REG - Croma Sec. Sol. Grp - Final Results

Croma Security SolutionsAnnouncement

07/11/2023 07:00

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RNS Number : 5582S  Croma Security Solutions Group PLC  07 November 2023

Croma Security Solutions Group Plc

("CSSG", "Croma", "the "Company" or the "Group")

Full Year Results

Core Business and Acquisitions Deliver Ahead of Expectations

Croma, the AIM listed innovation and service-focused security solutions
provider, is pleased to report its trading results for the 12 months to 30
June 2023 (the "Period" or "FY23")  as well as provide an update on its
strategy. The core businesses are delivering strong organic growth and
acquisitions are performing ahead of expectations, affirming the Group's
strategy to refocus on its core businesses and to identify acquisition
opportunities where there is significant scope to enhance sales growth and
profitability.

 

Financial Highlights

·      Group revenue for the Period including Vigilant of £42.83
million (FY22: £35.17 million)

·      Revenues on continuing operations for the period up 38% at £8.03
million (FY22: £5.83 million)

·      Like-for-like sales growth on continuing businesses of 21%

·      Gross margin improvement on continuing businesses of 300 basis
points to 47% (FY22: 44%)

·      EBITDA on continuing businesses of £0.95 million (FY22: £0.55
million)

·      Strong balance sheet with net cash of £2.14 million at the end
of the Period

·      Proposed final dividend of 2.2 p per share (FY22: 2.1 p)

 Operational Highlights

·      Vigilant was sold on 30 June 2023 for a total consideration of
£6.5 million plus intercompany balances of  £1.07 million

·      Acquisition of Southern Stronghold Limited and Safecell Security
Group Limited for net cash of £1.22 million adds an online business and three
new security centres to the network, increasing our total security centres to
14

·      Refreshed Board of Directors - Jo Haigh joins as Chair, Steve
Naylor as a NED and Teo Andreeva, previously Group Financial Controller was
appointed CFO and joined the Board

Outlook

·      FY24 has started well with a number of new commercial orders and
the ongoing sales of iLOQ

·      Acquisition pipeline is encouraging - the Group continues to
identify opportunities to expand its security centre network where it sees the
chance to enhance product offering to drive sales growth as well as to benefit
from efficiencies of scale and expertise

·      The Group will continue to drive organic growth by investing in
our security centres and expanding its sales network

·      The acquisition pipeline is promising.

Croma CEO, Roberto Fiorentino commented: "We are truly excited to be starting
a new chapter for Croma as we focus our efforts on our core businesses, Croma
Locksmiths and Croma Fire & Security (formerly branded Croma Systems),
where we see strong growth prospects. There is real scope for us to build out
a nationwide presence and we have a proven track-record of acquiring
businesses and enhancing their in-store product offer, sales growth,
profitability and delivering ahead of targets. FY24 has started well and there
are  a number of acquisition opportunities in the pipeline;  I am confident
that we will deliver a strong performance this year."

 

 

For further information visit www.cssgroupplc.com or contact:

 

Croma Security Solutions Group
Plc
    Tel: +44 (0)1489 566166

Roberto Fiorentino, CEO

Teo Andreeva, CFO

 

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

Claire de Groot

Safia Colebrook

 

This announcement contains inside information for the purposes of Article 7 of
the UK version of Regulation (EU) No 596/2014 which is part of UK law by
virtue of the European Union (Withdrawal) Act 2018, as amended ("MAR"). Upon
the publication of this announcement via a Regulatory Information Service,
this inside information is now considered to be in the public domain

Croma - Unlocking Growth Potential

 

Croma, the AIM listed innovation and service-focused security solutions
provider is pleased to report its trading results for the 12 months to 30 June
2023 (the "Period" or "FY23")  as well as to provide an update on its
strategy.

 

Chairman's Statement

 

When I joined Croma Group as non-executive Chairman in April this year, it was
with the conviction that I was joining a Group with a truly exciting future.
My career has been focused on providing advisory services to growth companies
such as Croma. Following the divestment of Vigilant, the management team has a
clear vision.  I am thrilled to join the Board to help execute on that
vision.  It is with great pleasure that I am able to report on the progress
that we have made this year with the successful divestment of Vigilant; on the
opportunity that lies ahead within our core businesses; as well as on the
financial results for the 12 months to 30 June 2023.

 

I am very pleased to report that our core businesses delivered a strong
performance in the Period and have performed ahead of management expectations
in spite of the time and energy devoted by management to secure the disposal
of Vigilant. For the Period, sales growth within the Group's core businesses
was up 38% with total sales of £8.03 million (FY22: £5.83 million).  EBITDA
(as analysed in the Consolidated Statement of Comprehensive Income) on
continuing businesses increased 73% to 0.95 million (FY22 £0.55 million). We
are in a strong cash position with net cash of £2.14 million at the year-end
after the £1.2 million expensed on acquisitions and the share buyback from
the Vigilant directors. This demonstrates the cash generative nature of our
core business in addition to the proceeds received and to be received from the
Vigilant disposal.

 

The strategic decision to divest Vigilant was made in 2022 in order to refocus
efforts on our core businesses, Croma Fire & Security (Rebranded from
Croma Systems) and Croma Locksmiths and to allow us to scale up these
businesses. Vigilant was sold for a total consideration of £6.5 million plus
intercompany balances of just over £1 million.  I believe that this
represents an excellent outcome in terms of price and gives us the firepower
to scale our core businesses.

 

With a strong balance sheet, the business refocused and a refreshed Board, we
are excited to be entering a new chapter for the Group. We are focused on
growing our core businesses both organically and via acquisition, fully
capitalising on the expansion opportunity ahead and investing in growth.  We
have ambitions to roll out our security centre network nationwide, building on
our current network of 14 security centres.  This will allow us to exploit
cross-selling opportunities as we expand our full product offering into new
locations and deliver cost synergies. We already have a strong track record of
acquiring businesses, adding value and increasing returns.

 

The Board is determined to work with a sense of rigour, openness, and
transparency, both within the Group as well as with our external stakeholders.
As a team, we will carefully assess the opportunities ahead and be accountable
for delivery.

 

The current financial year has started well and I believe that we will be able
to build on the growth that we achieved last year with a number of new clients
and the expansion of current services to new locations, alongside a good
acquisition pipeline. This expansion will require up-front investment in
people and infrastructure but we believe this is the right strategy to manage
anticipated future growth.

 

The Board is pleased to recommend a final dividend to shareholders of 2.2p per
share and subject to approval at the Annual General Meeting to be held on 1
December 2023, the final dividend will be paid on 15 December 2023 to all
shareholders on the register at the close of business on 1 December 2023. The
shares will be marked ex-dividend on 30 November 2023.

 

I would like to thank the team for welcoming me so warmly to Croma as well as
for their determination and hard work. I have no doubt that as we turn the
page to a new chapter, we do so with renewed energy and focus and I look
forward to working together with the Croma team to unlock growth, capitalising
on the opportunities that lie ahead.

 

 

 

 

J Haigh - Chairman

6 November 2023

 

 

 

 

 

CEO's Statement

 

FY23 was a busy year for Croma. In December 2022, we announced our intention
to divest Vigilant in order to focus on our core businesses and I am pleased
to report that this disposal was completed at the end of June 2023. I am
delighted to confirm that our core businesses, Croma Fire & Security and
Croma Locksmiths, have delivered results ahead of our expectations, very much
underlining the opportunity that lies ahead.

 

I am very pleased to welcome Jo Haigh and Steve Naylor to the Board as we take
this opportunity to reset. Their collective experience and advice will be
invaluable in supporting us on a new growth path. Teo Andreeva was appointed
CFO in April 2023, prior to this she was Group Financial Controller and I
would like to thank her for her long-term support and welcome her to the
Board.  As a Board, we are determined to work together, to be transparent
with all stakeholders and, with the completion of the Vigilant disposal, we
can fully focus our attention on the task ahead.

 

Our decision to divest Vigilant and focus on scaling up Croma Locksmiths and
Croma Fire & Security was based on our belief that the real growth
opportunity lies within these higher margin businesses. Its disposal marks a
transformational moment for Croma and gives us the financial resource to
unlock growth as we identify and capitalise on the opportunities ahead.

 

The Croma Locksmiths and Croma Fire & Security businesses are our
heritage, they are where the business started and have served us well over
many years. Both businesses have a loyal client base, reliable recurring and
repeat revenues and are profitable and cash generative. Croma Locksmiths
currently operates out of 14 security centres across the UK which offer
one-stop shop security solutions to commercial and retail customers. This
business boasts a diversified and loyal customer base.  Within the Croma Fire
& Security businesses, we have very strong relationships and expertise
within the hospital and leisure sector and are well-known for our innovative
and technology-led offers as well as for our reliability and high levels of
service.

 

There is significant scope for Croma Locksmiths and Croma Fire & Security
to grow as we build out a nationwide presence and bring together our product
offer and expertise across both businesses in new locations. We are seeking to
acquire retail locksmith businesses typically located just off the high
street. The UK locksmith market is fragmented, characterised by small, often
family-owned, local players. We have a proven track record of acquiring these
businesses, significantly enhancing their in-store offer and developing them
into modern security centres with a full product range for commercial and
individual customers. We have acquired many decades of expertise in the
industry and are able to apply our know-how and state-of-the-art software to
acquired businesses as well as deliver benefits of scale, as we drive real
efficiencies and support businesses with our central services.

 

This has proven very successful in the past and we believe that many more such
opportunities lie ahead at valuation levels where we can apply the same
template, add value and deliver good returns. Of course, we will need to
ensure that identified businesses and valuations stand scrutiny and we are
rigorous in due diligence but we believe there are significant opportunities
open on the horizon.

 

 

 

Roberto Fiorentino - CEO

6 November 2023

 

 

 

 

 

 

 

 

 

 

The directors present the Group Strategic Report for Croma Security Solutions
Group plc and its subsidiary companies for the year ended 30 June 2023.

 

Financial and Operational Review

 

Group sales for the Period were £42.83 million (FY22: £35.17 million)
including a full year of Vigilant which was divested as at close of year end
on 30 June 2023.

 

Sales from continuing businesses, Croma Locksmiths and Croma Fire and Security
were up 38% to £8.03 million, (FY22 £5.83 million), reflecting acquisitions
made during the period as well as strong organic growth within the core
businesses of 21% for the year.

 

Gross margins on continuing businesses increased by 300 basis points to 47%
(FY22: 44%).  EBITDA on continuing businesses before central costs for the
Period was £1.60 million (FY22: £1.34 million), an increase of 19%.
Adjusting for central Group overheads, EBITDA was up 73% at £0.95 million
(FY22: £0.55 million).

Group net profit on continuing businesses for the Period was £3.24 million
(FY22: £(0.61) million) and EPS was 21.7p (FY22: (4.1)p), including disposal
proceeds, excluding disposal proceeds EPS was 1.11p.

Over the year, we invested £1.68 million on acquisitions to include two
freeholds - Totton (Southampton) and Coventry. In addition to the above
figure, we purchased our existing security centre property in Southsea
(Portsmouth). These investments reflect our long-term belief in the prospects
of our security centre network.

 

Vigilant posted sales of £34.80 million and EBITDA of £0.92 million for
FY23. The total consideration to be received for the disposal will amount to
£6.5 million plus outstanding intercompany balances of £1.07 million. The
Group incurred non-recurring costs related to the disposal of Vigilant
totalling £0.23 million for the Period.

 

The proceeds from the divestment of Vigilant as well as solid underlying cash
generation enabled us to end the year ungeared, with a net cash balance of
£2.14 million (FY22: £2.56 million). Our cash position and ungeared balance
sheet should allow us to continue our stated strategy of acquiring locksmiths
and building out our security centres network where there is scope to enhance
the offering and deliver synergies.

 

Croma Locksmiths

 

Croma Locksmiths consists of the following subsidiaries - Croma Locksmiths
& Security Solutions Limited, Basingstoke Locksmiths Limited, Safeguard
(NW) Limited, Southern Stronghold Ltd and Authorized Access Systems Ltd.

 

The Croma Locksmiths business delivers one-stop-shop security solutions to
both commercial and residential customers and now comprises 14 security
centres across the UK.

 

Sales for the Period within Croma Locksmiths were up 45% to £4.70 million
(FY22: £3.25 million), while EBITDA of £0.97 million was up 31% from £0.74
million. We see a significant opportunity within this business for
cross-selling. For example, we have an important housing maintenance client
who has moved from using one local security centre to using a greater number
of our security centres on a national basis to service their needs. As a
result, this is expected to be a £0.20 million client for us in FY24 vs
£0.02 million in FY23.

 

Our partnership with ILOQ, as their preferred mainstream Locksmith supplier in
the UK market, continues to show great potential. Sales for the Period were
£0.32 million. We secured further orders in the second half which will be
delivered in the first half of the current financial year.

 

Croma Fire and Security (formerly Croma Systems)

 

Croma Fire & Security consists of the following subsidiaries - CSS Total
Security Ltd, Safecell Security Ltd and The Safecell Security Group Ltd.

 

Croma Fire and Security provides a full range of electronic security solutions
and services to commercial and individual customers and has strong commercial
relationships across the public health and hospitality sectors.

 

 

 

Croma Fire and Security recorded sales for the Period of £3.48 million (FY22:
£2.58 million) up 35%. EBITDA for the period was up 5% to £0.63 million
compared to £0.60 million in FY22. The business invested for the future and
appointed a commercial manager as a new role. During the Period, sales were
supported by ongoing customer relationships as well as some new customer wins
with CCTV orders from transport and infrastructure clients. A number of new
hospital contracts were also secured in second half of the year which will be
recognised in current year numbers.

 

FASTVEIN/Biometrics - We have seen little progress in our innovative
technology and moving forwards it is unlikely to play a large role in our
strategic plan. However, we continue to provide a number of established
clients with software and maintenance contracts contributing to our annual
recurring revenues and will also continue to support any new enquiries.

 

Sale of Vigilant

 

The Vigilant disposal was completed on 30 June 2023.  The total consideration
to be received for the disposal will amount to £6.50 million plus the
outstanding intercompany balance of £1.07 million. £0.67 million was paid in
cash on completion together with £1.07 million of intercompany loan
repayments and circa 800,000 shares owned by S. Morley and P. Williamson,
former Directors (with a value of £0.38 million) which have been placed into
treasury. Croma is scheduled to receive the balance of the proceeds as the
loan notes and redeemable shares are settled over the next 36 months.

 

The consideration of £6.50 million (excluding the intercompany balance of
£1.07 million) is broken down as follows:

i)              £0.67 million was paid in cash on completion

ii)             £0.38 million via the buyback of shares from S.
Morley and P. Williamson (non-cash transaction)

iii)            £4.13 million covered by the issue of Loan Notes
and

iv)           £1.30 million was paid on completion via the issue of
redeemable shares.

 

Acquisitions

 

The Group completed two acquisitions for the Croma Fire & Security and
Croma Locksmiths division during the period, Southern Stronghold Limited and
Safecell Security Group Limited. These acquisitions increased the number of
the Group's security centres to 14. Southern Stronghold Limited is a
well-established locksmith business that operates from two premises, one in
Coventry which has a large master key systems business, and one in Totton near
Southampton. Stronghold also has an online business, Stronghold Direct, which
has significant potential for the Group. Safecell is a long-standing Greater
Manchester security business with a focus on electronic, physical security and
fire systems, with a strong commercial and retail customer base in the North
of England. Both these businesses provide an opportunity for Croma to roll out
its offering into new locations as well as to leverage its central services
and are performing well to date.

 

Outlook

 

The year has started well with a number of new commercial orders and the
continued success of ILOQ.  We believe that we will be able to drive sales
growth organically through new sales and marketing initiatives, expanding our
network of sales people, and focusing on the development of our online
presence. We will also expand the network via acquisition - the pipeline is
promising. The Croma balance sheet is strong, we are cash generative, and we
are well-placed to take advantage of the opportunities ahead.

 

 

 

 Group financials                             FY2023                 FY2022                 FY2022
                                              Continuing operations  Continuing operations  Continuing and discontinued operations
                                              £000s                  £000s                  £000s
 Revenue                                      8,025                  5,831                  35,165
 Gross profit                                 3,749                  2,558                  6,396
 Gross margin %                               46.7%                  43.9%                  18.2%
 Other operating income                       3                      56                     86
 Impairment of goodwill                       -                      (627)                  (627)
 Operating profit                             427                    (479)                  245
 EBITDA                                       4,023                  548                    1,590
 Profit for the year                          3,235                  (612)                  63
 Earnings per share*                          1.11p                  (4.11p)                0.42p
 Net assets                                   15,151                 -                      12,143
 Cash (used in) / generated from operations   2,406                  -                      (860)
 Cash and cash equivalents                    2,144                  -                      2,556
 Dividends per share in relation to the year  2.2p                   -                      2.1p

 

The above financials relate to continuing operations for 2023, compared to
2022, which includes the divested division.

Profit from discontinued operations for FY2023 was £465k (FY2022: £675k).

*The earnings per share figure stated excludes the profit from disposal of
discontinued operations of £3,069k which contributed 20.6p to the earnings
per share figure for the year of 21.7p.

 

Below is a detailed EBITDA breakdown:

 

 

                                         Croma Locksmiths  Croma Fire & Security      Group    Total
                                         £,000             £,000                      £,000    £,000

 EBITDA                                  970               630                        2,423    4,023
 Vigilant - Profit on Disposal                                                        (3,069)  (3,069)
 EBITDA, Continuing Operations           970               630                        (646)    954

EBITDA on continued operations for 30 June 2023, on a like for like basis, was
£954k compared with £548k for 30 June

 

EBITDA on continued operations for 30 June 2023, on a like for like basis, was
£954k compared with £548k for 30 June 2022 an increase of 73%.

 

Cash collection has improved in the year compared to last year with debtors
reducing by 11 days from 54 to 43.

 

 

 

 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2023

 

 

 

 

 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION FOR THE YEAR ENDED 30 JUNE 2023

 

 

CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE
2023

 

 

 

 

 

 

 

 

 

 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2023

NOTES FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2023

 

 

1.      Basis of preparation

The Group financial statements have been prepared under the historical cost
convention and approved by the Directors in accordance with UK-adopted
international accounting standards.

 

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 announcement does not constitute statutory accounts of the Group for the
years ended 30 June 2022 or 30 June 2023.

The financial information has been extracted from the statutory accounts of
the Company for the year ended 30 June 2023.  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 2022 have been delivered to the
Registrar of Companies, whereas those for the year ended 30 June 2023 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 shortly 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 2023 and the year ended 30 June 2022.  The directors
expect similar accounting policies for the year ended 30 June 2024.

Discontinued operations

A discontinued operation is a component of the Group's business, the
operations and cash flows of which can be clearly distinguished from the rest
of the Group and which represents a separate major line of business operation.

Classification as a discontinued operation occurs at the earlier of disposal
or when the operation meets the criteria to be classified as held-for-sale
under IFRS 5.

When an operation is classified as a discontinued operation, the comparative
statement of profit or loss and OCI is re-presented as if the operation had
been discontinued from the start of the comparative year.

Disposal of subsidiaries

At the date of disposal of a subsidiary all assets and liabilities of the
disposed subsidiary are derecognised in the financial statements. The fair
value of consideration is recognised in the financial statements and any
resulting gain or loss in profit or loss attributable to the parent.

 

 

 

 

 

6. Earnings per share

 

The calculation of basic earnings per share is based on the profit
attributable to ordinary shareholders, from continuing operations, divided by
the weighted average number of shares in issue during the year, calculated on
a daily basis.

The calculation of diluted earnings per share is based on the basic earnings
per share adjusted to allow for the issue of shares and the post-tax effect of
dividends and interest on the assumed conversion of all other dilutive options
and other potential ordinary shares.

 

 

 * Share options have an average exercise price of £0.9 and are not dilutive
at 30 June 2023.

 

EPS for earnings for the year on continuing operations (excluding the profit
on disposal of discontinued operations) and used in basic and diluted EPS
1.11p.

The earnings per share figure stated excludes the profit from disposal of
discontinued operations of £3,069k which contributed 20.6p to the earnings
per share figure for the year on continuing operations of 21.7p.

 

 

Transaction costs of £23k relating to the acquisition of Southern Stronghold
Limited have been recognised as an expense and included within administrative
expenses in the statement of profit or loss.

 

If the acquisition of Southern Stronghold Limited had been completed on the
first day of the financial year,  Group revenues for the period would have
been £8,025k and Group profit attributable to equity holders of the parent
would have been £3,700k. Southern Stronghold Limited contributed £607k to
the Group's revenue  and £197k to the Group's profit before tax for the
period from the date of acquisition to the year-end date.

 

The amounts recognised at acquisition date in respect of property, plant and
equipment acquired include fair value adjustments of £337k to recognise the
uplift to market value. Furthermore, the amounts recognised at acquisition
date in respect of inventories acquired include a negative fair value
adjustments of £274k to recognise inventories at the lower of cost and net
realisable value. All other book amounts are considered to approximate their
fair values.

 

 

In addition to the above acquisition, the group acquired Manchester based
Safecell Security Group Limited and its two 100% owned subsidiaries on 19th
December 2022, trading out of a retail shop and office space in Bury, North
Manchester.

 

 

 

Transaction costs of £30k relating to the acquisition of Safecell Security
Group Limited have been recognised as an expense and included within
administrative expenses in the statement of profit or loss.

 

If the acquisition of Safecell Security Group Limited had been completed on
the first day of the financial year,  Group revenues for the period would
have been £8,505k and Group profit attributable to equity holders of the
parent would have been £3,748k. Safecell Security Group Limited contributed
£499k to the Group's revenue and £83k to the Group's profit before tax for
the period from the date of acquisition to the year-end date.

 

The amounts recognised at acquisition date in respect of property, plant and
equipment acquired include a negative fair value adjustments of £16k to
recognise the write down of plant and equipment. All other book amounts are
considered to approximate their fair values.

 

 

 

 

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