RNS Number:7060J
SectorGuard PLC
12 December 2007
SectorGuard Plc: SGD / Index: AIM / Sector: Support Services
12 December 2007
SectorGuard plc ('SectorGuard' or the 'Company')
Interim Results
SectorGuard Plc, the AIM listed specialist security provider, announces its
unaudited results for the 12 months ended 30 September 2007.
Overview
* Completed the acquisitions of Protector and Euro Security Systems
* Obtained Investors in People accreditation
* Revenue of �17,809,565 (2006: �17,781,897)
* Total Assets �14,134,837 (2006: �12,788,746)
* Net Cash Inflow from Operating �1,044,108 (2006: 217,873)
Chairman's Statement
I am pleased to report on the 12 month interim period ended on 30 September
2007, following the change of our accounting reference date from 30 September to
31 March. The accounts for this period have been prepared for the first time in
accordance with International Financial Reporting Standards and an explanation
of the impact of this change in accounting standards is included in the notes to
these accounts.
This period has been one of major investment and consolidation. During the
period we have: completed two acquisitions; launched the SectorGuard Data
Protection Suite, the first of its kind in the UK, which was opened by the
Chairman of the SIA, Baroness Henig; settled into new headquarters in Waltham
Cross; opened new offices in Crewe; acquired Investors In People (IiP)
accreditation; and are working towards obtaining accreditation for ISO 14001,
Environmental Management Standard. In addition, we have used this period to
complete the repositioning of SectorGuard as a total security solutions
provider, putting us at the forefront of the convergence of the individual
sectors and enhancing cross-selling opportunities across the business and
providing added value services to a wide range of clients.
We are now in a very strong position to achieve substantial growth in all areas
of our business, delivering significant increases in shareholder value.
Operations
During the period we completed two acquisitions: the business of Protector, a
specialist in installing cctv systems; and Euro Security Systems, a specialist
intruder alarm and cctv installation and maintenance business. These two
acquisitions have improved the strength and depth of our electro-technical
divisions.
The group's four operating divisions, Security Personnel, Response Services,
Fire & Security Systems, and Asset Protection have continued to develop both as
independent units and as integral parts of our Total Security Solution. The
continued development of this integrated solution has been greatly assisted by
moving the business units into one central office in Waltham Cross. In order to
maintain a similar approach in the Midlands and the North of England we have
also combined our Stourbridge manned guarding office and the Protector business
unit, which was previously located in Salford, into one office in Crewe. This
co-ordinated approach to the provision of security services and products has
enabled us to offer value added solutions to existing and potential suppliers,
providing real enhancement of the service offered and demonstrates a major
differentiation between us and other suppliers in this growing market.
During the period we have extended the range of services we offer our clients to
assist them in coping with the increased regulatory and legislative burden
placed on their businesses. The two principal new services offered are:
* Fire risk assessments and maintenance of fire management plans following
the implementation in October 2006 of the Regulatory Reform (Fire Safety)
Order 2005; and
* A Data Protection Suite, assisting clients in complying with the
requirements of Section 4 of the Data Protection Act 1998, where they
capture images from a cctv system.
In addition to developing new services to assist clients we are continuing to
invest in our own systems to ensure we stay at the forefront of regulatory and
legislative changes. During the period we have obtained accreditation for IiP
for the electro-technical division and made a corporate commitment on behalf of
the entire organisation. We have also commenced the accreditation process for
ISO 14001, Environmental Management Systems, and hope to receive accreditation
by the end of our financial year, making us one of the first security companies
to achieve this standard.
Obtaining these accreditations demonstrates to all stakeholders in the company
the investment we are prepared to make in our staff, systems and procedures with
a view to delivering best practice across the whole company and managing the
sustainability of our business and the resources we employ.
Acquisitions
As reported above, we acquired two businesses during the period with a view to
strengthening our Fire & Security Systems division and expanding our
geographical reach.
We acquired Protector, a Salford based specialist cctv installation and
maintenance business, from Smart Securities CCTV Ltd in February, and we
acquired Euro Security Systems, a Hertfordshire based business focused on the
installation and maintenance of electronic security systems including intruder
alarms, access control and cctv, in June.
Both of these acquisitions bring benefits of senior management, experience and
product knowledge in addition to a broad range of clients ranging from Hugo Boss
and Kwik Fit to Total Oil and Exxon Mobil. The geographical spread of the
electro-technical divisions of the business has now been spread nationwide and
our market penetration in the retail sector has been significantly improved as a
direct result. The Managing Director of Smart, Gareth Wright, has joined us as
General Manager of the electro-technical divisions and has been overseeing the
integration of Protector, Euro and the balance of our electro-technical business
into one comprehensive unit supplying services and product under the SectorGuard
Fire & Security Systems and SectorGuard Asset protection banners. Una Riley, the
former Managing Director of Euro, has joined us as Group Head of Communications,
and as well as being responsible for managing this important aspect of our
business, has assisted greatly in all aspects of achieving further accreditation
in the company. Una is a past Master of the Company of Security Professionals
and Senior Warden of the Guild of Public Relations Practitioners and adds a new
dimension to our senior management and our internal skill sets.
Finance
These accounts have been prepared for the first time under International
Financial Reporting Standards. There have been two principal changes to these
interim accounts arising from this transition, namely the re-classification of
Intangible Assets into Customer Lists which are amortised and Goodwill which is
not amortised but is still subject to an impairment review; and accounting for
share based payments under IFRS2 which requires the fair value of the equity
issued to be charged to the income statement as opposed to any discount to
market value. As SectorGuard has never issued options at a discount to market
value there has not been a charge to the profit and loss account in respect of
options in previous years. Details of the adjustments made can be found in the
notes to the accounts.
In addition to the changes outlined above, IFRS requires different disclosure in
the accounts and notes to the accounts. In common with many other businesses we
will publish a full transition document on our website detailing changes in
relation to both these financial statements and the full statements to be
published at the end of the financial accounting period.
Revenue for the 12 month period was �17,809,565 compared to �17,781,897 for the
year ended 30 September 2006, generating a Gross Profit of �3,699,688 (2006:
�3,746,790), thereby reporting a consistent 21% Gross Margin. There have been
minor fluctuations in margin over the course of the past 12 months due to the
varying mix of business. However, with the expected increased turnover from our
electro-technical divisions I would expect that to continue to have a marked
impact on the group's margin.
Whilst Gross Margin and Gross Profit have been maintained, EBITDA for the 12
months under review was �1,134,112 which was �441,266 less than for the year
ended 30 September 2006. This was principally due to the investment in
developing the business both in terms of the repositioning exercise, which cost
in excess of �100,000, and the integration of the acquisitions where there was a
period of overlap in terms of rent and other costs. These costs will not be
recurring and therefore should have no impact on future trading. Central
overheads have risen by around �120,000, however, due to the growth of the
business and the move to new offices. This increased overhead should be
recovered from the increased turnover we expect to generate.
The adoption of IFRS 2 in relation to share options has reduced our profits for
the 12 month period by �51,244 (y/e 30 September 2006: �34,587) and in
accordance with IFRS 2 we have re-stated prior year profits and created a share
based payment reserve with an opening balance of �67,054.
The business generated �1,044,108 net cash inflow from operating compared to
�217, 873 in 2006 and at 30 September 2007 had total assets of �14,134,837
(2006: �12,788,746).
Current trading and future outlook
The business is continuing to develop across all its divisions and now that the
integration of the electro-technical business units into one cohesive body is
taking shape I anticipate significant organic growth from this side of the
business. We have already generated significant income from the Data Protection
Suite and there have been a number of exciting opportunities for developing new
business by the improved ability to offer a total security solution package for
potential clients, especially on larger tenders.
The security personnel division is progressing strongly. The major challenge for
this division since 1 October has been the increase in statutory holiday
entitlement from 4 weeks to 4.8 weeks, this has an impact on staff resources as
additional staff will need to be recruited to cover a 20% increase in holiday.
In addition to our investment in ISO 14001 and Investors In People
accreditations, we have been developing a number of initiatives which have
increased our involvement with the security and wider community. We have been
developing an initiative with the City of London Mounted Police, which increases
their profile within local communities to try and build respect for the law and
the police with younger members of the community. Perhaps the most exciting
initiative is the SectorGuard Anglo American Exchange programme, which is open
to all members of the UK security profession and aims to raise standards within
the sector by facilitating an exchange programme between UK and US based
security operatives, sharing knowledge and procedures.
I am confident that the investment made over the past 18 months will lead to
increased business across all our divisions. Brand awareness has been increased
as a result of both our marketing and business development efforts, this in turn
is generating new business opportunities.
We are currently exploring a number of substantial acquisition opportunities in
the security personnel sector, which we hope to update shareholders on in the
near future. Following successful completion, we would then anticipate focusing
our energies on building the business organically.
David Marks
Chairman
12 December 2007
INDEPENDENT REVIEW REPORT TO SECTORGUARD PLC
Introduction
We have been engaged by the Group to review the condensed set of financial
statements in the report for the twelve months ended 30 September 2007 which
comprises a condensed income statement, a condensed balance sheet as at 30
September 2007, a condensed statement of changes in equity, a condensed cash
flow statement, comparative figures and associated notes
We have read the other information contained in the report and considered
whether it contains any apparent misstatements or material inconsistencies with
the financial information in the condensed set of financial statements.
This report is made solely to the Group in accordance with the terms of our
engagement to assist the Group in meeting the requirements of the AIM Rule 18.
Our review has been undertaken so that we might state to the Group those matters
we are required to state to it in this report and for no other purpose. To the
fullest extent permitted by law, we do not accept or assume responsibility to
anyone other than the Group for our review work, for this report or for the
conclusions we have reached.
Directors' responsibilities
The report is the responsibility of, and has been approved by, the directors.
The directors are responsible for preparing the report in accordance with AIM
Rule 18.
As disclosed in note one, the annual financial statements of the group are
prepared in accordance with IFRS as adopted by the European Union. It is the
responsibility of the directors to ensure that the condensed set of financial
statements included in this report have been prepared on a basis consistent with
that which will be adopted in the Group's annual financial statements.
Our responsibility
Our responsibility is to express to the Group a conclusion on the condensed set
of financial statements in the report based on our review.
Scope of review
We conducted our review in accordance with International Standard on Review
Engagements (UK and Ireland) 2410 "Review of Interim Financial Information
Performed by the Independent Auditor of the Entity" issued by the Auditing
Practices Board for use in the United Kingdom. A review of interim financial
information consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other review
procedures.
A review is substantially less in scope than an audit conducted in accordance
with International Standards on Auditing (UK and Ireland) and consequently does
not enable us to obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly we do not express an
audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe
that the condensed set of financial statements in the report for the twelve
months ended 30 September 2007 is not prepared, in all material respects, in
accordance with the requirements of the AIM rules.
Nexia Smith & Williamson
Consolidated Income Statement
For the 12 months ended 30 September 2007
Twelve months ended Six months ended 30 Year ended 30
30 September 2007 September 2007 September 2006
(unaudited) (unaudited) (audited)
Note � � �
REVENUE 3 17,809,565 9,249,895 17,781,897
Cost of sales (14,109,877) (7,556,014) (14,035,107)
GROSS PROFIT 3,699,688 1,693,881 3,746,790
Operating expenses (2,825,572) (1,376,871) (2,305,831)
OPERATING PROFIT 3 874,116 317,010 1,440,959
Finance income 8,815 3,886 12,143
Finance costs (142,037) (95,709) (152,868)
PROFIT BEFORE TAX 740,894 225,187 1,300,234
Tax expense (228,805) (69,543) (289,633)
PROFIT FOR THE PERIOD 512,089 155,644 1,010,601
======== ======== =========
EARNINGS PER SHARE (PENCE) 4
Basic 0.17 0.05 0.33
Diluted 0.17 0.05 0.33
Consolidated Balance Sheet
At 30 September 2007
As at As at
30 September 2007 30 September 2006
(unaudited) (audited)
� �
NON-CURRENT ASSETS
Intangible assets 8,338,774 7,146,948
Property, plant and equipment 795,561 642,716
Deferred tax recoverable 26,767 26,239
9,161,102 7,815,903
CURRENT ASSETS
Inventories 263,797 142,279
Trade and other receivables 4,651,705 4,527,519
Cash and cash equivalents 58,233 303,045
4,973,735 4,972,843
TOTAL ASSETS 14,134,837 12,788,746
========== ==========
CURRENT LIABILITIES
Trade and other payables 2,071,938 1,695,044
Current tax liabilities 264,835 303,265
Loans and overdrafts 941,440 521,767
Obligations under finance leases 189,379 70,409
Provisions 20,000 269,657
3,487,592 2,860,142
NON-CURRENT LIABILITIES
Loans and overdrafts 1,000,000 588,113
Obligations under finance leases 26,254 78,699
1,026,254 666,812
TOTAL LIABILITIES 4,513,846 3,526,954
EQUITY
Share capital 1,579,254 1,547,726
Share premium account 4,789,933 4,756,463
Share-based payment reserve 118,298 67,054
Other reserves 202,662 131,294
Retained earnings 2,930,844 2,759,255
TOTAL EQUITY 9,620,991 9,261,792
TOTAL LIABILITIES AND EQUITY 14,134,837 12,788,746
========== ==========
Consolidated Statement of Changes in Equity
For the Twelve Months ended 30 September 2007
Share
Share premium Share-based Merger Own shares Retained Total
capital account payment reserve in employee earnings
reserve trust
� � � � � � �
At 1 October 2005 1,525,625 4,761,083 32,467 158,395 (57,400) 2,053,779 8,473,949
Profit after tax Nil Nil Nil Nil Nil 1,010,601 1,010,601
Proceeds from shares
issued 22,101 Nil Nil 174,337 Nil Nil 196,438
Costs associated with
share options Nil (4,620) Nil Nil Nil Nil (4,620)
Share-based payment Nil Nil 34,587 Nil Nil Nil 34,587
Shares acquired Nil Nil Nil Nil (144,038) - (144,038)
Dividends paid Nil Nil Nil Nil Nil (305,125) (305,125)
------------ ------------ ------------ ------------ ------------ ------------ ------------
At 1 October 2006 1,547,726 4,756,463 67,054 332,732 (201,438) 2,759,255 9,261,792
Profit after tax Nil Nil Nil Nil Nil 512,089 512,089
Proceeds from shares
issued 31,528 39,119 Nil 141,268 Nil Nil 211,915
Costs associated
with share options Nil (5,649) Nil Nil Nil Nil (5,649)
Share-based payment Nil Nil 51,244 Nil Nil Nil 51,244
Shares acquired Nil Nil Nil Nil (69,900) Nil (69,900)
Dividends paid Nil Nil Nil Nil Nil (340,500) (340,500)
------------ ------------ ------------ ------------ ------------ ------------ ------------
At 30 September 2007 1,579,254 4,789,933 118,298 474,000 (271,338) 2,930,844 9,620,991
============ ============ ============ ============ ============ ============ ============
Consolidated Cash Flow Statement
For the Twelve Months Ended 30 September 2007
Twelve months Six months Year
ended ended ended
30 September 30 September 30 September
2007 2007 2006
(unaudited) (unaudited) (audited)
� � �
OPERATING ACTIVITIES
Cash flow from operations (Note 5) 1,311,871 (54,559) 541,835
Taxation paid (267,763) (267,763) (323,962)
------------- ------------- -------------
NET CASH INFLOW (OUTFLOW)
FROM OPERATING 1,044,108 (322,322) 217,873
------------- ------------- -------------
INVESTING ACTIVITIES
Payments to acquire intangible fixed (1,302,688) (441,143) (539,065)
assets
Payments to acquire tangible fixed assets (390,121) (182,186) (342,627)
Proceeds from disposal of tangible fixed 4,675 Nil 2,095
assets
------------- ------------- -------------
NET CASH OUTFLOW FROM INVESTING (1,688,134) (623,329) (879,597)
------------- ------------- -------------
FINANCING ACTIVITIES
Interest received 8,815 3,886 12,143
Interest paid (131,992) (85,664) (147,734)
Interest element of finance leases (10,045) (10,045) (5,134)
Equity dividends paid (340,500) Nil (305,125)
Issue of equity share capital 11,281 465 196,439
Expenses of ordinary share capital (5,649) Nil (5,170)
Share premium on issue of ordinary share capital 39,119 1,601 550
Purchase of own equity shares (69,900) (30,000) (144,038)
Repayment of loans (782,688) 244,179 (471,316)
New bank loans 1,600,000 Nil 1,000,000
New finance leases 138,062 138,062 Nil
Repayment of capital element of finance leases (71,537) (36,332) (44,286)
------------- ------------- -------------
NET CASH INFLOW FROM FINANCING 384,966 226,152 86,329
------------- ------------- -------------
Decrease in cash and bank overdrafts (259,060) (719,499) (575,395)
Cash and bank overdrafts at beginning of 274,135 734,574 849,530
period
------------- ------------- -------------
Cash and bank overdrafts at end of period 15,075 15,075 274,135
============= ============= =============
Cash and bank overdrafts at end of period
comprise:
Cash and cash equivalents 58,233 58,233 303,045
Overdrafts (43,158) (43,158) (28,910)
------------- ------------- -------------
15,075 15,075 274,135
============= ============= =============
Notes to the Interim Statement
at 30 September 2007
1 Financial Information
The group has elected to change the accounting reference date of all group
companies to 31 March under section 225 of the Companies Act 1985. This interim
statement covers the twelve-month period ended 30 September 2007. The next full
financial statements will be prepared for the eighteen-month period ended 31
March 2008 in accordance with International Financial Reporting Standards (IFRS)
as adopted for use in the EU applied in accordance with the provisions of the
Companies Act 1985.
The financial information for the twelve months ended 30 September 2007 is
unaudited and has been prepared in accordance with the group's accounting
policies, set out below, that are expected to apply for the eighteen-month
period ended 31 March 2008. These policies are in accordance with IFRS as
explained above. These results have been reviewed by the group's auditors. The
financial information relating to the year ended 30 September 2006 has been
extracted from the full financial statements for that year and has also been
restated in accordance with the accounting policies set out below. The report of
the auditors on the 2006 accounts as prepared under UK GAAP was unqualified and
did not contain a statement made under section 237(2) or section 237(3) of the
Companies Act 1985. The financial information in this report does not constitute
statutory accounts within the meaning of section 240 of the Companies Act 1985.
These interim financial statements have been prepared under the historical cost
convention.
Basis of consolidation
The consolidated financial statements incorporate the financial statements of
the company and all group undertakings. These are adjusted, where appropriate,
to conform to group accounting policies. The purchase method of accounting is
used to account for the acquisition of subsidiaries by the group. The results of
companies acquired or disposed of are included in the income statement after or
up to the date that control passes respectively.
Revenue
Revenue comprises the fair value of the consideration receivable for the sale of
goods and services in the ordinary course of the group's activities. Revenue is
shown net of value added tax and discounts.
The group recognises revenue when the amount of revenue can be reliably
measured, it is probable that future economic benefits will flow to the group
and when specific criteria have been met for each of the group's activities as
described below.
Manned guarding and mobile patrol:
Revenue represents the amount earned during the period for the provision of
security calculated on an hourly basis.
Supply and installation of electronic security systems and consumables:
Revenue represents the amount earned during the period from supplying and
installing electronic security systems and consumables. Revenue is recognised
and invoiced once equipment is supplied to clients' premises.
Electronic security systems maintenance agreements and keyholding and alarm
response services:
Revenue represents a non-refundable annual fixed fee charged to the group's
clients during the period for the provision of services and is recognised when
invoiced to the client. Revenue also includes the amounts earned on call-out
charges during the period arising when the group is required to attend the
client's premises, and is invoiced and recognised when the engineer visits the
site.
Segment reporting
A business segment is a group of assets and operations engaged in providing
products and services that are subject to risks and returns different from those
of other business segments. A geographical segment is engaged in providing
products and services within a particular economic environment that are subject
to risks and returns different from those of other segments operating in other
economic environments.
The group manages its operations on a business segment basis, and this is the
basis on which it reports its primary segment information.
Goodwill
Goodwill arises on the acquisition of business assets and subsidiary
undertakings and represents the excess of the fair value of consideration over
the fair value of identifiable net assets acquired. Goodwill is included in "
intangible assets"; it is tested annually for impairment and carried at cost
less accumulated impairment losses. Impairment losses on goodwill are not
reversed.
Goodwill is allocated to cash-generating units for the purpose of impairment
testing. The allocation is made to those cash-generating units or groups of
cash-generating units that are expected to benefit from the business combination
in which the goodwill arose.
Other intangible assets
Intangible assets are stated at cost less provisions for amortisation and
impairments. Customer lists separately acquired or acquired as part of a
business combination are amortised over their
estimated useful lives, using the straight-line basis, from the time they are
available for use. The estimated useful lives for determining the amortisation
charge are reviewed annually.
Finance lease agreements
Where the group enters into a lease which entails taking substantially all the
risks and rewards of ownership of an asset, the lease is treated as a finance
lease. The asset is recorded in the balance sheet as a tangible fixed asset and
is depreciated in accordance with the above depreciation policies. Future
instalments under such leases, net of finance charges, are included within
creditors. Rentals payable are apportioned between the finance element, which is
charged to the income statement on a straight-line basis, and the capital
element which reduces the outstanding obligation for future instalments.
Operating lease agreements
Rentals applicable to operating leases where substantially all of the benefits
and risks of ownership remain with the lessor are charged against profits on a
straight-line basis over the period of the lease.
Taxation
Deferred taxation is provided in full, using the liability method, on temporary
differences arising between the tax bases of assets and liabilities and their
carrying amounts in the consolidated financial statements. Deferred tax assets
are recognised to the extent that it is probable that future taxable profits
will be available against which the temporary differences can be utilised.
The charge for current tax is based on the results for the period, adjusted for
items which are non-assessable or disallowed.
Share option schemes
The group issues share options to all full-time permanent 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.
2 Critical accounting estimates and judgments
Estimates and judgments are continually evaluated and are based on historical
experience and other factors, including expectations of future events that are
believed to be reasonable under the circumstances.
The group makes estimates and assumptions concerning the future. The resulting
accounting estimates will, by definition, seldom equal the related actual
results. The estimate with the most significant risk of causing a material
adjustment to the carrying amounts of assets and liabilities within the next
financial year is the impairment of goodwill. The calculation of any impairment
loss requires an estimate of the value in use of the cash-generating units
(CGUs) to which goodwill has been allocated. This involves a forecast of the
future cash flows of the CGU and the selection of appropriate discount rates in
order to ascertain present values. A significant element of judgment is needed.
The cash flow projections are based on financial plans approved by senior
management covering a five year period. Cash flows for the following ten years
are extrapolated based on an estimated growth rate of 2.25%. This rate does not
exceed the average long-term growth rate for the UK. Management estimates
discount rates using pre-tax rates that reflect current market assessments of
the time value of money and the risks specific to the CGUs.
No goodwill impairment has been recognised in the period.
3 Segmental analysis
The group is organised into two main business segments: security personnel and
response services; and fire and security systems and asset protection. The group
operates exclusively in the UK and therefore no geographical analysis is
presented.
Security personnel Fire & security Unallocated Total
systems
� � � �
Twelve months ended
30 September 2007:
Revenue 15,312,912 2,496,653 Nil 17,809,565
------------- ------------ ----------- -----------
Result:
Operating profit 730,709 143,407 Nil 874,116
Finance income Nil Nil 8,815 8,815
Finance costs (122,125) (19,912) Nil (142,037)
----------- ----------- ---------- -----------
Profit before tax 608,584 123,495 8,815 740,894
=========== =========== ========== ===========
Twelve months ended
30 September 2006:
Revenue 15,458,094 2,323,803 Nil 17,781,897
------------- ------------ ----------- -----------
Result:
Operating profit 990,603 450,356 Nil 1,440,959
Finance income Nil Nil 12,143 12,143
Finance costs (132,889) (19,979) Nil (152,868)
----------- ----------- ---------- -----------
Profit before tax 857,714 430,377 12,143 1,300,234
=========== =========== ========== ===========
4 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.
Twelve months Six months Year
ended ended ended
30 September 30 September 30 September
2007 2007 2006
No No No
Weighted average number of ordinary
shares for the purpose of basic EPS 307,261,769 309,544,917 305,037,999
Effect of dilutive potential
ordinary shares: share options 738,974 635,541 2,087,084
------------ ------------ ------------
Weighted average number of ordinary
shares for the purpose of diluted EPS 308,000,743 310,180,458 307,125,083
============ ============ ============
BASIC EPS
Profit after taxation (�) 512,089 155,644 1,010,601
Earnings per share (pence) 0.17 0.05 0.33
DILUTED EPS
Profit after taxation (�) 512,089 155,644 1,010,601
Earnings per share (pence) 0.17 0.05 0.33
5 Cash flow statement
Reconciliation of operating profit to net cash inflow from operating activities
Twelve months Six months Year
ended ended ended
30 September 2007 30 September 2007 30 September 2006
� � �
Operating profit 874,116 317,010 1,440,959
Depreciation 237,276 129,135 130,138
Amortisation of intangible assets 22,720 17,071 4,281
Movement in share-based payment reserve 51,244 31,400 34,587
Profit on disposal of fixed assets (4,675) Nil (2,095)
(Increase)/decrease in inventories (121,518) 6,222 (4,675)
Increase in trade and other receivables (124,186) (552,198) (482,279)
Increase/(decrease) in trade and other payables 376,894 (3,199) (383,190)
Decrease in provisions Nil Nil (195,891)
------------ ------------ ------------
Net cash inflow/(outflow) from
operating activities 1,311,871 (54,559) 541,835
============ ============ ============
6 Acquisitions
The group acquired the following unincorporated businesses during the first
interim period:
Cost Customer lists Goodwill
� � �
Protector 859,555 214,889 644,666
Euro Security Systems 288,292 72,073 216,219
Protector, a specialist CCTV installation and maintenance business, was acquired
on 6 February 2007.
Euro Security Systems, a business focused on the installation and maintenance of
electronic security systems including intruder alarms access control and CCTV,
was acquired on 20 June 2007.
7 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.
8 Transition to IFRS
For all periods up to and including the year ended 30 September 2006, the group
prepared its financial statements in accordance with UK GAAP. The group will
prepare the financial statements for the eighteen-month period ended 31 March
2008 in accordance with IFRS.
IFRS 1 establishes the transitional requirements for the preparation of
financial statements in accordance with IFRS for the first time. The general
principle is that any Standards effective at the first-time reporting date for
the group (31 March 2008) are to be applied retrospectively to the opening IFRS
balance sheet (1 October 2005), the comparative period (the year ended 30
September 2006) and the reporting period (31 March 2008).
Outlined below is the group's position in relation to key exemptions and
exceptions that are available under IFRS.
Business combinations
The group has adopted the exemption not to apply IFRS 3 'Business Combinations'
in respect of acquisitions occurring prior to 1 October 2005. As a result, in
the opening balance sheet, goodwill arising from past business combinations
remains as stated under UK GAAP at 1 October 2005.
Share-based payment
IFRS 2 'Share-based Payment' has been applied to all grants of equity
instruments after 7 November 2002 that had not vested as at 1 October 2005.
Key IFRS adjustments are outlined below:
Share-based payment
The previous UK GAAP approach to share-based payments was to record any
intrinsic loss on grant suffered by the company. This means that for share
options granted at the market price, there was no charge to the income
statement. Where shares or options were granted at reduced cost to the employee,
the income statement was charged with an amount equal to the difference between
the exercise price and the market price on the date of the award, spread over
the performance period.
IFRS 2 'Share-based Payment', and its UK GAAP equivalent FRS 20 'Share-based
Payment', require the fair value of the equity instruments issued to be charged
to the income statement.
The group receives a tax credit, as appropriate, which relates to share options
and awards when exercised, based on the gains the holders make. The deferred tax
asset represents an estimate of future tax relief for this gain and is based on
the potential gains available to the option or award holders at the balance
sheet date.
The movement in deferred tax asset from one balance sheet to the next may result
in either a tax credit or a tax charge recorded in the income statement. The
amount of any tax credit recognised in the income statement is capped at the
cumulative amount of the tax effect of the share-based payment charge. Any
excess credit is taken to equity.
This adjustment reduced profit before tax in the year ended 30 September 2006 by
�34,587.
Goodwill amortisation
UK GAAP required goodwill to be amortised over its estimated expected useful
life, which the group had determined to be normally no longer than 20 years.
Under IFRS 3, however, goodwill is considered to have an indefinite life and so
is not amortised, but is subject to annual impairment testing. This adjustment
therefore reverses the goodwill amortisation charged under UK GAAP.
This adjustment increased profit before tax in the year ended 30 September 2006
by �409,994.
Intangible assets
UK GAAP recognises intangible assets as identifiable when they can be disposed
of separately from the revenue earning activity to which they contribute. IAS 38
'Intangible Assets' additionally recognises intangible assets when they arise
from contractual or other legal rights.
Of the goodwill recognised in the year ended 30 September 2006, �102,754 relates
to customer lists. These were not recognised under UK GAAP but are recognised
under IFRS. Customer lists are amortised over their estimated useful life, which
in this case is 20 years.
After goodwill of �409,994 had been added back to profit before tax (see above),
amortisation of customer lists reduced profit before tax by �4,281.
8 (a) Reconciliation of equity at 1 October 2005
UK GAAP Share-based Goodwill IFRS
payment amortisation
� � � �
Non-current assets
Intangible assets 7,033,171 7,033,171
Property, plant and equipment 295,073 295,073
Deferred tax recoverable 19,060 19,060
--------------- ---------------
7,347,304 7,347,304
--------------- ---------------
Current assets
Inventories 137,604 137,604
Trade and other receivables 4,042,044 4,042,044
Cash and cash equivalents 940,434 940,434
--------------- ---------------
5,120,082 5,120,082
--------------- ---------------
Total assets 12,467,386 12,467,386
=============== ===============
Current liabilities
Trade and other payables 2,078,234 2,078,234
Current tax liabilities 327,218 327,218
Loans and overdrafts 387,586 387,586
Obligations under finance leases 25,402 25,402
Provisions 886,555 886,555
--------------- ---------------
3,704,995 3,704,995
--------------- ---------------
Non-current liabilities
Loans and overdrafts 255,604 255,604
Obligations under finance leases 32,838 32,838
--------------- ---------------
288,442 288,442
--------------- ---------------
Total liabilities 3,993,437 3,993,437
--------------- ---------------
Equity
Share capital 1,525,625 1,525,625
Share premium account 4,761,083 4,761,083
Share-based payment reserve Nil 32,467 32,467
Other reserves 100,995 100,995
Retained earnings 2,086,246 (32,467) 2,053,779
--------------- ---------------
Total equity 8,473,949 8,473,949
--------------- ---------------
Total liabilities and equity 12,467,386 12,467,386
=============== ===============
8 (b) Reconciliation of equity at 30 September 2006
UK GAAP Share-based Goodwill Intangible Taxation IFRS
payment amortisation assets
� � � � � �
Non-current assets
Intangible assets 6,741,235 409,994 (4,281) 7,146,948
Property, plant and equipment 642,716 642,716
Deferred tax recoverable 15,863 10,376 26,239
--------------- ---------------
7,399,814 7,815,903
--------------- ---------------
Current assets
Inventories 142,279 142,279
Trade and other receivables 4,527,519 4,527,519
Cash and cash equivalents 303,045 303,045
--------------- ---------------
4,972,843 4,972,843
--------------- ---------------
Total assets 12,372,657 12,788,746
=============== ===============
Current liabilities
Trade and other payables 1,695,044 1,695,044
Current tax liabilities 263,032 40,233 303,265
Loans and overdrafts 521,767 521,767
Obligations under finance leases 70,409 70,409
Provisions 269,657 269,657
--------------- ---------------
2,819,909 2,860,142
=============== ===============
Non-current liabilities
Loans and overdrafts 588,113 588,113
Obligations under finance leases 78,699 78,699
--------------- ---------------
666,812 666,812
--------------- ---------------
Total liabilities 3,486,721 3,526,954
--------------- ---------------
Equity
Share capital 1,547,726 1,547,726
Share premium account 4,756,463 4,756,463
Share-based payment reserve Nil 67,054 67,054
Other reserves 131,294 131,294
Retained earnings 2,450,453 (67,054) 409,994 (4,281) (29,857) 2,759,255
--------------- ---------------
Total equity 8,885,936 9,261,792
--------------- ---------------
Total liabilities and equity 12,372,657 12,788,746
=============== ===============
8 (c) Reconciliation of income statement for the year ended 30 September 2006
UK GAAP Share-based Goodwill Intangible Taxation IFRS
payment amortisation assets
� � � � � �
Revenue 17,781,897 17,781,897
Cost of sales (14,035,107) (14,035,107)
--------------- ---------------
Gross profit 3,746,790 3,746,790
Operating expenses (2,676,957) (34,587) 409,994 (4,281) (2,305,831)
--------------- ---------------
Operating profit 1,069,833 1,440,959
Finance income 12,143 12,143
Finance costs (152,868) (152,868)
--------------- ---------------
Profit before tax 929,108 1,300,234
Tax expense (259,776) (29,857) (289,633)
--------------- ---------------
Profit for the period 669,332 1,010,601
=============== ===============
8 (d) Impact of IAS 1 "Presentation of Financial Statements" on the consolidated
balance sheet as at 30 September 2006
This table highlights the presentational impact of IFRS on the consolidated
balance sheet as at 30 September 2006. Assets, liabilities and shareholders'
funds are stated under UK GAAP values and format and are mapped from this
starting position to the line item classification required under IFRS.
UK GAAP values and format IAS1 UK GAAP values in IFRS
format Presentational
changes
� � �
Fixed assets Non-current assets
Intangible assets 6,741,235 6,741,235 Intangible assets
Tangible assets 642,716 642,716 Property, plant and
equipment
15,863 15,863 Deferred tax recoverable
--------------- --------------- ---------------
7,383,951 15,863 7,399,814
--------------- --------------- ---------------
Current assets Current assets
Stocks 142,279 142,279 Inventories
Debtors 4,543,382 (15,863) 4,527,519 Trade and other receivables
Cash at bank 303,045 303,045 Cash and cash equivalents
--------------- --------------- ---------------
4,988,706 (15,863) 4,972,843
--------------- --------------- ---------------
Creditors: Amounts falling due within one Current liabilities
year
Bank loans and overdrafts 421,767 100,000 521,767 Loans and overdrafts
Other loans 100,000 (100,000)
Trade creditors 135,631 1,559,413 1,695,044 Trade and other payables
Finance lease agreements 70,409 70,409 Obligations under finance
leases
Corporation tax 263,032 263,032 Current tax liabilities
PAYE and other taxes 710,911 (710,911)
Other creditors 736,659 (736,659)
Accruals and deferred income 111,843 (111,843)
269,657 269,657 Provisions
--------------- --------------- ---------------
2,550,252 269,657 2,819,909
--------------- --------------- ---------------
Creditors: amounts falling due after
more than one year 666,812 Nil 666,812 Non-current liabilities
--------------- --------------- ---------------
Provisions for liabilities 269,657 (269,657) Nil
--------------- --------------- ---------------
Capital and reserves Equity
Called-up share capital 1,547,726 1,547,726 Share capital
Share premium account 4,756,463 4,756,463 Share premium account
Merger reserve 332,732 (201,438) 131,294 Other reserves
Own shares in employee share trust (201,438) 201,438
Profit and loss account 2,450,453 2,450,453 Retained earnings
--------------- --------------- ---------------
Shareholders' funds 8,885,936 Nil 8,885,936 Total equity
--------------- --------------- ---------------
8 (e) Impact of IAS 1 "Presentation of Financial Statements" on the consolidated
profit and loss account for the year ended 30 September 2006
This table highlights the presentational impact of IFRS on the consolidated
profit and loss account for the year ended 30 September 2006. Income and
expense are stated under UK GAAP values and format and are mapped from this
starting position to the line item classification required under IFRS.
UK GAAP values and format IAS1 UK GAAP values in IFRS format
Presentational
changes
� � �
Turnover 17,781,897 17,781,897 Revenue
Cost of sales (14,035,107) (14,035,107) Cost of sales
--------------- ---------------
Gross profit 3,746,790 3,746,790 Gross profit
Operating expenses (2,676,957) (2,676,957) Operating expenses
--------------- ---------------
Operating profit 1,069,833 1,069,833 Operating profit
Interest receivable 12,143 12,143 Finance income
Interest payable and similar charges (152,868) (152,868) Finance charges
--------------- ---------------
Profit on ordinary activities before 929,108 929,108 Profit before tax
taxation
Tax on profit on ordinary activities (259,776) (259,776) Tax expense
--------------- ---------------
Profit for the financial year 669,332 669,332 Profit for the period
=============== ===============
* * ENDS * *
For further information, visit www.sectorguard.plc.uk or contact:
David Marks SectorGuard Plc Tel: 01992 701 940
Mob: 07836 571339
Jonathan Wright Seymour Pierce Tel: 020 7107 8000
Isabel Crossley St Brides Media & Finance Ltd Tel: 020 7242 4477
This information is provided by RNS
The company news service from the London Stock Exchange
END
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