Final Results for the year to 30 June 2013

RNS Number : 9870S

Croma Security Solutions Group PLC

14 November 2013

 



CROMA SECURITY SOLUTIONS GROUP PLC

(LON: CSSG)

FINAL RESULTS

FOR THE YEAR TO 30 JUNE 2013

CROMA SECURITY SOLUTIONS GROUP PLC ("the Group"), the AIM listed total security services provider, announces its audited results for the year ended 30 June 2013.  These reflect the first full years trading as a fully integrated security specialist provider following the expansion of the Group by acquisition in March 2012.

Highlights

·      Revenue growth to £13.25m an increase of 34%

·      Gross Profit up to £3.27m growth of 86%

·      Adjusted EBITDA* of £0.34m

·      Balance sheet net assets at £8.56m

·      Positive earnings of 0.55p per share

·      Renewal of the Group's largest contract, delivering revenues expected to exceed £3m per annum until April 2015.

*Adjusted EBITDA comprises earnings before interest, tax, depreciation, amortisation and impairment charges.

An electronic copy of the annual report is available from the Group's website www.cssgroupplc.com and copies have been sent to shareholders together with the Notice of AGM. 

For further information Contact:

Croma Security Solutions Group plc

Sebastian Morley, Chairman                                                                 Tel: [phone]

WH Ireland Limited (NOMAD)

Adrian Hadden / Nick Field                                                                  Tel: [phone]

Chairman's Statement

I have pleasure in reporting to shareholders the Group's final results for the year to 30 June 2013 which has seen tangible progress in shaping the Group.

The focus of the Group remains that of delivering sustained organic growth by concentrating on our unique offering to the security market.  Our aim is to offer a total, vertically integrated security service to clients who demand the most exacting service and technology. The security market remains fragmented and presents a clear opportunity for an integrated provider.

Operational Overview

Since our acquisition of the CSS Companies in 2012, we have successfully integrated our Board and management teams.  Likewise we have integrated our security service offering into a joined up and simple proposition.  However, growth in cross selling between divisions has been slower than initially anticipated due to the constraints of existing contracts and geographical separation.

The maintenance and expansion of solutions to our present clients is fundamental.  We continue to develop historical clients, some of whom currently use a diverse range of contractors, in order to bring all their needs under one roof when this makes good business sense for both parties.  

In tandem, we are also aggressively marketing our unique technical solutions: Fastvein® and our Vehicle Impact Protection System.  These products which delivered Group revenues of £0.1m in 2013 have required more investment in time and funding but it is vital that the Group stands apart in innovation.  This is not innovation for its own sake, we have developed products that will improve client's safety and security while cementing valuable intellectual property for the Group and our Shareholders.

Group Financials

The financial results of the Group reflect the improvements resulting from the acquisition of the CSS Companies in 2012 and the financial restructuring which occurred at the time.

Group turnover increased broadly in line with our expectations from £9.9m to £13.2m.  However, with investments being made in infrastructure to support the Group's development into a full service national security provider, and with some delays in our order pipeline, we delivered operating profits of £0.09m after amortisation and impairment charges of £0.30m.  Although this is an improvement from our prior year operating loss of £0.41m, this was still below our expectations at the start of the year.  The Board remain optimistic that we will see a continued improvement in operating profits for the coming year.

Our balance sheet net assets are at £8.56m (2012: £8.40m) including intangible assets of £7.19m.

Cash flow was positive at £0.39m which helped us repay the final tranche of the higher coupon loan notes.  With our investment in improved credit control procedures we expect our debtor days to continue to improve and our cash flow to remain positive.

The results of our main operating divisions are discussed below:

Croma Vigilant

Croma Vigilant continues to operate in the upper echelon of the manned guarding market with the delivery of its manned guarding, key holding and commissionaire services and is the largest revenue contributor to the Group.

In March 2013, Croma Vigilant was successful with a retender to its largest customer and will now continue to deliver its services to them for a further three years from its base in London.  This contract delivered guarding and commissionaire revenues of £3.71m during 2013 and was re-negotiated with improved terms.

Previously announced contract wins with NHS Walsall and UK Land delivered revenues of £0.47m and there was and expansion of our contract with one of the UK largest infrastructure utility Groups to provide guarding services for its electricity supply contract in Scotland.  This delivered revenues of £0.85m (2012: £0.50m).

Croma Security Systems, Croma Locksmiths & Croma Biometric

The first full year of trading since the merger of the Group has resulted in improved profitability at the gross profit level.

Working together with a national Cinema chain, Croma Security Systems and Croma Locksmiths have supported a national maintenance schedule that has proven to be onerous and costly.  The Board identified that this had an adverse effect on gross margin and so renegotiated with this customer on a region by region basis.  The new contact, which will allow the Group to only service locations local to its existing infrastructure, should deliver cost savings and together with a revised costing structure, gross margin margins are expected to improve.  This customer has expressed confidence in Croma Security Solution's delivery of new installations due to the cumulative knowledge and experience of our team that install these systems.

We have identified that parts of our existing engineering team was an expensive resource for installation, and so we have moved to a model where installation and first fix is carried out where possible by sub-contractors on a fixed price basis, thus controlling the costs of installation.  This is the model used by most major security specialists in the UK today.  Despite this we have retained many of our highly technical engineers to ensure continued quality commissioning and handover to our clients.

The Board has identified a need to be more proactive in selling specialist tailored solutions into niche markets and we have invested in business development staff to target specific markets with bespoke security solutions.

The Croma Security Systems offering has been further enhanced with further developments of two unique intellectual properties in Fastvein® and its Vehicle Impact Protection System ("VIPs") for which it has received due recognition in the media for its innovative high end security technology.

Due to recent market indicators, it is toward our intellectual property products where we intend to focus in order to maintain our competitive edge.

Fastvein®

This year we have further developed the Fastvein® product and software and we are preparing to launch an entirely new suite of software along with a new range of products that are ready for delivery and installation to our clients on a more commoditised basis rather than our previously specialised bespoke solution.

The Board has also identified that there are opportunities to exploit its intellectual property in Fastvein® outside of its core markets.  One example is in the medical sector where we hope that the licencing of the technology to third parties will yield revenues.

Higher margin installations such as FastVein® and with Colas, for which the vehicle protection system has been well received, will be targeted to boost turnover and profit margin.

VIPS

During the last two years, our technical team has worked in conjunction with Bosch and our customer Colas Traffic Management, to produce a high end solution for the safety of operatives working on our motorways.  VIPS was recognised with an industry award for innovation.  Colas is completing the installation of this technology to its entire fleet of impact protection vehicles and we anticipate receiving a new order from another highways contractor to provide the same VIPs technology.

Since it has the ability to save lives by giving due warning of a potential vehicle collision, the market for our VIPS technology extends beyond highway operatives and indeed the UK.  We anticipate marketing VIPS to the Police, Fire and Rescue services, Vehicle Recovery Operators and into any other vehicle with a need to stop on a highway anywhere in the world.

In CSS Locksmiths, we are currently experiencing a slight upturn in business partly due to a better economic outlook, especially in the housing sector.

Further efficiencies have been made along with an incentive scheme for staff to deliver profits in conjunction with turnover.  We have seen continued growth with our key accounts including our contract with a leading cruise line as they continue to expand their fleet from Southampton.

CSS Locksmiths should benefit from working with our Fastvein® technology, since the installation of these systems requires the skills and services of experienced locksmiths to install the more profitable high security electro-mechanical locking systems.

Outlook and Priorities

This year we have noticed that the decline in underlying sales from our traditional day to day operations has not only halted but in the case of maintenance revenue we have seen steady growth.  In addition, we have seen certain niche market applications coming to fruition.  These indicators lead us to be optimistic for the year ahead and indeed this is supported by our results for the first quarter 2014.

Having made savings and completed much of the development work, we are looking forward as mentioned previously, to a continued improvement in profits for the year ahead.

We hope that our intellectual property developments will mean that Croma Security Systems will benefit from on-going maintenance and licence fees so supporting the continued growth of revenue and margin.

Overall, the Board continues, to view the prospects of the Group for the current financial year with confidence.  The original philosophy and reasons for the integration of the CSS Companies into the Group remain, albeit that earnings growth has not been delivered as quickly as the Board had anticipated.

The Group is now positioned to capitalise on its investment in product and services while exploiting our financial stability.  We aim to grow organically and drive profitability with a view to increasing shareholder value.

S J F Morley

Executive Chairman

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 June 2013
Continuing operations:			2013			2012
			£			£
Revenue			13,250,699			9,899,137
Cost of sales			(9,981,692)			(8,137,965)
Gross profit			3,269,007			1,761,172
Administrative expenses			(3,195,790)			(2,189,334)
Other operating income			20,400			20,400
Operating profit/(loss)			93,617			(407,762)
	Analysed as:
	Earnings before interest, tax, depreciation, amortisation, impairment and acquisition costs		339,518			95,588
	Depreciation		(108,491)			(80,626)
	Amortisation of intangible assets		(210,780)			(52,696)
	Impairment of intangible assets		(84,362)			-
	Reduction in contingent consideration		157,732			-
	Acquisition costs		-			(370,028)
	Operating profit/(loss)		93,617			(407,762)
Finance expenses			(50,241)			(77,803)
Profit/(loss) before tax			43,376			(485,565)
Tax			36,420			67,613
Profit/(loss) for the year from continuing operations			79,796			(417,952)
Profit from discontinued operations			-			115,000
Profit/(loss) and total comprehensive Profit/(loss) for the year attributable to owners of the parent			79,796			(302,952)
Earnings per share
Basic and diluted earnings per share (pence)
- Earnings/(loss) from continuing operations			0.55			(6.33)
- Earnings from discontinued operations			-			1.74
Total			0.55			(4.59)

CONSOLIDATED STATEMENT OF FINANCIAL POSITION FOR THE YEAR ENDED 30 June 2013
Assets				2013		2013			2012	2012
				£		£			£	£
Non-current assets
Goodwill				5,866,961					5,866,961
Other Intangible assets				1,326,162					1,621,304
Property, plant and equipment				385,915					401,910
						7,579,038				7,890,175
Current assets
Inventories				220,202					179,743
Trade and other receivables				2,651,009					2,706,353
Cash and cash equivalents				677,858					692,531
						3,549,069				3,578,627
Total assets						11,128,107				11,468,802
Liabilities
Non-current liabilities
Deferred tax				(368,447)					(443,450)
Trade and other payables				(27,091)					(32,300)
Provisions				(4,119)					(9,469)
						(399,657)				(485,219)
Current liabilities
Convertible loan notes				-					(239,704)
Trade and other payables				(1,648,326)					(1,808,099)
Borrowings				(524,789)					(532,053)
						(2,173,115)				(2,579,856)
Total liabilities						(2,572,772)				(3,065,075)
Net assets						8,555,335				8,403,727
Issued capital and reserves attributable to owners of the parent
Share capital						743,307				725,127
Share premium						5,230,276				5,176,644
Merger reserve						2,139,454				2,139,454
Retained earnings						19,976				(78,605)
Undistributable Reserves						422,322				422,322
Other reserves						-				18,785
Total equity						8,555,335				8,403,727

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 30 June 2013

	Share Capital	Share premium	Merger Reserve	Retained earnings	Undistributable  reserve	Other Reserves	Total Equity
	£	£	£	£	£	£	£
At 1 July 2011	189,338	247,123	-	139,627	422,322	188,081	1,186,491
Loss for the year	-	-	-	(302,952)	-	-	(302,952)
Loan note redemption	-	-	-	84,720	-	(84,720)	-
Loan note conversion to equity	5,638	78,938	-	-	-	(84,576)	-
Issue of share capital	530,151	4,850,583	2,139,454	-	-	-	7,520,188
At 30 June 2012	725,127	5,176,644	2,139,454	(78,605)	422,322	18,785	8,403,727
Profit for the year	-	-	-	79,796	-	-	79,796
Loan note redemption	-	-	-	18,785	-	(18,785)	-
Issue of share capital	18,180	53,632	-	-	-	-	71,812
At 30 June 2013	743,307	5,230,276	2,139,454	19,976	422,322	-	8,555,335

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 30 June 2013

	2013		2012
	£		£
Cash flows from operating activities
Profit/(loss) before taxation	43,376		(485,565)
Depreciation, amortisation and impairment	403,633		133,322
(Profit)/loss on sale of plant and equipment	(1,432)		6,474
Movement on provisions	(5,350)		(13,651)
Net changes in working capital	(95,751)		(444,545)
Financial expenses	50,241		77,984
Corporation tax paid	(2,718)		(29,119)
Net cash generated/(used) from operations	391,999		(755,100)
Cash flows from Investing activities
Acquisition of subsidiaries net of cash	-		(2,758,248)
Purchase of property, plant and equipment	(85,097)		(38,310)
Proceeds on disposal of property, plant and equipment	26,163		-
Cash proceeds from disposal of subsidiary net of cash disposed	-		207,903
Net cash used in investing activities	(58,934)		(2,588,655)
Cash flows from financing activities
Hire purchase loan repayments	(43,722)		(30,815)
Repayments of invoice discounting facility	(7,264)		(272,752)
Repayment of borrowings	(243,710)		(600,000)
Issue of share capital - cash issue	-		4,483,353
Interest paid	(46,235)		(61,651)
Net (used)/generated from financing activities	(340,931)		3,518,135
Net (decrease)/increase in cash and cash equivalents	(7,866)		174,380
Cash and cash equivalents at beginning of period	685,724		511,344
Cash and cash equivalents at end of the period	677,858		685,724

Basis of preparation

While the financial information included in this preliminary announcement has been computed in accordance with International Financial Reporting Standards ("IFRSs"), this announcement does not itself contain sufficient information to comply with IFRSs.

The financial information set out in this announcement represents an abridged version of the Group's full Accounts for the year ended 30 June 2013, upon which the auditors have given an unqualified report.

The Annual report will be posted to all shareholders 14 November 2013 and will be available on request from the Company Secretary.  The Annual Report contains full details of the principal accounting policies adopted in the predation of these financial statements.

Going concern

The Group's activities are funded by a combination of long term equity capital, and short term invoice discounting and bank overdraft facilities.  The day to day operations are funded by cash generated from trading and primarily invoice discounting facilities.

In considering the ability of the Group to meet its obligations as they fall due, the Board have considered the expected trading and cash requirements of the Group until November 2014.

The Board remains positive about the retention of customers and outlook of its main trading operations.  The Board's profit and cash flow projections suggest that the Group will meet its obligations as they fall due with the use of existing uncommitted invoice discounting facilities.  The invoice discounting and overdraft facilities fall due for review on 30 September 2014 and the Board is confident these will be renewed.

The financial statements do not reflect the adjustments that would be necessary were the trading performance of the Group to deteriorate and in the unlikely event that the funding available from invoice discounting and the overdraft was not available.  The financial statements do not include the adjustments that would result if the Group was unable to continue as a going concern.

 

END

 

 

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