Final Results for the year to 30 June 2014

RNS Number : 2816W

Croma Security Solutions Group PLC

06 November 2014

 



CROMA SECURITY SOLUTIONS GROUP PLC

(LON: CSSG)

FINAL RESULTS

FOR THE YEAR TO 30 JUNE 2014

CROMA SECURITY SOLUTIONS GROUP PLC ("the Group"), the AIM listed total security services provider, announces its results for the year ended 30 June 2014.   

Highlights

·      Revenue growth to £14.81m, an increase of 12%

·      Gross Profit up to £3.66 m up 12%

·      Adjusted EBITDA of £0.62m

·      Balance sheet net assets at £8.88m

·      Positive earnings of 2.16p per share

·      Delivery of security services to Commonwealth Games Glasgow 2014

·      FastVein™ installations increasing.

An electronic copy of the annual report is available from the Group's website www.cssgroupplc.com along with the Notice of AGM.

For further information Contact:

Croma Security Solutions Group plc

Sebastian Morley, Chairman                                                                 Tel: [phone]

WH Ireland Limited (NOMAD and Broker)

Adrian Hadden / Mark Leonard                                                            Tel: [phone]

Chairman's Statement

I have pleasure in reporting the Group's final results for the year to 30th June 2014 which has seen the Group exceed expectations.

The strategy of the Group remains to deliver an integrated security offering to individuals and corporations with emphasis on high service levels, seamless management of diverse security requirements and an overall focus on quality.

Operational Overview

2013/14 has seen a strong performance across the Group, with all key constituents showing growth in turnover and profitability. Across the piece the Group is delivering profitability close to the forecasts prepared at the time of the acquisition, which is pleasing given the amount of reorganisation required in 2012/13.

Since the acquisition of the CSS Companies in 2012, the Board and management teams have been successfully integrated.  Likewise the security service offerings have integrated 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 the present client base is fundamental.  The Group continues 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.   

Group Financials

The financial results of the Group are pleasing and demonstrate that it has settled in to the new structure and is delivering the anticipated results.

Group turnover increased ahead of expectations from £13.3m to £14.8m.  Importantly, margin has improved and has resulted in operating profits of £0.34m (2013: £0.09m) after amortisation and depreciation charges of £0.28m.  This represents a fivefold increase in profitability and is ahead of expectations.  These results go a long way to confirming the Board's confidence in the fundamentals of the acquisition and put the Group back on track with their long term projections.  Sales pipelines are encouraging and The Board is confident that it will be able to maintain margins and thus see a continued growth in operating profits for the coming year

Our balance sheet net assets are at £8.88m (2013: £8.56m) including intangible assets of £7.01m.  The Group is now wholly ungeared and has no long term debt on the balance sheet.  Operational cashflow was positive at £0.67m.

Croma Vigilant

Croma Vigilant has had a particularly successful year; turnover has grown by 10.5%, and operating profit has increased to £416 k (2013: £330 k). This is due to a more proactive approach to business development, an awareness on the part of clients that there is value in a premium offering, and in no small part to the Commonwealth Games 2014.  Croma Vigilant was able to demonstrate its suitability to be part of the overall security offering for the Games, and the organisers have recognised the excellent service the company provided.   Whilst it is essentially a one-off contract it has certainly increased the standing and profile of the company to the point where it is being invited to more, and more profitable, tender opportunities.

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. It is the largest revenue contributor to the Group.

On top of its healthy retained client base, which has seen high levels of retention in the year, Croma Vigilant's contract as part of the security provider team for Commonwealth Games Glasgow 2014 lasted from May until August and generated revenues of £0.8m at very good margin.  Importantly, the service delivery was found to be faultless and Croma Vigilant was the only operator amongst a total pool of ten companies that incurred no penalties or fines for poor or non-performance.

Croma Vigilant continues to enjoy strong relationships with its long term customers, and revenues from retained clients are growing.  The company's firm belief is that a client retained is worth three clients won, and great effort goes into ensuring we are meeting and exceeding client expectations at all levels.

The ex-military ethos is also bearing fruit, and there is a strong and capable team of guards and supervisors. The company has inherited many guards through TUPE, and the first priority is always to ensure that new arrivals understand and share this approach. 

Croma Security Systems, Croma Locksmiths & Croma Biometric

Croma Security Solutions has seen an even more marked growth in turnover and profits, coming back to the pre-acquisition levels of performance.  Sales have grown 18.5% to £2.57m and profitability has increased to £0.41m. The company is concentrating on delivering high value systems to private and corporate clients, with the emphasis being on access control and intruder alarm systems.

National contracts have been renegotiated and are now performing satisfactorily, and high value security installations continue to allow the company to demonstrate its high levels of service and technical expertise.

Croma Security Systems have been working with Croma Vigilant in the support of one of the former's major clients, and opportunities to increase security services to existing clients by cross selling continue to be identified. This remains a challenging approach, but both Croma Vigilant and Security Systems are investing in sales and marketing resources to improve target market penetration.

The company is currently addressing an industry-wide issue of a shortage of trained engineers; during the recent recession the industry spent less time and money on training, resulting in a skills gap.  Croma Security Systems are taking on trainees to ensure it is able to field a full engineering team.

Croma Security Systems has been pushing its new products, FastVein™ and Vehicle Impact Protection System ("VIPS").  Both of these products are gaining traction.  VIPS has secured good sales with COLAS and AOne plus, and is looking to expand into Europe as well as UK.  FastVein™ is attracting very strong interest in UK and Europe as well as the Middle East.   Both FastVein™ and VIPS have been the subject of successful claims for Research and Development Corporation Tax Credits.

The Board is clear that the core revenue streams of the Group, that of manned guarding and security systems and locks, will continue to drive results to the forecast numbers and beyond.  The main effort will remain there, and new products will form the basis of incremental revenues and earnings.

In CSS Locksmiths there has been a shift in the nature of business away from consumers and towards commercial clients.  The high street market is highly competitive and margins are being eroded, whereas the commercial sector tends to recognise the Master Locksmith expertise more readily.  This shift inevitably impacts on credit risk and working capital absorption but builds stronger more defensible relationships.

The opportunities for expansion are twofold;  increase our geographical footprint by acquisition or franchise, and expand the range of services beyond locksmithing. Of these, the former is preferable as it plays to the core strengths of technical expertise and reputation.

Fastvein®

Development of the Fastvein™ suite of products is ongoing, and some modules are now being deployed whilst others are being finalised.  FastVein™ is attracting very strong interest in the UK and Europe, as well as the Middle East.  The Group has created a team to manage the brand development and to generate sales leads.  Inevitably with a new technology there is considerable inertia to overcome, but The Board are hopeful of confirmed orders before Christmas.

VIPS

The roll-out of VIPS by COLAS to its UK fleet of motorway maintenance vehicles has gone ahead successfully, and the executive team is working with COLAS to expand the technology into Europe.  The potential market for VIPS is considerable, and the company is determined to push this life saving product to emergency services, roadside assistance and breakdown vehicles and buses and other PSVs.

Outlook and Priorities

All Group entities are  looking to pursue an active strategy for organic growth in the coming year, with increased sales effort and active cost control.

Vigilant is clear that its emphasis on quality of service is giving it a marked edge and will allow it to target higher margin clients.  The directors feel that company has the right assets and people in place to drive significant growth, and the evidence of the first quarter of 2014 / 15 shows this to be working.

CSS Total Security is investing in an increased sales and marketing resource and will use that, with strong reputation and industry referral to continue to grow.  The key limitation will be the availability of skilled engineers, and to address that the company is training more and more of its own staff to the required standard.  The company will continue to deliver differentiated high quality service, and additionally is going to expand into the broader market with a lower cost offering for customers who feel their security needs are less pressing. This is a market that they have avoided in the past, but market research shows that there is an appetite for a reputable low - cost option.

FastVein™ and VIPS continue to be developed, and the Board look forward to briefing its stakeholders on exciting new contracts for each of these in the first half of this year.  Overseas opportunities appear every bit as promising as those in the UK, and the Board is reviewing all options for accessing an export market.

The Board views the coming year with optimism, and welcomes the great progress made in the last eighteen months.  The Group is resourced and ready to move forward, and has sufficient interest and sales pipeline to view the coming year with confidence. 

As previously intimated it remains our intention to pay dividends as soon as our financial performance warrants it, and I fully expect that this will commence in this financial year.

S J F Morley

Executive Chairman

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 June 2014
Continuing operations:			2014			2013
			£			£
Revenue			14,813,444			13,250,699
Cost of sales			(11,150,460)			(9,981,692)
Gross profit			3,662,984			3,269,007
Administrative expenses			(3,347,618)			(3,195,790)
Other operating income			21,453			20,400
Operating profit			336,819			93,617
	Analysed as:
	Earnings before interest, tax, depreciation, amortisation, impairment and acquisition costs		620,863			339,518
	Depreciation		(99,172)			(108,491)
	Amortisation of intangible assets		(184,872)			(210,780)
	Impairment of intangible assets		-			(84,362)
	Reduction in contingent consideration		-			157,732
	Operating profit		336,819			93,617
Finance expenses			(32,235)			(50,241)
Profit before tax			304,584			43,376
Tax			15,973			36,420
Profit  for the year attributable to owners of the parent			320,557			79,796
Earnings per share
Basic and diluted earnings per share (pence)
- Basic earnings per share			2.16			0.55
- Diluted earnings per share			2.16			0.55
Total			2.16			0.55

CONSOLIDATED STATEMENT OF FINANCIAL POSITION FOR THE YEAR ENDED 30 June 2014
Assets				2014		2014			2013	2013
				£		£			£	£
Non-current assets
Goodwill				5,866,961					5,866,961
Other Intangible assets				1,141,290					1,326,162
Property, plant and equipment				329,356					385,915
						7,337,607				7,579,038
Current assets
Inventories				222,958					220,202
Trade and other receivables				2,485,885					2,651,009
Cash and cash equivalents				899,693					677,858
						3,608,536				3,549,069
Total assets						10,946,143				11,128,107
Liabilities
Non-current liabilities
Deferred tax				(299,474)					(368,447)
Trade and other payables				(5,263)					(27,091)
Provisions				-					(4,119)
						(304,737)				(399,657)
Current liabilities
Trade and other payables				(1,596,053)					(1,648,326)
Borrowings				(166,682)					(524,789)
						(1,762,735)				(2,173,115)
Total liabilities						(2,067,472)				(2,572,772)
Net assets						8,878,671				8,555,335
Issued capital and reserves attributable to owners of the parent
Share capital						743,307				743,307
Share premium						5,230,276				5,230,276
Merger reserve						2,139,454				2,139,454
Retained earnings						340,533				19,976
Undistributable Reserves						422,322				422,322
Other reserves						2,779				-
Total equity						8,878,671				8,555,335

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 30 June 2014

	Share Capital	Share premium	Merger Reserve	Retained earnings	Undistributable  reserve	Other Reserves	Total Equity
	£	£	£	£	£	£	£
At 1 July 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 1 July 2013	743,307	5,230,276	2,139,454	19,976	422,322	-	8,555,335
Profit for the year	-	-	-	320,557	-	-	320,557
Issue of Share Options	-	-	-	-	-	2,779	2,779
At 30 June 2014	743,307	5,230,276	2,139,454	340,533	422,322	2,779	8,868,671

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 30 June 2014

	2014		2013
	£		£
Cash flows from operating activities
Profit before taxation	304,584		43,376
Depreciation, amortisation and impairment	284,044		403,633
(Profit)/loss on sale of plant and equipment	8,103		(1,432)
Movement on provisions	-		(5,350)
Net changes in working capital	37 ,286		(95,751)
Financial expenses	32,235		50,241
Corporation tax paid	-		(2,718)
Net cash generated from operations	666,252		391,999
Cash flows from Investing activities
Purchase of property, plant and equipment	(49,589)		(85,097)
Proceeds on disposal of property, plant and equipment	14,100		26,163
Net cash used in investing activities	(35,489)		(58,934)
Cash flows from financing activities
Hire purchase loan repayments	(23,742)		(43,722)
Repayments of invoice discounting facility	(358,107)		(7,264)
Repayment of borrowings	-		(243,710)
Issue of share capital - cash issue			-
Interest paid	(27,079)		(46,235)
Net (used) in financing activities	(408,928)		(340,931)
Net increase in cash and cash equivalents	221,835		(7,866)
Cash and cash equivalents at beginning of period	677,858		685,724
Cash and cash equivalents at end of the period	899,693		677,858

Basis of preparation

The Group financial statements have been prepared and approved by the directors in accordance with International Financial Reporting Standards (IFRS's), International Accounting Standards and Interpretations (collectively IFRS) issued by the International Accounting Standards Board (IASB) as adopted by the European Union ("adopted IFRS's").

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 represent an abridged version of the Group's full Accounts for the year ended 30 June 2014, upon which the auditors have given an unqualified report.

The Annual report will be posted to all shareholders on 5^th November 2014 and will be available on request from Unit 6 Fulcrum 4, Solent Way, Whiteley, Hampshire PO15 7FT .  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 2015.

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 facility was renewed in June 2014.  The  overdraft facilities falls due for review on 30 November 2015 and the Board is confident this 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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