CSSG 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
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.
· 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: +44 (0)7768 006 909
WH Ireland Limited (NOMAD and Broker)
Adrian Hadden / Mark Leonard Tel: +44 (0)207 220 1666
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.
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.
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 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.
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.
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