RNS Number:2158R
Protec PLC
23 October 2003
PROTEC PLC
("Protec" or the "Company")
PRELIMINARY RESULTS
FOR THE YEAR ENDED 30 JUNE 2003
Protec provides security & surveillance systems and facilities management
services.
HIGHLIGHTS
*Turnover more than doubled to #40.4 million (2002: #19.0 million)
*Operating profit before goodwill of #206,000 (2002: loss of #1.2 million)
*Profit before tax of #12,000 (2002: loss of #1.1 million)
*Benefits of restructuring, begun in second half, already apparent
*SDA Protec - turnover almost doubled to #17.6m
- new Managing Director appointed to accelerate expansion into new sales
sectors in UK
- office in Manchester opened as part of strategy to develop PFI
opportunities
- significant new contract wins include:
- security system at a Royal Residence in Saudi Arabia, worth US$ 2m
- Canary Wharf Estate Control Room
*Falcon - turnover up nearly threefold to #5.2m
- new contracts wins for surveillance products include:
- two UK Ministry of Defence contracts - worth #5.3m in total
- orders from Australian and UK Armed Forces - worth #3m
- preferred supplier status for Docklands Light Railway's major camera system
*SSS - turnover more than doubled to #17.6m
- new Communications Centre opened in Bristol, incorporates most advanced
Alarm Receiving
Centre in UK
*Board strengthened with new appointments - both executive and
non-executive
*Prospects remain very encouraging
Enquiries:
Protec plc Bruce Hiscock, Chief Executive Tel: 020 7448 1000 today
Paul Geraghty, Finance Director Thereafter: 01923 211590
Teather & Greenwood Ltd Jeff Keating or Robert Naylor Tel: 020 7426 9000
Biddicks Katie Tzouliadis Tel: 020 7448 1000
Kathryn van der Kroft
CHAIRMAN'S STATEMENT
Introduction
The Group has made very good progress during its second year of trading in its
reconstructed form. All three divisions, SDA, SSS and Falcon achieved strong
growth in turnover and operating profitability.
A key feature of the year was a review we undertook to strengthen our
operational capability. This has resulted in some important restructuring in the
second half of the year, particularly within the Systems Division, SDA. I am
happy to report that we are already seeing significant benefits. Our investment
programme we began at the beginning of the year is continuing and will lay
secure foundations for future sales and earnings growth across each division.
Results
Group turnover for the year was #40.4 million (2002: #19.0 million) and
operating profit before amortisation of goodwill was #206,000 (2002: loss of
#1.2 million). Excluding non-recurring items, central costs increased by 4% to
#708,000 (2002: #683,000); these figures are both stated before goodwill.
Non-recurring items related to management re-organisation totalled #175,000.
Operating profits before non-recurring costs were #381,000.
REVIEW OF OPERATIONS
SDA Protec
In the Systems Division, turnover during the year increased from #8.6 million to
#17.6 million following a number of significant project wins. However, as
previously reported, resourcing issues and a shortage of subcontractors delayed
certain projects and increased costs. This led to disappointing returns in the
first half of the year. Following our review, significant operational changes
were made, including the appointment of John Kirtland as Divisional Managing
Director. He has worked hard with his team and the second half of the year has
seen improved results.
Operational highlights include the completion of the substantial part of our
work to install an integrated CCTV system across Tyne and Wear's Metro system in
a contract now worth almost #7 million, and Phase One of the project to upgrade
the security system at Ashworth Special Hospital. Phase Two of the project,
valued at approximately #1 million is expected to be completed in 2004.
Overseas business has grown well and we are in the process of completing work
for the Jordanian Customs Service and have secured a contract worth US $2
million for a Royal Residence in Saudi Arabia.
We have made significant investment during the year to expand into new sales
sectors in the UK. We have identified three areas in particular, as offering us
good growth opportunities; transport, petrochemicals and Private Finance
Initiative (PFI). Our relationship with Midia Investments S.A., our largest
shareholder and an investment vehicle of Norman Turner, is important in our
ambitions to develop our presence in PFI partnerships and we have established a
new office in Manchester to develop opportunities together.
Falcon Protec
The Surveillance Division, under the leadership of Mike Illingworth, had an
excellent year, increasing turnover nearly threefold from #1.8 million to #5.2
million. The Division secured a number of significant electro-optical contracts
including two with the UK Ministry of Defence, valued at #4.4 million and #0.9
million. Falcon also won radio surveillance orders totalling in excess of #3
million from the Australian and UK Armed Forces.
Over the year, Falcon's product portfolio has been further expanded, with the
signing of a number of exclusive distributorship agreements and the development
of specialist camera systems. These products, and our experience in on-board
transport surveillance systems for London Underground Limited, offer a very
exciting range of sales opportunities in the transport and military sectors for
the coming year and beyond.
SSS Protec
Our Security and Management Services Division, managed by Terry Baker, has more
than doubled turnover from #8.6 million to #17.6 million. The first year of the
Homebase facilities management contract has been completed successfully and we
are currently pursuing similar UK retail contracts. Our new Communications
Centre in Bristol, incorporating the most advanced Alarm Receiving Centre in the
UK, was opened in February. Besides monitoring alarm signals from 4,000 retail
sites, and providing helpdesk, facilities management and reporting services, the
new Centre enables us to offer more advanced services to our customers. These
include remote video surveillance, and plant and utility monitoring. We have
already commenced a number of paid-for trials of these new services with some
major retailers and they are progressing well.
Board of Directors
We have given much attention to the make up of the Board; to the appropriate
balance between executive and non-executive members and to the appointment of a
senior non-executive director.
In order to strengthen our executive team, we were pleased to appoint John
Kirtland, Managing Director of SDA Protec, to the Board on 16 October 2003. John
is key to the changes we are making in our largest Division and he brings
considerable operational management experience to this role.
The composition of our non-executive team is changing too. With personal regret,
I announce that Sir Brian Tovey, who was my predecessor as Chairman of the
Board, will be standing down as a Director at the Group's AGM in December. Brian
has been a source of sound advice, guidance and enthusiastic support and I,
together with the rest of the Board, wish to place on record our appreciation
for all that he has done for the Company.
I am pleased to welcome Louise Turner who joined the Board as a non-executive
director on 16 October 2003 representing the interests of Midia Investments.
Louise replaces Francesca Welbore-Ker who resigned as a non-executive in
September. Francesca has been a strong supporter of the Company and I wish to
thank her on behalf of the Board for her contribution over the last few years.
In the coming months, we expect to strengthen the Board further with the
appointment of a senior non-executive. Our aim is to ensure proper governance
without losing the spirit of enterprise evident in our fast growing group. We
believe we are achieving that objective.
Conclusion
The second year's results for the new Protec Group demonstrate the strength of
our service offering and the exciting growth prospects that exist for us. As a
Board, we have set ourselves ambitious targets to develop the business further
and believe that our restructuring and investment programme will underpin these
ambitions.
Trading in the new financial year is very encouraging and I am confident that
the Group will continue to make progress in building sales and delivering
improved earnings.
PHILIP PARKER
Chairman
23 October 2003
OPERATING REVIEW
SDA Protec - Systems Division
The principal business of this division is the design, supply, installation and
maintenance of major integrated security systems for large commercial and public
sector customers both in the UK and overseas. As we reported in March, despite
significant project wins, SDA's results for the first half of the year were
disappointing, having been adversely affected by a number of operational factors
which caused both project delays and cost increases.
As part of our steps to strengthen SDA's operations, in December 2002, we
appointed John Kirtland as Managing Director for the Systems Division. John's
previous experience includes operating roles with Nortel, Anixter and Xerox, and
since joining, he has been addressing the business process and control issues in
the Division, re-organising the management structure and increasing the focus on
effective execution. The improved results in the second half reflect the
progress that John and his team have already made and we expect the benefit of
further improvements to flow through during the new financial year.
SDA achieved significant successes in the year. We completed a large proportion
of the contract for the installation of an integrated CCTV system across Tyne
and Wear's Metro system. When this project was won in July last year it was
worth over #6 million. The system has been enhanced over the intervening period
and contract is now worth almost #7 million. Furthermore, the project is the
UK's first integrated CCTV system installed on a light railway and provides SDA
with an excellent reference for opportunities in the transport sector.
The first phase of the project to upgrade security at Ashworth Special Hospital
has been completed during the year and we have since been awarded the contract
for the second phase. The project sets new standards for high security
installations and the security system includes the installation of a fibre optic
communications backbone, which carries data from CCTV cameras, access control
and patient tracking systems, perimeter intrusion detection sensors and
automatic number plate recognition technology. The second phase of the project
is worth almost #1 million and will be completed during the 2003/4 financial
year.
SDA's overseas business continues to grow. We have completed further work on our
long running projects in the Middle East including installing camera systems at
the new BORDER="0" crossing points for the Jordanian Customs Service. We also
secured a US $2 million contract to install a security system at a Royal
Residence in the Kingdom of Saudi Arabia which will be completed over the next
six months. In February 2003, the Group established an office in Abu Dhabi, an
area where SDA has been actively involved in a number of projects in the past.
The local presence has helped uncover opportunities for both SDA and Falcon and
we have identified a pipeline of projects worth more than US $10 million.
A core element of the strategic direction for both the Group and SDA has been
developing PFI (Private Finance Initiatives) opportunities in the areas of
health, education and transport. To co-ordinate our approach to these markets,
we have established an office in Manchester focusing exclusively on these
opportunities and establishing relationships with companies forming PFI
consortia. The PFI team is working closely with representatives of Midia
Investments SA ("Midia"), an investment vehicle of Norman Turner, who is also a
major shareholder in Protec plc. As explained at the time of Midia's
subscription in March 2003, Mr. Turner has significant experience of working in
close conjunction with local and central government, in the implementation of
partnerships between public and private sectors to deliver major commercial
construction projects. The combination of this expertise with SDA's track record
in integrated security and technology systems enables our PFI team to address an
exciting market opportunity.
Falcon Protec - Surveillance Division
Falcon Protec has delivered substantial growth in all areas of its business
during the last year. The Division has reinforced its standing as a CCTV
surveillance specialist winning a #4.4 million contract from the UK Ministry of
Defence to develop and supply an electro-optical surveillance system for
operational work. Falcon's radio surveillance business has generated orders for
its long established RX741 radio receiver from the Royal Australian Navy and for
its new direction finding equipment from the UK Ministry of Defence. These two
orders are worth over #3 million.
Electro-optical and radio surveillance are key areas of Falcon's business and
our products have been largely targeted towards Military and Defence customers.
We are now working with several large defence contractors on camera systems for
use in military vehicles. The potential for camera systems on military vehicles
includes gun site cameras and camera systems for use in battlefield scenarios
for both manned and remote control vehicles. We estimate that the current market
is worth #250 million and hope to develop our presence here over the course of
the next two years.
As part of the strategic development of Falcon, we are seeking to deepen our
involvement in the transport sector, specifically on train surveillance CCTV.
Falcon has developed, produced and supported on-board CCTV cameras and digital
video recorders that are currently in use on London Underground's Northern Line.
We believe Falcon is well placed to bid for further business as similar
surveillance systems are commissioned. London Underground Limited's planned
expenditure over the next three years is approximately #500 million.
Falcon has a solid platform to build upon and the potential to grow
significantly. The recent appointment in July of a new Divisional Sales
Director, Geoff Mitchell, will aid this process and help ensure that Falcon
successfully meets the challenges for the business in the next year.
SSS Protec - Services Division
SSS Protec has continued to grow its business during the year. Two key
developments were the opening of our new Communications Centre in Bristol and
the successful delivery of SSS's first full Facilities Management ("FM")
contract for Homebase.
The new Communications Centre was opened in February 2003 and replaced our
existing Alarm Receiving Centre. The new Centre complies with BS5979, ISO9002
and SSQS102 and is the most up-to-date monitoring station in the UK. The
Communications Centre provides alarm monitoring for over 4,000 sites throughout
the UK along with reporting services and escalation procedures that can be
tailored to a customer's operating processes. In addition, SSS can provide a
full helpdesk service, serving both security management and full facilities
management, from the Communications Centre. Other new services that have been
added include remote video surveillance and plant and utility monitoring.
Improvements in compression technology and the greater availability of band
width has helped to make remote video surveillance an area with enormous
potential growth. SSS has been running paid-for trials of remote video
surveillance and developing bespoke services for three UK retailers. These
trials have demonstrated substantial cost savings and efficiency improvements
for customers and we aim to roll out the trial across a complete estate of
properties.
SSS undertook its first full facilities management contract this year when
Homebase extended its existing security management contract into an FM contract.
The contract has now moved into its second year and we have won further small FM
contracts. We believe there is scope to develop this business further. However,
the Division is targeting only those contracts where our particular expertise
can add value for both SSS and the customer.
We are pleased with the level of success we have had in renewing existing
contracts. This, together with the business we have won in the newer areas of
facilities management and remote data monitoring, has increased the annual
recurring value of SSS's contracted revenue to approximately #8 million.
The Division is at an exciting time in its development and the challenge is to
continue its growth profile of the last three years.
GROUP OUTLOOK
The first months of our financial year are traditionally quiet. However, SDA has
secured new work at Canary Wharf on the new Estate Control Room. SDA has also
commenced the supply and installation of CCTV systems at a small number of
paid-for trials for a major petroleum retailer. If successful, this could yield
a contract worth in excess of Euro5 million over 3 years, with SDA supplying,
installing and commissioning cameras, digital video recorders and monitors in
almost 1,000 sites throughout Europe. Finally, we have also been working closely
with a number of potential partners in the building services and consulting
engineering sectors. This has now resulted in our formal appointment on a
partnership basis with Rotary, a building services company, and consulting
engineers, R.W. Gregory, to work on a number of significant projects.
SSS has continued its progress in developing its sales and marketing functions.
At the end of the financial year, additional sales resource was added, which is
now resulting in a larger sales pipeline. The lead time for SSS to turn a
prospect into a customer is still a significant investment for SSS. However, we
remain optimistic of good levels of firm orders in the second half of the
current year.
Falcon continues its progress in both the video and radio surveillance market
places and on its current projects. We have presented solutions for potential
video surveillance projects in South America and the Middle East. We have also
achieved preferred supplier status for a camera system on the Docklands Light
Railway and are currently carrying out trials. Furthermore, in the radio
surveillance sector, we have secured further orders for the RX741 receivers,
both new receivers and refurbishment of old systems.
With this encouraging start to the new financial year, I remain optimistic of
continuing progress across all divisions.
BRUCE HISCOCK
Chief Executive
23 October 2003
GROUP PROFIT AND LOSS ACCOUNT
for the year ended 30 June 2003
Year ended Year ended
30 June 2003 30 June 2002
#000 #000
TURNOVER 40,418 18,982
Cost of sales (35,830) (16,120)
-------------- -------------
GROSS PROFIT 4,588 2,862
Administrative Expenses
- continuing operations (4,382) (4,090)
- amortisation of goodwill (324) (324)
============== =============
OPERATING LOSS (118) (1,552)
Net interest receivable/(paid) 130 (7)
Amounts written back to investments - 485
-------------- -------------
PROFIT/(LOSS) BEFORE TAXATION 12 (1,074)
Taxation - -
-------------- -------------
PROFIT/(LOSS) AFTER TAXATION 12 (1,074)
-------------- -------------
PROFIT/(LOSS) FOR THE YEAR 12 (1,074)
-------------- -------------
EARNINGS/(LOSS) PER SHARE
Basic 0.0p (0.9p)
Diluted 0.0p (1.0p)
Adjusted 0.3p (1.0p)
All the above results derive from continuing activities.
There are no recognised gains and losses other than the profit for the year.
GROUP BALANCE SHEET
as at 30 June 2003
2003 2002
#000 #000
FIXED ASSETS
Tangible assets 875 362
Intangible assets 5,732 6,056
Investments - -
6,607 6,418
---------- -------------
CURRENT ASSETS
Stocks 1,200 115
Debtors 10,318 6,257
Cash at bank and in hand 1,634 2,171
13,152 8,543
CREDITORS - amounts falling due within one (12,285) (8,257)
year ---------- -------------
NET CURRENT ASSETS 867 286
---------- -------------
TOTAL ASSETS LESS CURRENT LIABILITIES 7,474 6,704
---------- -------------
CREDITORS - amounts falling due after one - (22)
year ---------- -------------
NET ASSETS 7,474 6,682
---------- -------------
CAPITAL AND RESERVES
Called up share capital 1,383 1,227
hare premium account 7,125 6,501
Special reserve 559 559
Profit and loss account (1,593) (1,605)
---------- -------------
SHAREHOLDERS' FUNDS (ALL EQUITY) 7,474 6,682
GROUP CASH FLOW STATEMENT
for the year ended 30 June 2003
Year ended Year ended
30 June 2003 30 June 2002
#000 #000
NET CASH INFLOW FROM OPERATING 152 794
ACTIVITIES
Returns on investments and servicing of 130 (7)
finance
Taxation 107 (108)
Capital expenditure and financial (689) (169)
investment
Acquisitions and disposals - 485
----------- ------------
CASH (OUTFLOW)/INFLOW BEFORE FINANCING (300) 995
Financing (237) (1,474)
----------- ------------
DECREASE IN CASH IN THE YEAR (537) (479)
RECONCILIATION OF NET CASH FLOW TO
MOVEMENT IN NET FUNDS
Decrease in cash in the year (537) (479)
Decrease/(increase) in debt and lease 17 (7)
financing
Loan notes repaid 1,000 1,445
MOVEMENT IN NET FUNDS IN THE YEAR 480 959
Opening net funds 1,132 173
----------- ------------
CLOSING NET FUNDS 1,612 1,132
NOTES TO THE FINANCIAL STATEMENTS
1. The figures for 2003 are unaudited and do not constitute statutory
accounts within the meaning of Section 240 of the Companies Act 1985.
The financial statements for the year ended 30 June 2002 have been
reported on by the company's auditors, and delivered to the Registrar of
Companies. The audit report was not qualified and neither did it contain
any statements under Section 237 (2) or (3) of the Companies Act 1985.
The unaudited results for the year ended 30 June 2003 have been prepared
in accordance with the accounting policies stated in the 2002 annual
Report and Accounts.
2. Turnover which is stated net of value added tax, arises from the
Group's principal activities and is all generated in the UK.
(i) Turnover analysed by geographical destination is as follows:
2003 2002
#000 #000
UK 38,440 16,903
Rest of World 1,978 2,079
40,418 18,982
(ii) Turnover and operating profit(loss) analysed by class of
business is as follows:
Systems & Central
Surveillance Services Operations Total
#000 #000 #000 #000
2003 Turnover 22,831 17,587 - 40,418
2003 Operating profit/ 738 351 (1,207) (118)
(loss)
2002 Turnover 10,375 8,572 35 18,982
2002 Operating profit/ (776) 231 (1,007) (1,552)
(loss)
2003 Net assets 276 706 6,492 7,474
2002 Net assets (542) 342 6,882 6,682
3. Earnings per share is calculated on the profit for the year #12,000
(2002 loss: #1,074,000) and on the weighted average number of shares in
issue in the year of 128,586,917 (2002: 122,673,561).
Diluted earnings per share is calculated on the profit for the year,
#12,000 (2002 loss: #1074000) and on the diluted weighted average number
of shares of 132,134,273 (2002: 110,906,295).
In order to reflect the ongoing operations of the group, supplementary
earnings per share figures are presented below. These exclude the
effects of investment write offs and amortisation of goodwill.
2003 2002
Weighted Earnings Weighted Earnings
Earnings Average No per Share Earnings Average No per Share
#000 of Shares Pence #000 of Shares Pence
Profit/ 12 128,586,917 0.0 (1,074) 122,673,561 (0.9)
(Loss) after
taxation
Investment & - - (485) (0.4)
loan write
back
Amortisation 324 0.3 324 0.3
of
goodwill
Adjusted 336 128,586,917 0.3 (1,235) 122,673,561 (1.0)
Earnings per
share
4. The Report and Accounts will be posted to Shareholders shortly and
will be available from the Company's registered office, Park House,
Ryarsh Park, Roughetts Road, Ryarsh, West Malling, Kent, ME19 5RP.
5. The Annual General Meeting will be held at the offices of Protec
plc, Axis 7, Rhodes Way, Watford, WD24 4TP at 12 noon on 5 December
2003. Copies of this announcement are available for a period of 14 days
from the date hereof from the Company's registered office, Park House,
Ryarsh Park, Roughetts Road, Ryarsh, West Malling, Kent, ME19 5RP and
from the Company's nominated advisor, Teather & Greenwood Limited,
Beaufort House, 15 St Botolph Street, London, EC3A 7QR.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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