2nd Jun 2010 07:00
2nd June 2010
OPSEC SECURITY GROUP PLC
("OpSec", "the Company" or "the Group")
preliminary Announcement of Results for the Year Ended 31st March 2010
OpSec Security Group plc, the supplier of anti-counterfeiting technologies, services and programmes announces its results for the year ended 31st March 2010.
Highlights
|
|
2010 |
2009 |
|
Revenue |
£35.0m |
£39.3m |
|
Operating Profit |
£1.6m |
£0.6m |
|
Adjusted Operating Profit* |
£2.5m |
£3.1m |
|
Loss Per Share |
(0.2)p |
(3.3)p |
|
Adjusted Basic Earnings Per Share* |
3.3p |
2.9p |
* Adjusted for the charges for intangible amortisation, exceptional charges and share based payments (note 2b)
·; The second half of the year was substantially stronger than the first half and the improved trading has continued into the early part of the current year;
·; The significant cost saving measures implemented have improved the operating leverage in the business and are benefiting profits;
·; Gross margins increased from 41.1% to 42.9%;
·; Group revenue decreased by 11% to £35.0 million with adjusted operating profits down to £2.5 million, reflecting the impact of global economic conditions in the first half of the year;
·; Net cash generated from operating activities improved to £5.1 million (2009: £3.5 million)
·; New funding arrangements secured with Investcorp.
David Mahony, Chairman, said:
"We entered the current year with a new major supportive investor, a strengthened balance sheet and a significantly lower cost base. The uplift in volumes which we experienced in the second half of the year just ended has continued into the early months of the current year and we view the future with some confidence."
"Currently the Group generally has a stronger pipeline than we have historically enjoyed. This pipeline, taken together with the new customers already secured, underpins our growth targets for the current year."
For further information, please contact:
OpSec Security Group plc today; 020 7067 0700
Mark Turnage, Chief Executive ([email protected]) thereafter: 0191 417 5434
Mike Angus, Finance Director ([email protected])
Weber Shandwick Financial 020 7067 0700
Nick Oborne/ Stephanie Badjonat
Oriel Securities Ltd 020 7710 7600
Michael Shaw/Neil Langford
2nd June 2010
OPSEC SECURITY GROUP PLC
("OpSec", "the Company" or "the Group")
preliminary Announcement of Results for the Year Ended 31st March 2010
Chairman's Statement
Introduction
Following a first half to the year that was severely affected by the impact of the financial and economic crisis on our customer base and their willingness to place orders at previous levels, I am pleased to report that the second half of the year saw some easing of the general economic position leading to more normal levels of order intake.
The second half also saw significant improvements in margins, profits and cash conversion as we realised the benefit from the integration of our American production facilities, the associated programme of radically reducing our buying costs and the recovery in volumes as the year progressed.
It is pleasing to be able to report that both Brand Protection and Bank Note and High Security successfully competed for significant new business in the year. It is in the nature of our business that periodically major programmes either run their course or are re-bid; this does not necessarily coincide with the award of new contracts and this had an adverse impact on the ID sector of our business in the year.
Currently the Group generally has a stronger pipeline than we have historically enjoyed. This pipeline, taken together with the new customers already secured, underpins our growth targets for the current year.
During the year ending 31st March 2010 we asked all Directors and a number of employees throughout the Group for assistance by agreeing to a salary sacrifice scheme or short time working. I am pleased to be able to report that we have now been able to reverse all of these short term measures.
The support we received from all staff in the year was considerable and I would like to thank all of them for the contribution they made in seeing the business through a difficult phase.
Investcorp Technology Partners
I am pleased to be able to report that on 8th March 2010 we completed a re-financing with Investcorp Technology Partners which raised gross proceeds of £15.7 million comprised of a £0.64 million placing of ordinary shares, a £7 million preferred share placing and $13 million of debt financing. The proceeds were applied initially to repaying the previous facility from the Royal Bank of Scotland with the balance being utilised in improving the cash position of the Group.
The investment by Investcorp will enable OpSec to take advantage of the significant growth, investment and acquisition opportunities that we see ahead of us. As part of these arrangements Hazem Ben Gacem and Anand Radhakrishnan were invited to join the Board; they have made an immediate and positive contribution.
Outlook
We entered the current year with a new major supportive investor, a strengthened balance sheet and a significantly lower cost base. The uplift in volumes which we experienced in the second half of the year just ended has continued into the early months of the current year and we view the future with some confidence.
DA Mahony
Chairman
2nd June 2010
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.
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. On a selective basis the Group will also 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 discrete 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 market sector fell by 30% to £5.9 million (2009: £8.5 million). This reflected the loss in the middle of the prior year of the Group's Middle Eastern tax stamp customer and a slowdown in the sale of temporary license plates in North America due to weak car sales. Sales of security products to Russia were slow in the first half of the financial year but were strong in the second half.
The Group has secured new business in China, Russia, Asia and in the USA which will benefit volumes in the year ending 31st March 2011. This, coupled with the development and capital expenditure programmes we have undertaken to expand and increase the value of the product range, 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 meant that the Brand Protection market started the year very slowly. However, on the back of a strong recovery in volumes and a number of new customer wins in the second half of the year, this sector recorded revenue for the financial year down by only 1% to £22.4 million (2009: £22.6 million).
Revenue generated from sales for DVD protection, consumer electronic products, and the tobacco industry in China fell during the year but this was offset by strong sales to the American sports leagues and the fashion sector.
The results reflect OpSec's very strong strategic positioning in this sector, as evidenced by the new customers won and the retention of underlying key customer accounts during a major economic downturn. 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 allows brand owners to address all facets of the problems associated with counterfeiting, grey marketing, and unlawful use and sale of branded merchandise both in retail establishments and online.
As a result of the return of volumes to historical levels and the new customers secured during the financial year, Brand Protection revenue in the early months of the year ending 31st March 2011 is significantly higher than the corresponding period of the financial year just ended.
ID Solutions
In the year ended 31st March 2010, revenue in the ID Solutions business decreased by 19% to £6.7 million, (2009: £8.3 million). The principal reason for the decline was the loss of one key government customer in Asia.
There were strong sales to the governments of both the USA and Canada although this was partially offset by lower sales of the laminate for the British passport.
OpSec's expanded new product range for ID Solutions has positioned the Group strongly to compete to supply products for the next generation of ID documents and there are a number of significant prospects in the pipeline which could benefit the year ending 31st March 2011.
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 referenced above. Manufacturing locations also lie within each geographical sector.
American Operations
Revenue in our American operations was $34.8 million, down 7% from the prior year total of $37.3 million. This reflected the loss of one ID Solutions contract and the slowdown in the sale of temporary license plates in North America. The early part of the year was impacted by the slow-down of Brand Protection volumes but this recovered in the second half of the year.
The combination of the Group's two American manufacturing locations on to its site in Lancaster, Pennsylvania was successfully completed during the year. This, together with a number of other initiatives, has helped the Group realise significant cost savings in the current financial year and consequently gross margins improved from 39.0% to 40.3% despite the impact of lower volumes.
The management team's focus on cost control and working capital management helped reduce overheads by 17% leading to a 60% increase in operating profits from $2.5 million to $4.1 million.
UK Operations
The integration of the business acquired from Light Impressions in the prior financial year was fully completed during the year. Revenue in the UK operations fell to £12.1 million from £16.3 million, principally as a result of the loss of the Group's Middle Eastern tax stamp customer in the prior year.
The gross margin generated by the UK operations increased from 37.7% to 41.1% as a result of a number of efficiency programmes and improvements in the mix of business serviced from our UK operations.
The lower volumes meant that, despite a 20% reduction in overheads, operating profit fell by 36% from £1.9 million to £1.2 million.
German Operations
The senior management in Germany has been reorganised following the decision by the vendors of P4M to retire following the end of their lock-in period. This has inevitably caused some disruption and some duplication of expense but it has now been successfully completed.
The German operations reported revenue of €3.2 million, an increase of 4% over the prior year figure of €3.1 million. The positive impact of new customers was partially offset by a slowdown in ordering from one major consumer electronics customer.
Operating profits fell from €1.1 million to€0.6 million due to the cost of investments made in the automation of certain functions which will benefit future periods, the duplication of costs during the management transition period and increased investment in sales and marketing.
3dcd Joint Venture
A three year extension of current commercial arrangements with the joint venture's major customer was signed during the financial year as a result of the successful development of the next generation of technology for optical disk protection. The costs associated with this new technology and lower volumes at this customer led to 3dcd performing slightly below expectations with a contribution of £0.5 million (2009: £0.7 million).
Corporate
The charge for share based payments in the current year increased from a credit of £2,000 to a charge of £213,000, partly as a consequence of the non-achievement of the performance conditions attaching to a number of the various incentive schemes in the prior year. Other corporate costs increased by 16% to £2.3 million (2009: £1.9 million). The major contributor to this increase was management bonus charges due to the achievement of the cash based bonus targets.
The profit and loss account in the prior year included an exceptional cost of £857,000 related to the cost of the significant headcount reductions that took place in that year together with the costs of closing the Parkton facility and moving it to Lancaster. There were no exceptional corporate costs in the year ending 31st March 2010.
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.
Total Group headcount fell from 280 at 31st March 2009 to 266 at 31st March 2010.
OpSec believes strongly that employee recruitment, training and retention are critical to its success and in particular has endeavoured during this difficult year to retain key staff. The Group remains fully committed to maintaining its health, safety and environmental standards and performance.
MT Turnage
Chief Executive
2nd June 2010
BUSINESS REVIEW
Financial Review
Revenue
The year to 31st March 2010 saw Group revenue decrease by 11% to £35.0 million (2009: £39.3 million). The decrease was primarily due to the prior year loss of a major customer in the Banknote and High Security Documents market and the loss of a major customer in the ID Solutions market during the year under review. Global economic conditions did adversely impact revenue in our Brand Protection market in the first half of the year but there was a strong recovery in the second half.
Gross profit margin
Gross profit margin for the year rose from 41.1% to 42.9% as the mix of sales improved and a number of operating efficiencies were achieved. These gains were partially offset by the impact of lower volumes but we did see greatly improved margins in the second half of the financial year when volumes were higher.
Operating Profit
Adjusted operating profit (adjusted for the effects of intangible amortisation and share based payments) decreased from £3.1 million to £2.5 million due to the impact of the lower revenue. Significant cost saving efforts were made to mitigate the impact of the lower volumes by reducing headcount costs and discretionary spend wherever possible.
Finance expense
The net finance cost for the year was £1.7 million (2009: £1.4 million). This includes an exceptional write off of £0.9 million in respect of debt advisor costs as a result of the refinancing (2009: £0.6 million).
Income Tax
The tax credit for the year of £0.2 million (2009: charge of £0.9 million) arises predominantly from refunds crystallised in the period which relate to R&D tax credits in the UK and tax losses carried back to earlier years in America.
Earnings per share
Basic adjusted earnings per share increased to 3.3p (2009: 2.9p). Adjusted fully diluted earnings per share increased to 3.2p (2009: 2.7p).
Balance sheet
Net assets decreased by £1.0 million to £31.0 million (2009: £32.0 million). The principal movements during the year arose from adverse foreign exchange movements of £1.7 million and own shares purchased offset by new share capital raised.
Cash flow
Net cash inflow from operating activities was £5.1 million (2009: £3.5 million). In addition, the Group received dividends from its joint venture amounting to £0.6 million (2009: £0.7 million).
The principal cash outflows during the year were the earn out payments relating to Light Impressions and P4M of £3.7 million (2009: £7.9 million), property, plant and equipment additions of £0.9 million (2009: £2.3 million) and interest and bank fee payments of £0.6 million (2009: £1.4 million). These outflows were funded from a net increase in borrowings of £1.8 million.
Overall the net cash inflow for the year was £2.8 million (2009: £3.0 million). After the effect of exchange rate fluctuations on cash of £0.3 million, net cash and cash equivalents increased to £7.4 million (2009: £4.2 million).
Liquidity Risk
OpSec seeks to maintain a balance between continuity of funding and flexibility. During the year the Group repaid its credit facilities with The Royal Bank of Scotland plc ("RBS") using an equity injection and loan from Investcorp Technology Partners ("Investcorp"). Investcorp subscribed for 2,668,850 ordinary shares at 24 pence per share and 20,000,000 9.75% redeemable convertible preferred ordinary shares at 35 pence per share. In addition, OpSec entered into a loan agreement with Investcorp for $13 million which was fully drawn down on 8th March 2010.
The loan is repayable in full on 8th March 2015 and carries interest of 9.0% per annum.
Foreign currency risk
A significant proportion of OpSec's net assets are in currencies other than sterling. The Company's policy is to limit the translation exposure and the resulting impact on shareholders' funds by borrowing in those currencies in which it has significant net assets.
Throughout the year borrowings were primarily denominated in sterling, Euros and US Dollars. The Company does not hedge the translation effect of exchange rate movements on the income statement.
The majority of OpSec's transactions are carried out in the functional currencies of its operations and so transaction exposure is limited.
Principal exchange rates
|
|
Average |
Closing |
||
|
|
2010 |
2009 |
2010 |
2009 |
|
US$: £ |
1.59 |
1.72 |
1.51 |
1.43 |
|
€: £ |
1.13 |
1.21 |
1.12 |
1.07 |
|
|
|
|
|
|
The differences between the average and closing exchange rates are such that if the results for the year ended 31st March 2010 were translated at the closing rates rather than the average rates, revenue would be increased by £1.2 million and operating profit by £0.1 million.
MW Angus
Finance Director
2nd June 2010
OPSEC SECURITY GROUP PLC
Consolidated Income Statement
|
|
Year ended 31-Mar-10 |
|
Year ended 31-Mar-09 |
|
|
£'000 |
|
£'000 |
|
|
|
|
|
|
Revenue |
34,992 |
|
39,339 |
|
Cost of sales |
(19,978) |
|
(23,181) |
|
Gross profit |
15,014 |
|
16,158 |
|
|
|
|
|
|
Distribution and selling costs |
(3,763) |
|
(4,875) |
|
Administrative expenses |
(9,417) - (654) - |
|
(8,882) (857) (800) (851) |
|
Exceptional administrative expenses Intangible amortisation Intangible impairment |
|||
|
Total administrative expenses |
(10,071) |
|
(11,390) |
|
|
1,180 |
|
(107) |
|
|
|
|
|
|
Share of profit of jointly controlled entities |
468 |
|
678 |
|
Operating profit |
1,648 |
|
571 |
|
|
|
|
|
|
Finance income |
(161) |
|
84 |
|
Finance expenses |
(1,749) |
|
(1,436) |
|
Net finance expense |
(1,910) |
|
(1,352) |
|
|
|
|
|
|
Loss before income tax |
(262) |
|
(781) |
|
|
|
|
|
|
Income tax |
155 |
|
(896) |
|
Loss for the year attributable to equity holders of the parent |
(107) |
|
(1,677) |
|
|
|
|
|
|
Basic loss per share (p) |
(0.2) |
|
(3.3) |
|
Diluted loss per share (p) |
(0.2) |
|
(3.3) |
Consolidated statement of comprehensive income
|
|
|
|
|
|
|
Loss for the financial year |
(107) |
|
(1,677) |
|
|
Other comprehensive income |
|
|
|
|
|
Foreign exchange translation differences |
(1,684) |
|
7,635 |
|
|
Effective portion of changes in fair value of cash flow hedges |
528 |
|
(628) |
|
|
Net change in fair value of cash flow hedges transferred to profit or loss |
57 |
|
43 |
|
|
Other comprehensive income for the financial year, net of income tax |
(1,099) |
|
7,050 |
|
|
Total comprehensive income for the financial year attributable to equity holders of the parent |
(1,206) |
|
5,373 |
|
OPSEC SECURITY GROUP PLC
Consolidated Statement of Changes in Equity
For the year ended 31st March 2010
|
|
Share Capital |
Share premium |
Translation reserve |
Hedging reserve |
Retained earnings |
Total equity |
|
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
|
|
|
|
|
|
|
|
|
|
Balance at 1st April 2009 |
2,669 |
29,309 |
6,113 |
(585) |
(5,530) |
31,976 |
|
|
Total comprehensive income for the year |
|
|
|
|
|
|
|
|
Loss for the period |
- |
- |
- |
- |
(107) |
(107) |
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income |
- |
- |
(1,684) |
585 |
- |
(1,099) |
|
|
|
- |
- |
(1,684) |
585 |
(107) |
(1,206) |
|
|
|
|
|
|
|
|
|
|
|
Transactions with owners recorded directly in equity |
|
|
|
|
|
|
|
|
Share based payments |
- |
- |
- |
- |
213 |
213 |
|
|
Issuance of shares (net of costs) |
133 |
376 |
- |
- |
- |
509 |
|
|
Own shares sold |
- |
- |
- |
- |
90 |
90 |
|
|
Own shares purchased |
- |
- |
- |
- |
(604) |
(604) |
|
|
Total transactions with owners |
133 |
376 |
- |
- |
(301) |
208 |
|
|
|
|
|
|
|
|
|
|
|
At 31st March 2010 |
2,802 |
29,685 |
4,429 |
- |
(5,938) |
30,978 |
For the year ended 31st March 2009
|
|
Share Capital |
Share premium |
Translation reserve |
Hedging reserve |
Retained earnings |
Total equity |
|
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
|
|
|
|
|
|
|
|
|
|
Balance at 1st April 2008 |
2,669 |
29,309 |
(1,522) |
- |
(3,873) |
26,583 |
|
|
Total comprehensive income for the year |
|
|
|
|
|
|
|
|
Loss for the period |
- |
- |
- |
- |
(1,677) |
(1,677) |
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income |
- |
- |
7,635 |
(585) |
- |
7,050 |
|
|
|
- |
- |
7,635 |
(585) |
(1,677) |
5,373 |
|
|
|
|
|
|
|
|
|
|
|
Transactions with owners recorded directly in equity |
|
|
|
|
|
|
|
|
Share based payments |
- |
- |
- |
- |
(2) |
(2) |
|
|
Own shares sold |
- |
- |
- |
- |
83 |
83 |
|
|
Own shares purchased |
- |
- |
- |
- |
(61) |
(61) |
|
|
Total transactions with owners |
- |
- |
- |
- |
20 |
20 |
|
|
|
|
|
|
|
|
|
|
|
At 31st March 2009 |
2,669 |
29,309 |
6,113 |
(585) |
(5,530) |
31,976 |
OPSEC SECURITY GROUP PLC
Consolidated Balance Sheet
|
|
31-Mar-10 |
|
31-Mar-09 |
|
|
£'000 |
|
£'000 |
|
ASSETS |
|
|
|
|
Non-current assets |
|
|
|
|
Property, plant and equipment |
9,015 |
|
11,633 |
|
Intangible assets |
26,679 |
|
28,609 |
|
Investment in jointly controlled entity |
337 |
|
530 |
|
Other investments |
18 |
|
18 |
|
Deferred tax assets |
3,903 |
|
4,347 |
|
Total non-current assets |
39,952 |
|
45,137 |
|
|
|
|
|
|
Current assets |
|
|
|
|
Inventory |
3,187 |
|
3,868 |
|
Trade and other receivables |
7,712 |
|
7,517 |
|
Cash and cash equivalents |
7,376 |
|
4,244 |
|
Assets held for resale |
1,031 |
|
- |
|
Total current assets |
19,306 |
|
15,629 |
|
|
|
|
|
|
Total assets |
59,258 |
|
60,766 |
|
|
|
|
|
|
LIABILITIES |
|
|
|
|
Current liabilities |
|
|
|
|
Interest-bearing loans and borrowings |
- |
|
(1,249) |
|
Deferred government grants |
(52) |
|
(20) |
|
Provisions |
(66) |
|
(536) |
|
Income tax payable |
(3) |
|
(252) |
|
Trade and other payables |
(11,240) |
|
(13,922) |
|
Total current liabilities |
(11,361) |
|
(15,979) |
|
|
|
|
|
|
Non-current liabilities |
|
|
|
|
Interest-bearing loans and borrowings |
(16,359) |
|
(11,787) |
|
Deferred government grants |
(337) |
|
(159) |
|
Derivative financial instruments |
- |
|
(585) |
|
Deferred tax liabilities |
(223) |
|
(280) |
|
Total non-current liabilities |
(16,919) |
|
(12,811) |
|
|
|
|
|
|
Total liabilities |
(28,280) |
|
(28,790) |
|
|
|
|
|
|
Net assets |
30,978 |
|
31,976 |
|
|
|
|
|
|
EQUITY |
|
|
|
|
Capital and reserves |
|
|
|
|
Issued capital |
2,802 |
|
2,669 |
|
Share premium account |
29,685 |
|
29,309 |
|
Translation reserve |
4,429 |
|
6,113 |
|
Hedging reserve |
- |
|
(585) |
|
Retained earnings |
(5,938) |
|
(5,530) |
|
Total equity attributable to equity holders of the parent |
30,978 |
|
31,976 |
OPSEC SECURITY GROUP PLC
Consolidated Statement of Cash Flows
|
|
Year ended 31-Mar-10 |
|
Year ended 31-Mar-09 |
|
|
£'000 |
|
£'000 |
|
Cash flows from operating activities |
|
|
|
|
Loss for the year |
(107) |
|
(1,677) |
|
Depreciation |
2,065 |
|
1,764 |
|
Amortisation/impairment of intangible assets |
654 |
|
1,651 |
|
Profit on sale of property, plant and equipment |
(1) |
|
- |
|
Release of government grants |
(14) |
|
(20) |
|
Equity settled share based expense |
213 |
|
(2) |
|
Share of profit of jointly controlled entities |
(468) |
|
(678) |
|
Finance income |
161 |
|
(84) |
|
Finance expenses |
1,749 |
|
1,436 |
|
Income tax expense |
(155) |
|
896 |
|
Movement in inventory |
449 |
|
892 |
|
Movement in trade and other receivables |
806 |
|
493 |
|
Movement in trade and other payables |
492 |
|
469 |
|
|
|
|
|
|
Cash from operating activities |
5,844 |
|
5,140 |
|
Interest paid |
(644) |
|
(1,436) |
|
Income tax paid - overseas |
(76) |
|
(175) |
|
|
|
|
|
|
Net cash inflow from operating activities |
5,124 |
|
3,529 |
|
|
|
|
|
|
Cash flows from investing activities |
|
|
|
|
Acquisition of subsidiary undertaking (net of cash acquired) |
(3,715) |
|
(7,948) |
|
Acquisition of property, plant and equipment |
(901) |
|
(2,340) |
|
Proceeds from sale of property, plant and equipment |
1 |
|
- |
|
Proceeds from sale of investment |
- |
|
- |
|
Proceeds from receipt of government grants |
153 |
|
- |
|
Dividends received from jointly controlled entity |
629 |
|
705 |
|
Interest received |
(161) |
|
84 |
|
|
|
|
|
|
Net cash outflow from investing activities |
(3,994) |
|
(9,499) |
|
|
|
|
|
|
Cash flows from financing activities |
|
|
|
|
Payment of finance lease liabilities |
(208) |
|
(58) |
|
Drawdown of borrowings |
16,082 |
|
12,008 |
|
Repayment of borrowings |
(14,252) |
|
(3,049) |
|
Proceeds from issuance of shares (net of costs) |
566 |
|
- |
|
Proceeds from sale of own shares |
90 |
|
83 |
|
Purchase of own shares |
(605) |
|
(61) |
|
|
|
|
|
|
Net cash inflow from financing activities |
1,673 |
|
8,923 |
|
Net increase in cash and cash equivalents |
2,803 |
|
2,953 |
|
|
|
|
|
|
Cash and cash equivalents at the start of the year |
4,244 |
|
793 |
|
Effect of exchange rate fluctuations on cash |
329 |
|
498 |
|
Cash and cash equivalents at the end of the year |
7,376 |
|
4,244 |
OPSEC SECURITY GROUP PLC
Notes to the Preliminary Announcement
For the year ended 31st March 2010
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 2010 or 2009. The financial information for 2009 is derived from the statutory accounts for 2009 which have been delivered to the registrar of companies. The auditors have reported on the 2009 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 reports and (iii) did not contain statements under section 498 (2) or (3) of the Companies Act 2006. The statutory accounts for 2010 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 financial position has been significantly enhanced following the refinancing.
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. There are two new standards which impact significantly on disclosure; Amendment to IAS 1 Presentation of Financial Statements, and IFRS 8 Operating segments, which are discussed further below. Details of other standards, amendments and interpretations that have become effective for the first time this year will be included in the statutory accounts.
Amendments to IAS 1 Presentation of financial statements require the presentation of a statement of changes in equity as a primary statement, separate from the Income statement, and a statement of comprehensive income which has replaced the statement of recognised income and expense.
IFRS 8 'Operating segments' is also mandatory for the first time this year, and requires that the segments should be reported on the same basis as the internal information reported to the chief operating decision maker ('CODM') whom the Group has identified as the Executive Directors.
The Group has reviewed the requirements of IFRS 8 including consideration of what results and information the Executive Directors review regularly to assess performance and allocate resources, and has concluded that the reportable segments remain geographical, but that Germany is a separately reportable segment. No operating segments have been aggregated. Segment performance is assessed on the basis of sales and adjusted operating profit (operating profit excluding exceptional items, share based payment charges and amortisation of intangibles). The joint venture, 3dcd, and corporate costs are not allocated to these segments, nor are interest and taxation.
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. Revenue is also measured by market sector and this information is included further below:
|
|
2010 |
|
2009 |
|
|
£'000 |
|
£'000 |
|
|
|
|
|
|
a) Segment revenue |
|
|
|
|
|
|
|
|
|
American operations |
21,780 |
|
22,230 |
|
UK operations |
12,136 |
|
16,281 |
|
German operations Inter-segment revenue |
2,842 (1,766) |
|
2,592 (1,764) |
|
|
34,992 |
|
39,339 |
|
|
|
|
|
|
Intersegment revenue is determined on an arm's length basis.
b) Segment result and reconciliation to loss before income tax
|
|
|
|
|
|
|
|
|
|
American Operations |
2,577 |
|
1,550 |
|
UK Operations |
1,188 |
|
1,870 |
|
German Operations |
544 |
|
889 |
|
Segment result |
4,309 |
|
4,309 |
|
Jointly controlled entity |
468 |
|
678 |
|
Corporate costs |
(2,262) |
|
(1,910) |
|
Adjusted operating profit |
2,515 |
|
3,077 |
|
Exceptional administrative expenses |
- |
|
(857) |
|
Intangible amortisation |
(654) |
|
(800) |
|
Intangible impairment |
- |
|
(851) |
|
Share based payments |
(213) |
|
2 |
|
Operating profit |
1,648 |
|
571 |
|
Financial income |
(161) |
|
84 |
|
Financial expense |
(1,749) |
|
(1,436) |
|
Loss before income tax |
(262) |
|
(781) |
|
|
|
|
|
|
|
|
|
|
3) Total Operating Expenses
|
|
2010 £'000 |
|
2009 £'000 |
|
Distribution and Selling Costs
Distribution and selling costs |
3,763 |
|
4,875 |
|
Administrative Expenses
Technical support |
1,058 |
|
1,022 |
|
Research and development costs |
1,732 |
|
1,928 |
|
Administrative costs |
6,627 |
|
5,932 |
|
Exceptional administrative expenses |
- |
|
857 |
|
Intangible amortisation |
654 |
|
800 |
|
Intangible impairment |
- |
|
851 |
|
|
10,071 |
|
11,390 |
|
Total operating expenses |
13,834 |
|
16,265 |
|
|
|
|
|
Exceptional administrative expenses in the prior year reflected the cost of redundancies together with the costs of closing the Parkton facility and moving it to Lancaster.
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 2010.
5) Finance Income
|
|
2010 £'000
|
|
2009 £'000 |
|
Interest income |
6 |
|
25 |
|
Exchange (losses)/gains on foreign currency deposits |
(167) |
|
59 |
|
|
(161) |
|
84 |
6) Finance Expenses
|
|
2010 £'000
|
|
2009 £'000 |
|
Interest expense on financial liabilities measured at amortised cost |
(743) |
|
(758) |
|
Net change in fair value of cash flow hedges transferred from equity |
(57) |
|
(43) |
|
Exceptional cost of debt advisor fees written off |
(949) |
|
(635) |
|
|
(1,749) |
|
(1,436) |
7) Taxation
|
|
2010 £'000 |
|
2009 £'000 |
|
Corporation tax |
|
|
|
|
|
|
|
|
|
Overseas taxes - current year |
- |
|
(22) |
|
Overseas taxes - prior year |
(243) |
|
- |
|
UK taxes - prior year |
(108) |
|
(3) |
|
|
|
|
|
|
Deferred taxes
|
|
|
|
|
Current year |
196 |
|
921 |
|
Prior year |
- |
|
- |
|
|
|
|
|
|
|
(155) |
|
896 |
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 £108,000 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 prior year credit of £218,000 has arisen in relation to tax repayments which have resulted from losses carried back to prior years.
No corporation tax has arisen in Germany in relation 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 2010 the Group had recognised a deferred tax asset of £3,903,000 (2009: £4,347,000) 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 2010 the Group also had an additional unrecognised deferred tax asset of £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.
As at 31st March 2010 deferred tax liabilities of £223,000 remain in relation to the intangible assets acquired within the business of P4M.
8) Earnings Per Share
The calculations of earnings per share are based upon the following profits and numbers of shares.
|
|
2010 £'000 |
|
2009 £'000 |
|
|
|
|
|
Earnings |
|
|
|
Earnings for the financial year (basic and diluted) |
(107) |
|
(1,677) |
Exceptional costs |
949 |
|
1,492 |
Intangible amortisation |
654 |
|
800 |
Intangible impairment |
- |
|
851 |
Equity settled share based payments |
213 |
|
(2) |
Adjusted earnings for the financial year (basicand diluted) |
1,709 |
|
1,464 |
|
|
|
|
|
Weighted average number of shares |
No. of shares |
|
No. of shares |
For basic EPS |
51,098,581 |
|
50,634,466 |
Effect of share options and other awards |
2,002,807 |
|
2,946,502 |
For diluted EPS |
53,101,388 |
|
53,580,968 |
9) A copy of the preliminary statement is available from the Company Secretary, 40 Phoenix Road, Crowther District 3, Washington, Tyne & Wear, NE38 0AD.
10) The preliminary announcement was approved by the Board of Directors for release on 2nd June 2010.
Related Shares:
OSG.L