Final Results
Reliance Security Group PLC
27 June 2002
EMBARGOED UNTIL 7.00 AM
THURSDAY 27 JUNE 2002
Reliance Security Group plc
Preliminary announcement of results for the year ended 26 April 2002
• Turnover up 28.8% to £231.6 million (2001: £179.8 million)
• Profit before tax up 17.9% to £11.5 million (2001: £9.8 million)
• Earnings per share up 22.1% to 35.8p (2001: 29.3p)
• Dividend per share up 15.3% to 13.6p (2001: 11.8p)
• Strong organic growth
• Sustained investment in complementary businesses
• Continued growth in facilities management and higher value added services
Brian Kingham, Chairman, commenting on the results, said:
'Once again I am delighted to report outstanding progress in a year when we have
again invested heavily for the future. The Group now employs over 10,000 people
and is building upon its core competencies in security and facilities management
creating an added dimension in value to customers and shareholders'.
Notes to Editors
Reliance is an established market leader in the provision of contract security,
facilities management, and support services. Reliance employs over 10,000 people
from a network of offices throughout the UK.
For further information:
Brian Kingham Chairman 020 7730 9716
Neil French Group Finance Director 01895 205105
27 June 2002
CHAIRMAN'S STATEMENT
Once again I am delighted to report outstanding progress in a year when we have
again invested heavily for the future. Our strong profits and turnover growth,
which is all the more welcome because it is largely organic, is driven by
continuing investment in complementary businesses and development of specialist
skills to serve new market segments. The Group now employs over 10,000 people
and is building upon its core competencies in security and facilities
management, creating an added dimension in value for customers and shareholders.
Results
Turnover for the year to 26 April 2002 increased by 28.8% to £231.6m (2001:
£179.8m). Profit before tax for the year rose by 17.9% to £11.5m (2001: £9.8m)
and earnings per share rose by 22% to 35.8p (2001: 29.3p). Cash generated from
operations more than doubled to £14.8m (2001: £6.5m).
Dividend
A final dividend is proposed of 10.45p making a total of 13.6p (2001: final
dividend of 9.0p, total 11.8p) subject to approval at the AGM on 11 September
2002 and payable on 20 September 2002 to shareholders on the register on 30
August 2002.
Overview
Our strategic priorities are to extend and strengthen our market leadership in
security services and solutions, where we are already one of the three largest
providers, and to expand our strong presence in the fast growing and
complementary facilities management and outsourced business process markets.
Differentiation derives from a culture of continuous improvement and attitudes
supportive of exceptional individual and team performance in delivering high
levels of customer care. We have developed an innovative approach to work
processes and the use of technology. This differentiation and our emphasis on
long-term customer relationships and high levels of recurring revenue, will
continue to deliver strong organic growth, which will be supplemented by new
start-ups and bolt-on acquisitions complementary to our core competencies.
Security Services
We have continued to grow our overall business volume, we have added capacity to
our infrastructure to handle further expansion and widened our IT support to
achieve greater financial and competitive benefits. The tragic events of
September 11th in the United States have heightened awareness of security issues
everywhere and increased customers' desire for improvements and change. Whilst
experiencing significant growth, the market remains highly competitive and
exhibits interest in integrated solutions which offer economies and increased
effectiveness. Our building of organisational capacities, including remote
surveillance, to meet these needs over the last few years, has added to our
competitive strength and enabled us to provide comprehensive security solutions.
During the year, we mobilised a number of large scale and complex nationwide
contracts involving teams with a variety of skills and disciplines, supported by
appropriate technology. Notable were our £50m contract over five years for BAe
Systems and the extension of our work for Norwich Union, following the creation
of CGNU, and for SmithKline Beecham on becoming GlaxoSmithKline.
We have maintained our focus on growing specialist market segments
differentiating ourselves by offering a greater depth of skills and more
comprehensive services. Our specialist retail security business, in its third
year of existence, increased its business by 40%. We won significant new
business in transport and distribution, manufacturing, and pharmaceuticals. A
notably fast-growing segment this year has been Financial and Investment with
59% growth. Our new contract with Deutsche Bank, covering 32 locations, was
mobilised as well as 11 other new contracts in this specialist market segment.
Patrol Net, our national network of rapid response vehicles has won a variety of
new customers, increasing sales by 25%. This service, when combined with other
group products including remote electronic surveillance, has a capacity to offer
customers highly flexible security as well as estate management options.
We have a continuing programme of investment in IT systems and infrastructure
directed to enhancing customer benefits, reducing costs, streamlining work
processes and shifting resources to customer facing roles. We increased IT
management resources, including two specialist board level appointments.
Expenditure on IT in the year was £1.2m with £3.7m scheduled for 2002/2003. This
will result in considerable benefits in competitive strength, enhanced customer
services and new economies of scale from 2004.
The UK government regulation of the private security industry through licensing
of employees is to be rolled out in 2003/2004. We expect this to have a
favourable effect on the industry by reducing irresponsible competitive pressure
on wages and encouraging greater investment in training and contract management
support. We would also expect to see the opening up of certain government
security and quasi security activities indicated in the Home Secretary's support
for 'a wider police family'.
Our electronic surveillance business continues to progress, increasing sales by
24% and recurring revenues by over 30%. Our reputation for the highest technical
standards in design, installation and maintenance was echoed in the much sought
after Security Management Today security excellence awards where we won 'Best
Security Installer' and 'Best Customer Care Initiative'.
We have extended our support for charitable, voluntary and government
organisations involved in community crime prevention initiatives. We worked with
the Youth Justice Board in pioneering community merit awards. We worked with the
Midlands Retail Crime Reduction Initiative in partnership with the local
authorities and major retailers. We were proud once again to sponsor the Police
Foundation annual lecture. We renewed support for Youth mentoring projects and
for Crime Concern, the leading crime prevention charity. These initiatives serve
to underline our active support for those working to develop and operate
imaginative programmes which address the causes of crime. This is a long term
investment in communities which benefits our customers and makes good business
sense.
USA
In November 2001, following the tragic events of September 11th, the US
Government enacted legislation to federalise pre-board security screening at US
airports. When implemented, this will have an adverse impact on the aviation
security business of Command Security Corporation, in which the Group has a
21.7% stake.
We have considered carefully the carrying value of the investment in Command.
Recognising the business's strong profit and cash generation in the period
preceding the implementation of the legislation in November 2002, its recent
growth in the unaffected parts of the business and the potential for pre-board
screening to return to the private sector in 2005, we have determined that the
carrying value of the Group's investment in Command at £4.6m at the year end is
appropriate.
Facilities Management
The year has seen outstanding progress in our facilities management and support
services businesses. We have won important new contracts with an annual sales
value of £22m. We now directly employ more than 2,280 FM people providing a wide
range of facilities and support services. In addition we deliver the services of
more than 55 service partners through a process of seamless supply-chain
integration. We provide our customers with increased flexibility and added value
by managing change, multi-tasking and process re-engineering.
We operate the facilities at 2,350 locations nationwide involving approximately
23 million sq. ft. of offices and industrial space. Planned maintenance
programmes, performance management systems and daily support services are
supplemented by 24 hour 7 day help desks which process large numbers of
enquiries. We respond with a wide range of services including mechanical and
electrical engineering, energy management, fabric and buildings services,
cleaning, security, catering, grounds, reception, mailroom, health, safety and
administration.
Our £100m pa five year FM contract with the BT Group, the largest yet awarded in
the private sector, in partnership with Carillion plc and Balfour Beatty/Haden,
has now entered its second year. The groundbreaking innovative approach,
offering multi-skilling and tasking continues to be refined and to offer our
customer a wide range of operational efficiencies and economic benefits.
To sustain high levels of growth we have enlarged and strengthened the
management team at all levels, bringing into the business a powerful new
dimension in FM expertise and achievement. Martin Pickard, a widely experienced
facilities specialist and a founder of the Association of Facilities Management
has joined the board of Reliance Integrated Services Limited as chief executive;
Keith Glennister as business development director; Chris Adcock as finance
director; and operations specialists Howard Cooper, Peter Jones and Graham
Sherlock.
Our provision of specialist FM and support services to the Criminal Justice
System has made strong progress, growing by 55%. We announced in January the
award by the Scottish Executive of the electronic monitoring (tagging) of
offenders contract for the whole of Scotland, which is now fully mobilised and
operating successfully. We believe we are now the largest UK provider of
electronic tagging which as an alternative to imprisonment continues to gain
popularity with the Home Office and the Courts. Our 30 year contract to finance,
design, build and operate four buildings for the Police Service is on target for
completion in October. Meanwhile, we have started operations with the provision
of 'early services' at all locations. Our work for the Forensic Science Service
has grown by 26% to serve 34 of our 43 Police Services. I reported in December
the warrant enforcement contract for Magistrates Courts, which has made
excellent progress exceeding its promised performance improvement by 25% in the
first six months.
Market growth in facilities management and outsourced business processes is
estimated to be in the area of 15%pa.
People
It is my great pleasure to pay tribute to the achievements of our people and to
extend my warmest thanks on behalf of the board.
Our employees have done a tremendous job with great enthusiasm and
professionalism. They have made the 'Reliance Difference' often with notable
style, as in winning a record number of 'Security Officer of the Year' awards
from the British Security Industry Association. Our people have built on last
year's Government awarded Charter Mark for high achievement in customer service
with a range of initiatives designed to renew and reinvent the many elements
constituting outstanding customer service. A new method of measuring and
benchmarking the 'Red Book' continuous improvement scheme was developed as well
as new measurement processes for quality improvement. An exceptionally high
proportion of our people, over 90%, are customer facing and are called upon to
provide high levels of inter personal and communications skills. Almost 1,000
customer letters of commendation were received this year.
Once again we increased spending on training, with particular emphasis given to
the workplace and the development of continuous improvement champions. We
provide a wide variety of in-house training courses with over 5,600 employees
benefiting this year. Dedicated training days for managers and supervisors were
increased by 34%. Training for our FM service delivery people is increasingly
focused on multi-skilling to improve individual productivity and to enable the
provision of more effective customer solutions. More than 300 employees achieved
City and Guilds qualifications. Over 50% of appointments to existing management
jobs were made by internal promotions.
Preparations for assessment next year of our 'Investors in People' accreditation
were started. Investors in People forms the core of our approach and affirms our
belief in investing to enable our people to improve their knowledge and skills.
It is the framework for continuously improving the performance of our business
and making us more competitive through a planned approach to setting and
communicating business objectives and developing our people to meet these
objectives.
James Graham, due to other commitments, stood down from the group board at the
year end and I thank him for his wise counsel and valuable contribution. In
March we were delighted to welcome to the group board Nigel Stapleton, a former
chairman of Reed Elsevier plc. I also welcome Sir Neville Purvis, the former
director general of the British Safety Council who in August became Chairman of
Reliance Secure Task Management Ltd.
The Future
We operate in a growing £50 billion UK market which is fragmented with few
barriers to substantial growth. In security services and solutions we have built
a strong market leadership position and a momentum which we believe will benefit
from impending regulation and increased demand. Our strong presence in the
rapidly growing facilities management market complements and strengthens our
competitive position. Our emphasis is on the specialist and higher value added
areas of our markets where our core competencies and market achievements offer
competitive advantage. We have consistently made the necessary investment to
drive growth and we look to the future with confidence.
Brian Kingham
Chairman
26 June 2002
FINANCIAL REVIEW
Overview
In the year to 26 April 2002, the Group has achieved significant growth in
turnover and profit and has generated a substantial cash inflow.
Turnover for the year was £231.6 million, 28.8% higher than in the previous
year, reflecting strong organic growth in the Group's operating companies. In
the period 1997-2002, the Group has grown its turnover at a compound annual rate
of 17.8%.
Profit before taxation for the year was £11.5 million, 17.9% higher than in the
prior year. In the period 1997-2002, the Group's pre-tax profits have increased
at a compound annual rate of 30.4%.
Net cash inflow from operating activities, after funding significant organic
growth in the year, was £14.8 million (2001: £6.5 million).
Over the period of three years to 26 April 2002, the total return to the
Company's shareholders far exceeded the total returns calculated on the basis of
the FTSE All Share and FTSE Support Services indices. Over the periods of five
years and ten years to 26 April 2002, for which FTSE Support Services data are
not available, the total return to the Company's shareholders also far exceeded
the total returns calculated on the basis of the FTSE All Share index. We are
committed to continuing to generate superior returns for our shareholders.
Accounting standards
The Group has adopted the requirements of Financial Reporting Standard 19
'Deferred Tax' and Urgent Issues Task Force Abstract 34 'Pre-contract Costs'.
The impact on the results for the current and prior year, which is not material,
is quantified in Note 6 to the Preliminary Announcement. The prior year's
results have been restated as necessary. The Group does not currently operate a
defined benefit pension scheme, so the requirements of Financial Reporting
Standard 17, 'Retirement Benefits' do not currently apply.
Group results
Operating margin
Gross margin, the ratio of gross profit to sales, is higher in Security Services
than in Facilities Management, which latter, as a result of its faster growth,
accounted for 20.6% of Group turnover compared with 10.1% in the prior year. As
a result, Group gross margin was 18.8% compared with 19.1% in the prior year.
The ratio of administrative expenses to turnover was 14.4% (2001: 14.1%),
reflecting continued investment in management, systems and training to support
the Group's continuing growth.
Consequently, Group operating margin, the ratio of operating profit to turnover
was 4.4% compared with 5.0% in the previous year.
Goodwill amortisation
The charge for goodwill amortisation in the year was £0.4 million (2001: £0.1
million), of which £0.2 million (2001: £0.1 million) was included in share of
associates' operating profit. The increase in the overall charge in the year
reflects a full year's charge in respect of acquisitions and investments
completed in the year to April 2001 and a charge in the current year relating to
the acquisition of the electronic monitoring services business.
Net interest payable
Net interest payable, including the Group's share of interest payable by
associated undertakings, was £0.6 million (2001: £0.1 million). The increase,
year on year, reflects the cost of financing the acquisitions and investments
completed in the second half of the previous year, the aggregate cost of which
was £10.5 million. Interest cover remained healthy at 19 times (2001: 93 times).
Taxation
The net taxation charge for the year was £3.5 million (2001: £3.2 million) which
represents an effective rate of 30.2% (2001: 32.3%). The reduction in effective
rate reflects the low effective rate of taxation on the Group's share of
associated companies' profits in the current year.
Earnings per share
Basic earnings per share increased by 22.1% to 35.8p. In the period 1997-2002,
the Group's underlying basic earnings per share have increased at a compound
annual rate of 32.1%.
Dividends
Dividends paid or proposed were 13.6p per share, 15.3% higher than in the
previous year. Dividend cover was 2.6 times (2001: 2.5 times), reflecting the
Group's policy of retaining sufficient profit to facilitate its continuing
growth. Over the past five years, the Group's return on shareholders' funds (the
ratio of post-tax profit to shareholders' funds) has consistently exceeded 30%.
Cash flow
Net cash inflow from operating activities was £14.8 million (2001: £6.5 million)
an increase of 127%. The year-on-year improvement reflects an increase in profit
and tighter control over working capital.
UK corporation tax paid was £3.0 million (2001: £2.7 million) reflecting higher
profits and the progressive impact of self-assessment.
Capital expenditure and financial investment resulted in a cash outflow of £2.8
million (2001: £7.1 million). The prior year figure included £5.4 million
relating to investments in Chesterton International plc and Safe Estates
Services Limited.
The net cash outflow from acquisitions was £0.3 million (2001: £5.1 million)
representing costs incurred in the year in connection with the acquisition of
the electronic monitoring services business in the South of England. The prior
year figure comprised the acquisition of Goldrange Limited and the investment in
Command Security Corporation.
Dividends paid, excluding dividends paid in respect of shares held by the ESOP
trust, increased by 9.6% to £2.7 million.
The improvement in operating cash flow and the reduced expenditure on
acquisitions and investments resulted in a cash inflow before financing of £6.9
million (2001: £10.9 million outflow).
Segment results
Recognising the continuing growth and increasing significance of the Group's
facilities management businesses, a segmental analysis of turnover, profit and
operating assets has been introduced this year. Segment profit, for each
segment, comprises profit on ordinary activities after share of associates'
results and before finance charges.
The 'Security Services' and 'Facilities Management' segments include the results
of those of the Group's businesses and associated undertakings that provide to
their customers site-based security services and facilities management services
respectively. Central administrative costs and operating assets have been
allocated to the two segments.
Security Services
Turnover was £183.8 million, 13.8% higher than in the previous year, reflecting
strong organic growth, including the award of several large, multi-year
contracts.
Segment profit increased by 13.7% to £9.4 million (2001: £8.2 million), the
increase matching growth in turnover. As a result, segment operating margin, the
ratio of segment profit to turnover, was maintained at 5.1%.
Effective control over working capital resulted in a 5.6% reduction in operating
assets to £17.9 million (2001: £19.0 million), notwithstanding the growth in
turnover. Consequently, the return on operating assets, the ratio of segment
profit to operating assets, increased to 52.3% (2001: 43.4%).
Facilities Management
Turnover was £47.8 million, 162% higher than in the previous year. The increase
in turnover reflects a full year's trading on major contracts in Reliance
Integrated Services and the considerable expansion of Reliance Secure Task
Management following the award of several significant contracts and the
acquisition of the electronic monitoring services business in the South of
England.
Segment profit increased by 69.4% to £2.8 million (2001: £1.7 million). Segment
operating margin was 5.9%, compared with 9.1% in the previous year, reflecting
the transition from interim phase to full service delivery on certain major
contracts and significant strengthening and enlargement of management and
business development teams to provide for continuing growth.
Good control over working capital, together with the receipt of a dividend from
an associated undertaking, resulted in a 50% reduction in operating assets to
£1.8 million (2001: £3.7 million), notwithstanding the increase in turnover. The
return on operating assets therefore increased sharply to 152% (2001: 44.8%).
Reliance Security Group plc
Group profit and loss account (Audited)
for the year ended 26 April 2002
Restated
2002 2001
Notes
£'000 £'000
Group turnover 3 231,629 179,794
Cost of sales (188,165) (145,476)
Gross profit 43,464 34,318
Administrative expenses (33,365) (25,378)
Operating profit 10,099 8,940
Share of associates' operating profits 2,059 942
Profit on ordinary activities before finance charges 3 12,158 9,882
Net interest payable
(567) (46)
Group
Associates (69) (60)
Profit on ordinary activities before taxation 11,522 9,776
Tax on profit on ordinary activities (3,480) (3,154)
Profit on ordinary activities after taxation 8,042 6,622
Dividends 4 (3,067) (2,665)
Retained profit for the year transferred to reserves 4,975 3,957
Earnings per ordinary share
Basic 35.8p 30.5p
Effect of prior year adjustment - (1.2)p
Restated basic 5 35.8p 29.3p
Diluted 35.4p 30.0p
Effect of prior year adjustment - (1.2)p
Restated diluted 5 35.4p 28.8p
The restatement of the prior year's results relates to the adoption of FRS 19
'Deferred Tax' and the early adoption of UITF 34 'Pre-Contract Costs' as
disclosed in note 6.
All material operations in the Group continued throughout both financial years.
Reliance Security Group plc
Group statement of total recognised gains and losses (Audited)
for the year ended 26 April 2002
Restated
2002 2001
Note
£'000 £'000
Profit for the financial year
Group 6,511 6,038
Associates 1,531 584
Total recognised gains relating to the year 8,042 6,622
Cumulative effect of prior year adjustments 6 (84) -
Total gains recognised since last financial statements 7,958 6,622
The restatement of the prior year's results relates to the adoption of FRS 19
'Deferred Tax' and the early adoption of UITF 34 'Pre-Contract Costs' as
disclosed in note 6.
Reliance Security Group plc
Group balance sheet (Audited)
as at 26 April 2002
Restated
2002 2001
£'000 £'000
Fixed Assets
Intangible assets : goodwill 3,075 1,847
Tangible assets 6,407 6,585
Investments 13,438 11,906
22,920 20,338
Current assets
Stocks 1,024 1,072
Debtors 37,038 29,252
Cash at bank and in hand 4,493 7
42,555 30,331
Creditors: amounts falling due within one year (37,706) (28,833)
Net current assets 4,849 1,498
Total assets less current liabilities 27,769 21,836
Creditors: amounts falling due after more than one year (637) (821)
Provisions for liabilities and charges (720) -
Net assets 26,412 21,015
Capital and reserves
Called up share capital 1,164 1,153
Share premium account 2,264 1,853
Revaluation reserve 152 152
Profit and loss account 22,832 17,857
Equity shareholders' funds 26,412 21,015
The restatement of the prior year's results relates to the adoption of FRS 19
'Deferred Tax' and the early adoption of UITF 34 'Pre-Contract Costs' as
disclosed in note 6.
Reliance Security Group plc
Group cash flow statement (Audited)
for the year ended 26 April 2002
2002 2001
Note £'000 £'000
Net cash inflow from operating activities 7 14,823 6,544
Returns on investments and servicing of finance
Interest received 17 166
Interest paid (528) (135)
Interest element of finance lease repayments (65) (45)
Dividends received from associates 1,364 -
Net cash inflow/(outflow) from returns on investments and
servicing of finance 788 (14)
Taxation
UK corporation tax paid (2,950) (2,743)
Capital expenditure and financial investment
Purchase of tangible fixed assets (1,334) (1,304)
Purchase of own shares by ESOP (1,533) (503)
Sale of own shares by ESOP 23 -
Purchase of fixed asset investments - (5,373)
Sale of tangible fixed assets 85 94
Net cash outflow from investing activities (2,759) (7,086)
Acquisitions
Purchase of subsidiary undertakings - (593)
Purchase of a business (305) -
Investment in associates - (4,521)
Net cash outflow from acquisitions (305) (5,114)
Equity dividends paid (2,729) (2,489)
Net cash inflow/(outflow) before financing 6,868 (10,902)
Financing
Issue of ordinary share capital 422 9
Increase in short term borrowings - 504
Capital element of finance lease repayments (356) (224)
Net cash inflow from financing 66 289
Increase/(decrease) in cash in the year 6,934 (10,613)
Reconciliation of net cash flow to movement in net cash/(debt)
Increase/(decrease) in cash in the year 6,934 (10,613)
Net cash inflow/(outflow) from borrowings and finance lease repayments 356 (280)
Change in net cash/(debt) resulting from cash flows 7,290 (10,893)
New finance leases (100) (822)
Movement in net cash/(debt) in the year 7,190 (11,715)
Opening net (debt)/cash at start of year (5,097) 6,618
Closing net cash/(debt) at end of year 2,093 (5,097)
Reliance Security Group plc
Notes to the accounts (Audited)
for the year ended 26 April 2002
The financial information set out above does not comprise the Company's
statutory accounts. The auditors have given an unqualified opinion on the
accounts for the year ended 26 April 2002 which will be delivered to the
Registrar of Companies following the annual general meeting. Statutory accounts
for the previous year ended 27 April 2001 have been filed with the Registrar of
Companies. The auditors' report on those accounts was unqualified and did not
contain any statement under section 237(2) or (3) of the Companies Act 1985.
1 Accounting Convention
The Group accounts have been prepared in accordance with applicable accounting
standards and under the historical cost convention, as modified by the
revaluation of land and buildings. The accounting policies have been
consistently applied in dealing with items which are considered material in
relation to the Group's accounts, except for the policy on deferred tax which
has been changed to comply with FRS 19 'Deferred Tax' and the policy on bid
costs which has been changed to comply with UITF 34 'Pre-contract costs' as
explained in note 6. The financial years of all group companies are the 52 or 53
weeks up to the Friday nearest the accounting reference date of 30 April.
2 Consolidation
The consolidated profit and loss account and balance sheet incorporate the
accounts of Reliance Security Group plc and its subsidiary undertakings. The
results of subsidiary undertakings acquired during the year are included in the
consolidated profit and loss account from the date on which control passed.
3 Segmental information
Turnover Segment profit Operating assets
Restated Restated Restated
2002 2001 2002 2001 2002 2001
£'000 £'000 £'000 £'000 £'000 £'000
By activity
Security services 183,827 161,572 9,359 8,230 17,891 18,960
Facilities management 47,802 18,222 2,799 1,652 1,840 3,685
231,629 179,794 12,158 9,882 19,731 22,645
Segment profit is profit on ordinary activities, including share of associates'
operating profits, before finance charges.
Operating assets are those net assets controlled by Reliance's operating
divisions and reconcile with net assets as follows: -
Restated
2002 2001
£'000 £'000
Operating assets 19,731 22,645
Items excluded:-
Net cash / (debt) 2,093 (5,097)
Listed and unlisted investments and loans 5,373 5,373
Investment in own shares 2,949 1,428
Taxation payable (1,913) (1,646)
Deferred taxation 560 364
Dividends payable (2,357) (2,019)
Interest payable (24) (33)
Total net assets 26,412 21,015
In accordance with the equity method adopted for accounting for associates,
Group turnover excludes turnover of Command Security Corporation Inc. All Group
turnover is therefore derived from within the United Kingdom and represents the
amount receivable for services supplied, net of VAT.
4 Dividends
In addition to the interim dividend of 3.15p (2001: 2.80p), the directors
recommend a final dividend of 10.45p (2001: 9.00p) which, subject to approval at
the Annual General Meeting on 11 September 2002, will be payable on 20 September
2002 to those shareholders on the register of members on 30 August 2002.
5 Earnings per share
Restated
Note 2002 2001
£'000 £'000
Earnings (previously reported) 8,042 6,892
Prior year adjustment 6 - (270)
Earnings (restated) 8,042 6,622
2002 2001
Number Number
Weighted average number of shares 23,118,270 23,059,360
Weighted average number of shares held in ESOP trust (629,568) (447,974)
Shares used to calculate basic earnings per share 22,488,702 22,611,386
Dilutive potential shares 232,391 335,522
Shares used to calculate diluted earnings per share 22,721,093 22,946,908
The basic and diluted earnings per share have been calculated in accordance with
FRS14, based on profit after tax and the weighted average number of ordinary
shares in issue during the year, less shares held by the ESOP trust.
6 Prior year adjustment
The Group's policy for accounting for deferred tax has been revised to comply
with FRS 19 'Deferred Tax'. Previously deferred tax assets were not recognised.
Deferred tax assets are now recognised to the extent that, on the basis of
available evidence, it is regarded more likely than not that there will be
sufficient taxable profits from which the future reversal of the underlying
timing differences can be deducted.
The effects of the change in policy are:
2002 2001
£'000 £'000
Profit and loss account
Decrease/(increase) in tax charge 196 (172)
Balance sheet
Recognition of deferred tax asset 560 364
The Group's policy for accounting for bid costs was not separately disclosed,
but accounting practice was to defer these costs to the extent that recovery
within the contract was reasonably assured. The Group has revised its policy to
comply with UITF 34 'Pre-Contract Costs'. The revised policy is that the Group
expenses all pre-contract costs except for certain directly attributable costs
which, when it is virtually certain that a contract will be awarded, are
capitalised and written off over the life of the contract. Costs incurred prior
to the date when a contract award is virtually certain are not subsequently
reinstated.
The effects of the change in policy are:
2002 2001
£'000 £'000
Profit and loss account
Decrease/(increase) in administrative expenses 100 (140)
(Increase)/decrease in current year tax charge (30) 42
Increase/(decrease) in profit for the financial year 70 (98)
Balance sheet
Decrease in other debtors (540) (640)
Reduction in provision for taxation 162 192
Decrease in net assets (378) (448)
The cumulative effect of the prior year adjustments is:
2002 2001
£'000 £'000
Profit and loss account
Decrease/(increase) in administrative expenses 100 (140)
Decrease/(increase) in current year tax charge 166 (130)
Increase/(decrease) in profit for the financial year 266 (270)
Balance sheet
Decrease in other debtors (540) (640)
Recognition of deferred tax asset 560 364
Reduction in provision for taxation 162 192
Increase/(decrease) in net assets 182 (84)
7. Reconciliation of operating profit to net cash inflow from operating
activities
Restated
2002 2001
£'000 £'000
Operating profit 10,099 8,940
Depreciation charges 1,753 1,380
Amortisation of goodwill 214 77
Loss on sale of fixed assets 1 4
Increase in stocks 48 (549)
Increase in debtors (8,068) (7,791)
Increase in creditors 10,776 4,483
Net cash inflow from operating activities 14,823 6,544
8 Analysis and reconciliation of net cash/(debt)
28 April New finance 26 April 2002
Cash flow leases
2001 £'000
£'000 £'000
£'000
Cash at bank and in hand 7 4,486 - 4,493
Overdrafts (2,448) 2,448 - -
(2,441) 6,934 - 4,493
Loan due within one year (1,471) - - (1,471)
Finance leases (1,185) 356 (100) (929)
(2,656) 356 (100) (2,400)
Net cash / (debt) (5,097) 7,290 (100) 2,093
This information is provided by RNS
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