Final Results

7th June 2011

OPSEC SECURITY GROUP PLC

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

preliminary Announcement of Results for the Year Ended 31st March 2011

OpSec Security Group plc, the supplier of anti-counterfeiting technologies, services and programmes announces its results for the year ended 31st March 2011.

Highlights

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

·; Strong overall performance by the Group;

·; Group adjusted operating profits up 52% to £3.8 million;

·; Group revenue increased by 15% to £40.4 million with strong performance in our Brand Protection and Banknote and High Security Documents divisions;

·; Gross margins increased from 42.9% to 44.3% due to volume impact and on-going cost-control and efficiency programmes;

·; Acquisition of small ID business based in the Dominican Republic and Puerto Rico announced on 24th May 2011;

·; Cash offer for the business from Investcorp.

David Mahony, Chairman, said:

"With the results for the year to 31st March 2011 showing growth both in turnover and in profitability the impact of the recent recession appears to have been surmounted. The international spread of the Group's business has greatly assisted in this and gives grounds for believing further progress can be made. A significant pipeline of opportunities exists but conversion of these opportunities will be key in the current year as we are starting the year knowing that there will be a higher than normal level of contracts which will draw to a close. To help ensure a better conversion of prospective customers and accelerate our revenue growth we are increasing our investment in sales and marketing in the current year."

For further information, please contact:

OpSec Security Group plc

Mark Turnage, Chief Executive ([email protected])  0191 417 5434

Mike Angus, Finance Director ([email protected])

Weber Shandwick Financial 020 7067 0700

Nick Oborne/ Stephanie Badjonat

Shore Capital 020 7408 4090

Dru Danford/Stephane Auton

7th June 2011

OPSEC SECURITY GROUP PLC

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

preliminary Announcement of Results for the Year Ended 31st March 2011

Chairman's Statement

Introduction

The year ending 31st March 2011 saw a strong overall performance by the Group. As in prior years the second half was particularly strong. We were successful both in winning new business and, of equal importance, retaining key customers in the Banknote and High Security and the Brand Protection sectors of our business. The ID Solutions element of our business did not enjoy similar levels of success in the year; while it won some new contracts these were not sufficient fully to offset the loss of a number of accounts. In some instances the projects which it failed to secure were not lost to competition but were delayed or deferred. The recently announced acquisition of Advantics, details of which are given in the attached Chief Executive's report, is expected to assist in securing new business for the ID Solutions sector of our activities.

Our manufacturing operations, now fully consolidated onto single sites in both the UK and the US, successfully continued their programme of margin improvement. Both facilities realised benefits from the capital investment programmes we have completed over the last few years; coupled with this we have also seen benefits from the strengthening of the production management teams.

We continue to see a number of opportunities to improve the profitability of our operations. In order to realise these opportunities, and to ensure that we are able to deliver increased revenue successfully, the Group will continue to invest in its operations.

The benefits to the Group of these manufacturing efficiency measures and the overhead saving programmes implemented during the economic downturn have clearly helped the operating leverage in the business. This is responsible in part for the contrast between the first half and the second half of the year. Sales in the second half accounted for 51% of the annual total whereas operating profit in the second half accounted for 64% of the annual total.

As in previous years I would, on behalf of the Board and shareholders like to thank all our employees for the efforts they have made to support the Group throughout the year.

Cash offer

On 27th April 2011, Orca Holdings Limited ("Orca") and the Independent Directors of OpSec announced that they had reached agreement on the terms of a recommended cash offer of 50 pence for each OpSec Share (the "Initial Offer"). The Initial Offer was subject to certain conditions including the approval by independent shareholders of OpSec of the Management Team Arrangements and the Employee Benefit Trust arrangements.

At the General Meeting of OpSec held on 27th May 2011, the required ordinary resolution was not passed by the requisite majority of independent shareholders of OpSec. Accordingly on 2nd June 2011, Orca announced that the Initial Offer had lapsed with immediate effect and was no longer capable of acceptance.

Orca and the Independent Directors of OpSec subsequently announced on 2nd June 2011 that they had agreed the terms of a new recommended cash offer (the "New Offer") for the entire issued (and to be issued) share capital of OpSec not already owned by Orca. The New Offer comprised 50 pence in cash (the "New Offer Price") for each OpSec Share. The New Offer is conditional upon, inter alia, valid acceptances being received in respect of OpSec Shares which carry more than 50% of the voting rights exercisable at OpSec general meetings when aggregated with the Voting Shares already held, or subsequently acquired or agreed to be acquired, by Orca and persons acting in concert with it.

The New Offer, as with the Initial Offer, gives OpSec's shareholders the opportunity to achieve a cash exit at a very substantial premium to the recent market price. Once completed, OpSec will have access to significantly greater and more appropriately structured finance, increasing its ability to invest further in the OpSec Group's business. This should benefit all stakeholders.

Outlook

With the results for the year to 31st March 2011 showing growth both in turnover and in profitability the impact of the recent recession appears to have been surmounted. The international spread of the Group's business has greatly assisted in this and gives grounds for believing further progress can be made. A significant pipeline of opportunities exists but conversion of these opportunities will be key in the current year as we are starting the year knowing that there will be a higher than normal level of contracts which will draw to a close. To help ensure a better conversion of prospective customers and accelerate our revenue growth we are increasing our investment in sales and marketing in the current year.

DA Mahony

Chairman

7th June 2011

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 some of the world's largest corporations.

OpSec supplies technologies and solutions into three core markets: Banknote and High Security Documents, Brand Protection and ID Solutions. 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 via a network of over 40 agents worldwide. On 24th May 2011 OpSec announced the acquisition of Marohu Investments S.R.L. in the Dominican Republic and Advantics Corporation in Puerto Rico (together the "Advantics Business"), which will expand the Group's operations into the Caribbean and Central America.

Strategy

OpSec's strategy is to provide world-class authentication technologies and solutions into its three 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 strategy.

Market Sectors

OpSec is organised by market-facing groups, each addressing its individual market with dedicated management, sales, sales support, and technology development teams. The three 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 rose by 69% to £10.0 million (2010: £5.9 million). This performance reflected new business won during the year, as well as strong ordering from existing customers.

Of note, the Group was selected during the year to provide security for a new Asian currency, and delivered the product under stringent timelines. It should be noted that the volume requirements from this customer in the financial year ending 31st March 2012 are not expected to match the launch volumes delivered in this financial year. OpSec also launched its new "SecureETag" product in the USA with the state of Arkansas, combining its secure optical features with a web-accessible database and online authentication for law enforcement. Both of these contracts were secured in the face of significant competition. The Group has also secured new business in Latin America, Africa and the Middle East during the year.

While the timing of orders in this sector, particularly from governments, is difficult to estimate, the new business won during the year coupled with key new hires, positions us well in this market sector for future growth.

Brand Protection

Revenue generated in this sector is dependent upon the volume of consumer products sold and the impact of global economic conditions. Consequently, on the back of a strong improvement in consumer spending, new customers and the expansion of a number of existing customer programmes, this sector recorded revenue for the financial year up by 12% to £25.1 million (2010: £22.4 million).

Revenue generated from sales in the US sports leagues, and to the tobacco industry in China, were particularly strong during the year. In addition, the Group continued 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.

ID Solutions

In the year ended 31st March 2011, revenue in the ID Solutions business decreased by 21% to £5.3 million, (2010: £6.7 million). The principal reasons for the decline were a slowdown in ordering from a major government customer in North America and the loss of two major passport programmes in Europe. Ordering from other customers was mixed, primarily due to the timing of receipt 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.

OpSec continues to pursue a range of ID Solutions customers in a variety of different geographies. There continues to be a pipeline of prospects which could significantly benefit the year ending 31st March 2012 if successfully converted.

Geographical Business Units

The Group reports revenues and profitability split geographically between its American, UK and German operations. These operations compete across all the market sectors referred to above. Manufacturing locations also lie within each geographical sector.

American Operations

Revenue in our American operations was $35.9 million, an increase of 3% against the prior year total of $34.8 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.

Following the consolidation in the prior year of the Group's two manufacturing facilities to Lancaster, Pennsylvania there continues to be significant effort undertaken to operate the single US manufacturing site as efficiently as possible. This included the hiring of a number of new manufacturing management team members during the year and the implementation of a number of cost control and efficiency programmes. Gross margins increased during the year from 40.3% to 40.9%.

A significant investment was made during the year in the development of the new "SecureETag" product which led to an increase in research and development expenditure. Overall operating profit increased by 7% from $4.1 million to $4.4 million.

UK Operations

Revenue in the UK operations rose to a record £16.1 million from £12.1 million, principally as a result of the new security business won in the Banknote and High Security sector during the year.

The gross margin generated by the UK operations increased from 37.9% to 43.7% as a result of increased volumes during the year, improved sales mix and a number of efficiency programmes implemented during the year.

Overheads increased by 44% as a result of the additional sales commissions' payable on the new government business. Operating profit increased by 83% from £1.2 million to £2.0 million.

German Operations

The German operations reported revenue of €3.16 million, a fall of 2% over the prior year figure of €3.22 million. The positive impact of new customers was offset by a slowdown in ordering from several major customers.

Operating profits fell from €0.6 million to€0.4 million due to new hiring into the German office during the year, which we believe will strengthen the operation in future years.

3dcd Joint Venture

The increase contribution from our joint venture during the year of £0.9 million (2010: £0.5 million) reflected its major customer's one off ordering of equipment to support the new imaging technology launched during the prior year.

Corporate

The charge for share based payments in the current year decreased from a charge of £213,000 to a credit of £210,000, partly as a consequence of the non-achievement of the performance conditions attaching to a number of the previously made awards. Other corporate costs were slightly down at £2.2 million (2010: £2.3 million).

The Advantics acquisition

OpSec announced on 24th May 2011 that it had signed sale and purchase agreements for 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 will significantly enhance OpSec's product offering in the ID Solutions business and improve the Group's distribution network. The transaction has been structured with an up-front payment and an earn-out with the maximum amount payable capped at $6.0 million.

People

OpSec has employees operating from its manufacturing facilities in North America, Germany and the United Kingdom, as well as its optical laboratories in the United Kingdom, the corporate office in USA, and sales and support facilities in Hong Kong. In addition, OpSec will now have a small team of employees based in the Dominican Republic following its acquisition of the Advantics business.

Total Group headcount rose from 266 at 31st March 2010 to 281 at 31st March 2011.

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

7th June 2011

BUSINESS REVIEW

Financial Review

Revenue

The year to 31st March 2011 saw Group revenue increase by 15% to £40.4 million (2010: £35.0 million). The increase was primarily due to securing a major new customer in the Banknote and High Security Documents market for the supply of banknote security thread and an increase in sales in our Brand Protection market underpinned by the global recovery in consumer spending.

Gross profit margin

Gross profit margin for the year rose from 42.9% to 44.3%. A number of operating efficiencies were achieved in both the UK and American operations which helped reduce the Group's material costs. The increased volumes more than offset the increased production overheads resulting from investments in strengthening the manufacturing team.

Operating Profit

Overheads increased by 12% due to additional sales commissions incurred on new government business and higher research and development costs related to the new "e-tag" product. Adjusted operating profit (adjusted for the effects of intangible amortisation and share based payments) increased from £2.5 million to £3.8 million.

Finance expense

The net finance cost for the year was £2.2 million (2010: £1.9 million). This represents the effect of the refinancing undertaken with Investcorp in March 2010 and includes £0.6 million in respect of the amortisation of debt advisor costs related to the refinancing (2010: exceptional write off of £0.9 million).

Income Tax

The tax credit for the year of £0.2 million (2010: credit of £0.2 million) arises predominantly from refunds crystallised in the period which relate to R&D tax credits in the UK.

Earnings per share

Basic adjusted earnings per share increased to 3.5p (2010: 3.3p). Adjusted fully diluted earnings per share increased to 3.3p (2010: 3.2p).

Balance sheet

Net assets were largely unchanged at £30.7 million (2010: £31.0 million). The principal movements during the year arose from adverse foreign exchange movements of £1.0 million and own shares purchased offset by Group profits.

Cash flow

Net cash inflow from operating activities reduced to £1.8 million (2010: £5.1 million) as a result of working capital movements. In addition, the Group received dividends from its joint venture amounting to £1.1 million (2010: £0.6 million).

The principal cash outflows during the year were the earn out payments relating to Light Impressions and P4M of £0.9 million (2010: £3.7 million), property, plant and equipment additions of £1.0 million (2010: £0.9 million), repayment of borrowings of £1.9 million (2010: increased borrowings of £1.9 million) and interest and bank fee payments of £0.6million (2010: £0.6 million). In addition to the dividends received from the joint venture, a further £0.6 million was received in proceeds from the sale of the plant in Parkton, Maryland.

The major capital expenditure planned for the year ending 31st March 2012 is a new ERP system. An implementation team has been established and work has already started on the implementation of the new system.

Overall the net cash outflow for the year was £0.9 million (2010: inflow of £2.8 million). After the effect of exchange rate fluctuations on cash of £0.2 million, (2010: inflow of £0.3 million) net cash and cash equivalents decreased to £6.3 million (2010: £7.4 million).

Liquidity Risk

OpSec seeks to maintain a balance between continuity of funding and flexibility. The Group's financing is currently provided byInvestcorp Technology Partners ("Investcorp"). Investcorp hold 2,668,850 ordinary shares and 20,000,000 9.75% redeemable convertible preferred ordinary shares of 35 pence per share. In addition, OpSec entered into a loan agreement with Investcorp for $13 million which was fully drawn down on 8th March 2010.

The loan is repayable in full on 8th March 2015 and carries interest of 9.0% per annum. The capital balance on the loan at 31st March 2011 was $10 million and the expectation is that the loan will be repaid by 30th September 2011 so that no redemption premium becomes payable.

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 borrowing in those currencies in which it has 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 2011 were translated at the closing rates rather than the average rates, revenue would be decreased by £0.6 million and operating profit by £0.03 million.

MW Angus

Finance Director

7th June 2011

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 2011

For the year ended 31st March 2010

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 2011

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 2011 or 2010. The financial information for 2010 is derived from the statutory accounts for 2010 which have been delivered to the registrar of companies. The auditors have reported on the 2010 accounts; their report was (i) unqualified, (ii) did not include references to any matters to which the auditors 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 2011 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 loan facility with Investcorp. The facilities are due for renewal in March 2015. 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 2011

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 2011

3) Total Operating Expenses

The costs above are after charging legal and professional costs associated with the recent cash offer for OpSec of £385,000 and a loss on disposal of the Parkton property of £359,000. These costs were offset by the release of certain provisions relating to the acquisitions made in 2009 of £369,000 and the recognition of a profit of £193,000 on the disposal of a fixed asset investment.

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 2011.

5) Finance Income

6) Finance Expenses

OPSEC SECURITY GROUP PLC

Notes to the Preliminary Announcement

For the year ended 31st March 2011

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 £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.

A corporation tax credit of £72,000 has arisen in Germany as a result of utilisation of tax losses relating to the Group's operations in that country.

The deferred tax charge arising in the period relates mainly to the utilisation of the brought forward deferred tax asset in the American entities.

At 31st March 2011 the Group had recognised a deferred tax asset of £3,853,000 (2010: £3,903,000) 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 2011 the Group also had an additional unrecognised deferred tax asset of £6,110,000 (2010: £7,842,000) 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 28% to 26% and losses in the US expiring unutilised. The UK has also announced a phased reduction in the mainstream corporate tax rate from 26% to 23% 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 £705,000 to £5,405,000.

As at 31st March 2011 deferred tax liabilities of £146,000 remain in relation to the intangible assets acquired within the business of Light Impressions.

OPSEC SECURITY GROUP PLC

Notes to the Preliminary Announcement

For the year ended 31st March 2011

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 and prior years of £873,000 and £3,715,000 respectively relate to earn out payments in respect of acquisitions made in the year ended 31st March 2009.

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. The total consideration payable is capped at US$6.0m.

The Advantics Business is a small software development business focussing 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.

Due to the timing of the acquisitions, a fair value exercise has not been completed as at the date of this preliminary announcement.

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 7th June 2011.