REG - Croma Sec. Sol. Grp - Final Results
11/11/2022 07:17
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RNS Number : 0522G Croma Security Solutions Group PLC 11 November 2022
11 November 2022
Croma Security Solutions Group Plc
("Croma", "CSSG", the "Company" or the "Group")
Final Results
Investment & New Client Wins
Croma Security Solutions Group plc, the AIM listed total security services
provider, announces its final results for the year end ended 30 June 2022.
Financial highlights
· 8% increase in revenues to £35.16m (2021: £32.54m) reflecting
continued demand for the Group's security solutions
· Gross profit margin improved to 18.2% (2021: 16.5%)
· Pandemic related Government support income reduced to £0.1m (2021:
£0.76m)
· EBITDA of £1.59m (2021: 1.98m). Excluding government support EBITDA
was £1.50m (2021: £1.22m)
· No borrowings other than lease liabilities and credit card
liabilities.
· Cash balances of £2.6m (30 June 2021: £5.4m) partly reflecting new
investments in property, plant and equipment and inventory.
· 5% increase in total dividend for the year to 2.1p (2021: 2.0p)
reflecting confidence in the outlook for all Group businesses.
Operational highlights: Investment in assets, people and new technologies
· Expansion of the security centre network with the acquisition of three
stores (two post year-end) taking the network to 13 sites across the UK
· Following on from becoming the preferred UK distributor for iLOQ in
October 2021, Group wide training was implemented on iLOQ to support ability
to sell and install nationally
· Investment in new biometric partnership with Fingo, an identity
authentication and payments platform
· Focus and investment on retention across staff base as competition for
security professionals increases
Post Year-End: Significant new client wins
· Four new contract wins together worth £6.1m as follows:
o Croma Vigilant won a three year contract worth £5m per annum, for the
guarding services of a London property portfolio with option to extend for a
further two years;
o PR0ception won a three year contract worth £0.5m per annum, for the same
London property portfolio (as above), with option to extend for a further two
years;
o Croma Vigilant won a three year contract worth £0.4m per annum, for the
guarding services of a substantial North West retail site; and
o £0.3m order for iLOQ for major UK company in the education sector with
potential for further orders.
· Benefit from these new contracts will come in the current financial
year and is equivalent to approximately 17% of Group revenues for 30 June
2022.
Sebastian Morley, Chairman of CSSG, said: "This has been another successful
year for the business. Coming out of the pandemic, the Group is in good
order with increasing demand from existing and new customers, no borrowings
and the capital to invest should opportunities arise. Profit margins
improved during the year albeit comparisons with last year are skewed by
government support income in 2021. During the year under review, we invested
in assets, people and new technologies. We are now seeing the benefit of
that investment, in the current financial year with significant new contract
wins that will boost our future financial performance."
For further information visit www.cssgroupplc.com or contact:
Croma Security Solutions Group Plc
Tel: +44 (0)7768 006 909
Sebastian Morley (Chairman)
WH Ireland Limited
Tel: +44 (0)207 220 1666
(Nominated Adviser and Broker)
Mike Coe
Sarah Mather
Novella
Tel: +44 (0)203 151 7008
Tim Robertson
Fergus Young
This announcement contains inside information as defined in the UK Market
Abuse Regulations and is disclosed in accordance with the Company's
obligations under those Regulations.
Chairman's Statement
This has been another solid trading period for the Group, and I am therefore
very pleased to present the trading results for the 12 months to 30 June 2022.
Coming out of the pandemic period, the Group is equally well positioned as it
was when we entered. During the pandemic, we adapted well to the market
conditions, maintained our customer and employee base and continued to deliver
premium security solutions and services. The Group's financial performance
during the year under review, reflects this, with revenues increasing by 8% to
£35.16m and earnings before interest, taxation depreciation and amortisation
("EBITDA") excluding government support income for the pandemic, increasing by
23% to £1.6m.
The Group remains debt free, excluding lease liabilities, and with cash
balances, as of 30 June 2022, of £2.6m, is well placed to support and expand
all parts of the business. Customer demand is strong, evidenced by the
increase in sales during the year and the significant new contract wins
announced since the year end.
Our strategic objectives have remained unchanged. We are focused on
servicing the premium end of the security market and becoming the British
security brand in Britain. The locksmith and systems security market remains
highly fragmented made up of many small businesses which offer us acquisition
opportunities. In the last 12 months we have added three further security
centres through two acquisitions, the second coming post year end. Alongside
growing by acquisition, we continue to grow organically led by our reputation
for delivering a premium service and expanding the range of our services we
provide to existing clients, in particular, adding PROception to current
manned guarding contracts.
Also underpinning our organic growth is the perceived need amongst private
companies and government departments to protect individuals and assets from
the range of potential risks. These risks encompass many types of events
from anti-social behaviour, vandalism, theft and physical threats to
individuals or groups. Sadly, most corporate bodies will at some time
experience one of these events and this experience then tends to lead senior
management to upgrade the protection of their assets to a premium security
service such as ours.
Innovation and in particular, innovation through technology continues to be a
specific focus for the Group. We have a strong track record of early adoption
where we see opportunity to differentiate and enhance our services. A key
focus for the business is our partnership with Finnish firm iLOQ. The iLOQ
product is a market leading lock product which is opened and powered by a
mobile phone. We have been the preferred UK national distributor of iLOQ
since October 2021 and we have invested in training our personnel across our
security centres to be able to market and install the product nationally.
Since the year end, we have signed a contract with a major education partner
which has the potential to be rolled out nationally, the first we hope of many
such contracts.
The Board is pleased to recommend a final dividend to shareholders of 2.1p per
share and subject to approval at the Annual General Meeting to be held on 6
December 2022, the final dividend will be paid on 16 December 2022 to all
shareholders on the register at the close of business on 2 December 2022.
The shares will be marked ex-dividend on 1 December 2022.
The year under review has been a period of further growth but also one of
investment in assets, people and new technologies. The benefit of these
investments has been reflected in the excellent new business wins achieved
since the year end, the impact of which will be first felt in the current
financial year. As a Board, we are also acutely aware of the economic
environment and how and where this might impact the Group. Employee
retention is a key area and we have been working hard to ensure our employee
base receives competitive pay levels combined with a positive and engaging
work environment. Our position of having no borrowings and continued
positive cash balances, ensures we have the financial flexibility to support
our businesses where necessary.
As a consequence, the Board is confident in the prospects of the business.
Sebastian Morley - Chairman
10 November 2022
Operational Review
The Directors present the Group Strategic Report for Croma Security Solutions
Group plc and its subsidiary companies for the year ended 30 June 2022.
The Group's strategic objectives continue to be:
· to deliver market leading full-service security offerings to the upper
quartile end of both large corporations and government. Achieved by
maintaining quality of service as a priority, focusing on meeting the full
range of our clients' security needs, and leveraging our brand and client
base;
· to produce consistent growth in financial performance, by maintaining our
margins and managing our costs. Acquisitions will be pursued only when they
can be seen clearly to add value to the Group;
· to develop and bring to market new technologies; and
· to deliver attractive shareholder returns.
The Group's longer-term objectives are:
· to grow our core offerings in the UK and abroad until we are the security
provider of choice to leading large corporates;
· to expand our service offering to include e-security; and
· to develop specific high-end national projects.
The maintenance and expansion of solutions to the present client base is
fundamental. The Group continues to expand the services to long-term
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.
The performance of each business segment is discussed below:
Croma Vigilant
Croma Vigilant, our largest division, generated sales of £29.3m (2021:
£27.4m) and operating profit of £0.7m (2021: £1.1m).
The increase in sales reflects the increase in demand for our security
solutions however, operating profits have declined due to various factors
including increased spend on post pandemic travel costs, new spending on IT
software, a potential bad debt provision of £0.1m and additional rent and
rates at our Dumfries office, where we have doubled our floorspace occupancy.
Our bottom line does not show the benefit from government support relating to
the pandemic which inflated operating profits for this division by a net
figure of £0.2m in 2021 compared to 2022.
Croma Vigilant provides manned guarding and reception services for property
assets and individuals and continues to employee over 900 security personnel
throughout the UK. Fundamental to the division's success is the military
ethos that pervades all aspects of the way the division is run, and all
contact with customers. Alongside this approach is a focus on innovation. A
key area of innovation has been the creation of PROception, a front of house
concept, making the modern reception part of a building's security strategy.
It is a natural combination with the divisions manned guarding services for
buildings where there is a reception, and our clients are recognising the
significant benefits of combining the two services to the significant
enhancement of a building's security.
The experience and expertise contained across our employee base is significant
and in the current economic environment it is crucial that we remain an
employer of choice with competitive pay levels together with providing a
positive and engaging work environment. To deliver a premium security
service is only possible by having a high quality of personnel to do so. To
maintain our competitive advantage, we look for new ways to enhance our
customer and employee experience and during the year we have invested
approximately £0.1m in new payroll software which will enable us to future
proof our employee expansion beyond the limits of our existing software which
was becoming a constraint to growth.
Contracted revenues over a period exceeding one month were £25.9m being 88.4%
(2021: 82%) of income, ensuring that the division continues to have good
visibility over the reliability of future revenues. We encourage our
existing customer base to sign longer term contracts and also to target new
business which gives us the opportunity to invest having the surety of
significant revenue streams. Since the year-end, Croma Vigilant has won
three major contracts together worth £5.9m per annum all of which will run
for a minimum of 3 years.
Approximately £20m of our contracted revenues are on contracts which are due
for renewal in the coming year (note 3) and of these approximately £6m of
revenue are on contracts where our customer has an option to extend for
between 12 and 24 months.
There was a similar split in income to previous years between private and
public, of approximately two thirds/one third respectively.
Croma Security Systems
Croma Security Systems including Croma Biometrics recorded sales of £2.6m
(2020: £2.5m) and an operating profit before impairment of £0.5m (2021:
£0.5m). Prior year profits benefited from government support of 0.2m so
this represents a good performance and shows that the business is returning to
the level of performance seen pre-pandemic.
In support of the Group's focus on providing total security solutions, Croma
Security Systems continues to provide a full range of electronic security
solutions including CCTV, high security locks to FastVein™ biometrics
technology for high-speed human identification.
As our cinema chain customers continue to recover from the COVID pandemic
spending on refurbishments of their portfolio has not yet returned to
pre-pandemic levels. We are hopeful that during the coming year further
refurbishment projects will allow us to increase our offering to them through
our expanding network of security centres.
Approximately 17% or our sales were derived from our cinema customers and 18%
from our work with two Southern based NHS trusts. Revenues from maintenance
contracts which are renewed on an annual basis account for approximately
£0.5m (2021: 0.4m) of the division's income.
In January 2022, we entered a new strategic partnership with FinGo, a
biometric identity authentication and payments platform. The new alliance
naturally complements and strengthens each company's leading solutions in the
provision of non-invasive biometric technology but has yet to yield any
significant revenues to date.
FASTVEIN™ biometrics is deployed across the education and construction
sectors, providing customers with a quick, easy to use, accurate and
cost-effective access control and identity management systems. working with
FinGo enables us to include payments alongside identity and access control
offerings.
Largely due to an increase in group WACC to 17% is has been necessary to
impair the carrying value of goodwill in this division by £0.6m (2021:
£nil).
Croma Locksmiths
Croma Locksmiths, which operates through 13 security centres in the UK and
centrally through the Group, delivered sales of £3.2m (2021: £2.6m) and
operating profit of £0.4m (2021: £0.3m) which represents a good performance
given that the prior year benefitted from government support of £0.3m.
We remain focused on creating a national chain of modern security centres.
We began the financial year with 10 centres and since then the division has
completed two acquisitions. The first acquisition, completed in November
2021 was of Safeguard Ltd, a Manchester based locksmith business servicing the
security needs of Cheshire and operating from a retail store in Warrington.
The second acquisition, completed in July 2022, was of Southern Stronghold
Ltd, a long-standing locksmith business that operates from two freehold
premises, one in Coventry and a second near Southampton in Totton. All three
stores will in time be converted into the division's security centre format,
increasing our national footprint and taking the number of centres to 13.
Our contracts with a leading mechanical and engineering business and with a
cruise business operating out of Southampton were largely dormant during the
prior year but in the current year we are pleased to report revenues of
£0.5m.
The iLOQ partnership continues to show promise alongside significant
investment in training security staff in how to market the product as well as
install it nationwide. The benefit of this investment has been shown, in a
new contract win, with a major player in the education sector. The initial
contract worth £0.3m in revenue was completed in the new financial year.
There is potential for a nationwide roll-out.
Trading in the security centres remains positive and we look forward to
further expanding our network of centres across the UK.
Group Financials
2022 2021
The Group financials can be summarised as follows: £000's £000's
Revenue 35,165 32,539
Gross profit 6,396 5,385
Gross margin % 18.2% 16.5%
Other operating income 86 764
EBITDA 1,590 1,982
Impairment of goodwill (627) -
Operating profit 245 1,251
Earnings per share 0.42p 6.56p
Net assets 12,143 12,378
Cash (used in)/generated from operations (860) 2,155
Cash and cash equivalents 2,556 5,433
Dividend per share in relation to the year 2.1p 2p
Gross profit increased by £1m however additional spending on overheads and a
reduction in COVID support led to a reduction on EBITDA to £1.6m (2021:
£2.0m). We also suffered a bad debt in the year of £0.1m in our guarding
division.
During the year, cash generated from operations was negative at £0.9m (2021:
positive £2.2m). This was largely driven by an increase in inventory of
£0.3m and our debtor book which was £1.6m higher at £6.8m (2021: £5.1m)
with debtor days up to 54 days (2021: 42 days).
Cash collection has improved post year end and as at 10 November 2022 we have
realised approximately £5.7m or 91% of our year end debtor book.
Outlook and future developments
Demand for our services is increasing as evidenced by the excellent new client
wins post year end. Our strategy to be the leading British security brand is
clear and to that end we are carefully extending our footprint of security
stores across the country. We have the financial stability and cash
resources to further invest in our development and we believe we are well
placed to continue to grow both revenues and profits for the benefit of our
shareholders.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2022
Continuing operations:
2022 2021
£000's £000's £000's £000's
Revenue 35,165 32,539
Cost of sales (28,769) (27,154)
Gross profit 6,396 5,385
Administrative expenses (6,237) (4,898)
Other operating income 86 764
Operating profit 245 1,251
Analysed as:
Earnings before interest, tax, depreciation amortisation 1,590 1,982
Impairment (627) -
Depreciation (636) (565)
Amortisation of intangible assets (82) (166)
Operating profit 245 1,251
Finance expenses (45) (40)
Profit before tax 200 1,211
Tax (137) (234)
Profit/(loss) for the year from continuing operations 63 977
Total comprehensive (loss)/ income for the year attributable to owners of the 63 977
parent
Earnings per share
Basic and diluted earnings/(loss) per share (pence) 0.4 6.6
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
FOR THE YEAR ENDED 30 JUNE 2022
2022 2021
£000's £000's
Assets
Non-current assets
Goodwill 5,827 6,454
Other intangible assets 207 290
Property, plant and equipment 1,477 488
Right-of-use assets 1,120 997
8,631 8,229
Current assets
Inventories 1,076 681
Trade and other receivables 6,778 5,097
Cash and cash equivalents 2,556 5,433
10,410 11,211
Total assets 19,041 19,440
Liabilities
Non-current liabilities
Deferred Tax (117) (91)
Lease liabilities (796) (764)
(913) (855)
Current liabilities
Trade and other payables (5,609) (5,924)
Borrowings and lease liabilities (376) (283)
(5,985) (6,207)
Total liabilities (6,898) (7,062)
Net assets 12,143 12,378
Issued capital and reserves attributable to owners of the parent
Share capital 794 794
Treasury shares (399) (399)
Share premium 6,133 6,133
Merger reserve 2,139 2,139
Capital redemption reserve 51 51
Retained earnings 3,425 3,660
Total equity 12,143 12,378
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2022
2022 2021
£000's £000's
Cash flows from operating activities
Profit before taxation 200 1,211
Depreciation amortisation and impairment 1,345 731
(Profit) on sale of property, plant and equipment (21) (19)
Net changes in working capital (2,091) 374
Financial expenses 45 40
Corporation tax paid (338) (182)
Net cash (used in)/generated from operations (860) 2,155
Cash flows from investing activities
Purchase of subsidiaries net of cash acquired (94) -
Purchase of property, plant and equipment (1,216) (138)
Proceeds on disposal of property, plant and equipment 31 28
Net cash used in investing activities (1,279) (110)
Cash flows from financing activities
Payments to reduce lease liabilities (445) (408)
Increase in borrowings 5 11
Dividends paid (298) (291)
Interest paid - -
Net cash used in financing activities (738) (688)
Net (decrease)/increase in cash (2,877) 1,357
Cash and cash equivalents at beginning of period 5,433 4,076
Cash and cash equivalents at end of period 2,556 5,433
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2022
Share Capital Treasury shares Share Merger Retained Total
capital
Redemption
premium
reserve
earnings
equity
reserve
£000's £000's £000's £000's £000's £000's £000's
At 1 July 2020 794 51 (399) 6,133 2,139 2,974 11,692
Loss for the year - - - - - 977 977
Dividends paid - - - - - (291) (291)
At 30 June 2021 794 51 (399) 6,133 2,139 3,660 12,378
Profit for the year - - - - - 63 63
Dividends paid - - - - - (298) (298)
At 30 June 2022 794 51 (399) 6,133 2,139 3,425 12,143
NOTES TO THE PRELIMINARY ANNOUCEMENT FOR THE YEAR ENDED 30 JUNE 2022
1. Basis of preparation
The Group financial statements have been prepared and approved by the
Directors in accordance with UK-adopted international accounting standards
("Adopted IFRS").
While the financial information included in this preliminary announcement has
been computed in accordance with Adopted IFRSs, this announcement does not
itself contain sufficient information to comply with Adopted IFRSs.
This preliminary announcement does not constitute statutory accounts of the
Group for the years ended 30 June 2021 or 30 June 2022.
The financial information has been extracted from the statutory accounts of
the Company for the year ended 30 June 2022. The auditors reported on those
accounts; their reports were unqualified and did not include references to any
matters to which the auditors drew attention by way of emphasis without
qualifying their report and did not contain a statement under either Section
498 (2) or Section 498 (3) of the Companies Act 2006.
The accounts for the year ended 30 June 2021 have been delivered to the
Registrar of Companies, whereas those for the year ended 30 June 2022 will be
delivered to the Registrar of Companies following the Company's Annual General
Meeting.
The Annual Report will be posted to all shareholders who have requested a copy
on 11 November 2022 and will be available on request from Unit 7 & 8
Fulcrum 4, Solent Way, Whiteley, Hampshire PO15 7FT and on the Company website
at http://www.cssgplc.com/investors/. The Annual Report contains full
details of the principal accounting policies adopted in the preparation of
these financial statements.
2. Accounting policies
The accounting policies applied by the Group in this report are the same as
those applied by the Group in the consolidated financial statements for the
year ended 30 June 2022 and the year ended 30 June 2021. The directors
expect similar accounting policies for the year ended 30 June 2023.
3. Segmental reporting
Croma Croma Croma Central Total
Vigilant
Security
Locksmiths
(Guarding)
Systems
(Locks)
(Electronic)
2022 Business Segments £000's £000's £000's £000's £000's
Segment revenues 29,334 2,579 3,252 - 35,165
Gross profit 3,838 1,215 1,343 - 6,396
Administrative expenses (2,835) (637) (646) (795) (4,913)
Amortisation - - (82) - (82)
Depreciation (318) (104) (214) - (636)
Profit/(loss) on disposal 9 9 3 - 21
Other operating income 30 15 41 - 86
Operating profit/(loss) before impairment 724 498 445 (795) 872
Impairment of goodwill - (627) - - (627)
Operating profit/(loss) 724 (129) 445 (795) 245
Segment assets 8,421 4,276 5,527 817 19,041
Segment (liabilities) (4,425) (826) (1,598) (49) (6,898)
Segment net assets 3,996 3,450 3,929 768 12,143
Additions to non-current assets 404 255 1,100 - 1,759
2021 Business Segments £000's £000's £000's £000's £000's
Segment revenues 27,454 2,447 2,638 - 32,539
Gross profit 3,473 982 934 (4) 5,385
Administrative expenses (2,389) (568) (505) (724) (4,186)
Amortisation - (47) (119) - (166)
Depreciation (252) (79) (234) - (565)
Profit/(loss) on disposal 2 11 6 - 19
Other operating income 258 243 263 - 764
Operating profit/(loss) 1,092 542 345 (728) 1,251
Segment assets 8,297 4,673 4,931 1,539 19,440
Segment (liabilities) (4,751) (956) (1,298) (57) (7,062)
Segment net assets 3,546 3,717 3,633 1,482 12,378
Additions to non-current assets 235 35 28 - 298
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