13th Mar 2006 07:00
Group 4 Securicor plc Preliminary Results Announcement January - December 2005Group 4 Securicor, the international security solutions group,today announces its preliminary results for the twelve months to 31 December2005.RESULTS HIGHLIGHTS - Strong organic turnover growth of 7% - Group turnover up 8.2% to ‚£4,130 million * - PBITA up 16% to ‚£254 million * - Margin improvement of 0.5% to 6.2% - Cash flow generation of ‚£198 million, 80% of PBITA - Adjusted earnings per share increased to 11.1p - Recommended final dividend up 21% to 2.24 pence per share (DKK 0.2435) - Challenges remain in some European manned security markets - Very good performances from Cash Services division, the US and New Markets overall - Overall strong set of results for first full year of operation* at constant exchange ratesNick Buckles, Group Chief Executive, commented:"With the merger integration completed and synergies achieved, weare now in a position to demonstrate the ongoing benefits and growth potentialof the enlarged group. Organic turnover growth and profit improvement are verystrong and we are pleased to be able to recommend a final dividend of 2.24pence per share. We have also declared our intention to reduce our dividendcover to 2.5 times adjusted earnings over the medium term, demonstrating ourconfidence in the continuing strong performance of the organisation.Whilst there are some businesses which require added focus to bringthem in line with the group targets, overall trading is going well and we areconfident that this will continue into 2006 and beyond."For further enquiries, please contact:Nick Buckles - Chief Executive Officer +44 (0) 1293 554400Trevor Dighton - Chief Financial OfficerDebbie McGrath - Director of CommunicationsRob Gurner - Investor Relations ManagerMedia enquiries:Patrick Toyne-Sewell - Citigate Dewe Rogerson +44 (0) 7973 672649Notes to Editors:Group 4 Securicor is an international security solutions group,operating in over 100 countries throughout the world and employing around400,000 people. Group 4 Securicor is a market leader in the provision ofsecurity services, cash services and justice services in many of the countriesin which it operates. For more information on Group 4 Securicor, visitwww.g4s.com.Presentation of Results:A presentation to investors and analysts is taking place today at0900 at the London Stock Exchange, 10 Paternoster Square, London, EC4M 7LS. Atelephone dial-in facility is also available on +44 (0)20 7162 0125.Annual General Meeting:The company's annual general meeting will be held in London on 29June.FINANCIAL SUMMARYResultsThe results which follow have been prepared under InternationalFinancial Reporting Standards (IFRS). A statement detailing the implicationsof the changes resulting from IFRS was made on 5 September 2005. The resultsalso contain comparatives that reflect the pro forma statements issued inMarch 2005 which have subsequently been converted to IFRS (see Basis ofpreparation on page 7).Group TurnoverTurnover of Continuing Businesses 2005 2004 ‚£m ‚£mTurnover at constant exchange rates 4,129.9 3,816.0Exchange difference (52.1)Total continuing business turnover 4,129.9 3,763.9Turnover increased by 8.2% in the period from ‚£3,816 million to ‚£4,130million. Organic turnover growth was 7%.Organic Turnover Europe North America New Markets TotalGrowthManned Security 2.5% 8.5% 19.3% 7.1%Security Systems 4.0% 63.2% 48.7% 8.0%Cash Services 5.8% (5.0%) 19.8% 6.2%Total 3.7% 7.7% 21.1% 7.0%Group ProfitPBITA of Continuing Businesses 2005 2004 ‚£m ‚£mPBITA at constant exchange rates 254.0 218.5Exchange difference (2.8)Total continuing business PBITA 254.0 215.7PBITA at constant exchange rates increased by16% to ‚£254 million. The PBITA margin increasedfrom 5.7% to 6.2%.Cash Flow and FinancingCash Flow 2005 2004 ‚£m ‚£mOperating cash flow 198 213.1Operating cash flow / PBITA 80% 100%Operating cash flow was ‚£198.0 million in the year, representing80% of PBITA. This met the group's target of 80% and was achieved despite thehigh levels of cash generation at the end of 2004. Net borrowings at the endof the year were ‚£657 million (2004: ‚£586 million).DIVISIONAL ANALYSISManned Security Division Turnover PBITA Margins ‚£m ‚£m * At constant exchangerates 2005 2004 2005 2004 2005 2004Europe * 1,364.5 1,325.5 73.3 75.5 5.4% 5.7%North America * 1,014.6 958.6 61.0 54.8 6.0% 5.7%New Markets * 495.2 391.2 35.6 26.3 7.2% 6.7%Total * 2,874.3 2,675.3 169.9 156.6 5.9% 5.9%Exchange differences (34.6) (1.9)At actual exchange 2,640.7 154.7ratesThe manned security division achieved overall organic growth of7.1% and margins were maintained at 5.9% in line with the prior year.Overall organic growth in Europe was slightly less than at the halfyear at 2.5% overall, reflecting the challenges of top line growth in the UKand Scandinavia.In the UK, organic growth was negative for the full year, but goodcost control and delivery of the synergy benefits from the integration meantthat profitability was ahead of target. Security Officer licencing remains ontrack and we expect to meet the SIA deadlines. Customer retention remainsstable at around 85%.Justice Services started new contracts in electronic monitoring andimmigration in 2005 and much of the year has focused on starting thesecontracts and continuing to improve service levels. As expected, profitabilityin Justice Services was reduced in 2005, reflecting the lower margins andincreased geographical coverage of the new electronic monitoring contract.The Netherlands manned security business performed well andfinished the year with strong organic growth, mainly through higher volumes inaviation contracts and stability returning to the market following thecompletion of the Falck divestment in November. We expect further improvementsin the Netherlands in 2006.France had a difficult year as the industry was unable to recoverGovernment-mandated wage increases from the customer base during the firsthalf. There is a new management team in place and we expect the business toimprove in 2006.Elsewhere in Europe, there were strong performances in Germany,Austria, Hungary, the Baltic States and Luxembourg. Profits in Greece returnedto normal levels following the boost from the Athens Olympics security in2004.Organic growth in North America was 8.5%, representing a strongperformance in the US, but a difficult year in Canada, affected by the fullyear impact of the loss of a major contract.In the US, Wackenhut continued its strong performance, with organicgrowth of 9% overall. The Government and nuclear sectors were particularlystrong, and the commercial sector also performed ahead of expectations,assisted by the additional revenue relating to services provided as a resultof the hurricanes in 2005.In New Markets, organic growth overall was 19.3%, continuing thestrong performance of the first half into the remainder of the year. India,the Middle East, Latin America, South East Asia and Central Asia all performedahead of expectations.The business in South Africa has settled down following thecompletion of the integration and the conclusion of Black Economic Empowermentnegotiations.International Accounts are beginning to pick up momentum and we areworking hard to make the most of our international footprint to service thesecustomers.Security Systems Division Turnover PBITA Margins ‚£m ‚£m * At constant exchangerates 2005 2004 2005 2004 2005 2004Europe * 342.0 323.7 27.7 25.4 8.1% 7.8%North America * 3.1 1.9 0.4 0.2 12.9% 10.5%New Markets * 44.5 29.6 4.0 3.0 9.0% 10.1%Total * 389.6 355.2 32.1 28.6 8.2% 8.1%Exchange differences (6.0) -At actual exchange rates 349.2 28.6The security systems division achieved overall organic growth of8.0% and margins improved slightly on the same period last year to 8.2%. Thiswas a good performance and shows strong progress over the previous year.In Europe organic growth in the systems division was 4%, a solidimprovement on the first half.Our largest systems business in Denmark had a very strong year withgood margin improvements. There was also a good result in Israel andimprovements in France and Finland where the businesses moved intoprofitability in 2005 having made small losses in the previous year.In New Markets organic growth was around 49%, continuing the trendsof prior year periods, albeit from a relatively small revenue base. Wecontinue to introduce security systems capability into many new markets, withparticularly positive developments in the Middle East, Latin America and EastAfrica.Cash Services Division Turnover PBITA Margins ‚£m ‚£m * At constant exchangerates 2005 2004 2005 2004 2005 2004Europe * 688.6 640.2 58.4 44.7 8.5% 7.0%North America * 76.9 69.6 2.8 4.2 3.6% 6.0%New Markets * 100.5 75.7 15.5 11.7 15.4% 15.5%Total * 866.0 785.5 76.7 60.6 8.9% 7.7%Exchange differences (11.5) (1.0)At actual exchange rates 774.0 59.6The cash services division achieved overall organic growth of 6.2%and margins grew strongly against the same period in the prior year to 8.9%.Overall organic growth in Europe was 5.8%, in line with the firsthalf and with a significant reduction in turnover in Germany caused by majorprice reductions.The UK cash services business performed very strongly this year,achieving good growth and improving profitability whilst absorbing asignificant pay award and maintaining very high levels of customer service.There were good growth and margin improvements in the Netherlandsdue to excellent cost control and new business wins in the banking sector.The performance in Germany has greatly improved on the prior year,although the business remains slightly loss-making. In France, increasedsecurity and wage costs have proved difficult to pass on to customers.Finland, Ireland, and Belgium are all performing well and Swedenshowed signs of improvement in the last quarter of 2005, with a new managementteam driving the business forward.In North America, the business in Canada is recovering from asubstantial robbery, leading to additional security costs. New management havebeen appointed and we expect the business to be back on track during the firsthalf of 2006.In New Markets there was strong overall organic growth of around20%. Whilst all markets saw further developments in bank and ATM outsourcing,growth was particularly strong in South East Asia, the Middle East and EastAfrica.STRATEGIC REVIEWGrowth OpportunitiesFuture growth is expected to continue across all product areastowards the group's medium-term targets. New Markets continue to grow stronglyoverall and as our cash services businesses in different countries movethrough the phases of development from pure cash in transit to cash managementand ATM outsourcing, there are further opportunities for the businesses togrow.Our ability to service international accounts is a strong point ofdifferentiation for the organisation, made possible through our globalcoverage. We expect demand for quality security services across internationalboundaries to increase in the future.G4S Global Risks, the group's consulting and specialist securitybusiness, has opportunities for future growth across a wide range of services,from risk consultancy to investigative and government security supportservices. By using the international footprint of the group, the business isable to provide these specialist services across a wide range of countries.Opportunities for the development of justice services exist inexporting our expertise into new markets as well as growing our currentcontract base, particularly in electronic monitoring of offenders.We do not believe that there will be substantial opportunities forcombined security systems and manned security in the short term, but we areconfident that, by having a systems capability closely aligned to our mannedsecurity businesses, we will be able to take advantage of opportunities forproviding complete security solutions to our customers.Margin ProgressionMargin progression will be achieved through driving growth in ourtraditional sectors, through the opportunities described above and as a resultof our usual tight control of costs and effective management of resources.There are also a number of businesses which are currently operating below ourmargin targets and our focus in 2006 will be on bringing these businesses inline with the group's profit targets.Acquisitions & DivestmentsThe group's acquisition strategy remains unchanged and focused on afew key areas. Our businesses are constantly seeking bolt-on acquisitionsacross all services which will add scale or additional expertise to ourbusinesses or continue to consolidate fragmented markets.Whilst the organisation already operates in more than 100countries, we will seek to fill any appropriate geographic gaps in thesecurity services businesses. This will enable further development of ourGlobal Risks customer base and increase the opportunities for expandinginternational accounts.In cash services, it is not essential to have wide internationalcoverage, but it is important to choose markets carefully depending on therole of the central bank, the sophistication of the cash cycle and thecompetitive landscape. Therefore, we will be selective about new countryentries and target specific key markets.Our acquisition strategy will remain focused on these key areas andwe will ensure that any acquisition opportunities meet our internal criteria,ensuring that they are the right businesses, in the right markets and with theopportunity to deliver the appropriate level of return on investment.OTHER FINANCIAL ISSUESSynergies and One-off ItemsAs reported at the half year, the integration process was completedduring the year. Total integration costs were ‚£55 million, with ‚£18 million in2005 and ‚£37 million in 2004. There was also a one-off reorganisation cost of‚£4 million in the German cash services business, as reported at the half year.FinancingOn 28 June 2005 the group concluded refinancing of a ‚£1 billionmulticurrency revolving credit facility with a new margin of 0.225%, areduction of 0.15%. Maturity was also extended as the facility is for fiveyears with options, exercisable by the lending banks, to extend the term toseven years. The group has other available facilities of ‚£347 million.As of 31 December 2005, net debt was ‚£657 million representing agearing of 68%. The group has sufficient capacity to finance growth.TaxationThe effective tax rate reduced to 31.4% from 32.5% in 2004 and webelieve that this level is sustainable into the future.PensionsThe group's funding shortfall on the valuation basis specified inIAS19 Employee Benefits was ‚£217 million before tax or ‚£152 million after tax(2004: ‚£220 million and ‚£154 million respectively).Although the value of the assets in the funds has increased by ‚£166million since 2004, this was counteracted by a reduction in bond rates, whichare used to discount liabilities for IAS19 purposes, and by the impact of anincrease in projected longevity. We firmly believe that, over the very longterm in which pension liabilities become payable, improved investment returnsshould eliminate the deficit in the schemes in respect of past serviceliabilities. However, in recognition of the currently reported deficits, anadditional cash contribution of ‚£23.5 million before tax is being made to theUK schemes in the year commencing 1 January 2006 (with no P&L impact).DividendFollowing the successful integration of the Group 4 and Securicorbusinesses, and reflecting management belief in the strong future prospects ofthe business, the board has decided to amend the company's dividend policy.Accordingly, the board aims to reduce the company's target dividend cover fromover 3 times to around 2.5 times over the medium term.As an initial step, the Board is recommending a final dividend for2005 of 2.24 pence per share (DKK 0.2435). Taken with the interim dividend of1.30 pence per share (DKK 0.143) this gives a full year dividend of 3.54 penceper share (DKK 0.3865).FORTHCOMING BOARD CHANGESAs previously announced, Jorgen Philip-Sorensen will step down aschairman and leave the board after the annual general meeting at the end ofJune. He will be succeeded as non-executive chairman by the current deputychairman, Alf Duch-Pedersen, who is retiring as chief executive of the Danishcompany, Danisco A/S, this summer. Waldemar Schmidt, non-executive director,will also retire after the annual general meeting.REVIEW AND OUTLOOKThe first full year of trading for Group 4 Securicor focused onbringing together two organisations to create one company which is strongerand able to maximise the opportunities available across a wide range ofmarkets. The integration of the two companies has been a great success and isa credit to everyone involved in the process. Whilst bringing the organisationtogether and developing the strategy for the future, we have also continued todrive growth, improve profits and develop a platform on which the company cancontinue to move forward.Our decision to significantly increase our dividend for 2005 and toaim to reduce dividend cover over the medium term reflects the culmination ofa successful merger and our confidence in the strength of our business andsustainability of its performance into the future.13 March 2006Group 4 Securicor plcUnaudited pro forma preliminary financial information announcementFor the year ended 31 December 2005Basis of preparationThis pro forma financial information is consistent with the results for Group4 Securicor plc for the year ended 31 December 2005. However, as explained innote 1 to the unaudited preliminary results announcement, the statutoryresults for Group 4 Securicor plc for the year ended 31 December 2004 shown ascomparatives therein include the full year trading of the security businessesof the former Group 4 Falck A/S and the trading of the businesses of Securicorplc for the period from 20 July 2004 to 31 December 2004. Therefore, thedirectors consider that it is of assistance to shareholders to show pro formafinancial information of the combined entities for the full year comparativeperiod. This information is shown below. Similarly presented is operating cashflow information.Pro forma revenue and PBITAFor the year ended 31 December 2005 Actual Pro formaContinuing operations 2005 2004 ‚£m ‚£m Revenue 4,129.9 3,763.9 Profit before interest, taxation, amortisation ofacquisition-related intangibles and exceptional items (PBITA) Group PBITA 248.7 213.3 Share of profit from associates 5.3 2.4 Total PBITA 254.0 215.7 Adjusted earnings per share (pence) 11.1pOperating cash flowFor the year ended 31 December 2005 Actual Pro forma 2005 2004 ‚£m ‚£m Group PBITA 248.7 213.3Depreciation and amortisation of assets other than 82.2 79.7acquisition-related intangiblesEquity settled transactions 2.7 1.5Profit on sale of fixed assets (0.8) (1.1)(Increase)/decrease in working capital and provisions beforeexceptionals (45.0) 7.6Net cash flow from capital expenditure (89.8) (87.9)Operating cash flow 198.0 213.1 Reconciliation of operating cash flows for 2005 Actual 2005 ‚£m Net cash flow from operating activities (per the consolidated cashflow statement) 174.5Net cash flow from capital expenditure (89.8)Cash outflow on exceptional items 38.0Additional pension contributions 15.0Operating loss from discontinued operations 1.7Adjustment for unwinding of sundry debt factoring arrangements 5.6Tax paid 53.0Operating cash flow 198.0The group has not presented a comparative reconciliation of operating cashflows to net cash flows from operating activities for 2004 because thestatutory consolidated cash flow statement for that year does not include thecash flows of the combined entities for the full year.Group 4 Securicor plcUnaudited pro forma preliminary financial information announcement for theyear ended 31 December 2005Pro forma business sector and geographical analysisFor the year ended 31 December 2005 Actual Pro forma 2005 2004 ‚£m ‚£mRevenue Manned SecurityEurope 1,364.5 1,315.9North America 1,014.6 943.7New Markets 495.2 381.1Total Manned Security 2,874.3 2,640.7Security SystemsEurope 342.0 317.9North America 3.1 1.8New Markets 44.5 29.5Total Security Systems 389.6 349.2Cash ServicesEurope 688.6 635.1North America 76.9 64.3New Markets 100.5 74.6Total Cash Services 866.0 774.0Total revenueEurope 2,395.1 2,268.9North America 1,094.6 1,009.8New Markets 640.2 485.2Total revenue 4,129.9 3,763.9 PBITA Manned SecurityEurope 73.3 74.0North America 61.0 54.7New Markets 35.6 26.0Total Manned Security 169.9 154.7Security SystemsEurope 27.7 25.5North America 0.4 0.2New Markets 4.0 2.9Total Security Systems 32.1 28.6Cash ServicesEurope 58.4 44.7North America 2.8 3.9New Markets 15.5 11.0Total Cash Services 76.7 59.6Total PBITAEurope 159.4 144.2North America 64.2 58.8New Markets 55.1 39.9 278.7 242.9Head office costs (24.7) (27.2)Total PBITA 254.0 215.7The 2005 results presented above are consistent with those presented in note 5to the unaudited preliminary results announcement.Group 4 Securicor plcUnaudited preliminary results announcementFor the year ended 31 December 2005Consolidated income statementFor the year ended 31 December 2005 2005 2004 Notes ‚£m ‚£mContinuing operations Revenue 5 4,129.9 3,093.6 Profit from operations before amortisation ofacquisition-related intangibles, exceptional items and shareof profit from associates 248.7 163.1Share of profit from associates 5.3 2.4 Profit from operations before amortisation ofacquisition-related intangibles and exceptional items (PBITA) 5 254.0 165.5 Amortisation of acquisition-related intangibles (33.8) (13.4)Exceptional items:- Restructuring costs consequential upon acquisitions (22.2) (37.2)- Impairment of goodwill - (55.9)- Change in accounting estimates - (57.9) 8 (22.2) (151.0) Profit from operations before interest and taxation 198.0 1.1 Investment income 9 72.8 39.6Finance costs 10 (113.3) (58.9) Profit/(loss) from continuing operations before taxation 157.5 (18.2) Taxation:- Before amortisation and exceptional items (67.1) (48.0)- On amortisation of acquisition-related intangibles 10.0 4.0- On exceptional items (0.9) 36.5 11 (58.0) (7.5) Profit/(loss) from continuing operations after taxation 99.5 (25.7) Loss from discontinued operations 6 (8.8) (39.7) Profit/(loss) for the period 90.7 (65.4) Attributable to:Equity holders of the parent 80.8 (72.3)Minority interests 9.9 6.9Profit/(loss) for the period 90.7 (65.4) Earnings per share attributable to ordinary equityshareholders of the parent 13 For profit/(loss) from continuing operations:Basic 7.1p (3.4)pDiluted 7.0p (3.4)p For profit/(loss) from continuing and discontinuedoperations:Basic 6.4p (7.5)pDiluted 6.4p (7.5)p Dividends per share declared and proposed in respect of theperiod 12 2005 2004 Interim (declared and recognised in 1.30p - 16.4 -reserves)Final (proposed but not recognised) 2.24p 1.85p 28.3 23.5Total 3.54p 1.85p 44.7 23.5Consolidated balance sheetAs at 31 December 2005 2005 2004 Notes ‚£m ‚£mASSETS Non-current assetsGoodwill 1,172.7 1,096.3Acquisition-related intangible assets 241.4 253.3Other intangible assets 27.3 25.3Property, plant and equipment 355.4 339.5Investment in associates 3.9 10.1Trade and other receivables 50.3 40.5Deferred tax asset 112.9 111.0 1,963.9 1,876.0 Current assetsInventories 35.3 34.2Trading investments 61.4 60.7Trade and other receivables 830.7 702.6Cash and cash equivalents 263.8 191.6Non-current assets classified as held for sale - 29.9 1,191.2 1,019.0 Total assets 3,155.1 2,895.0 LIABILITIES Current liabilitiesBank overdrafts (58.7) (13.9)Bank loans (87.7) (92.3)Obligations under finance leases (12.1) (15.4)Trade and other payables (756.5) (700.7)Tax liabilities (27.6) (23.8)Retirement benefit obligation (30.0) (30.8)Short-term provisions (44.5) (44.4) (1,017.1) (921.3) Non-current liabilitiesBank loans (790.1) (695.1)Obligations under finance leases (33.9) (22.0)Trade and other payables (1.0) (16.0)Retirement benefit obligation (211.0) (204.8)Long-term provisions (47.3) (36.7)Deferred tax liabilities (84.8) (89.2) (1,168.1) (1,063.8) Total liabilities (2,185.2) (1,985.1) Net assets 969.9 909.9 EquityShare capital 317.2 316.1Reserves 625.0 563.3Equity attributable to equity holders of the parent 14 942.2 879.4Minority interests 27.7 30.5 Total equity 969.9 909.9Consolidated cash flow statementFor the year ended 31 December 2005 2005 2004 ‚£m ‚£m Profit/(loss) from continuing operations before taxation 157.5 (18.2)Operating (loss)/profit from discontinued operations (1.7) 0.5 Adjustments for:Investment income (72.8) (39.6)Finance costs 113.3 58.9Depreciation of property, plant and equipment 75.4 57.6Impairment loss on property, plant and equipment - 8.2Amortisation of acquisition-related intangible assets 33.8 13.4Amortisation of other intangible assets 6.8 5.8Impairment of goodwill - 55.9Share of profit from associates (5.3) (2.4)Loss on disposal of property, plant and equipment 2.8 1.3Equity settled transactions:- Performance share plan 1.2 0.8- Share options 1.5 0.7Operating cash flows before movements in working capital 312.5 142.9 (Increase)/decrease in inventories (6.3) 1.6(Increase)/decrease in receivables (67.9) 5.2(Decrease)/increase in payables and provisions (10.8) 17.0Cash generated by operations 227.5 166.7 Tax paid (53.0) (30.0) Net cash from operating activities 174.5 136.7 Investing activitiesInterest received 9.8 4.5Dividends received from associates 12.3 -Purchases of property, plant and equipment (108.0) (99.3)Proceeds on disposal of property, plant and equipment 18.2 16.2Acquisition of subsidiaries (69.7) (93.3)Acquisition of investments in associates - (5.9)Net cash balances acquired 3.0 64.0Cash movement relating to the Group 4 Falck A/S demerger - (48.9)Disposal of subsidiaries 42.1 (0.8)Disposal/(purchase) of trading investments 4.8 (11.6)Purchase of own shares (6.1) -Acquisition of minority shareholders of the former Group 4Falck A/S (9.5) - Net cash used in investing activities (103.1) (175.1) Financing activitiesShare issue 4.9 0.2Net sale of own shares - 5.4Dividends paid to minority interest (5.1) (2.3)Dividends paid (39.9) (3.3)Net increase in borrowings 47.3 209.9Interest paid (47.9) (25.6)Repayment of obligations under finance leases (7.6) (5.9) Net cash from financing activities (48.3) 178.4 Net increase in cash and cash equivalents 23.1 140.0 Cash, cash equivalents and bank overdrafts at the beginningof the period 177.7 37.4 Effect of foreign exchange rate fluctuations on cash held 4.3 0.3 Cash, cash equivalents and bank overdrafts at the end of theperiod 205.1 177.7Consolidated cash flow statement (continued)For the year ended 31 December 2005 Notes 2005 2004 ‚£m ‚£mReconciliation of net cash flow to movement in net debt Increase in cash, cash equivalents and bank overdrafts 23.1 140.0(Decrease)/increase in liquid resources (4.8) 11.6Increase in debt and lease financing (39.7) (204.0) Change in net debt resulting from cash flows (21.4) (52.4)Borrowings acquired with subsidiaries (1.3) (212.2)New finance leases (20.7) (5.9)Movement in net debt in the period (43.4) (270.5)Translation adjustments (27.5) 23.9Net debt at the beginning of the period (586.4) (339.8) Net debt at the end of the period 15 (657.3) (586.4)A reconciliation of net debt at 31 December 2005 to amounts reported in thebalance sheet is presented in note 15 to this announcement.Consolidated statement of recognised income and expenseFor the year ended 31 December 2005 2005 2004 ‚£m ‚£m Exchange differences on translation of foreign operations 36.5 8.8Actuarial losses on defined benefit pension schemes (22.6) (16.5)Tax on items taken directly to equity 12.3 3.8Net income/(expense) recognised directly in equity 26.2 (3.9)Profit/(loss) for the period 90.7 (65.4)Total recognised income/(expense) 116.9 (69.3) Attributable to:Equity holders of the parent 107.0 (76.2)Minority interests 9.9 6.9Total recognised income/(expense) 116.9 (69.3)Notes to the preliminary announcement1) General informationThe financial information set out in this announcement does not constitute thecompany's financial statements for the years ending 31 December 2005 or 2004.Statutory financial statements for 2004, which were prepared under UK GAAP,have been delivered to the Registrar of Companies. The auditors have reportedon the 2004 financial statements; their report was unqualified and did notcontain a statement under section 237(2) or (3) of the Companies Act 1985. Thestatutory financial statements for 2005, which are being prepared underInternational Financial Reporting Standards as adopted by the European Union(EU), will be finalised on the basis of the financial information presented bythe directors in this preliminary announcement and will be delivered to theRegistrar of Companies in due course.As a result of a scheme of arrangement of Securicor plc, which becameeffective on 19 July 2004, Group 4 Securicor plc became the ultimate holdingcompany of the Securicor plc group of companies and, on the same date, and asthe result of a recommended offer for its shares, it acquired Group 4 A/S, theholding company of the former security businesses of Group 4 Falck A/S. On thebasis that the transaction was effected by using a new parent, Group 4 A/S wasidentified as the acquiror. The comparative results of Group 4 Securicor plcfor the year to 31 December 2004 therefore include the full year of trading ofthe security businesses of the former Group 4 Falck A/S and the trading of thebusinesses of Securicor plc for the period from 20 July 2004 to 31 December2004.2) Statement of complianceThe financial information set out in this announcement has been presented forthe first time in accordance with International Financial Reporting Standardsadopted for use in the EU and its interpretations adopted by the InternationalAccounting Standards Board (IFRS). With certain mandatory or optionalexceptions detailed in IFRS 1 "First-time Adoption of International FinancialReporting Standards", the comparatives for 2004 have been restated under IFRSand the group's date of transition to IFRS is 1 January 2004, other than inrespect of IAS 32: "Financial Instruments: Disclosure and Presentation" andIAS 39: "Financial Instruments: Recognition and Measurement", for which it is1 January 2005. However, whilst the financial information has been prepared onthis basis, this announcement does not itself contain sufficient informationto comply with IFRS.The disclosures required by IFRS 1 concerning the transition from UK GAAP toIFRS were included in the IFRS financial information published on 5 September2005 and were represented in full in the interim statement dated 12 September2005 and will also be included within the group's annual report and accounts.The effect of the group's election to apply IAS 32 and IAS 39 from 1 January2005 is that the 2004 comparative income statement and statement of recognisedincome and expense are, in respect of these standards alone, presented inaccordance with UK GAAP and do not include any charge or credit in respect ofchanges in the fair values of financial instruments.3) Accounting policiesThe financial information presented in this announcement has been prepared inaccordance with the same accounting policies as the statutory accounts for theyear ended 31 December 2004 save for those changes arising from IFRSapplicable as at 31 December 2005. These changes were detailed in the IFRSfinancial information published on 5 September 2005 and represented in thegroup's interim statement dated 12 September 2005. The accounting policieswill be presented in full in the group's annual report and accounts.4) Acquisition accountingThe comparative balance sheet at 31 December 2004 has been restated to reflectthe completion during 2005 of the initial accounting in respect ofacquisitions made during 2004. Adjustments made to the provisional calculationof the fair values of assets and liabilities acquired amount to ‚£18.4m, withan equivalent increase in the reported value of goodwill.5) Segmental analysisThe group operates in three core product areas, manned security, securitysystems and cash services. The group operates on a worldwide basis and derivesa substantial proportion of its revenue and operating profit from each of thefollowing geographic regions: Europe, North America and New Markets(comprising Latin America and the Caribbean, Africa, the Middle East and GulfStates, and Asia Pacific).The current management structure of the group is a combination of product areaand geography, within which the larger businesses generally report by productarea. The group's primary segmentation is therefore by business segment andits secondary segmentation is by geography. Segment information is presentedbelow.Segment revenue 2005 2004 ‚£m ‚£mBy business segmentManned SecurityEurope 1,364.5 1,055.1North America 1,014.6 921.4New Markets 495.2 292.9Total Manned Security 2,874.3 2,269.4Security SystemsEurope 342.0 315.9North America 3.1 1.8New Markets 44.5 26.6Total Security Systems 389.6 344.3Cash ServicesEurope 688.6 402.9North America 76.9 29.8New Markets 100.5 47.2Total Cash Services 866.0 479.9Total revenue 4,129.9 3,093.6 By geographical marketEurope 2,395.1 1,773.9North America 1,094.6 953.0New Markets 640.2 366.7Total revenue 4,129.9 3,093.6Segment result Profit before interest, taxation, amortisation ofacquisition-related intangibles and exceptional items (PBITA) 2005 2004 ‚£m ‚£mBy business segmentManned SecurityEurope 73.3 51.6North America 61.0 53.0New Markets 35.6 19.1Total Manned Security 169.9 123.7Security SystemsEurope 27.7 25.0North America 0.4 0.2New Markets 4.0 3.0Total Security Systems 32.1 28.2Cash ServicesEurope 58.4 23.5North America 2.8 2.1New Markets 15.5 8.8Total Cash Services 76.7 34.4PBITA before head office costs 278.7 186.3Head office costs (24.7) (20.8)Total PBITA 254.0 165.5 By geographical marketEurope 159.4 100.1North America 64.2 55.3New Markets 55.1 30.9PBITA before head office costs 278.7 186.3Head office costs (24.7) (20.8)Total PBITA 254.0 165.56) Discontinued operationsDiscontinued operations represent operations disposed of during 2004 and 2005.They include the operations of Falck Security Nederland and its subsidiaries(with the exception of aviation security activities) and of Group 4 Falck CashServices UK. The disposal of these businesses was required by the EuropeanCommission as a condition for their approval of the combination between Group4 and Securicor on 19 July 2004. During the disposal process the group onlyhad restricted control over these operations and in consequence their resultshave not been consolidated from 20 July 2004. Falck Security Nederland wassold on 2 November 2005 and Group 4 Falck Cash Services UK on 7 March 2005.Also included within discontinued operations are the security operations ofCognisa in the US, which were sold on 31 August 2005.Revenue from discontinued operations amounted to ‚£39.8m (2004: ‚£86.5m) inmanned security and ‚£nil (2004: ‚£3.0m) in cash services. (Losses)/profits fromdiscontinued operations before amortisation of acquisition-related intangiblesand exceptional items amounted to ‚£(1.7)m (2004: ‚£1.8m) in manned security and‚£nil (2004: ‚£(0.3)m) in cash services. The net loss attributable todiscontinued operations of ‚£(8.8)m (2004: ‚£(39.7)m) presented in the incomestatement is represented by the total (loss)/profit for the year attributableto discontinued operations of ‚£(1.9)m (2004: ‚£0.1m) and the total loss for theyear on disposal of discontinued operations of ‚£(6.9)m (2004: ‚£(39.8)m).7) Acquisitions and disposalsThe group undertook a number of acquisitions in the year, none of which wereindividually material. The total fair value of net assets acquired amounted to‚£19.3m, generating goodwill of ‚£32.6m, satisfied by a total consideration of‚£51.9m.Principal acquisitions in subsidiary undertakings include the purchase ofOneService, a valuables transportation business in the US, and Universal, acash-in-transit business in Canada. In addition, the group increased itsexisting shareholding in Hashmira Company, a security business in Israel.Other acquisitions included Chubb Security Services in Taiwan and the assetsand liabilities of ADT Offender Monitoring in North America.During the year, the group disposed of the operations of Falck Nederland andits subsidiaries (with the exception of aviation security activities) on 2November 2005, and of Group 4 Cash Services UK and Securicor Luxembourg on 7March 2005 as required by the European Commission. In addition, the securityoperations of Cognisa Security in the US were sold on 31 August 2005.8) Exceptional items 2005 2004 ‚£m ‚£m Restructuring costs consequential upon acquisitions (22.2) (37.2)Impairment of goodwill in respect of businesses in Finland, Germany,Poland, South Africaand Austria - (55.9)Change in accounting estimates - (57.9) Total exceptional items (22.2) (151.0)9) Investment income 2005 2004 ‚£m ‚£m Interest receivable 12.0 4.6Investment income from pension assets 60.8 35.0 Total investment income 72.8 39.6Notes to the preliminary announcement (continued)10) Finance costs 2005 2004 ‚£m ‚£m Interest payable (47.1) (22.6)Finance costs from pension liabilities (65.7) (36.3)Decrease in fair value of trading investments (0.5) - Total finance costs (113.3) (58.9)11) Taxation 2005 2004 ‚£m ‚£m UK taxation (11.2) (10.3)Overseas taxation (55.9) (37.7) Total taxation charge before taxation on amortisation andexceptional items (67.1) (48.0) Deferred taxation credit on amortisation of 10.0acquisition-related intangibles 4.0Taxation (charge) / credit on exceptional items (0.9) 36.5 Total taxation charge (58.0) (7.5)12) Dividends 2005 2004 ‚£m ‚£m Amounts recognised as distributions to equity holders in theperiod: Final dividend of DKK 0.049 per share for the year ended 31 December 2003 - 3.6Final dividend for the year ended 31 December 2004 of 1.85p(DKK 0.1981) per share 23.5 -Interim dividend for the six months ended 30 June 2005 of1.30p (DKK 0.143) per share 16.4 - Total amounts recognised as distributions to equity holdersin the period 39.9 3.6 Proposed final dividend for the year ended 31 December 2005of 2.24p (DKK 0.2435) (2004:1.85p, DKK 0.1981 ) per share 28.3 23.5The proposed final dividend is subject to approval by shareholders at theAnnual General Meeting. If so approved, it will be paid on 11 July 2006 toshareholders who are on the register on 9 June 2006. The exchange rate used totranslate it into Danish Kroner is that at 9 March 2006.13) Earnings per share attributable to ordinary shareholders of the parent 2005 2004 ‚£m ‚£mFrom continuing and discontinued operationsEarnings/(loss)Profit/(loss) for the year attributable to equity holders of the 80.8parent (72.3)Effect of dilutive potential ordinary shares (net of tax) - -Profit/(loss) for the purposes of diluted earnings/(loss) per share 80.8 (72.3) Number of shares (m)Weighted average number of ordinary shares 1,265.0 966.9Effect of dilutive potential ordinary shares 6.0 -Weighted average number of ordinary shares for the purposes of 1,271.0 966.9diluted earnings/(loss)per share Earnings/(loss) per share (pence)Basic 6.4p (7.5)pDiluted 6.4p (7.5)p From continuing operationsEarnings/(loss)Profit/(loss) for the year attributable to equity holders of the 80.8 (72.3)parentAdjustment to exclude loss for the period from discontinued 8.8 39.7operationsProfit/(loss) from continuing operations 89.6 (32.6)Effect of dilutive potential ordinary shares (net of tax) - -Profit/(loss) from continuing operations for the purpose of diluted 89.6 (32.6)earnings/(loss) per share Earnings/(loss) per share from continuing operations (pence)Basic 7.1p (3.4)pDiluted 7.0p (3.4)p From discontinued operationsLoss per share from discontinued operations (pence)Basic (0.7)p (4.1)pDiluted (0.7)p (4.1)p From adjusted earningsEarnings/(loss)Profit/(loss) from continuing operations 89.6 (32.6)Adjustment to exclude net pension finance costs and fair valueadjustments to financial instruments (net of tax) 3.8 0.9Adjustment to exclude amortisation of acquisition-related intangible 23.8 9.4assets (net of tax)Adjustment to exclude exceptional items (net of tax) 23.1 114.5Adjusted profit for the year attributable to equity holders of the 140.3 92.2parent Adjusted earnings per share (pence) 11.1p 9.5p14) Reconciliation of equity attributable to equity holders of the parent 2005 2005 2005 2004 2004 2004 Share Share capital Reserves Total capital Reserves Total ‚£m ‚£m ‚£m ‚£m ‚£m ‚£m At 1 January 316.1 563.3 879.4 180.4 71.5 251.9Total recognisedincome/(expense)attributable to equityshareholders of the parent - 107.0 107.0 - (76.2) (76.2)Shares issued 1.1 3.8 4.9 0.1 0.2 0.3Fair value of shares issuedon acquisition of Securicor plc - - - 135.6 574.5 710.1Dividends declared - (39.9) (39.9) - (3.6) (3.6)Own shares purchased - (6.1) (6.1) - - -Equity settled transactions:- Performance share plan - 1.2 1.2 - 0.8 0.8- Share options - 1.5 1.5 - 0.7 0.7Change in fair value ofhedging derivatives - (5.8) (5.8) - - -Consideration received onsale of own shares - - - - 5.4 5.4Movement arising fromacquisition of minorityshareholders of the formerGroup 4 Falck A/S - - - - (10.0) (10.0)At 31 December 317.2 625.0 942.2 316.1 563.3 879.415) Analysis of net debt 2005 2004 ‚£m ‚£m Cash in hand and at bank 263.8 191.6Trading investments 61.4 60.7Current liabilitiesBank overdrafts and loans (146.4) (106.2)Finance leases (12.1) (15.4)Non-current liabilitiesBank loans (790.1) (695.1)Finance leases (33.9) (22.0)Total (657.3) (586.4)ENDGROUP 4 SECURICOR PLCRelated Shares:
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