Final Results

24th May 2012

OPSEC SECURITY GROUP PLC

("OpSec", "the Company" or "the Group")

preliminary Announcement of Results for the Year Ended 31st March 2012

OpSec Security Group plc, the supplier of anti-counterfeiting technologies, services and programmes announces its results for the year ended 31st March 2012.

Highlights

* Adjusted for the charges for intangible amortisation, exceptional charges and share based payments (notes 2b and 8)

• Financial performance of the Group has been impacted by the timing of certain government orders;

• Group revenue decreased by 5% to £38.3 million: 8% growth and record revenue in our Brand Protection business was offset by lower revenue in our government businesses;

• Group adjusted operating profits down 39% to £2.3 million;

• Acquisition of small ID business based in the Caribbean completed on 24th May 2011;

• Cash offer for the business from Investcorp closed on 31st August 2011;

• Acquisition of Delta Labelling and new placing completed on 16th April 2012.

David Mahony, Chairman, said:

"Although the year to 31st March 2012 was disappointing in terms of the performance achieved, the Board believes that the continuing strength of the Brand Protection business along with the reorganisation of the government market groups and the further planned investments in the business will position the Company for sustained growth and profitability."

For further information, please contact:

OpSec Security Group plc

Mark Turnage, Chief Executive ([email protected])  +1 720 394 2803

Mike Angus, Finance Director ([email protected])

Shore Capital 020 7408 4090

Stephane Auton/Patrick Castle

24th May 2012

OPSEC SECURITY GROUP PLC

("OpSec", "the Company" or "the Group")

preliminary Announcement of Results for the Year Ended 31st March 2012

Chairman's Statement

Introduction

The year to 31st March 2012 saw a fall in Group revenue with a significant decline in adjusted operating profit. While the year saw satisfactory performance from certain elements of the business other sectors disappointed.

Brand Protection, the largest of the market facing groups, achieved record results with an 8% increase in revenue with higher sales to continuing customers and encouraging growth in the online brand protection segment of its business.

Banknote and High Security Documents ("BNHS") revenue, as anticipated, experienced a decline of 30% in turnover in the year due to the cyclical element inherent in the supply of currency thread to a major Asian currency customer. The order cycles of that customer are such that the business which did not accrue in the last year will have a significant positive impact on the current year

ID Solutions sales declined 22% due to the failure to offset the known loss of certain accounts by sufficient conversion of its pipeline of opportunities. Extensive management changes have been made and the ID business will be combined with the Group's BNHS activities into a single Government Protection group in the current year.

Cash offer/Acquisitions/Financing

A number of major exceptional items impacted the year; these included the costs relating to a cash offer made by Investcorp via Orca for the balance of the shares not owned by them, a restructuring of the Group's debt and the acquisitions of a small ID business in the Caribbean and Delta Labelling Ltd. ("Delta"). Full details of all these items are given elsewhere in this report.

Delta, an established supplier of brand protection labels, is UK based but sources its products from suppliers in China. Delta has a proven record of profitable growth and has been consistently cash generative. Delta's two founders will continue with the business and work to maximise the considerable cross selling opportunities that will arise from exploiting the complementary product ranges of OpSec's brand protection activities and Delta's own range.

The acquisition of Delta was supported by a placing in April 2012 of 17.3m shares at 45p per share with a number of our major shareholders participating in the financing.

While the Group sees acquisitions such as those made in the last year as strong adjuncts to developing the Group's business, it recognises that the key to sustained growth is investment in both staff and facilities. The programme to strengthen the sales and marketing activities of the Group is now nearing completion. The current year will see further investment including the relocation of the Group's UK based origination facilities.

Outlook

Although the year to 31st March 2012 was disappointing in terms of the performance achieved, the Board believes that the continuing strength of the Brand Protection business along with the reorganisation of the government market groups and the further planned investments in the business will position the Company for sustained growth and profitability.

DA Mahony

Chairman

24th May 2012

BUSINESS REVIEW

Chief Executive's Review

Introduction

OpSec is an international company whose mission is to provide solutions to its customers to combat counterfeiting and the related problems of diversion, grey marketing, online brand abuse and fraud. OpSec's customers include numerous governments and many of the world's largest corporations.

OpSec has traditionally supplied technologies and solutions into three core markets: Banknote and High Security Documents, Brand Protection and ID Solutions. At the end of the year, the decision was taken to combine the Banknote and High Security Documents division with the ID Solutions division into a single Government Protection Group. In addition, OpSec owns 50% of 3dcd LLC, a joint venture which licenses technologies for the protection of optical disks (CDs and DVDs).

OpSec's customers are served from Company facilities in the USA, the UK, Germany, Hong Kong, and the Dominican Republic and via a network of over 40 agents worldwide.

Strategy

OpSec's strategy is to provide world-class authentication technologies and solutions into its core markets, leveraging its unique technology portfolio, its expertise, and its global distribution network. OpSec will invest in people, technology, manufacturing and distribution to continue its growth and broaden its product offerings. The Group will also continue to make acquisitions that fit its core market strategy or enhance its technology portfolio.

Market Sectors

OpSec's sales activities are organised by market-facing groups, each addressing its individual market with dedicated management, sales, sales support, and technology development teams. The market facing groups are supported by the manufacturing group which provides them with products and services from the Group's manufacturing facilities in Europe and the USA.

Banknote and High Security Documents

Revenue in the Banknote and High Security Documents market sector fell by 30% to £7.0 million (2011: £10.0 million). This performance reflected the cyclical order patterns from the Asian currency customer secured in the previous year.

Sales of OpSec's new "SecureETag" product in the USA have been strong during the year as have sales to a major Eastern European government.

The Company announced recently that it has signed a partnership agreement with Xerox to pursue opportunities in the American tax stamp market.

Brand Protection

This sector recorded revenue for the financial year up by 8% to £27.2 million (2011: £25.1 million).

Revenue generated from sales to the US sports leagues, and to the tobacco industry in China, was strong during the year. In addition, the Group continues to see growth in its online monitoring business.

The results reflect OpSec's continued strong strategic positioning in this sector. OpSec is unique in providing brand protection solutions which encompass both the tagging and tracking of physical product through the supply chain, as well as the online monitoring of brand identity and activity, and the online sale of merchandise. This combination of online and offline solutions is driven by market needs for more timely information about supply chains, and OpSec believes it is uniquely well positioned to meet the needs of the market.

ID Solutions

In the year ended 31st March 2012, revenue in the ID Solutions business decreased by 22% to £4.1 million, (2011: £5.3 million). The principal reasons for the decline were the full year impact of the lost UK passport contract and the loss of a significant Government customer in North America. The Group's conversion of pipeline opportunities during the year was disappointing and ordering from other existing customers was mixed, primarily due to the timing of orders.

During the year the Group continued to invest in expanding the range of products offered into the sector. This range has been enhanced by the acquisition of the Advantics business. The ID Solutions business will be merged with the Banknote and High Security Documents business to form a single Government Protection group in the year ending 31st March 2013.

Geographical Business Units

The Group reports revenues and profitability split geographically between its American, UK and German operations. These operations cover all the market sectors referred to above.

American Operations

Revenue in our American operations was $37.0 million, an increase of 3% against the prior year total of $35.9 million. The American results were impacted negatively during the year by the weak performance of the ID Solutions group, whose products are primarily manufactured in our US facilities.

There continues to be significant effort undertaken to operate the US manufacturing site as efficiently as possible. A major part of this effort has been the implementation of a new ERP system which started in the year and is scheduled to go live in the early part of the financial year ending 31st March 2013. Gross margins decreased slightly during the year from 40.9% to 40.4%.

A significant investment was made during the prior year in the development of the new "SecureETag" product. This led to an increase in research and development expenditure which did not repeat in the year. Overall operating profit increased by 18% from $4.4 million to $5.1 million.

UK Operations

Revenue in the UK operations decreased from £16.1 million to £13.5 million, principally as a result of deliveries to the new Asian currency customer during the prior year which will not repeat until the year ending 31st March 2013. These irregular order cycles are a common feature of large government orders received by the Group.

The gross margin generated by the UK operations fell to 30.5% from 43.7% as a result of sales mix and reduced volumes during the year.

Overheads reduced as a result of lower sales commissions' payable. Operating profit decreased to £0.5 million from £2.0 million.

German Operations

German operations reported revenue of €3.5 million, an increase of 12% over the prior year figure of €3.2 million.

Operating profits rose from €0.4 million to €0.5 million.

3dcd Joint Venture

The decreased contribution from our joint venture during the year of £0.4 million (2011: £0.9 million) reflected one off ordering of equipment during the prior year by its major customer.

Corporate

The charge for share based payments in the current year was £338,000 compared to a credit of £210,000 in the prior year resulting from the non-achievement of performance conditions. Other corporate costs were slightly down at £1.9 million (2011: £2.2 million).

The Advantics acquisition

OpSec announced on 24th May 2011 the acquisition of the Advantics business based in the Dominican Republic and Puerto Rico. Advantics is a small software development business focusing specifically on developing ID solutions for issuance of passports, national ID cards and other secure credentials. This acquisition, which now forms part of the US operations, significantly enhances OpSec's product offering in the ID Solutions business and improves the Group's distribution network.

The Delta Labelling acquisition

OpSec completed the effective acquisition of the Delta Labelling business on 31st March 2012. Delta has a consistent record of profitability and cash generation and will complement OpSec's existing brand protection business in the fashion and apparel sector. The acquisition of Delta will also provide OpSec with a distribution facility in Hong Kong and an opportunity to increase its presence in Asian markets.

The acquisition provides the Group with significant cross-selling opportunities, a new range of products to sell into the Group's customer base for brand protection products, and the opportunity to sell the Group's products to Delta's customers. The acquisition is anticipated to be earnings enhancing within the current year.

People

OpSec has employees operating from its manufacturing facilities in North America, the United Kingdom, Germany and the Dominican Republic, as well as its optical laboratories in the United Kingdom, the corporate office in USA, and sales and support facilities in Hong Kong.

Total Group headcount rose from 281 the beginning of the financial year to 332 at 31st March 2012.

OpSec believes strongly that employee recruitment, training and retention are critical to its success. The Group remains fully committed to maintaining its health, safety and environmental standards and performance.

MT Turnage

Chief Executive

24th May 2012

BUSINESS REVIEW

Financial Review

Revenue

The year to 31st March 2012 saw Group revenue decrease by 5% to £38.3 million (2011: £40.4 million). The decrease was primarily due to lower turnover with the new banknote security thread customer in Asia secured in the prior year. This reduction was partially offset by an increase in sales in our Brand Protection market and turnover of £0.34 million in our new Advantics business.

Gross profit margin

Gross profit margin for the year fell from 44.3% to 39.6%.. The operating leverage of the decreased volumes more than offset the operating efficiencies achieved in both the UK and American operations.

 Exceptional costs

There were exceptional costs during the year of £2.2 million (2011: £nil). This represents the costs of the two acquisitions plus costs associated with the cash offer for the business (note 3).

Operating Profit

Overheads decreased by 8.2% due to reduced sales commissions incurred on government business and the one off research and development costs related to the new "e-tag" product incurred in the prior year. Adjusted operating profit (adjusted for the effects of intangible amortisation, exceptional items and share based payments) decreased to £2.3 million from £3.8 million.

Finance expense

The net finance cost for the year was £1.1 million (2011: £2.2 million). This reflects the improved terms of new financing arrangement entered into with JP Morgan Chase during the year.

Income Tax

The tax charge for the year of £0.1 million (2011: credit of £0.2 million) arises predominantly from a refund of R&D tax credits in the UK, the reduction in the deferred tax asset recognised in the UK following a reduction in the UK rate of corporation tax to 24% from 26% and the utilisation of tax losses.

Earnings per share

Basic adjusted earnings per share decreased to 2.0p (2011: 3.5p). Adjusted fully diluted earnings per share decreased to 2.0p (2011: 3.3p).

Balance sheet

Net assets were down £1.6 million at £29.1 million (2011: £30.7 million). The principal movement arose from the loss for the year.

Cash flow

Net cash inflow from operating activities reduced to £0.3 million (2011: £1.8 million) as a result of the exceptional costs and the reported loss for the period. In addition, the Group received dividends from its joint venture amounting to £0.5 million (2011: £1.1 million).

The principal cash outflows during the year were the acquisition of the Caribbean operations (£0.7 million), property, plant and equipment additions of £1.3 million (2011: £1.0 million), repayment of borrowings of £1.8 million (2011: £1.9 million) and interest and bank fee payments of £1.2million (2011: £0.6 million).

The major capital expenditure planned for the year ending 31st March 2013 is the relocation of the Group's optical laboratories onto a new site. The programme to implement a new ERP system which commenced in the prior year will continue in the current year.

Overall the net cash outflow for the year was £2.9 million (2011: £0.9 million). After the effect of exchange rate fluctuations on cash of £0.3 million, (2011: £0.2 million) and acquired company opening cash of £1.9 million, net cash and cash equivalents decreased to £4.9 million (2011: £6.3 million).

Subsequent Events

OpSec completed the effective acquisition of the Delta Labelling business on 31st March 2012 for a total consideration of £12.5 million plus Delta's excess cash at completion. Legal completion took place on 16th April 2012 at which time £9.5 million was payable in cash with deferred cash consideration of £3.0 million being payable (subject to the achievement of certain performance targets and milestones) in four instalments including a final instalment of £2.6 million payable once the sales of specified Delta products and of OpSec products to named Delta customers during the two year period ending 31st March 2014 have been achieved.

The initial cash consideration payable for Delta was funded by a placing of 17,337,476 new ordinary shares at 45 pence per share with existing shareholders that raised £7.8 million before expenses and a subscription by the sellers for 2,666,666 new ordinary shares at 75 pence per share that raised £2.0 million in cash.

Liquidity Risk

OpSec seeks to maintain a balance between continuity of funding and flexibility. The Group's financing is currently provided by Investcorp Technology Partners ("Investcorp") and JP Morgan Chase Bank. Investcorp hold 34,794,963 ordinary shares and 20,000,000 7.5% redeemable convertible preferred ordinary shares of 35 pence per share.

On 31st October 2011 the Company repaid all amounts, being US$9.6 million, due to be repaid to Investcorp under the former loan agreement dated 1st February 2010. The total amount repaid comprised the US$7.0m outstanding capital and accrued interest and other payments. The repayment was financed through new banking facilities of up to $11.25m arranged with JPMorgan Chase Bank. The new facilities compromise: a) a three year revolving credit facility of $2m; b) a five year term loan of $8m; and c) a multicurrency overdraft facility of up to $1.25m.

Foreign currency risk

A significant proportion of OpSec's net assets are in currencies other than Sterling. The Company's policy is to limit the translation exposure and the resulting impact on shareholders' funds by matching borrowing currencies to the currencies of its significant net assets.

Throughout the year borrowings were primarily denominated in Sterling and US Dollars. The Company does not hedge the translation effect of exchange rate movements on the income statement.

The majority of OpSec's transactions are carried out in the functional currencies of its operations and so transaction exposure is limited.

Principal exchange rates

The differences between the average and closing exchange rates are such that if the results for the year ended 31st March 2012 were translated at the closing rates rather than the average rates, revenue would be decreased by £0.1 million and operating profit by £0.02 million.

MW Angus

Finance Director

24th May 2012

OPSEC SECURITY GROUP PLC

Consolidated Income Statement

Consolidated statement of comprehensive income

OPSEC SECURITY GROUP PLC

Consolidated Statement of Changes in Equity

For the year ended 31st March 2012

For the year ended 31st March 2011

OPSEC SECURITY GROUP PLC

Consolidated Balance Sheet

OPSEC SECURITY GROUP PLC

Consolidated Statement of Cash Flows

OPSEC SECURITY GROUP PLC

Notes to the Preliminary Announcement

For the year ended 31st March 2012

1) Basis of preparation

The financial information set out above has been prepared in accordance with the recognition and measurement criteria of International Financial Reporting Standards (IFRS) as adopted by the EU (Adopted IFRSs).

The financial information set out above does not constitute the Company's statutory accounts for the years ended 31st March 2012 or 2011. The financial information for 2011 is derived from the statutory accounts for 2011 which have been delivered to the registrar of companies. The auditor has reported on the 2011 accounts; their report was (i) unqualified, (ii) did not include references to any matters to which the auditor drew attention by way of emphasis without qualifying their report and (iii) did not contain statements under section 498 (2) or (3) of the Companies Act 2006. The statutory accounts for 2012 will be finalised on the basis of the financial information presented by the Directors in this preliminary announcement and will be delivered to the registrar of companies in due course.

The Group's business activities, together with the factors likely to affect its future development, performance and position are set out in the Chief Executive's Review above. The financial position of the group, its cash flows, liquidity position and borrowing facilities are described in the Financial Review above.

The Group meets its day to day working capital requirements through its cash balances and facilities with JP Morgan Chase Bank. Whilst the economic outlook remains uncertain, the Group's forecasts and projections, taking account of reasonably possible changes in trading performance, show that the Group should be able to operate within the level of its agreed facilities.

After making enquiries, the Directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Accordingly they continue to adopt the going concern basis in preparing the annual report and accounts which will be finalised on the basis of the financial information presented in this preliminary announcement.

New standards

The accounting policies used in the preparation of the financial information have been applied consistently throughout the Group and are unchanged from previous years. The impact of new standards and interpretations effective for the first time in the current year is not significant.

OPSEC SECURITY GROUP PLC

Notes to the Preliminary Announcement

For the year ended 31st March 2012

2) Segment Information

Segment information is presented on the basis of geographical segments as this is the basis on which profit is measured within the Group.

OPSEC SECURITY GROUP PLC

Notes to the Preliminary Announcement

For the year ended 31st March 2012

3) Total Operating Expenses

The exceptional costs are detailed below.

4) Share of Profit of Jointly Controlled Entity

The share of profit of jointly controlled entity represents the Group's share of the results of 3dcd for the year ended 31st March 2012.

5) Finance Income

OPSEC SECURITY GROUP PLC

Notes to the Preliminary Announcement

For the year ended 31st March 2012

6) Finance Expenses

7) Taxation

No corporation tax is payable in the current year by any of the Group's UK based companies due to existing trading and non trading losses brought forward. A prior year credit of £99,000 (2011: £157,000) has been recognised in relation to R&D tax credits claimed in the Group's UK based companies.

Current period corporation tax on profits arising in the Group's American operations comprises state taxes and federal taxes, which have been reduced due to losses brought forward from prior years.

The deferred tax charge arising in the period relates mainly to the utilisation of the brought forward deferred tax asset in the American entities, and a reduction in the UK deferred tax asset reflecting the reduction in UK corporation tax rate to 24% from 26%..

At 31st March 2012 the Group had recognised a deferred tax asset of £3,446,000 (2011: £3,662,000) arising principally from losses available in the UK and America which can be utilised to offset future profits of the same trades and other short term timing differences

At 31st March 2012 the Group also had an additional unrecognised deferred tax asset of £5,845,000 (2011: £6,110,000) in respect of unutilised tax losses and tax depreciation. This additional asset has not been recognised due to uncertainty relating to the utilisation of those tax assets. The reduction in the asset not recognised arises from a combination of the change in the UK's mainstream corporate tax rate from 26% to 24% and losses in the US expiring unutilised.

OPSEC SECURITY GROUP PLC

Notes to the Preliminary Announcement

For the year ended 31st March 2012

7) Taxation (continued)

The UK has also announced a phased reduction in the mainstream corporate tax rate from 26% to 22% by April 2014. If the proposals are enacted as set out, the value of the unprovided deferred tax asset would be reduced by a further £313,000 to £3,447,000.

As at 31st March 2012 deferred tax liabilities of £117,000 (2011: £146,000) remain in relation to the intangible assets acquired within the business of Light Impressions. New deferred tax liabilities of £1,430,000 and £111,000 respectively have been recognised in relation to the Delta Labelling and Advantics acquisitions made during the year.

8) Earnings per Share

The calculations of earnings per share are based upon the following profits and numbers of shares.

9) Acquisitions

The cash outflows for the acquisition of subsidiary undertakings in the current year relate to payments in respect of the acquisition made in the Caribbean. On 24th May 2011 OpSec acquired 100% of the issued share capital of Marohu Investments S.R.L. in the Dominican Republic and Advantics Corporation in Puerto Rico (together the "Advantics Business"). The purchase price consists of an upfront cash payment of US$0.3m and an earn-out arrangement under which a further $750,000 has been paid.

The Advantics Business is a small software development business focusing on developing ID solutions for issuance of passports, national ID cards and other secure credentials. The business is primarily based in the Dominican Republic with an ancillary business in Puerto Rico.

10) A copy of the preliminary statement is available from the Company Secretary, 40 Phoenix Road, Crowther District 3, Washington, Tyne & Wear, NE38 0AD.

11) The preliminary announcement was approved by the Board of Directors for release on 24th May 2012.