A leader in Europe’s fire security industry. LONDON SECURITY PLC ANNUAL REPORT AND ACCOUNTS 2019 London Security plc Annual Report and Accounts 2019 London Security plc Each year we provide fire protection for over 233,000 customers through our local presence in the United Kingdom, Belgium, the Netherlands, Austria, France, Germany, Denmark and Luxembourg. Customer focus. We continually strive to offer the highest quality of service and products to our valued customers. We employ the best trained and qualified engineers with quality products that have achieved the highest performance ratings to blue chip companies, governments or private individuals. Our services and products are commercialised through long-established brands. Nu-Swift, Ansul, Total, Premier and Master: the unique styling of our products makes them immediately recognisable to both the industry and customers alike. We aim to achieve the highest levels of service and product quality. Our employees are trained to the most stringent servicing standards and we develop the highest performance-rated fire products. These activities are performed whilst considering the preservation of the environment. More information at londonsecurity.org STRATEGIC REPORT Highlights FINANCIAL HIGHLIGHTS Earnings per share Operating profit Revenue 135.8p £24.2m £146.9m +1.6% +4.3% +6.7% 24.2 135.8 146.9 23.2 133.7 137.7 21.7 20.9 116.7 125.9 112.4 18.5 114.8 100.1 101.2 15 16 17 18 19 15 16 17 18 19 15 16 17 18 19 OUR EUROPEAN GROUP BRANDS Strategic report ® 01 Financial highlights 01 Our European group brands 02 Chairman’s statement 04 Financial review 06 Strategic report Governance 08 Directors and Company advisers 10 Report of the Directors 13 Directors’ remuneration report Financial statements 14 Independent auditor’s report 20 Consolidated income statement 21 Consolidated statement of comprehensive income 22 Consolidated statement of changes in equity London Security plc continues to deliver industry-leading profit 23 Consolidated statement of financial position margins since acquiring the Ansul and Nu-Swift businesses. 24 Consolidated statement of cash flows The challenges for the future are to continue to grow through acquisition and organically and to build upon our competitive 25 Notes to the financial statements advantage of being a complete fire protection solution provider. 58 Parent Company balance sheet 59 Parent Company statement of changes in equity 60 Notes to the Parent Company financial statements 64 Notice of Annual General Meeting 67 Group companies Annual Report and Accounts 2019 London Security plc 01 STRATEGIC REPORT Chairman’s statement J.G. Murray, Chairman FINANCIAL HIGHLIGHTS Trading review Dividends The financial highlights illustrate that the A final dividend in respect of 2018 of Group’s revenue increased by £9.2 million £0.40 per ordinary share was paid to Financial highlights of the (6.7%) to £146.9 million and operating shareholders on 5 July 2019. An interim audited results for the year ended profit increased by £1.0 million (4.3%) dividend in respect of 2019 of £0.40 per 31 December 2019 compared with to £24.2 million. These results reflect: ordinary share was paid to shareholders the year ended 31 December 2018 on 29 November 2019. The Board is the positive impact of acquisitions in are as follows: • recommending the payment of a final 2018 and 2019 in the United Kingdom, dividend in respect of 2019 of £0.20 per revenue of £146.9 million Austria, Belgium, the Netherlands • ordinary share to be paid on 10 July 2020 (2018: £137.7 million); and Denmark; to shareholders on the register on • operating profit of £24.2 million • improved performance from our 12 June 2020. The shares will be (2018: £23.2 million); service business in continental Europe; marked ex-dividend on 11 June 2020. profit for the year of £16.8 million continued improvement from newer • • Coronavirus impact assessment (2018: £16.5 million*); service offerings (e.g. emergency lights and passive fire protection); and It is clear that the coronavirus pandemic • earnings per share for the year will have a significant impact on the of £1.36 (2018: £1.34*); and • the movement in the Euro to Sterling business and we have taken a number average exchange rate, which had a dividend per share of £0.80 of actions to weather the storm. When • an adverse effect of £1.0 million on (2018: £0.80). the pandemic first appeared in China, reported revenue and £0.2 million the initial threat was to our supply chain. * Restated – see note 32. on operating profit. A more detailed It is now very clear that the risk to customer review of this year’s performance demand is by far our greatest challenge is given in the Financial Review and we are prepared for a significant and the Strategic Report. downturn in sales for the duration of the pandemic. Acquisitions Many of the components which we are It remains a principal aim of the Group reliant on are sourced from China and we to grow through acquisition. Acquisitions have therefore suffered some delays in are being sought throughout Europe and the delivery of such components in the the Group will invest at prices where an first quarter. The Chinese government’s adequate return is envisaged by the Board. response to the outbreak has meant that In the year under review the Group has capacity returned over the course of acquired eight established fire protection February and into March. Our strategic businesses and has grown its presence stockholding has meant our production in the Netherlands, Belgium and the UK impact has been minimised. We are with the acquisition of service contracts continuing to monitor the effects on from smaller well-established businesses our manufacturing capability. for integration into the Group’s existing subsidiaries. With a return to relative normality on the supply side, we are now focused Management and staff on customer demand. By the middle 2019 was a year in which the of March, the virus had impacted all staff performed well and, on behalf of our European trading territories. of the shareholders, I would like to Throughout Europe governments are express thanks and appreciation for responding to the pandemic by applying their contribution. The Group recognises severe restrictions on movement and that we can only achieve our aims with introducing social distancing measures talented and dedicated colleagues who which have forced many of our customers provide outstanding customer service to temporarily close. We have prepared in every area of the business. the business for varying levels of sales declines by temporarily reducing staff levels in some locations. 02 London Security plc Annual Report and Accounts 2019 We have evaluated the remaining controlled using the furlough process demand for our services and sectors where applicable. The Board therefore where this is deemed essential, for considers that its strong balance sheet example in some areas including and material net cash position means health, communications and utilities. that it is well placed to navigate through In addition, where customers still want the impact of the coronavirus outbreak. work carrying out and we able to work within government guidelines, we are Annual General Meeting continuing to provide our usual levels The Annual General Meeting of service. This is varying by country, (“AGM”) will be held at 2 Jubilee Way, with the Netherlands operating at Elland, West Yorkshire HX5 9DY, over 50% but other countries being on 30 June 2020 at 11.30 am. Under affected more. Where we offer call out the UK government’s current prohibition or support services under contracts, on non-essential travel and public for example for fire alarms, we continue gatherings, it will not be possible to offer these services and fulfil our for shareholders to attend the AGM contractual obligations. in person. We therefore strongly During this period of uncertainty we encourage shareholders to vote on all have been in constant contact with our resolutions by completing the enclosed staff, customers, banks and advisers to form of proxy for use at that Meeting, ensure clear and concise communication. which you are requested to return in Our priority is to do all we can to ensure accordance with the instructions on that our offices, depots and services are the form. kept as safe as possible, in order to protect our employees and business partners J.G. Murray at all times. Many of our employees and Chairman customers are experiencing very difficult circumstances and we continue to support 21 May 2020 them in many ways. The health and wellbeing of our people is our highest priority. We are thankful and proud of our team members who continue to respond as essential service providers. We have modelled the effects of this sales decline along with all the measures we can take to ensure that the Company remains within its cash and bank facilities, and have prepared cash flow forecasts for a period in excess of 12 months. Based upon this modelling, the Group has sufficient cash beyond June 2021 without renegotiating its bank facilities. Future prospects As the situation continues, cash management will be a key consideration; the London Security Group has a healthy balance sheet, strong cash reserves and a track record for good cash generation. Debt recovery remains consistent with previous years and staff costs will be Annual Report and Accounts 2019 London Security plc 03 STRATEGIC REPORT Financial review IN SUMMARY Consolidated Income Statement The Group’s effective income tax rate The Group’s revenue increased by has remained constant at 30% which £9.2 million (6.7%) to £146.9 million. is above the UK corporation tax rate of • Our acquisitive strategy continues Operating profit increased by £1.0 million 19% as most of the expense is incurred to add to Group profitability.