Preliminary Results

London Securities PLC 28 April 2000 CHAIRMAN'S STATEMENT ACQUISITION OF ANSUL S.A. In July 1999, the company undertook a purchase of its own shares, buying 25,000 ordinary shares at 83p each. This buy-back reduced the public interest in the company below the 25 per cent. required by the London Stock Exchange for a full listing and in August 1999 the company transferred to AIM. In common with many small quoted property companies, and compounded by the presence of a substantial shareholder, there was little liquidity in the market for the company's ordinary shares. The mid-market price of an ordinary share at the close of business on 7 December 1999 was 91.5p, representing a 57.6 percent discount to its net asset value as at 30 June 1999 of 215.8p. On 29 December 1999 the company entered into an agreement to acquire the entire issued share capital of Ansul S.A. ('Ansul') for a consideration of £48.4 million. Ansul was a wholly owned subsidiary of EOI European and Overseas Investments SARL ('EOI'), which at that date was ultimately the beneficial owner of 75.4 per cent. of the issued share capital of your company. Taking into account the acquisition of Nu-Swift Limited ('Nu-Swift') by Ansul on the same date and adjusting for the additional borrowings of £11.0 million taken on by Ansul for that purpose, this valued Ansul and Nu-Swift (together, the 'Fire Group') at £59.4 million. The consideration for the acquisition was satisfied: (i) £24.5 million by the issue of 9,496,124 new ordinary shares at a price of 258p per share, representing the estimated net asset value per ordinary share as at 29 December 1999, taking account of a property revaluation which was carried out for the purposes of this transaction. This represented a premium of 182 per cent. over the mid-market price of 91.5p per ordinary share at the close of business on 7 December 1999, the date immediately prior to the announcement of the acquisition. The shares rank pari passu with the existing ordinary shares, save that they do not rank for the final dividend in respect of the year ended 31 December 1999; and (ii) by a cash payment of £23.9 million, comprising: (a) £11.0 million paid by a newly formed wholly owned subsidiary of the company formed specifically for the purpose of the acquisition, out of the proceeds of new bank borrowings taken on for the purpose of this transaction. (b) £11.0 million from the proceeds of the sale of the group's property subsidiaries. (c) £1.9 million from the company's own cash reserves. In order to provide part of the cash consideration, the company entered into an agreement to dispose of its property subsidiaries to EFS Property Holdings Limited for a consideration of £11,013,000, payable in cash on completion. This represented the estimated aggregate net asset value of those subsidiaries as at 29 December 1999. The non-recourse borrowings of those subsidiaries, which amounted to £10,125,000 remains the responsibility of those subsidiaries after completion, and the company has no continuing responsibility for that debt. BUSINESS OF THE FIRE GROUP The Fire Group operates in the portable fire extinguisher market in the UK, Holland, Belgium, Austria and Switzerland. The Fire Group is profitable and operates a cash generative business which requires a relatively small amount of working capital. The Fire Group has a successful track record of making acquisitions and is regularly reviewing potential acquisition opportunities. Nu-Swift is based in the UK and also has subsidiaries operating in Belgium, Holland and Switzerland. Ansul has its head office in Belgium and also has subsidiaries in Holland, Austria and Switzerland. The Fire Group primarily manufactures, sells, rents and services portable fire extinguishers to and on behalf of end users, although other fire and safety related products including fire alarms, dry risers and safety signs are also sold. The Fire Group produces a range of extinguishers under four principal brands. The Nu-Swift group sells the Premier and Harland ranges. The Ansul group trades as Ansul in Belgium and Holland and Total in Austria and Switzerland. The Ansul group produces the Master and Turex range of fire extinguishers. In addition to its own products, the Fire Group also sells other manufacturers' products, largely as a result of the product ranges offered by companies acquired by the Fire Group. The Fire Group intends to manufacture its own extinguishers partially to replace these products in 2000. FINANCING OF THE ENLARGED GROUP The effect of the acquisition is that the group has entered into loan facilities of £22.0 million with Lloyds TSB Bank Plc and Artesia Banking Corporation S.A., of which £11.0 million was utilised by Ansul as partial consideration for the acquisition of Nu-Swift Limited and £11.0 million was utilised as partial satisfaction of the cash consideration for the acquisition of Ansul. An amount equivalent to £14 million is denominated in Euros and £8 million is denominated in Sterling. This reflect the underlying cash flows of the Fire Group. Lloyds TSB Bank Plc and Artesia Banking Corporation S.A. have also agreed to make available a further facility of £3.0 million to enable the group to make acquisitions in the future. FINANCIAL INFORMATION ON THE FIRE GROUP The pro forma consolidated profit and loss account for the Fire Group for the year ended 31 December 1999 showed that the Fire Group recorded a profit on ordinary activities before amortisation of goodwill and service agreement costs of £7.8 million (1998: £7.2 million) on a turnover of £36.9 million (1998: £36.7 million). The figures included in the pro forma financial information exclude certain costs and income which are not expected to recur following the acquisition. These costs will be restricted to a maximum of £900,000 for the year ending 31 December 2000. PROPOSED BUY-BACK OF ORDINARY SHARES The company has some 2,300 shareholders, of whom about 1,500 own less than 20 ordinary shares. Were these shareholders to sell their ordinary shares, it is likely that in the majority of cases the dealing costs would exceed the sale proceeds. The costs of distributing the interim and final results of the company and also the annual dividend to all shareholders are excessive for a small company. For these reasons, the company intends, subject to obtaining shareholders' approval, at an extra-ordinary general meeting of the company, to offer to purchase up to 250 ordinary shares from each shareholder on the register at 31 March, 2000 at a price of 258p per ordinary share, payable on the first business day after the extra-ordinary general meeting. I, as Chairman of the company and controlling shareholder of EOI, have undertaken that I and/or parties connected with me will vote in favour of the relevant resolution at the annual general meeting. Full details of this proposed buy-back by the company are included in a circular to shareholders which is being posted to shareholders at the same time as the annual report. REVIEW OF BUSINESS FOR 1999 The profit and loss account for 1999 represents the group's former business as a property investment group. Net rents receivable after deducting administrative expenses and net interest payable improved by £131,000, largely due to a reduction in net interest payable of £115,000. An exceptional profit of £1,878,000 arose on the disposal of the group's property subsidiaries, of which £1,830,000 comprises the increase in valuation of the properties between 31 December 1998 and the date of disposal. The acquisition of the Fire Group has not been reflected in the results for 1999 as those businesses did not trade between 29 December 1999, the date of acquisition and 31 December 1999, except to the extent that an exchange gain of £25,000 arose on the Euro-denominated element of the new bank borrowings taken on to finance the acquisition. FUTURE PROSPECTS OF THE FIRE GROUP The Fire Group has traded satisfactorily in 2000 to date, although results from our operations in Continental Europe expressed in Sterling are adversely affected by the ongoing fall of the Euro. In line with our stated policy, we have made two small acquisitions in Belgium and Austria in the year. With further acquisitions expected, together with our commitment to continuous improvement within the existing business, we remain optimistic for the remainder of 2000. DIVIDENDS A final dividend of 2 pence per ordinary share is proposed, payable on 11 July 2000 to shareholders on the register at 16 June 2000. New shares issued as a result of the acquisition of Ansul do not qualify for this dividend. J.G. MURRAY Chairman LONDON SECURITIES PLC PRELIMINARY ANNOUNCEMENT OF THE UNAUDITED CONSOLIDATED PROFIT AND LOSS ACCOUNT for the year ended 31 December 1999 Unaudited Audited Notes 1999 1998 £000 £000 Gross rents receivable 2,006 2,005 Direct property outgoings (107) (127) ------- ------- Net rents receivable 1,899 1,878 Administrative expenses (113) (108) Revaluation surplus 0 600 ------- ------ Operating profit 1,786 2,370 Profit on sale of property investment companies 5 1,878 0 ------- ------- Profit on ordinary activities before interest and taxation 3,664 2,370 Net interest payable (683) (798) Exchange gain on foreign currency 25 0 ------- ------- Profit on ordinary activities before taxation 3,006 1,572 Taxation 1 (376) (124) ------- ------- Profit for the financial year 2,630 1,448 Dividends 2 (102) (102) ------- ------- Retained profit 6 2,528 1,346 ======= ======= Basic earnings per ordinary share 3 50.7p 28.3p ======= ======= Adjusted earnings per ordinary share 3 14.2p 14.1p ======= ======= All of the gross rents receivable and the operating profits above arose from discontinued operations. There is no difference between the profit on ordinary activities before taxation and the retained profit for the year as stated above and their historical cost equivalents. There is no dilution of the company's shares. UNAUDITED PROFORMA PROFIT AND LOSS ACCOUNT As explained in the Chairman's statement, the company acquired the entire share capital of Ansul S.A. on 29 December 1999. The table below shows, for the purposes of illustration only, the combined operating profits of the Fire Group, adjusted for the items mentioned below and also before charging any goodwill amortisation. The figures shown below have been extracted (and, where appropriate, translated at the relevant exchange rates) from the audited financial statements of the Ansul Group and the Nu-Swift Group. Further, the Fire Group has borne certain office and other costs, including the costs of certain executives of the Fire Group, including Jacques Gaston Murray, Jean-Jacques Murray, Jean-Christophe Pillois and Emmanuel Sebag (all of whom are directors of London Securities plc). Under the Services Agreement, further details of which are set out in the circular to shareholders dated 13 December 1999, these costs will be restricted to a maximum of £900,000 for the year ending 31 December 2000. The actual office and other costs borne by Ansul and Nu-Swift have been shown in the table below as 'Service Agreement costs'. ANSUL AND NU-SWIFT GROUPS UNAUDITED PROFORMA PROFIT AND LOSS ACCOUNT Table Part 1 Nu-Swift Ansul Group 1999 1999 1999 £000 £000 £000 Turnover 20,635 16,267 36,902 Cost of sales (3,413) (2,469) (5,882) ------- ------- ------- Gross profit 17,222 13,798 31,020 Distribution costs (9,810) (5,413) (15,223) Administrative expenses (4,844) (5,367) (10,211) Goodwill amortisation (623) (382) (1,005) ------- ------- ------- Operating profit after goodwill amortisation 1,945 2,636 4,581 Adjustments: Income from fixed asset investments 67 - 67 Goodwill amortisation 623 382 1,005 Service Agreement costs 1,775 369 2,144 ------- ------- ------- Operating profit before goodwill amortisation and Service Agreement costs 4,410 3,387 7,797 Maximum Service Agreement costs (900) ------- Operating profit before goodwill amortisation and after Service Agreement costs 6,897 ------- Table Part 2 Nu-Swift Ansul Group 1998 1998 1998 £000 £000 £000 Turnover 19,658 17,019 36,677 Cost of sales (3,442) (2,756) (6,198) ------- ------- ------- Gross profit 16,216 14,263 30,479 Distribution costs (9,199) (5,920) (15,119) Administrative expenses (4,727) (5,683) (10,410) Goodwill amortisation (609) (430) (1,039) ------- ------- ------- Operating profit after goodwill amortisation 1,681 2,230 3,911 Adjustments: Income from fixed asset investments 171 - 171 Goodwill amortisation 609 430 1,039 Service Agreement costs 1,740 325 2,065 ------- ------- ------- Operating profit before goodwill amortisation and Service Agreement costs 4,201 2,985 7,186 Maximum Service Agreement costs (900) ------- Operating profit before goodwill amortisation and after Service Agreement costs 6,286 ------- LONDON SECURITIES PLC UNAUDITED CONSOLIDATED BALANCE SHEET at 31 December 1999 Unaudited Audited Notes 1999 1998 £000 £000 Fixed assets Intangible assets 4 52,568 - Tangible assets 4 5,843 19,595 Investments 4 70 - ------- ------- 58,481 19,595 ------- ------- Current assets Stocks 4 2,421 - Debtors 7,622 209 Cash at bank and in hand 3,633 2,171 ------- ------- 13,676 2,380 ------- ------- Creditors: amounts falling due within one year Finance debt (3,169) (10,075) Other creditors (10,781) (1,226) ------- ------- (13,950) (11,301) ------- ------- Net current liabilities (274) (8,921) ------- ------- Total assets less current liabilities 58,207 10,674 ------- ------- Creditors: amounts falling due after more than one year Finance debt (19,007) - Other creditors (390) - ------- ------- (19,397) 0 ------- ------- Provision for liabilities and charges (1,131) (2) ------- ------- Net assets 37,679 10,672 ======= ======= Capital and reserves Called up share capital 1,459 512 Share premium 6 27,476 3,925 Capital redemption reserve 6 105 103 Revaluation reserve 6 - 1,985 Merger reserve 6 2,033 2,033 Profit and loss account 6 6,606 2,114 ------- ------- Total equity shareholders' funds 37,679 10,672 ======= ======= LONDON SECURITIES PLC UNAUDITED CONSOLIDATED CASH FLOW STATEMENT for the year ended 31 December 1999 Unaudited Audited 1999 1998 Notes £'000 £'000 Net cash inflow from operating activities 1,291 1,806 ------- ------- Returns on investments and servicing of finance Interest received 115 118 Interest paid (798) (906) ------- ------- Net cash outflow from returns on investments and servicing of finance (683) (788) ------- ------- Taxation UK Corporation tax paid (405) (230) ------- ------- Acquisitions and disposals Purchase of subsidiary undertakings 4 (23,910) - Net cash acquired with purchase of subsidiary undertakings 4 3,391 - Receipts from sale of subsidiary undertakings 5 11,013 - Net cash transferred with sale of subsidiary undertakings 5 (112) - ------- ------- Net cash outflow for acquisitions and disposals (9,618) 0 ------- ------- Equity dividends paid to shareholders (102) (102) ------- ------- Net cash (outflow)/inflow before use of liquid resources and financing (9,517) 686 ------- ------- Management of liquid resources increase/(decrease) in short-term deposits with banks 1,759 (1,759) ------- ------- Financing Purchase of own shares (21) - New long term loans 11,000 - ------- ------- Net cash inflow/(outflow) from financing 10,979 - ------- ------- Increase/(decrease) in cash and cash equivalents 3,221 (1,073) ======= ======= Major non-cash transaction Part of the consideration for the purchase of Ansul S.A. comprised shares. Further details of the acquisition are set out in Note 4. LONDON SECURITIES PLC NOTES TO THE PRELIMINARY ANNOUNCEMENT for the year ended 31 December 1999 1 TAX ON PROFIT ON ORDINARY ACTIVITIES 1999 1998 £000 £000 United Kingdom corporation tax at 30.25 per cent. (1998: 31 per cent.) Current 387 255 Deferred (2) (3) ------- ------- 385 252 Overprovision in respect of prior years: Current (9) (128) ------- ------- 376 124 ======= ======= The tax charge for the year is lower than expected because there is no tax liability in respect of the profit on sale of the property investment companies. 2 DIVIDENDS 1999 1998 £000 £000 Dividend on ordinary equity shares: Final proposed of 2.0 pence per share payable on qualifying shares (1998: 2.0 pence) 102 102 ======= ======= 3 EARNINGS PER SHARE The calculation of basic earnings per ordinary share is based on the profit on ordinary activities after taxation of £2,630,000 (1998: £1,448,000) and on 5,186,285 (1998: 5,120,495) ordinary shares, being the weighted average number of ordinary shares in issue during the period. The calculation of adjusted earnings per ordinary share is based on a weighted average of 5,108,340 (1998: 5,120,495) ordinary shares in issue prior to 29 December 1999 and on adjusted earnings which comprise: 1999 1998 £000 £000 Profit on ordinary activities after taxation 2,630 1,448 Eliminate effect of: Profit on disposal of property investment companies (1,878) - Exchange gain on foreign currency (25) - Revaluation surplus 0 (600) Tax credit in respect of prior years 0 (128) ------- ------- 727 720 ======= ======= 4 ACQUISITIONS On 29 December 1999 the Company acquired the entire share capital of Ansul S.A. The book and provisional fair values of the tangible net liabilities assumed were as follows: Book and provisional fair value £000 Tangible fixed assets 5,843 Investments 70 Stocks 2,421 Debtors 6,976 Cash at bank and in hand 3,391 Finance debt (11,756) Corporation tax (570) Other liabilities (10,533) ------- Net liabilities assumed (4,158) Goodwill arising on acquisition 52,568 ------- 48,410 ======= Satisfied by: Cash 23,910 Issue of shares 24,500 ------- 48,410 ======= Provisional fair values based on book values have been assumed as Ansul was only acquired shortly before the year-end. Actual fair values will be determined in the current year. Any changes to fair value in the year ending 31 December 2000 will be reflected through a change in goodwill. 5 DISPOSALS On 29 December 1999, the Company sold the entire share capitals of Evenprofit Limited, Majorcredit Limited, Nu-Swift Finchley Limited, Nu-Swift Sovereign Limited, Nu-Swift Chalfont Limited and Nu-Swift Glenthorn Limited. The net assets disposed of were as follows: Book value £000 Investment properties 19,595 Debtors 446 Cash at bank and in hand 112 Finance debt (10,075) Corporation tax (376) Other current liabilities (567) ------- Net assets disposed of 9,135 Profit on disposal 1,878 ------- Sale proceeds 11,013 ======= Satisfied by cash 11,013 ======= These shares were sold to EFS Property Holdings Limited, a fellow subsidiary of the EOI European and Overseas Investments SARL group, and the proceeds were utilised in part payment of the consideration for Ansul S.A. 6 SHAREHOLDERS' FUNDS Table Part 1 Share Share Capital Capital premium redemption account reserve £000 £000 £000 At 1 January 1999 512 3,925 103 Transfer of revaluation reserve - - - Issue of ordinary shares 949 23,551 - Purchase of own shares and maintenance of capital (2) - 2 Retained profit for the year - - - ------- ------- ------- At 31 December 1999 1,459 27,476 105 ======= ======= ======= Table Part 2 Revaluation Merger Profit and reserve reserve loss account £000 £000 £000 At 1 January 1999 1,985 2,033 2,114 Transfer of revaluation reserve (1,985) - 1,985 Issue of ordinary shares - - - Purchase of own shares and maintenance of capital - - (21) Retained profit for the year - - 2,528 ------- ------- ------- At 31 December 1999 0 2,033 6,606 ======= ======= ======= NATURE OF FINANCIAL INFORMATION The financial information contained in this preliminary announcement does not constitute statutory accounts within the meaning of Section 240 of the Companies Act 1985 as amended (the 'Act'). Accounts for the year ended 31 December 1998 have been filed with the Registrar of Companies in England and Wales. They carried an unqualified audit report and contained no statement under Section 237 (2) or (3) of the Act. The Preliminary Announcement has been agreed for release by the auditors. ANNUAL REPORT Copies of the Annual Report will be posted to shareholders in May 2000 and will be available to the public from the Company's registered office at Wistons Lane, Elland, West Yorkshire, HX5 9DS.

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