RNS Number:2346Z
SectorGuard PLC
29 June 2007
SectorGuard Plc / Ticker: SGD / Index: AIM / Sector: Support Services
29 June 2007
SECTORGUARD PLC ('SectorGuard' or 'the Group')
INTERIM RESULTS
SectorGuard Plc, the AIM listed total security solutions group, announces its
results for the six months ended 31 March 2007.
Highlights
* Gross profit up to #2,005,807 (2006: #1,965,702)
* Gross margin rose from 21.6% to 23.4%
* Net cash inflow from operating activities of #1,366,430 - to be used to
finance acquisitions and service debt redemption
* A number of new contracts for both manned guarding services and
electronic security systems
* Acquisition of Protector, a specialist cctv system installer
* Continued investment in the development of the group's infrastructure
and systems
* Post period end, acquisition of the assets of Hertfordshire based
security systems business - Euro Security Systems
Chairman's Statement
I am pleased to report on the six month period ended 31 March 2007 during which
we have continued to build on both the Group's business base and its
infrastructure. In the period under review we acquired Protector, a specialist
cctv system installer, opened new offices in the North West of England to
service our broadening client base and invested in systems and personnel across
the Group to enable SectorGuard to take better advantage of business
opportunities on offer. In addition, we have been awarded a number of new
contracts for both manned guarding services and electronic security systems.
Finance
The gross profit generated in the period rose to #2,005,807 (2006: #1,965,702)
and gross margin rose from 21.6% to 23.4%. The increase in margin is a result of
our change in product and service mix in the reporting period and it is expected
that this will vary with the incidence of new orders year-on-year. However, we
are continuing to maintain our financial strength whilst winning business in an
increasingly competitive marketplace. Operating profit before amortisation was
#562,755 (2006: #665,945) generating a net cash inflow from operating activities
of #1,366,430 in the period, which is being used to finance acquisitions and
service debt redemption.
These accounts have been prepared in accordance with FRS 20 "Share-based
payment" which requires a charge to be made to the profit and loss account in
respect of our share option scheme. The adoption of this accounting standard has
reduced our profits for the current period by #19,844 (2006: #14,577), and in
accordance with FRS 20 we have restated prior year profits and created a share
based payment reserve with an opening balance of #67,054.
Operations
During the course of the period we completed the re-branding of the Group's
divisions to present SectorGuard as a single source supplier whilst still
demonstrating capability and expertise in each of our specialist areas. The
first tangible reward for this exercise was the award of the JD Sports contracts
for manned guarding, cctv and intruder alarm services to add to our existing
contract with them for the supply of electronic article surveillance systems. We
strongly believe that this is the way forward for the industry, with suppliers
such as SectorGuard being able to implement value added solutions using
complementary services and products. Other contracts SectorGuard was awarded in
this period include Carillion FM, London Borough of Tower Hamlets, London
Metropolitan University, London Borough of Camden and Medical Research Council.
Acquisitions
In February 2007 we completed the acquisition of Protector, a specialist cctv
system installer, which added a tier of senior level management to our fire and
security systems division and strengthened our sales and engineering teams. The
addition of Protector's senior staff to the core team we acquired on the
acquisition of SectorAlarm two years ago will facilitate the expansion of the
systems divisions of our business, both organically and through further
acquisition.
Post period we have acquired the assets of Euro Security Systems ("Euro"), a
business that specialises in the installation and maintenance of intruder alarm
and cctv systems. This acquisition adds to our client base and extends the
geographic spread of our engineering base to allow us to better serve our
nationwide contracts. In addition, Una Riley the managing director of Euro, a
leading figure in the security industry, has joined our senior executive team as
Group Head of Communications with a view to further raising SectorGuard's
profile with existing clients, prospective clients and the general public.
Current Trading and Future Outlook
Since the period end we have continued to grow organically and, as detailed
above, have completed the acquisition of Euro. We anticipate that this organic
growth coupled with further acquisitions will continue to drive the growth of
the business. In anticipation of this growth we are continuing to invest in the
development of the Group's infrastructure and systems and expect the full year's
results to reflect this investment.
There are a number of anticipated legislative and regulatory challenges to be
faced by the security industry following on from the introduction of licensing
last year. The next legislative change is the anticipated increase in statutory
holiday leave from 20 days to 24 days with effect from 1 October 2007 and the
subsequent increase to 28 days two years thereafter. This will inevitably have
an inflationary effect on manned guarding contracts as well as lead to an
increase in staffing numbers to cover the additional holiday periods. We have
established a project team to assist the Group, our employees and our clients in
the transition to 24 days holiday.
This has been a very busy start to the year with the opening of new offices,
completion of two acquisitions and commencement of a number of contracts. I look
forward to reporting on the full-year's impact at year-end.
David Marks
Chairman
29 June 2007
GROUP CONSOLIDATED PROFIT & LOSS ACCOUNT
FOR THE SIX MONTHS ENDED 31 MARCH 2007
Six Months Six Months Year
ended ended ended
31 Mar 2007 31 Mar 2006 30 Sept 2006
(unaudited) (unaudited) (audited)
As restated As restated
Note # # #
TURNOVER 4 8,559,670 9,104,547 17,781,897
Cost of sales 6,553,863 7,138,845 14,035,107
--------- --------- ----------
GROSS PROFIT 2,005,807 1,965,702 3,746,790
--------- --------- ----------
Operating expenses before
goodwill
amortisation (1,443,052) (1,299,757) (2,301,550)
Goodwill amortisation (220,059) (206,729) (409,994)
--------- --------- ---------
Operating expenses (1,663,111) (1,506,486) (2,711,544)
----------- ----------- -----------
OPERATING PROFIT 4 342,696 459,216 1,035,246
Interest receivable 4,929 129 12,143
Interest payable and similar
charges (46,328) (62,480) (152,868)
-------- -------- ---------
PROFIT ON ORDINARY ACTIVITIES
BEFORE TAXATION 301,297 396,865 894,521
Tax on profit on ordinary
activities 2 (90,390) (140,404) (259,776)
-------- --------- ---------
PROFIT FOR THE PERIOD 210,907 256,461 634,745
======= ======= =======
EARNINGS PER SHARE (PENCE) 3
Basic 0.07 0.08 0.21
Diluted 0.07 0.08 0.21
All the activities of the Group are classed as continuing.
The Group has no recognised gains or losses for the period other than those
shown above.
GROUP CONSOLIDATED BALANCE SHEET
AT 31 MARCH 2007
As at As at As at
31 Mar 2007 31 Mar 2006 30 Sept 2006
(unaudited) (unaudited) (audited)
As restated As restated
Note # # #
FIXED ASSETS
Intangible assets 7,436,108 6,932,659 6,741,235
Tangible assets 742,510 476,418 642,716
------- ------- -------
8,178,618 7,409,077 7,383,951
--------- --------- ---------
CURRENT ASSETS
Stocks 270,019 194,114 142,279
Debtors 4,115,370 4,918,201 4,543,382
Cash at bank 5 740,477 611,569 303,045
------- ------- -------
5,125,866 5,723,884 4,988,706
CREDITORS: Amounts falling
due within one year (2,548,061) (2,948,298) (2,550,252)
----------- ----------- -----------
NET CURRENT ASSETS 2,577,805 2,775,586 2,438,454
--------- --------- ---------
TOTAL ASSETS LESS CURRENT
LIABILITIES 10,756,423 10,184,663 9,822,405
CREDITORS: Amounts falling
due after more than one year (1,648,758) (936,688) (666,812)
----------- --------- ---------
9,107,665 9,247,975 9,155,593
PROVISIONS FOR LIABILITIES
AND CHARGES (323,044) (833,154) (269,657)
---------- --------- ---------
NET ASSETS 8,784,621 8,414,821 8,885,936
========= ========== =========
CAPITAL AND RESERVES
Called-up share capital 1,558,542 1,525,625 1,547,726
Share premium account 4,793,981 4,759,505 4,756,463
Merger reserve 332,732 158,395 332,732
Share-based payment reserve 6 86,898 47,044 67,054
Own shares in employee share
trust (241,338) (80,863) (201,438)
Profit and loss account 6 2,253,806 2,005,115 2,383,399
--------- --------- ---------
SHAREHOLDERS' FUNDS 7 8,784,621 8,414,821 8,885,936
========= ========= =========
GROUP CONSOLIDATED CASH FLOW STATEMENT
FOR THE SIX MONTHS ENDED 31 MARCH 2007
Six months Six months Year
ended ended ended
31 Mar 2007 31 Mar 2006 30 Sep 2006
(unaudited) (unaudited) (audited)
# # #
Net cash inflow (outflow)
from operating activities 5 1,366,430 (34,613) 541,835
Returns on investments and
servicing of finance (41,399) (62,351) (140,725)
Taxation - (112,000) (323,962)
Capital expenditure and financial
investment (1,064,805) (402,849) (879,597)
Equity dividends paid (340,500) (305,125) (305,125)
--------- --------- ---------
NET CASH OUTFLOW BEFORE FINANCING (80,274) (916,938) (1,107,574)
Financing 517,706 588,073 470,185
------- ------- -------
INCREASE (DECREASE) IN CASH
IN THE PERIOD 5 437,432 (328,865) (637,389)
======= ========= =========
NOTES TO THE INTERIM STATEMENT
FOR THE SIX MONTHS ENDED 31 MARCH 2007
1. Financial Information
The interim results for the six months ended 31 March 2007 and six months ended
31 March 2006 are unaudited and do not constitute statutory accounts within the
meaning of section 240 of the Companies Act 1985. They have been drawn up using
accounting policies and principles used in the preparation of the audited annual
accounts for the year ended 30 September 2006 with the exception of the
introduction of FRS 20 "Share-based payment" which requires a charge to be made
to the profit and loss account in respect of equity-settled share-based payment
transactions.
In accordance with transitional provisions, FRS 20 has been applied to all
grants of equity instruments after 7 November 2002 which had not vested before 1
October 2005.
The Group issues share options to selected employees with the aim of rewarding
all staff equally for their loyalty to the Group. Share options are measured at
fair value at the date of grant. The fair value is expensed on a straight-line
basis over the vesting period, which is usually three years. Options are
forfeited if the employee leaves before the option vests, and it is assumed that
50% of options will be forfeited.
Fair value is measured using the Black-Scholes model. A volatility of 50% has
been assumed, reflecting the view of management that, as the business grows, the
short-term impact of acquisitions on the share price will fall.
The comparative information for the year ended 30 September 2006 does not
constitute statutory accounts within the meaning of section 240 of the Companies
Act 2005, but it has been derived from the audited financial statements for that
year which have been filed with the Registrar of Companies. The report of the
auditors was unqualified and did not contain a statement under section 237 (2)
or (3) of the Companies Act 1985.
2. Taxation
The tax charge for the period is based on the anticipated effective tax rate for
the year to 30 September 2007.
3. Earnings per share
The basic earnings per ordinary share is calculated by dividing profit for the
period by the weighted average number of ordinary shares outstanding during the
period.
The diluted earnings per ordinary share is calculated by dividing profit for the
period by the weighted average number of shares outstanding during the period
after adjusting both figures for the effect of dilutive potential ordinary
shares.
An adjusted earnings per share figure has been calculated in addition to the
earnings per share required by FRS22 "Earnings per share". The directors believe
that the presentation of an adjusted basic earnings per ordinary share, being
the basic earnings per ordinary share adjusted for goodwill amortisation,
assists with understanding the underlying performance of the group.
Six months ended Six months ended Year ended
31 Mar 2007 31 Mar 2006 30 Sep 2006
(restated) (restated)
No. No. No.
Weighted average number
of ordinary shares for
purpose of basic EPS 304,966,077 303,545,861 305,037,999
Effect of dilutive
potential ordinary
shares: share options 996,228 2,037,939 2,087,084
------------- ------------ ------------
Weighted average number
of ordinary shares for
the purpose of diluted EPS 305,962,305 305,583,800 307,125,083
------------- ------------ ------------
Basic and diluted EPS
Profit after taxation #210,907 #256,461 #634,745
Earnings per share 0.07p 0.08p 0.21p
EPS before amortisation of
goodwill
Profit after taxation 210,907 256,461 634,745
Adjustment for amortisation
of goodwill 154,041 134,374 359,632
------------- ------------ ------------
Adjusted profit
after taxation #364,948 #390,835 #994,377
------------- ------------ ------------
Basic earnings per share 0.12p 0.13p 0.33p
Diluted earnings per share 0.12p 0.13p 0.32p
4. Segmental information
Turnover Operating profit
# #
Security personnel and response services 7,511,687 191,317
Fire and security systems and asset protection 1,047,983 151,379
--------- -------
Period ended 31 March 2007 8,559,670 342,696
========= =======
Security personnel and response services 8,069,049 308,540
Fire and security systems and asset protection 1,035,498 150,676
--------- -------
Period ended 31 March 2006 (as restated) 9,104,547 459,216
========= =======
Security personnel and response services 15,458,094 718,726
Fire and security systems and asset protection 2,323,803 316,520
--------- -------
Year ended 30 September 2006 (as restated) 17,781,897 1,035,246
========== =========
5. Cash flow statement
Reconciliation of operating profit to net cash inflow from operating activities
#
Operating profit 342,696
Amortisation 220,059
Depreciation 108,141
Movement in share-based payment reserve 19,844
Profit on disposal of fixed assets (4,675)
Increase in stocks (127,740)
Decrease in debtors and prepayments 428,012
Increase in creditors and accruals 380,093
-------
Net cash inflow from operating activities 1,366,430
=========
Analysis of changes in net debt
At Cash Non-cash At
30 Sep 2006 flows movements 31 Mar 2007
Net cash: Cash at bank 303,045 437,432 - 740,477
------- ------- ------- -------
Debt due within one year (521,767) 467,410 - (54,357)
Debt due after one year (588,113) (1,011,887) (1,600,000)
Finance lease agreements (149,108) 35,205 - (113,903)
--------- ------ ------- ---------
(1,258,988) (509,272) - (1,768,260)
----------- --------- ------- -----------
Net debt (955,943) (71,840) - (1,027,783)
========= ======== ======= ===========
6. Prior Period Adjustments
The effect of the introduction of FRS 20 (see note 1) on the comparative
financial information is as follows:
At 31 Mar 06 At 30 Sep 06
# #
Profit and loss account:
As previously reported 2,052,159 2,450,453
Effect of FRS 20 (47,044) (67,054)
-------- --------
As restated 2,005,115 2,383,399
========= =========
Share-based payment reserve:
Effect of FRS 20 47,044 67,054
------ ------
As restated 47,044 67,054
====== ======
7. Statement of movement in shareholders' funds
#
At 30 September 2006 8,885,936
Profit for the period 210,907
Dividends (340,500)
Issue of new shares 48,334
Share-based payment reserve 19,844
Increase in own shares in employee share trust (39,900)
--------
At 31 March 2007 8,784,621
=========
8. Interim Report
Copies of this Interim Report are being sent to all shareholders and will be
available to the public from the Company's Head Office: Hanover House,
Queensgate, Britannia Road,
Waltham Cross, Hertfordshire EN8 7TF.
* * ENDS * *
For further information visit www.sectorguard.plc.uk or contact:
David Marks SectorGuard Plc Tel: 07734 051 547
Isabel Crossley St Brides Media & Finance ltd Tel: 020 7242 4477
Jonathan Wright Seymour Pierce Limited Tel: 020 7107 8000
This information is provided by RNS
The company news service from the London Stock Exchange
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