Reliance warns on second-half profits

SHARES in Reliance Security, the electronic surveillance and security guard group, tumbled 22p to 133p after the company warned that profits in the second half to April would be worse than expected.

Brian Kingham, chairman, said: 'Over the last year conditions have been very tough and margins have remained under severe pressure. The measures we have taken to cut costs will not be sufficient to bring profits up to the levels we had hoped.'

He said that second-half profits would be broadly in line with the pounds 905,000 achieved in the first half, compared with pounds 2.5m last year. Before yesterday's announcement brokers had been expecting full-year pre-tax profits of about pounds 3m ( pounds 3.4m).

Reliance is finding the going tough in both its divisions. Manned security, which employes 4,500 guards, up from 4,300 a year ago, faced an increasing squeeze between wage inflation on the one hand and the price customers were prepared to bear. Bad debts increased.

The company also suffered from its continued commitment to an electronic surveillance business it started building up three years ago. Mr Kingham admitted: 'The timing couldn't really have been worse.'

Although turnover has risen from pounds 1.8m to pounds 5m over the past two years, the division has never made a profit. It is expected to have lost about pounds 1m last year.

Mr Kingham said he was confident that profits would bounce back in the year beginning in May. Last year had seen non-recurring spending to secure quality accreditation, but in total, costs could be pounds 1m lower than last year. He promised a maintained final dividend of 3.4p.

The market for manned security is estimated at almost pounds 1bn a year and has been growing at an annual rate of 15 per cent.

Reliance is expected to make pre-tax profits in the year to April of pounds 1.8m, improving to pounds 2.5m next year.