15th Nov 2012 07:00
15th November 2012
OPSEC SECURITY GROUP PLC
("OpSec" or "the Group")
Interim results for the six months ended 30th September 2012
OpSec Security Group plc, the supplier of anti-counterfeiting technologies and services, announces its interim results for the six months ended 30th September 2012.
Highlights
2012 unaudited | 2011 unaudited
| ||
Group revenue | £25.5m | £19.9m | |
Adjusted operating profit* | £3.1m | £1.4m | |
Profit / (Loss) before tax | £1.7m | (£1.7m) | |
Basic profit / (loss) per share | 2.6p | (3.3p) | |
Adjusted basic earnings per share* | 4.1p | 1.4p |
* Adjusted for the effects of share based payments, exceptional items and the charge for intangible amortisation (see notes 3 and 9).
·; Adjusted operating profit up by 115% to £3.1 million;
·; Group revenue increased by 28% to £25.5 million;
o Government Protection revenues by 45%
o Brand Protection revenues by 20%
·; Net cash inflow from operating activities increased from £0.2 million to £4.9 million;
·; The Delta Labelling acquisition contributed revenue of £2.4 million and operating profit of £0.6 million;
·; Acquisition of the holographic security business from JDSU for an up-front payment of $11.5 million completed in October 2012; and
·; New funding arrangements agreed with JP Morgan Chase.
- Ends -
For further information, please contact:
OpSec Security Group plc +1 720 394 2803
Mark Turnage, Chief Executive/Mike Angus, Finance Director
Shore Capital & Corporate Ltd 020 7408 4090
Stephane Auton/Patrick Castle
15th November 2012
OPSEC SECURITY GROUP PLC
("OpSec" or "the Group")
Interim results for the six months ended 30th September 2012
Chairman's Statement
The Group has delivered strong results in what has been a period of significant corporate activity. The effective acquisition of Delta Labelling was completed on 31st March 2012 and the acquisition of the holographic security business of JDSU was completed on 12th October 2012. These acquisitions were funded by a placing of shares in April 2012 and new banking arrangements which were agreed with JP Morgan Chase in October 2012.
Group revenue for the six months ended 30th September 2012 increased by 27.7% to £25.5 million, (2011: £19.9 million) due to strong ordering from our customers in the Government Protection sector and the impact of the Delta Labelling acquisition.
Adjusted Operating Profit (see note 3) increased from £1.4 million to £3.1 million. The profit after taxation of £1.7 million compared to a loss of £1.7 million in the same period of the prior year.
Government Protection
As previously disclosed, the ID Solutions element of our business was merged with our Banknote and High Security activities with effect from 1st April 2012 to form a single Government Protection group. This sector reported an increase in revenues of 45% over the same period last year due primarily to increased orders from a currency customer in Asia and an Eastern European government. Order levels from these customers are not expected to be at the same level in the second half of the current financial year.
Brand Protection
Revenue in this market sector increased by 20% compared to the same period in the prior year. This increase includes the revenue from the Delta Labelling business. Excluding this contribution, Brand Protection revenue increased by 2%. Strong growth continues to come from existing customers in the US, offset by a fall in European brand protection revenues.
Operations
The increased sales volumes noted above combined with continued cost-saving and efficiency measures contributed to gross margins increasing from 40.4% to 45.4%. The Group has committed to a significant programme of investment in its sales and marketing organisation targeted at increasing organic sales growth. The costs of this initiative will impact results in the second half of the current financial year.
3dcd
The contribution from our joint venture 3dcd in the period was $553,000 (2011: $239,000). This contribution benefitted from a one off order for equipment.
Acquisitions
OpSec completed the effective acquisition of the Delta Labelling business on 31st March 2012. This business complements OpSec's existing brand protection business in the fashion and apparel sector and provides OpSec with a distribution facility in Hong Kong which will be used to increase our presence in Asian markets. Delta Labelling contributed revenue of £2.4 million in the first half of the year and generated an adjusted operating profit of £0.6 million.
The Group completed the acquisition of the holographic security business of JDS Uniphase Corporation on 12th October 2012 for an initial consideration of $11.5 million (the "Holographic Security Business"). Further consideration of up to $4 million could become payable depending on whether certain performance conditions are achieved during the 12 month period following completion of the acquisition. The consideration for the acquisition was satisfied from the Company's existing cash resources and additional bank facilities with JP Morgan Chase.
The Holographic Security Business, while primarily focused on the production and supply of security holograms and related optical-security devices for transaction cards, additionally supplies products for secure government documents and brand protection customers. Key clients of the business include MasterCard, VISA and American Express. For the year ended 30th June 2012, the Holographic Security Business generated revenue of $19.7 million and profit before tax of $0.4 million. As at 30th June 2012, it had gross assets of $9.0 million.
New Banking Arrangements
On 12th October 2012 the Group increased its term loan with JP Morgan Chase from $6.3 million to $16.3 million. The additional debt was used to part fund the acquisition of the holographic security business of JDS Uniphase Corporation.
Board Changes
Hazem Ben Gacem stood down from the Board of Directors on 7th September 2012. On behalf of the Board I would like to thank Hazem for the contribution he has made to the Group.
Prospects
Given the order patterns of certain key government customers the second half of the financial year is not expected to be as strong as the first half of the year. However, the impact of the acquisitions noted above and the additional investment we are making in sales and marketing are expected to bring significant benefits over time.
DA Mahony
Chairman
15th November 2012
OPSEC SECURITY GROUP plc
Consolidated Income Statement
Six months ended30-Sept-12 |
Six months ended 30-Sept-11 |
Year ended 31-Mar-12 | |||
Unaudited | Unaudited | Audited | |||
£'000 | £'000 | £'000 | |||
Revenue | 25,471 | 19,949 | 38,288 | ||
Cost of sales | (13,906) | (11,889) | (23,116) | ||
Gross profit | 11,565 | 8,060 | 15,172 | ||
Distribution and selling costs | (3,691) | (2,367) | (4,316) | ||
Administrative expenses | (5,405) | (4,623) | (9,217) | ||
Exceptional Administrative expenses | - | (1,968) | (2,159) | ||
Intangible amortisation | (786) | (238) | (449) | ||
Total administrative expenses | (6,191) | (6,829) | (11,825) | ||
1,683 | (1,136) | (969) | |||
Share of profit of jointly controlled entities | 347 | 146 | 360 | ||
Operating profit/(loss) | 2,030 | (990) | (609) | ||
Finance income | (19) | 18 | (38) | ||
Finance expense | (385) | (757) | (1,082) | ||
Profit/(Loss) before income tax | 1,626 | (1,729) | (1,729) | ||
Income tax | 95 | 33 | (126) | ||
Profit/(Loss) for the period attributable to equity holders of the parent |
1,721 |
(1,696) |
(1,855) | ||
Earnings per share (pence) | |||||
Basic eps | 2.6 | (3.3) | (3.4) | ||
Diluted eps | 2.6 | (3.3) | (3.4) | ||
Consolidated statement of comprehensive income
| |||||
Profit/(Loss) for the financial period | 1,721 | (1,696) | (1,855) | ||
Other comprehensive income | |||||
Foreign exchange translation differences | (524) | 354 | (373) | ||
Other comprehensive (expense)/income for the financial period |
(524) |
354 |
(373) | ||
Total comprehensive income/(expense) attributable to equity holders of the parent |
1,197 |
(1,342) |
(2,228) | ||
OPSEC SECURITY GROUP plc
Consolidated statement of changes in equity
For the 6 months ended 30th September 2012
| Share Capital | Share premium | Translation reserve | Retained earnings | Total equity | |
| unaudited | unaudited | unaudited | unaudited | unaudited | |
| £'000 | £'000 | £'000 | £'000 | £'000 | |
|
|
|
|
|
| |
Balance at 1st April 2012 | 3,000 | 29,685 | 2,837 | (6,458) | 29,064 | |
|
|
|
|
|
| |
Profit for the period | - | - | - | 1,721 | 1,721 | |
|
|
|
|
|
| |
Other comprehensive income/(expense) | - | - | (524) | - | (524) | |
|
-
|
- |
(524) |
1,721 |
1,197 | |
|
|
|
|
| ||
Transactions with owners recorded directly in equity |
|
|
|
|
| |
Share based payments | - | - | - | 240 | 240 | |
Own shares purchased | - | - | - | (8) | (8) | |
Own shares issued | 1,000 | 8,802 | - | - | 9,802 | |
Total contributions by and distributions to owners |
1,000 |
8,802 |
- |
232 |
10,034 | |
|
|
|
|
| ||
At 30th September 2012 | 4,000 | 38,487 | 2,313 | (4,505) | 40,295 |
Additional breakdown of other comprehensive income is provided in the Statement of Comprehensive Income.
OPSEC SECURITY GROUP plc
Consolidated statement of changes in equity
For the 6 months ended 30th September 2011
| Share Capital | Share premium | Translation reserve | Retained earnings | Total equity | |
| unaudited | unaudited | unaudited | unaudited | unaudited | |
| £'000 | £'000 | £'000 | £'000 | £'000 | |
|
|
|
|
|
| |
Balance at 1st April 2011 | 2,802 | 29,685 | 3,210 | (4,998) | 30,699 | |
|
|
|
|
|
| |
Loss for the period | - | - | - | (1,696) | (1,696) | |
|
|
|
|
|
| |
Other comprehensive income/(expense) | - | - | 354 | - | 354 | |
|
-
|
- |
354 |
(1,696) |
(1,342) | |
|
|
|
|
| ||
Transactions with owners recorded directly in equity |
|
|
|
|
| |
Share based payments | - | - | - | 204 | 204 | |
Own shares sold | - | - | - | 57 | 57 | |
Own shares issued | 198 | - | - | - | 198 | |
Total contributions by and distributions to owners |
198 |
- |
- |
261 |
459 | |
|
|
|
|
| ||
At 30th September 2011 | 3,000 | 29,685 | 3,564 | (6,433) | 29,816 |
OPSEC SECURITY GROUP plc
Consolidated statement of changes in equity
For the year ended 31st March 2012
| Share Capital | Share premium | Translation reserve | Retained earnings | Total equity | |
| audited | audited | audited | audited | audited | |
| £'000 | £'000 | £'000 | £'000 | £'000 | |
|
|
|
|
|
| |
Balance at 1st April 2011 | 2,802 | 29,685 | 3,210 | (4,998) | 30,699 | |
|
|
|
|
|
| |
Loss for the period | - | - | - | (1,855) | (1,855) | |
|
|
|
|
|
| |
Other comprehensive income/(expense) | - | - | (373) | - | (373) | |
|
|
|
|
|
| |
|
- |
- |
(373) |
(1,855) |
(2,228) | |
|
|
|
|
| ||
Transactions with owners recorded directly in equity |
|
|
|
|
| |
Share based payments | - | - | - | 338 | 338 | |
Issuance of shares (net of costs) | 198 | - | - | - | 198 | |
Own shares sold | - | - | - | 57 | 57 | |
Own shares purchased | - | - | - | - | - | |
Total contributions by and distributions to owners |
198 |
- |
- |
395 |
593 | |
|
|
|
|
| ||
At 31st March 2012 | 3,000 | 29,685 | 2,837 | (6,458) | 29,064 |
Additional breakdown of other comprehensive income is provided in the Statement of Comprehensive Income.
OPSEC SECURITY GROUP plc
Consolidated Balance Sheet
30-Sept-12 | 30-Sep-11 | 31-Mar-12 | ||
unaudited | unaudited | Audited | ||
£'000 | £'000 | £'000 | ||
ASSETS | ||||
Non-current assets | ||||
Property, plant and equipment | 7,235 | 7,604 | 7,227 | |
Intangible assets | 36,604 | 25,543 | 37,830 | |
Investment in jointly controlled entity | 48 | (39) | 15 | |
Deferred tax assets | 3,650 | 3,619 | 3,446 | |
Total non-current assets | 47,537 | 36,727 | 48,518 | |
Current assets | ||||
Inventory | 4,006 | 3,221 | 4,361 | |
Trade and other receivables | 8,670 | 8,479 | 9,006 | |
Cash and cash equivalents | 6,566 | 4,226 | 4,914 | |
Total current assets | 19,242 | 15,926 | 18,281 | |
Total assets | 66,779 | 52,653 | 66,799 | |
LIABILITIES | ||||
Current liabilities | ||||
Interest-bearing loans and borrowings | (1,000) | (4,493) | (1,000) | |
Deferred government grants | (20) | (20) | (20) | |
Income tax payable | (313) | - | (445) | |
Trade and other payables | (11,268) | (10,522) | (21,564) | |
Total current liabilities | (12,601) | (15,035) | (23,029) | |
Non-current liabilities | ||||
Interest-bearing loans and borrowings | (10,160) | (7,464) | (10,794) | |
Deferred government grants | (306) | (192) | (320) | |
Deferred tax liabilities | (1,658) | (146) | (1,658) | |
Other payables | (1,759) | - | (1,934) | |
Total non-current liabilities | (13,883) | (7,802) | (14,706) | |
Total liabilities | (26,484) | (22,837) | (37,735) | |
Net assets | 40,295 | 29,816 | 29,064 | |
EQUITY | ||||
Capital and reserves | ||||
Issued capital | 4,000 | 3,000 | 3,000 | |
Share premium | 38,487 | 29,685 | 29,685 | |
Translation reserve | 2,313 | 3,564 | 2,837 | |
Retained earnings | (4,505) | (6,433) | (6,458) | |
Total equity attributable to equity holders of the parent |
40,295 |
29,816 |
29,064 | |
|
|
|
| |
|
|
|
| |
OPSEC SECURITY GROUP plc
Condensed Consolidated Statement of Cash Flows
Six months ended 30-Sept-12 | Six months ended 30-Sept-11 |
Year ended 31-Mar-12 | |
unaudited | unaudited | Audited | |
£'000 | £'000 | £'000 | |
Cash flows from operating activities | |||
Profit/(Loss) for the period (1) | 1,721 | (1,696) | (1,855) |
Depreciation | 910 | 943 | 1,879 |
Amortisation/impairment of intangible assets | 786 | 238 | 449 |
Loss on sale of property, plant and equipment | - | 5 | 6 |
Release of government grants | (13) | (13) | (25) |
Equity settled share based expense | 240 | 204 | 338 |
Share of profit of jointly controlled entities | (347) | (146) | (360) |
Finance income | 19 | (18) | 38 |
Finance expenses | 385 | 757 | 1,082 |
Income tax expense | (95) | (33) | 126 |
Movement in inventory | 338 | 440 | (534) |
Movement in trade and other receivables | 4 | 381 | 432 |
Movement in trade and other payables | 1,593 | 285 | (94) |
Cash flows from operating activities | 5,541 | 1,349 | 1,482 |
Interest paid | (633) | (1,114) | (1,158) |
Income tax paid - overseas | (11) | (16) | (20) |
Net cash inflow from operating activities |
4,897 |
219 |
304 |
Cash flows from investing activities | |||
Acquisition of subsidiary undertaking (net of cash acquired) | (11,583) | (183) | 1,278 |
Acquisition of property, plant and equipment | (974) | (654) | (1,314) |
Proceeds from sale of investment | 16 | 12 | 12 |
Proceeds from sale of property, plant and equipment | - | - | - |
Dividends received from jointly controlled entity | 319 | 321 | 479 |
Interest received | (19) | 18 | (38) |
Net cash (outflow)/inflow from investing activities | (12,241) | (486) | 417 |
Cash flows from financing activities | |||
Payment of finance lease liabilities | (103) | (104) | (208) |
Drawdown of borrowings | - | - | 4,989 |
Repayment of borrowings | (510) | (1,839) | (6,769) |
Proceeds from issuance of new shares (net of costs) | 9,802 | 198 | 198 |
Proceeds from sale of own shares | - | 57 | 57 |
Purchase of own shares | (8) | - | - |
Net cash inflow/(outflow) from financing activities |
9,181 |
(1,688) |
(1,733) |
Net increase/(decrease) in cash and cash equivalents | 1,837 | (1,955) | (1,012) |
Cash and cash equivalents at the start of the period | 4,914 | 6,250 | 6,250 |
Effect of exchange rate fluctuations on cash | (185) | (69) | (324) |
Cash and cash equivalents at the end of the period |
6,566 |
4,226 |
4,914 |
(1) The losses for the period ended 30th September 2011 and the year ended 31st March 2012 includes the exceptional items set out in Note 4 below.
OpSec Security Group plc
Notes to the Interim Statement
1. Basis of preparation
This interim financial information has been prepared applying the accounting policies that were applied in the preparation of the Company's published consolidated financial statements for the year ended 31st March 2012.
The following new standards, amendments to standards and interpretations issued by the International Accounting Standards Board became effective during the period, but have no material effect on the Group's financial statements:
·; Disclosures - Transfers of Financial Assets (Amendments to IFRS 7)
·; Severe Hyperinflation and Removal of Fixed Dates for First-time Adopters (Amendments to IFRS 1)
·; Deferred Tax: Recovery of Underlying Assets (Amendments to IAS 12)
After taking into account expected trading and cash flows for at least the next 12 months and the new facilities agreed with JP Morgan Chase, the Directors have a reasonable expectation that the Group has adequate resources for the foreseeable future and they continue to adopt the going concern basis in this Interim Statement.
2. Status of financial information
The interim information for the six months ended 30th September 2012 has not been audited or reviewed by the auditors.
The comparative figures for the financial year ended 31st March 2012 are not the Company's statutory accounts for that financial year. Those accounts have been reported on by the Company's auditors and delivered to the registrar of companies. The report of the auditors was (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.
This interim report is available on the Company's website, www.opsecsecurity.com.
3. Segment Information | Six months ended | Six months ended |
Year ended | |||
30-Sep-12 | 30-Sep-11 | 31-Mar-12 | ||||
unaudited | unaudited | audited | ||||
£'000 | £'000 | £'000 | ||||
a) Revenue by geographic segment | ||||||
American operations | 11,689 | 11,751 | 23,344 | |||
UK operations | 11,037 | 7,478 | 13,454 | |||
Delta Labelling | 2,373 | - | - | |||
German operations | 1,173 | 1,543 | 3,052 | |||
Intersegment sales | (801) | (823) | (1,562) | |||
25,471 | 19,949 | 38,288 | ||||
b) Revenue by market sector | ||||||
Government Protection | 9,237 | 6,376 | 11,089 | |||
Brand Protection | 16,234 | 13,573 | 27,199 | |||
25,471 | 19,949 | 38,288 | ||||
c) Operating profit by geographic segment | ||||||
American operations | 1,390 | 1,532 | 2,946 | |||
UK operations | 1,775 | 448 | 484 | |||
Delta Labelling | 558 | - | - | |||
German operations | 98 | 304 | 469 | |||
Jointly Controlled Entity | 347 | 146 | 360 | |||
Corporate costs | (2,138) | (3,420) | (4,868) | |||
Operating profit/(loss) | 2,030 | (990) | (609) | |||
Exclude intangible amortisation | 786 | 238 | 449 | |||
Exclude exceptional items | - | 1,968 | 2,159 | |||
Exclude equity settled share based payments |
240 |
204 |
338 | |||
Adjusted operating profit | 3,056 | 1,420 | 2,337 | |||
d) Adjusted operating profit by geographic segment | |||||
American operations | 1,390 | 1,532 | 2,946 | ||
UK operations | 1,775 | 448 | 484 | ||
Delta Labelling | 558 | - | - | ||
German operations | 98 | 304 | 469 | ||
Jointly Controlled Entity | 347 | 146 | 360 | ||
Corporate costs | (1,112) | (1,010) | (1,922) | ||
Adjusted operating profit | 3,056 | 1,420 | 2,337 | ||
4. Operating expenses | |||||
Six months ended | Six months ended |
Year ended | |||
30-Sep-12 | 30-Sep-11 | 31-Mar-12 | |||
unaudited | unaudited | audited | |||
£'000 | £'000 | £'000 | |||
Distribution and Selling Costs | |||||
Selling and marketing costs | 3,691 | 2,367 | 4,316 | ||
Administrative Expenses | |||||
Technical support | 513 | 471 | 998 | ||
Research and development costs | 1,155 | 1,051 | 2,027 | ||
Administrative expenses | 3,737 | 3,101 | 6,192 | ||
Exceptional administrative expenses | - | 1,968 | 2,159 | ||
Intangible amortisation | 786 | 238 | 449 | ||
6,191 | 6,829 | 11,825 | |||
Total Operating Expenses | 9,882 | 9,196 | 16,141 | ||
Exceptional items included within administrative expenses | |||||
Costs relating to the acquisition of Advantics | - | 274 | 147 | ||
Costs relating to the acquisition of Delta Labelling |
- |
- |
368 | ||
Cash Offer legal fees | - | 103 | 25 | ||
Prepayment penalty | - | 1,591 | 1,619 | ||
- | 1,968 | 2,159 |
The prepayment penalty was paid to Investcorp and was triggered by the change of control that resulted from the cash offer for the business.
5. Share of operating profit of jointly controlled entity
|
The share of operating profit of joint ventures represents the Group's share of the results of 3dcd for the six months ended 30th September 2012. The operating profit of 3dcd is subject to taxation in the accounts of its partners.
6. Acquisitions
The cash paid in respect of acquisition of subsidiaries is in respect of the Delta Labelling acquisition. The Group paid $11.5 million for the holographic business of JDSU on 12th October 2012.
An exercise to calculate the fair value of the assets and liabilities in respect of the JDSU acquisition is currently in progress and will be included in the full year financial statements. |
7. Finance income and expense | |||||||||
Six months ended | Six months ended |
Year ended |
| ||||||
30-Sep-12 | 30-Sep-11 | 31-Mar-12 |
| ||||||
unaudited | unaudited | audited |
| ||||||
| |||||||||
£'000 | £'000 | £'000 |
| ||||||
Financial income |
| ||||||||
| |||||||||
Interest income | - | 7 | 6 |
| |||||
Foreign exchange (losses)/gains on foreign currency deposits | (19) | 11 | (44) |
| |||||
(19) | 18 | (38) |
| ||||||
| |||||||||
Financial expenses |
| ||||||||
| |||||||||
Interest expense | (320) | (577) | (838) |
| |||||
Amortisation of debt advisor fees | (65) | (180) | (244) |
| |||||
(385) | (757) | (1,082) |
| ||||||
8. Taxation | |||||||||
The charge for taxation is calculated by applying the Directors' best estimate of the annual effective tax rate to the profit/(loss) for the period. | |||||||||
9. Earnings per share | |||||||||
The calculations of earnings per share are based upon the following earnings and numbers of shares. | |||||||||
Six months ended | Six months ended |
Year ended | |||||||
30-Sep-12 | 30-Sep-11 | 31-Mar-12 | |||||||
unaudited | unaudited | audited | |||||||
Earnings | £'000 | £'000 | £'000 | ||||||
Earnings for the financial period | 1,721 | (1,696) | (1,855) | ||||||
Exceptional items | - | 1,968 | 2,159 | ||||||
Intangible amortisation | 786 | 237 | 449 | ||||||
Share-based payments | 240 | 204 | 338 | ||||||
Adjusted earnings for the financial period | 2,747 | 713 | 1,091 | ||||||
| |||||||||
Weighted average number of shares | No. of shares | No. of shares | No. of shares | ||||||
For Basic earnings per share | 66,645,993 | 52,155,030 | 54,827,230 | ||||||
Effect of share options and other awards | 605,306 | 89,361 | 345,889 | ||||||
For Diluted earnings per share | 67,251,299 | 52,244,391 | 55,173,119 | ||||||
Related Shares:
OSG.L