5,020 3,800 10,752
Depreciation charges 1,216 907 2,070
(Profit)/loss on the sale of fixed assets (2) 8 7
Amortisation of goodwill 190 168 337
Increase in stocks (340) (648) (973)
Decrease / (increase) in debtors 4,106 3,260 (1,677)
(Decrease) / increase in creditors (6,245) (2,269) 3,390
-------------------------------------------- ---------- ---------- --------
Net cash inflow from operating activities 3,945 5,226 13,906
-------------------------------------------- ---------- ---------- --------
9 Analysis and reconciliation of net cash
25 April 31 October
2003 Cash flow 2003
#'000 #'000 #'000
---------------------------------------- ----------- -------- --------
Cash at bank and in hand 8,849 364 9,213
---------------------------------------- ----------- -------- --------
Loan due within one year (3,315) - (3,315)
Finance Leases and hire purchase
obligations (711) 230 (481)
---------------------------------------- ----------- -------- --------
Total borrowings (4,026) 230 (3,796)
---------------------------------------- ----------- -------- --------
Net cash 4,823 594 5,417
---------------------------------------- ----------- -------- --------
10 Distribution
A copy of the financial information will be sent to all shareholders. Copies are
available to the public from the Company's registered office at Boundary House,
Cricketfield Road, Uxbridge, Middlesex, UB8 1QG.
This information is provided by RNS
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END
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