Final Results

4th June 2015

OPSEC SECURITY GROUP PLC

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

preliminary Announcement of Results for the Year Ended 31st March 2015

OpSec Security Group plc, the supplier of anti-counterfeiting technologies, services and programmes announces its results for the year ended 31st March 2015.

Highlights

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

• Significant Board and senior management changes;

• Group revenue increased by 10% to £61.3 million;

• Group adjusted operating profit increased by 62% to £3.7 million;

• Cash inflow from operating activities of £3.8 million (2014: £1.6 million);

• Closing cash balance of £6.7 million (2014: £2.6 million).

Richard Fuller, Chairman, said:

"We are starting the current financial year with a healthy order book but also with the knowledge that two of our current customer programmes are coming to an end and that the re-stocking at one of our major transaction card customers will not repeat in the current financial year. The rationalisation of the Group's production facilities scheduled to be completed in the first half of the new financial year should be a significant benefit to the Group's profitability."

For further information, please contact:

OpSec Security Group plc

Mike Angus, Finance Director ([email protected]) +1 720 394 2803

Shore Capital 020 7408 4090

Stephane Auton/Patrick Castle

4th June 2015

OPSEC SECURITY GROUP PLC

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

preliminary Announcement of Results for the Year Ended 31st March 2015

Chairman's Statement

Introduction

The year to 31st March 2015 saw a strong increase in Group Revenue and in Group Operating Profit. Revenue was particularly strong in our Transaction Card and Government Protection markets.

Exceptional Items

Two exceptional items impacted the year. The acquisition of JDSUH with its facility in Robbinsville New Jersey required that the Group's manufacturing facilities be rationalised. Certain costs associated with that rationalisation are included in these results. The Group also incurred costs relating to the restructuring of the Board and the senior management team.

Capital Restructuring

As previously reported, in April 2014 the Company completed a Placing and Open Offer which raised approximately £7.0 million before expenses. The funds were raised to reduce the Company's borrowings, to pay the accrued dividend owing in respect of the Preferred Shares, to fund the rationalisation of the Group's manufacturing facilities, to fund certain product development and growth expansion initiatives and to provide further working capital for the Group.

Board and Management Changes

A number of changes to the Board and management team were made during the year.  On 21st May 2014 Hazem Ben-Gacem re-joined the OpSec Board of Directors. At the same time Glenn Luk stood down as a non-executive director of the Company.

Mark Turnage stepped down from the post of Chief Executive on 8th July 2014 and continued to serve as Vice Chairman until 9th February 2015 when he left the Board. Richard S. Cremona became Chief Executive of the Company on 8th July 2014. There have also been significant changes to the senior management team of the Company during the year.

On 30th September 2014 David Mahony stepped down from the Board of the Company and I succeeded him as Chairman.

Finally, David Erlong replaced Anand Radhakrishnan as a non-executive director of the Company on 7th April 2015.

I would like to take this opportunity to thank all of those people who have left the Company for their contributions over many years. I would also like to welcome all the people who have joined the Company and wish them great success in their time with us.

Outlook

We are starting the current financial year with a healthy order book but also with the knowledge that two of our current customer programmes are coming to an end and that the re-stocking at one of our major transaction card customers will not repeat in the current financial year. The rationalisation of the Group's production facilities scheduled to be completed in the first half of the new financial year should be a significant benefit to the Group's profitability.

R Fuller

Chairman

4th June 2015

BUSINESS REVIEW

Business Model and Strategy

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 supplies technologies and solutions into three core markets: Government Protection, Brand Protection and Transaction Cards. 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 its facilities in the USA, the UK, Germany, Hong Kong, the Dominican Republic and via a network of over 40 agents worldwide.

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 intends to 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.

Group Revenue

Prior to the changes made to the management team, OpSec's sales activities were organised by market-facing groups, each addressing its individual market with dedicated management, sales, sales support, and technology development teams. The market facing groups were supported by the operations and digital operations groups which provide them with products and services from the Group's facilities in Europe, the USA and Asia.

In order to maximise sales opportunities and leverage more efficiently our resources the Company has moved to a single "One OpSec" organisational structure based upon product lines and geographies. The implementation of this structure will provide end-to-end delivery of our product lines and services whilst enhancing accountability and performance in the markets we serve. The Company intends to increase its marketing expenditure in the current year to increase market awareness and promote the Company's capabilities.

The year to 31st March 2015 saw Group revenue increase by 10% to £61.3 million (2014: £55.5 million).

Government Protection

Revenue in the Government Protection market sector increased by 11% to £13.8 million (2014: £12.4 million).

The year saw strong growth due to contracts secured in the prior year for ID products and the excise stamp market together with strong demand from our Asian currency customer. This was partially offset by reduced orders from an Eastern European government.

Brand Protection

This sector recorded a decrease in revenue of 4% for the financial year to £31.3 million (2014: £32.5 million).

The decrease in revenue was primarily due to a price reduction at a major Asian tobacco customer and lower volumes in the football related apparel business where the prior year benefited from the impact of the World Cup. The Company was also notified during the year that two of its current brand protection programmes will be discontinued in the current financial year. Against this there have been record levels of new business won in the year which will benefit the current financial year.

Transaction Cards

Revenue in the transaction card market sector for the year was 52% higher at £16.3 million (2014: £10.7 million).

The increase in revenue from the prior year reflected strong demand in North America as the market transitions to "chip and pin" cards together with re-stocking at a major customer following a supply chain disruption in the prior period.

Geographical Business Units

The Group has two operating segments, each of which is a reportable segment; these are the Group's geographic business units.

American Operations

Revenue in our American operations was $70.4 million, an increase of 23% against the prior year total of $57.2 million. The American results were impacted positively by new customer wins in the Government Protection group and strong revenue from the Transaction Card market.

Gross margin fell during the year from 35.0% to 33.6% due to product mix and some duplicative costs associated with the rationalisation of the Group's manufacturing facilities.

Overall adjusted operating profit increased by 142% from $2.9 million to $6.9 million.

EMEA Operations

Revenue in the EMEA operations increased from £21.4 million to £21.9 million, principally as a result of higher order levels from an established Asian currency customer offset by lower sales to a European government customer and certain Brand Protection customers.

The gross margin generated by the EMEA operations fell from 38.6% to 38.1% as a result of a price reduction at a major customer and additional labour costs associated with the rationalisation of the Group's manufacturing facilities.

Overheads increased as a result of higher sales commissions and adjusted operating profit decreased from £1.8 million to £1.2 million.

3dcd Joint Venture

The contribution from our joint venture during the year was £0.3 million (2014: £0.5 million).

Corporate

There was a credit for share based payments in the current year of £0.5 million (2014: charge of £0.2 million) resulting from the surrender of previous share awards in connection with a new executive share option scheme. Other corporate costs increased over the prior year to £2.2 million (2014: £1.7 million) due to the impact of the management restructuring and provision for management bonuses.

Exceptional costs

There were exceptional costs during the year of £1.6 million (2014: £2.0 million). The acquisition of JDSUH with its facility in Robbinsville New Jersey required that the Group's manufacturing facilities be rationalised. Certain costs associated with that rationalisation are included in these results. The Group also incurred costs relating to the restructuring of the Board and the senior management team.

Finance expense

On 31st March 2014, the Company announced that it had conditionally placed an aggregate of 21,212,121 New Ordinary Shares with Orca Holdings Ltd ("Orca") and Herald Investment Trust Ltd ("Herald") subject to the clawback in respect of valid acceptances received pursuant to an Open Offer. Accordingly, following the result of the Open Offer, under the Placing, Orca subscribed for 13,717,951 New Ordinary Shares and Herald subscribed for 6,858,975 New Ordinary Shares. The 21,212,121 New Ordinary Shares issued pursuant to the Placing and Open Offer were admitted to trading on AIM on 22nd April 2014.

The Group's financing is currently provided by Investcorp Technology Partners ("Investcorp") and JP Morgan Chase Bank. At 31st March 2015 Investcorp held 48,512,914 ordinary shares and 20,000,000 7.5% redeemable convertible preferred ordinary shares of 35 pence per share.

At 31st March 2015 the Group had an outstanding Term Loan of $8.3 million and a revolving credit facility of $2.0 million.

The net finance cost for the year was £0.9 million (2014: £1.0 million). This reflects the impact of exchange rate movements and repayments made during the year.

Income Tax

The tax charge in the income statement of £0.4 million (2014: credit of £1.0 million) arises predominantly from a reduction in deferred tax assets related to trading losses carried forward.

Earnings per share

Basic adjusted earnings per share decreased to 2.6p (2014: 2.9p). Adjusted fully diluted earnings per share decreased to 2.6p (2014: 2.9p).

Cash flow

Net cash inflow from operating activities was £2.4 million (2014: £1.3 million), the increase resulting from higher operating profit and better working capital movements in the period. In addition, the Group raised £6.8 million from the Placing and Open offer, repaid borrowings of £2.4 million (2014: £2.2 million) and received dividends from its joint venture amounting to £0.3 million (2014: £0.3 million).

The principal cash outflows during the year were property, plant and equipment additions of £2.3 million (2014: £2.2 million), earn-out payments of £0.9 million (2014: £0.4 million) and interest and bank fee payments of £1.3 million (2014: £0.2 million).

The major capital expenditure planned for the year ending 31st March 2016 is related to the continued rationalisation of our manufacturing facilities and investment in the Company's digital technologies.

Overall the net cash inflow for the year was £3.9 million (2014: outflow of £3.2 million). After the favourable impact of exchange rate fluctuations on cash of £0.3 million, (2014: negative £0.2 million), net cash and cash equivalents increased to £6.7 million (2014: £2.6 million).

RS Cremona

Chief Executive

4th June 2015

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 2015

For the year ended 31st March 2014

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 2015

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 2015 or 2014. The financial information for 2014 is derived from the statutory accounts for 2014 which have been delivered to the registrar of companies. The auditor has reported on the 2014 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 2015 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 Business Review. The financial position of the group, its cash flows, liquidity position and borrowing facilities are also described in the Business Review.

The Group meets its day to day working capital requirements through its cash balances and facilities with JP Morgan Chase Bank.

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 following Adopted IFRSs have been applied for the first time for the year ended 31st March 2015:

· IFRS 10 'Consolidated Financial Statements'

· IFRS 11 'Joint Arrangements'

· IFRS 12 'Disclosure of Interests in Other Entities'

· IAS 27 'Separate Financial Statements'

· IAS 28 'Investments in Associates and Joint Ventures'

As a result of the adoption of this suite of standards, the Group has reassessed i) whether it has control over its investees; and ii) the status of its interests in joint arrangements. No modifications of previous conclusions about either control regarding the Group's investees or about joint arrangements were required. The application of these standards has therefore not had an impact on the Group's result for the year or its equity.

Various other amendments and interpretations are effective for the first time, none of which have had any impact on the Group financial statements.

The following Adopted IFRSs have been issued and endorsed by the EU but have not been applied by the Group in these financial statements as they are not yet effective. Their adoption is not expected to have a material effect on the financial statements:

· Annual Improvements to IFRSs 2010-2012 Cycle

· Annual Improvements to IFRSs 2011-2013 Cycle

· Amendments to IAS 19 - Defined benefit plans: employee contributions

OPSEC SECURITY GROUP PLC

Notes to the Preliminary Announcement

For the year ended 31st March 2015

2) Segment Information

The Group has two operating segments, each of which is a reportable segment; these are the Group's geographic business units. Information regarding the results of each reporting segment is presented below.

OPSEC SECURITY GROUP PLC

Notes to the Preliminary Announcement

For the year ended 31st March 2015

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 2015.

5) Finance Income

OPSEC SECURITY GROUP PLC

Notes to the Preliminary Announcement

For the year ended 31st March 2015

6) Finance Expenses

7) Income Tax

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. The current period corporation tax is in respect of profits arising in the Group's American operations, comprising state taxes and federal taxes of £88,000 and profits arising in the OpSec Delta Hong Kong business.

A prior year adjustment of £53,000 has arisen in OpSec Security Group plc due to disclaiming group relief from OpSec Security Limited in the period ended 31st March 2014 to instead claim RDEC tax relief from OpSec Security Limited. A prior year adjustment has arisen in OpSec Security Limited of £42,000 as a result of the reversal of a tax debtor in relation to the hive up of OpSec Delta Limited.

The deferred tax charge arising in the period primarily relates to a reduction in net operating losses carried forward in respect of the American business operations.

At 31st March 2015 the Group had recognised a net deferred tax asset of £4,723,000 (2014: £4,409,000) 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 2015 the Group also had an additional unrecognised deferred tax asset of £3,764,000 (2014: £3,581,000) in respect of unutilised tax losses and tax depreciation. This asset has not been recognised due to uncertainty relating to the utilisation of those tax assets. The increase in the asset not recognised arises from additional losses in the UK and the impact of foreign exchange movements on deferred tax balances in the Group's American operations.

OPSEC SECURITY GROUP PLC

Notes to the Preliminary Announcement

For the year ended 31st March 2015

8) Earnings per Share

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

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

10) The preliminary announcement was approved by the Board of Directors for release on 4th June 2015.