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Maclellan Group (MLG)

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Wednesday 15 March, 2006

Maclellan Group

Preliminary Results

Maclellan Group PLC
15 March 2006


Preliminary Announcement of Results

year ended 31 December 2005

                              MacLellan Group plc

     Preliminary announcement of results for the year ended 31 December 2005

                              CHAIRMAN'S STATEMENT


I am delighted to report a record set of results for the year ended 31 December
2005.  These results show the effectiveness of the operating structure which was
put in place in the final quarter of 2004 and the Group is now in excellent

The financial highlights for the year are:-

  • Turnover from continuing operations up by 22% to £232.8 million (2004:
    £190.2 million)

  • EBITDA up by 88% to £12.8 million (2004: £6.8 million)

  • Profit before goodwill amortisation and taxation up by 107% to £8.8
    million (2004: £4.3 million)

  • Profit before taxation up by  244% to £5.046 million (2004:  £1.465

  • Operating margin before goodwill amortisation, other income, interest and
    taxation increased to 4.4% (2004: 2.5%)

  • Fully diluted underlying earnings per share increased by 16% to 6.04 pence
    (2004: 5.2 pence)

  • Basic earnings per share increased to 2.4 pence (2004: 0.0 pence)

  • Net cash inflow from operating activities increased to £13.2 million
    (2004: £8.9 million)

  • Year end net debt reduced to £8.2 million (2004: £14.1 million) with net
    interest covered 7.6 times by operating profit before goodwill amortisation
    and other income (2004: 5.5 times)

Proposed Dividend

The improved financial performance of the Group during 2005 allows the Board to
propose a significantly improved dividend of 1.25 pence which, subject to
Shareholder approval, will be paid on 3 July 2006.  This is a 25% increase on
the last dividend paid to shareholders on 4 July 2005.

Operational Review

2005 was a year of consolidation in order to drive the benefits from the
integration of the previous year's acquisitions into the Group's new operating
structure.  2005's results include new segmental reporting disclosures which
reflect the reporting structures now implemented within the Group.

Our Security and Specialist Services operations performed extremely well in 2005
reporting an operating profit before goodwill amortisation of £5.3 million on a
turnover of £68.9 million (2004: £1.7 million operating profit before goodwill
amortisation on a turnover of £30.3 million).  The performances of both First
Security Group Limited and TASS (Europe) Limited which were both acquired in the
second half of 2004 have exceeded our expectations.

Our Integrated Services operations reported an operating profit before goodwill
amortisation of £4.8 million on a turnover of £163.9 million (2004: £3.0 million
operating profit before goodwill amortisation on a turnover of £159.8 million)
despite suffering a £0.4 million "hit" to profits caused by the April 2005
administrative receivership of the Rover Group.  The Chief Executive's Review
sets out the many significant contract wins which our operations secured in 2005
and we are particularly pleased that 2006 will see the commencement of a new
five year relationship with Prudential Property Investment Managers to provide
operational and facilities management services at 14 retail destinations across
the UK.  The annual value of this contract is expected to be in the region of
£20 million.



We are well positioned to benefit from the further consolidation which is likely
to occur in the outsourced business services markets in which we operate.
Although these markets are competitive, we see many exciting opportunities for
profitable growth including "bolt on" acquisitions.  Our immediate focus,
however, is to continue to expand organically in 2006 and produce further
healthy growth in earnings per share.


The Board is encouraged by current trading and is enthusiastic and confident
about the Group's prospects for 2006.

A L R Morton

15 March 2006



We provide over 60 different facilities services to more than 1,000 customers at
some 3,500 different locations across the UK and the Republic of Ireland.  We
employ in excess of 13,500 people.

We aim to be the facilities provider of choice to customers in the retail,
industrial, commercial and public sectors in the UK and the Republic of Ireland.

We deliver both multiple services on large contracts at multiple locations or a
bespoke, single service to a customer on just one site.  Our service breadth is
wide enough to include the provision of facilities services to Sainsbury's at
395 of their stores throughout the UK and the provision of stewarding services
to Chelsea Football Club for every match they play at Stamford Bridge.


We strongly believe in the benefits of self performance which means that,
wherever possible, the services we provide are undertaken by our own employees.
The single key factor which sets us apart in the facilities services market
place is our ability to effectively manage the self performed services we
provide to our customers.

It is our ability to deliver a wide range of high quality self performed
services which leads to close working relationships with our customers.  We
become an effective partner with our customers through our willingness to
understand their business needs.  This leads to high retention rates when
contracts are retendered and strong forward order visibility.  Strong earnings
visibility provides us with the confidence to invest in our own employees, their
training needs and the support structures which sit behind the front line of
service provision.

Our operating model sounds simple.  After ten acquisitions and three disposals
since 1998, we know what we can do and we have developed an operating model
which works.  The results for 2005 show that our operating model is working very


Turnover in 2005 increased by 22% over 2004.  Operating profit before goodwill
amortisation increased by 88% over 2004 to £10.2 million.  Net operating margins
before goodwill amortisation were 4.4% in 2005 (2.7% in 2004).  Profit before
goodwill amortisation and taxation increased by 107% to £8.8 million.    Fully
diluted underlying earnings per share were 6.04 pence (2004: 5.2 pence).

Net Group debt at 31 December 2005 was £8.2 million which included £6.9 million
of net bank borrowings.  Net Group debt reduced by £5.9 million during 2005
mainly as a result of £13.2 million of net cash inflow from operating
activities.  The Group enjoys banking facilities of £29.2 million and our net
debt position is forecast to reduce further in 2006 as our operations continue
to generate cash.  The management of debtors showed healthy improvement in 2005
and the 31 December 2005 debtor position was £1.84 million lower than the
position at the previous year end despite rising turnover levels.

We have introduced a segmental analysis for 2005 which separately shows the
results of our Integrated Services activities and our Security and Specialist
Services activities.  The segmental analysis reflects the reporting structures
now established within the Group.


Our Integrated Services activities increased operating profit before goodwill
amortisation by 62.8% over 2004 on turnover which increased by 2.6% over 2004.
2004 had been a difficult year for our Integrated Services activities because of
the loss of work at the Bluewater and Touchwood Shopping centres and the
completion of the reorganisation exercises which were required to integrate the
acquisitions made in previous years.  2005's budget was, therefore, consciously
set with low turnover growth but with significant profit improvement  and we are
delighted that this has been successfully achieved.   Turnover growth will
increase in 2006 as a result of the significant number of new contracts secured
in the second half of 2005 and profit will grow accordingly.

Our Security and Specialist Services operations reported an operating profit
before goodwill amortisation of £5.3 million on turnover of £68.9 million (2004:
operating profit before goodwill amortisation of £1.7 million on turnover of
£30.3 million).  The net operating margin before goodwill amortisation increased
from 5.6% in 2004 to 7.7% in 2005.  TASS and SSD remain the subject of earn out
arrangements which we anticipate will eventually result in £4.25 million of
further payments to the vendors if the stretching profit performance targets are

The Group entered 2005 with a £1.7 million loan stock investment in Booth
Industries Group PLC.  £0.529 million of the loan stock was redeemed in March
2005 with a related premium and we have been notified that a further £0.5
million will be redeemed in March 2006.


The major challenges which faced us at the start of 2005 concerned the
management of the introduction of licensing of all employed security officers
throughout our security operations and the continuing upgrading of our support
systems so that we can continue to improve the quality of service delivery to
our customers through the use of the latest technology and equipment.

Licensing has been the dominant issue facing all organisations which operate in
the security marketplace.  We have three operations which employ a significant
number of officers (First Security, MacLellan Attlaw and MacLellan
International).  All three operations have made great efforts to be on top of
the relevant training and vetting issues so that we fully comply with the
Security Industry Authority's requirements.  We are confident that we will
obtain Approved Contractor Status at the earliest possible opportunity.

Our Integrated Services activities continued to make further positive advances
on the systems development front and MacLellan International's IT Steering Group
was particularly busy during the year.  New business analytics software has been
successfully introduced which provides for both a speedier and more detailed
level of financial and operational information to be available to our managers.
The "Order Point" System introduced in 2004 which raises orders within a single,
safe electronic catalogue portal has been rolled out throughout the company.
The MacLellan Audit Process System has been successfully introduced to many of
our larger multi site contracts and the response from our customers has been
very positive.

Our Security operations further developed their control room capabilities and
increased the scope of their services to provide a range of very specific value
added services to complement their core manned guarding capabilities.



All of our operations enjoyed a number of significant contract wins in 2005.

MacLellan International secured major new contracts with Sainsbury's,
Somerfield, Superdrug, Southwark Council, BAe Systems, BMI, Cushman Wakefield,
Mellon Bank and Prudential Property Investment Managers.  MacLellan
International's confirmed forward order book currently sits at approximately
£470 million and over 90% of its 2006 turnover budget is already secured.

First Security has extended the range of its operations outside the M25 and
along the M4 corridor with contract wins at Sony and Newbury Business Park as
well as securing new work for Reuters, Somerset House, CSFB and Societe

MacLellan Attlaw commenced new work with South West Trains during 2005 and
continues to develop its integrated security offering into the retail sector
with a combination of a specialist training service capability, an electronic
security offering and a nationwide manned guarding capability.  MacLellan Attlaw
is also a Specialist at events security and has secured a major contract win at
the new Wembley Stadium where work is expected to commence late in 2006.

TASS continued to secure a number of significant contract wins in the cradle
maintenance and fall arrest markets in which it operates and 90% of its turnover
budget for 2006 is already secured.  SSD Window Cleaning won new contracts
during 2005 with Bruntwood Estates, Mainstay Housing Corporation and ABN Amro.


I would like, on behalf of the Board, to thank our management and employees for
their continuing commitment and hard work.

In addition, the courage and willingness to help others of many of our employees
is also something which the Board would like to recognise.  Last summer was of
course dominated by the dreadful events of 7 July. Above and beyond the call of
duty is perhaps an over used and cliched phrase but it certainly applies in the
case of our employees' response to the Tavistock Square bombing where a number
of First Security's officers and MacLellan International employees were working
at the BMA.  In addition, many MacLellan Attlaw security officers were working
at rail network locations.  Throughout the City of London on that day many of
our employees were called upon in ways they had never experienced before and,
hopefully, will never experience again.  Their actions showed real courage and
we are proud to have such strong characters in our team.


I said last year that the biggest single challenge for 2005 was to deliver
significant growth at the earnings per share level through continuing organic
growth and improved operating performance.  The same applies for 2006; once
again, management is looking forward to the challenge.

John R Foley
Chief Executive
15 March 2006

for the year ended 31 December 2005

                                                2005                                        2004

                                     Before                                      Before
                                 goodwill &   Goodwill &                     goodwill &   Goodwill &
                                exceptional  exceptional                    exceptional  exceptional       Total
                                      items        items       Total              items        items   (restated)
                                       £000         £000        £000               £000         £000        £000
Continuing operations               232,781            -     232,781            190,165            -     190,165

Cost of sales                     (200,999)            -   (200,999)          (165,237)        (284)   (165,521)

Gross profit                         31,782            -      31,782             24,928        (284)      24,644

Administrative expenses
Goodwill amortisation                     -      (3,784)     (3,784)                  -      (2,795)     (2,795)
Exceptional items                         -            -           -                  -      (2,187)     (2,187)
Other                              (21,620)            -    (21,620)           (17,786)            -    (17,786)
                                   (21,620)      (3,784)    (25,404)           (17,786)      (4,982)    (22,768)

Other operating income                    -            -           -                440            -         440

Operating profit
Continuing operations                10,162      (3,784)       6,378              7,582      (5,266)       2,316

Net interest                        (1,332)            -     (1,332)              (851)            -       (851)

Profit on ordinary                    8,830      (3,784)       5,046              6,731      (5,266)       1,465
activities before

Tax on profit on
ordinary activities                 (2,640)            -     (2,640)            (2,176)          741     (1,435)

Profit for the
financial year                        6,190      (3,784)       2,406              4,555      (4,525)          30

Dividends                                                    (1,014)                                       (583)

Profit / (loss) for the
financial year retained                                        1,392                                       (553)

Earnings per share
Basic                                                           2.4p                                        0.0p
Diluted                                                         2.3p                                        0.0p

Earnings per share before goodwill amortisation and
exceptional items:
Basic                                                           6.1p                                        5.4p
Diluted                                                         6.0p                                        5.2p

The above figures are stated on an historical cost basis.

The restatement of the results for the year ended 31 December 2004 relates to
the new accounting treatment for proposed dividends as required by Financial
Reporting Standard 21.  Further information is given in note 2.

at 31 December 2005

                                                                                2005                  2004
                                                                                £000                  £000
Fixed assets
Intangible assets                                                             64,286                68,520
Tangible assets                                                                7,240                 7,622
Investments                                                                    1,380                 1,924
                                                                              72,906                78,066
Current assets
Stocks                                                                           493                   790
Debtors                                                                       37,126                38,966
Cash at bank and in hand                                                       3,962                 2,575
                                                                              41,581                42,331
Creditors: Amounts falling due within one year
Borrowings                                                                   (3,505)               (6,221)
Other creditors                                                             (37,884)              (40,237)
                                                                            (41,389)              (46,458)

Net current assets / (liabilities)                                               192               (4,127)

Total assets less current liabilities                                         73,098                73,939

Creditors: Amounts falling due after more than one year
Borrowings                                                                   (8,637)              (10,441)
Other creditors                                                              (2,125)               (2,375)

Net assets                                                                    62,336                61,123

Capital and reserves
Called up share capital                                                        5,490                 5,482
Ordinary shares to be issued                                                   2,125                 2,375
Share premium account                                                         48,879                48,786
Profit and loss account                                                        5,842                 4,480
Equity shareholders' funds                                                    62,336                61,123

for the year ended 31 December 2005

                                                                                      2005                   2004
                                                                    Note              £000                   £000

Net cash inflow from operating activities                              A            13,220                  8,922

Returns on investments and servicing of finance
Interest received                                                                      137                    147
Interest paid                                                                      (1,355)                  (690)
Interest element of finance lease payments                                           (141)                  (143)
Loan issue costs paid                                                                    -                  (224)
Net cash outflow from returns on investments and servicing of
finance                                                                            (1,359)                  (910)

Taxation                                                                           (3,294)                  (478)

Capital expenditure and financial investment
Purchase of tangible fixed assets                                                  (2,437)                (1,885)
Disposal of tangible fixed assets                                                      225                    163
Redemption of loan stock in unquoted company                                           589                     28
Net cash outflow from capital expenditure and financial
investment                                                                         (1,623)                (1,694)

Acquisitions and disposals
Purchase of subsidiary undertakings                                                      -                (5,549)
Repayment of loans acquired with subsidiary undertakings                                 -                (5,604)
Bank balances acquired with subsidiary undertakings                                      -                  2,269
Earnout consideration on acquisitions made in prior year                              (50)                  (798)
Net cash outflow from acquisitions and disposals                                      (50)                (9,682)

Dividends paid                                                                     (1,014)                  (583)

Net cash inflow / (outflow) before financing                                         5,880                (4,425)

Ordinary shares issued                                                                 101                    148
Expenses incurred in issue of ordinary shares                                            -                  (432)
Loans due within one year:
-   increases in term debt                                                             494                  1,364
-   repayments in year                                                 C           (4,136)                (2,602)
Loans due after one year:
-   increases in term debt                                                           1,460                  8,341
Capital element of finance lease payments                              C           (1,107)                  (928)

Net cash (outflow) / inflow from financing                                         (3,188)                  5,891

Increase in cash in the year                                        B, C             2,692                  1,466

for the year ended 31 December 2005


                                                                                      2005                   2004
                                                                                      £000                   £000
Operating Activities
Operating profit                                                                     6,378                  2,316
Amortisation                                                                         3,784                  2,795
Depreciation                                                                         2,629                  2,134
(Profit) / loss on disposal of tangible fixed assets                                  (31)                      5
Exchange differences                                                                  (25)                     25
Decrease / (increase) in stocks                                                        297                  (182)
Decrease / (increase) in debtors                                                     1,535                (4,126)
(Decrease) / increase in creditors                                                 (1,347)                  5,955
Net cash inflow from operating activities                                           13,220                  8,922

                                                                                      2005                   2004
                                                                                      £000                   £000
Increase in cash in the year                                                         2,692                  1,466
Net cash flow from changes in debt                                                   5,243                (5,951)
New loans to settle obligations including loan notes                               (1,954)                  (841)
New finance lease agreements                                                          (12)                (1,434)
Finance leases acquired with subsidiary undertakings                                     -                  (198)
Loan issue cost amortisation                                                          (65)                   (30)
Exchange movements                                                                       3                      -
Movement in net debt in the year                                                     5,907                (6,988)
Net debt at beginning of year                                                     (14,087)                (7,099)
Net debt at end of year                                                            (8,180)               (14,087)


                                                        At                               Other                At
                                               31 December              Cash          non-cash  31 December 2005
                                                      2004              flow           changes
                                                      £000              £000              £000              £000
Cash at bank and in hand                             2,575             1,387                 -             3,962
Overdraft                                          (1,305)             1,305                 -                 -
                                                     1,270             2,692                 -             3,962

Debt due within one year                           (3,809)             4,136           (3,306)           (2,979)
Debt due after one year                            (9,216)                 -             1,289           (7,927)
Finance lease agreements
-   within one year                                (1,107)             1,107             (526)             (526)
-   after one year                                 (1,225)                 -               515             (710)
                                                  (15,357)             5,243           (2,028)          (12,142)

                                                  (14,087)             7,935           (2,028)           (8,180)



A.   Turnover, operating profit and net operating assets by division
                                                 profit before
                                                      goodwill       Goodwill                 Net operating
                                       Turnover   amortisation   amortisation        Total           assets
                                           £000           £000           £000         £000             £000
Integrated services
Continuing operations                   163,929          4,844        (2,021)        2,823           34,977

Security and specialist services
Continuing operations                    68,852          5,318        (1,763)        3,555           35,539
Turnover                                232,781                                                      70,516

Operating profit
Operating profit before depreciation                    12,791        (3,784)        9,007
Depreciation                                           (2,629)              -      (2,629)
                                                        10,162        (3,784)        6,378
Other operating income                                       -              -            -
Net interest and net debt                              (1,332)              -      (1,332)          (8,180)

Profit on ordinary activities before taxation            8,830        (3,784)        5,046

Net assets                                                                                           62,336

                                                  profit before
                                                       goodwill       Goodwill                  Net operating
                                        Turnover   amortisation   amortisation         Total           assets
                                            £000           £000           £000          £000             £000
Integrated services
Continuing operations                    159,834          2,976        (2,027)           949           38,413

Security and specialist services
Continuing operations                     30,331          1,695          (768)           927           36,797
Turnover                                 190,165                                                       75,210

Operating profit
Operating profit before depreciation                      6,805        (2,795)         4,010
Depreciation                                            (2,134)              -       (2,134)
                                                          4,671        (2,795)         1,876
Other operating income                                      440              -           440
Net interest and net debt                                 (851)              -         (851)         (14,087)

Profit on ordinary activities before taxation             4,260        (2,795)         1,465

Net assets                                                                                             61,123

NOTES continued


B.   Turnover, operating profit before goodwill amortisation and net operating assets by country of origin

                                                 2005                                      2004
                                                                Net                                      Net
                                            Operating     operating                   Operating    operating   
                                Turnover       profit        assets         Turnover     profit       assets
                                    £000         £000          £000             £000       £000         £000
United Kingdom                   228,886       10,007         6,178          186,844      4,985        5,779
Rest of Europe                     3,895          155            51            3,321        126          911
                                 232,781       10,162         6,229          190,165      5,111        6,690

All of the above turnover is invoiced to customers within the country of origin.


If approved at the Annual General Meeting, proposed dividends of 1.25 pence per
ordinary share and 0.4375 pence per preference share will be paid on 3 July 2006
to shareholders on the register on 9 June 2006.

The new Financial Reporting Standard (FRS 21) requires dividends to be debited
to the profit and loss account when they are paid or approved at an Annual
General Meeting.  Previously, the Companies Act 1985 required that proposed
dividends be reported in the profit and loss account.  In applying this change
in accounting practice, the previously reported figures for 2004 have been
restated with the effect that shareholders' funds at 31 December 2004 have been
increased by £1,014,000 (2003: £583,000).


The basic and diluted earnings per share have been calculated on the following
earnings and weighted average number of shares in issue:
                                                         2005                               2004
                                                                 Number of                          Number of
                                                  Earnings          shares         Earnings            shares
                                                      £000            '000             £000              '000

Basic EPS: Earnings available to equity
shareholders                                         2,406         101,437               30            85,969
Effect of dilutive securities:
Options                                                  -             989                -               857

Diluted EPS: Adjusted earnings                       2,406         102,426               30            86,826

Under FRS25, equity shareholders now includes both ordinary shareholders and
convertible preference shareholders; the number of ordinary shares is the
aggregate of ordinary shares in issue and the ordinary shares that would be
issued on the conversion of the convertible preference shares.

The Directors consider that a more appropriate measure of the performance of the
Group excludes, principally, the effect of goodwill which is a non-cash item.
This measure of the underlying earnings per share has been calculated on the
above profit available to equity shareholders adjusted for restructuring and
non-recurring items, goodwill amortisation and related taxation.  The
calculations of earnings per share can be reconciled as follows:

                                                      Diluted                              Undiluted
                                                  2005             2004                 2005             2004
                                                 pence            pence                pence            pence

Basic EPS                                          2.3              0.0                  2.4              0.0
Effect of:
- goodwill amortisation                            3.7              3.2                  3.7              3.3
- contract debt provision and cessation              -              1.3                    -              1.3
- redundancy and rationalisation costs               -              0.7                    -              0.8
Underlying EPS                                     6.0              5.2                  6.1              5.4

NOTES  continued


The financial information set out above does not constitute statutory accounts
as defined in Section 240 of the Companies Act 1985.  The financial information
for the year ended 31 December 2005 has been extracted from the statutory
accounts on which the auditors have issued an unqualified audit report and which
will be delivered to the Registrar of Companies in due course.

The financial information for the year ended 31 December 2004 has been extracted
from the statutory accounts for that year and restated for the treatment of
dividends in accordance with FRS 21; the auditors gave an unqualified report on
the financial statements for that year and the full accounts have been delivered
to the Registrar of Companies.


The Annual General Meeting will be held on Wednesday 3 May 2006 at MacLellan
House, Clews Road, Oakenshaw, Redditch, Worcestershire, B98 7ST commencing at 12
noon.  It is expected that the Notice of Meeting, together with the Report and
Financial Statements will be mailed to shareholders on 7 April 2006.


Copies of this announcement are available from the registered office of the
company: Enterprise House, Chamber Court, Castle Street, Worcester WR1 3AD.



John R Foley
Chief Executive
MacLellan Group plc
Tel: 01905 744400
Mobile: 07785 333480

David Currie
Head of Corporate Finance
Investec Investment Banking
Tel: 0207 597 5970

                      This information is provided by RNS
            The company news service from the London Stock Exchange

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