19th Dec 2014 09:15
19th December 2014
OPSEC SECURITY GROUP PLC
("OpSec" or "the Group")
Interim results for the six months ended 30th September 2014
OpSec Security Group plc, the supplier of anti-counterfeiting technologies and services, announces its interim results for the six months ended 30th September 2014.
Highlights
2014 unaudited | 2013 unaudited
| ||
Group revenue | £29.8m | £27.4m | |
Adjusted operating profit* | £1.6m | £0.8m | |
Loss before tax | £(0.6m) | £(2.2m) | |
Basic loss per share | (0.5p) | (2.8p) | |
Adjusted basic earnings per share* | 1.4p | 0.3p |
* Adjusted for the effects of share based payments, exceptional items and the charge for intangible amortisation (see notes 3 and 4).
· Adjusted operating profit up by 110 % to £1.6 million;
· Overall Group revenue increased by 8.5% to £29.8 million;
o Government Protection revenues up by 30.5% due to orders from Asian currency customer and shipments to new customers
o Brand Protection revenues down 7.4% due to price reductions/lower order levels from key EMEA customers
o Transaction Card revenues up by 32.4%
o Adverse exchange rate impact of £2.4 million due to strength of sterling against the dollar
· The rationalisation of the Group's manufacturing facilities is progressing and is scheduled for completion in 2015;
· Significant management and Board changes;
· The new equity issued in April has strengthened the Balance Sheet.
- Ends -
For further information, please contact:
OpSec Security Group plc +1 720 394 2803
Richard S. Cremona, Chief Executive/Mike Angus, Finance Director
Shore Capital & Corporate Ltd 020 7408 4090
Stephane Auton/Patrick Castle
19th December 2014
OPSEC SECURITY GROUP PLC
("OpSec" or "the Group")
Interim results for the six months ended 30th September 2014
Chairman's Statement
Group revenue for the six months ended 30th September 2014 increased by 8.5% to £29.8 million (2013: £27.4 million), due largely to the impact of significantly increased transaction card revenues which contributed £7.2 million (2013: £5.5 million).
Adjusted operating profit (see note 3) increased from £750,000 to £1,577,000 as a consequence of the operating leverage of the higher volumes. A number of exceptional items (see note 4) adversely impacted the first half contributing to a post-tax loss of £442,000 as compared to a loss of £2,152,000 in the same period of the prior year.
Government Protection
The increase in revenue which this sector experienced in the period was due primarily to revenue generated from customer contracts won in the prior year and a higher level of orders from a currency customer in Asia, offset by lower orders from an Eastern European government. Order levels from these customers are expected to slow in the second half of the financial year.
Brand Protection
Revenue in this sector was down compared to the same period in the prior year. Low order volumes from a major brand enhancement customer and price reductions at a key Asian customer were partially offset by growth from existing customers in America.
Transaction Cards
This sector performed ahead of our expectations due to a high level of new card issues and re-stocking at a major customer. These higher volumes are expected to continue into the second half of the current year.
Operations
Gross margin increased from 36.4% to 38.4% as the positive impact of the increased sales volumes noted above was offset by changes in sales mix and the impact of the transition costs associated with the rationalisation of the Group's operating facilities.
The Group's efforts to integrate its acquisition of the holographics business of JDSU and to rationalise manufacturing operations are ongoing and scheduled for completion in 2015.
3dcd
The contribution from our joint venture 3dcd in the period was £113,000 (2013: £226,000). The prior year contribution benefited from a one off order for equipment.
Board and Management Changes
There were significant changes to the Board during the period. Richard S. Cremona replaced Mark Turnage (who stays on the Board as Vice Chairman) as Chief Executive Officer and I succeeded David Mahony as Chairman. I would like to take this opportunity to thank both Mark and David for their contribution to OpSec over many years.
There were also some significant changes to the management team. Ben Stump joined the Group as Chief Technology Officer and we have new people in charge of both our American and EMEA operations.
Exceptional Items
The acquisition of JDSUH with its facility in Robbinsville New Jersey required that the Group's manufacturing facilities be rationalised. In the period the Group incurred certain expenses relating to this rationalisation.
The Group also incurred expenses relating to the Board and management changes noted above.
Prospects
The benefits of the new business secured in the prior year and high order levels in the Transaction Cards market are expected to continue to have a positive impact on the second half of the current year. This will be offset by an expected downturn in order levels in the Government Protection market in the second half.
The rationalisation of the Group's operating facilities should, when completed, enhance profitability in the next financial year.
R Fuller
Chairman
19th December 2014
OPSEC SECURITY GROUP plc
Consolidated Income Statement
Six months ended30-Sept-14 |
Six months ended 30-Sept-13 |
Year ended 31-Mar-14 | |||
Unaudited | Unaudited | Audited | |||
£'000 | £'000 | £'000 | |||
Revenue | 29,773 | 27,438 | 55,526 | ||
Cost of sales | (18,335) | (17,452) | (34,854) | ||
Gross profit | 11,438 | 9,986 | 20,672 | ||
Distribution and selling costs | (4,852) | (4,484) | (8,825) | ||
Administrative expenses | (5,254) | (5,083) | (10,251) | ||
Exceptional Administrative expenses | (561) | (1,147) | (2,035) | ||
Intangible amortisation | (1,050) | (1,131) | (2,227) | ||
Total administrative expenses | (6,865) | (7,361) | (14,513) | ||
(279) | (1,859) | (2,666) | |||
Share of profit of jointly controlled entity | 113 | 226 | 479 | ||
Operating loss | (166) | (1,633) | (2,187) | ||
Finance income | 1 | (72) | (84) | ||
Finance expense | (457) | (485) | (947) | ||
Loss before income tax | (622) | (2,190) | (3,218) | ||
Income tax | 180 | 38 | 964 | ||
Loss for the period attributable to equity holders of the parent |
(442) |
(2,152) |
(2,254) | ||
Loss per share (pence) | |||||
Basic eps | (0.5) | (2.8) | (2.9) | ||
Diluted eps | (0.5) | (2.8) | (2.9) | ||
Consolidated statement of comprehensive income
| |||||
Loss for the financial period | (442) | (2,152) | (2,254) | ||
Other comprehensive income/(expense) Items that are or may be reclassified subsequently to profit and loss | |||||
Foreign exchange translation differences | 701 | (1,467) | (1,995) | ||
Effective portion of changes in value of cash flow hedges |
6 |
19 |
30 | ||
Other comprehensive income/ (expense) for the financial period |
707 |
(1,448) |
(1,965) | ||
Total comprehensive income/(expense) attributable to equity holders of the parent |
265 |
(3,600) |
(4,219) | ||
OPSEC SECURITY GROUP plc
Consolidated statement of changes in equity
For the 6 months ended 30th September 2014 (unaudited)
Share Capital | Share premium | Translation reserve | Hedging reserve | Retained earnings | Total equity | ||
£'000 | £'000 | £'000 | £'000 | £'000 | £'000 | ||
Balance at 1st April 2014 | 4,000 | 38,487 | 2,082 | (12) | (9,996) | 34,561 | |
Loss for the period | - | - | - | - | (442) | (442) | |
Other comprehensive income/(expense) | - | - | 701 | 6 | - | 707 | |
|
-
|
- |
701 |
6 |
(442) |
265 | |
Transactions with owners recorded directly in equity | |||||||
Share based payments | - | - | - | - | 132 | 132 | |
Own shares purchased | - | - | - | - | - | - | |
Own shares issued | 1,060 | 5,739 | - | - | - | 6,799 | |
Total contributions by and distributions to owners |
1,060 |
5,739 |
- |
- |
132 |
6,931 | |
At 30th September 2014 | 5,060 | 44,226 | 2,783 | (6) | (10,306) | 41,757 |
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 2013 (unaudited)
Share Capital | Share premium | Translation reserve | Hedging reserve | Retained earnings | Total equity | ||
£'000 | £'000 | £'000 | £'000 | £'000 | £'000 | ||
Balance at 1st April 2013 | 4,000 | 38,487 | 4,077 | (42) | (7,976) | 38,546 | |
Loss for the period | - | - | - | - | (2,152) | (2,152) | |
Other comprehensive (expense)/income | - | - | (1,467) | 19 | - | (1,448) | |
|
-
|
- |
(1,467) |
19 |
(2,152) |
(3,600) | |
Transactions with owners recorded directly in equity | |||||||
Share based payments | - | - | - | - | 105 | 105 | |
Own shares purchased | - | - | - | - | - | - | |
Own shares issued | - | - | - | - | - | - | |
Total contributions by and distributions to owners |
- |
- |
- |
- |
105 |
105 | |
At 30th September 2013 | 4,000 | 38,487 | 2,610 | (23) | (10,023) | 35,051 |
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 year ended 31st March 2014 (audited)
Share Capital | Share premium | Translation reserve | Hedging reserve | Retained earnings | Total equity | ||
£'000 | £'000 | £'000 | £'000 | £'000 | £'000 | ||
Balance at 1st April 2013 | 4,000 | 38,487 | 4,077 | (42) | (7,976) | 38,546 | |
Loss for the period | - | - | - | - | (2,254) | (2,254) | |
Other comprehensive income/(expense) | - | - | (1,995) | 30 | - | (1,965) | |
|
- |
- |
(1,995) |
30 |
(2,254) |
(4,219) | |
Transactions with owners recorded directly in equity | |||||||
Share based payments | - | - | - | - | 234 | 234 | |
Issuance of shares (net of costs) | - | - | - | - | - | - | |
Own shares purchased | - | - | - | - | - | - | |
Total contributions by and distributions to owners |
- |
- |
- |
- |
234 |
234 | |
At 31st March 2014 | 4,000 | 38,487 | 2,082 | (12) | (9,996) | 34,561 |
Additional breakdown of other comprehensive income is provided in the Statement of Comprehensive Income.
OPSEC SECURITY GROUP plc
Consolidated Balance Sheet
30-Sept-14 | 30-Sept-13 | 31-Mar-14 | |
unaudited | unaudited | Audited | |
£'000 | £'000 | £'000 | |
ASSETS | |||
Non-current assets | |||
Property, plant and equipment | 7,357 | 8,552 | 7,787 |
Intangible assets | 35,876 | 38,024 | 36,465 |
Investment in jointly controlled entity | 156 | - | 38 |
Deferred tax assets | 5,016 | 4,266 | 4,741 |
Total non-current assets | 48,405 | 50,842 | 49,031 |
Current assets | |||
Inventory | 6,507 | 5,547 | 5,126 |
Trade and other receivables | 13,337 | 9,998 | 11,564 |
Assets held for sale | - | - | 300 |
Cash and cash equivalents | 5,901 | 3,249 | 2,575 |
Total current assets | 25,745 | 18,794 | 19,565 |
Total assets | 74,150 | 69,636 | 68,596 |
LIABILITIES | |||
Current liabilities | |||
Interest-bearing loans and borrowings | (1,199) | (8,578) | (2,376) |
Deferred government grants | (20) | (20) | (20) |
Provisions | (1,978) | (2,348) | (2,383) |
Income tax payable | (6) | (14) | (4) |
Trade and other payables | (15,325) | (12,996) | (14,888) |
Total current liabilities | (18,528) | (23,956) | (19,671) |
Non-current liabilities | |||
Interest-bearing loans and borrowings | (11,502) | (7,000) | (11,960) |
Derivative financial instruments | (6) | (23) | (12) |
Deferred government grants | (297) | (282) | (309) |
Provisions | (691) | (1,210) | (1,025) |
Deferred tax liabilities | (332) | (699) | (332) |
Other payables | (1,037) | (1,415) | (726) |
Total non-current liabilities | (13,865) | (10,629) | (14,364) |
Total liabilities | (32,393) | (34,585) | (34,035) |
Net assets | 41,757 | 35,051 | 34,561 |
EQUITY | |||
Capital and reserves | |||
Issued capital | 5,060 | 4,000 | 4,000 |
Share premium | 44,226 | 38,487 | 38,487 |
Hedging reserve | (6) | (23) | (12) |
Translation reserve | 2,783 | 2,610 | 2,082 |
Retained earnings | (10,306) | (10,023) | (9,996) |
Total equity attributable to equity holders of the parent |
41,757 |
35,051 |
34,561 |
OPSEC SECURITY GROUP plc
Consolidated Statement of Cash Flows
Six months ended 30-Sept-14 | Six months ended 30-Sept-13 |
Year ended 31-Mar-14 | |
unaudited | unaudited | Audited | |
£'000 | £'000 | £'000 | |
Cash flows from operating activities | |||
Loss for the period (1) | (442) | (2,152) | (2,254) |
Depreciation | 1,103 | 1,081 | 2,121 |
Amortisation/impairment of intangible assets | 1,050 | 1,131 | 2,227 |
Loss on sale of property, plant and equipment | - | - | 10 |
Loss on reclassification of assets held for resale | - | - | 431 |
Release of government grants | (15) | (13) | (29) |
Equity settled share based payment | 132 | 105 | 234 |
Share of profit of jointly controlled entities | (113) | (226) | (479) |
Finance income | (1) | 72 | 84 |
Finance expenses | 457 | 465 | 947 |
Income tax | (180) | (38) | (964) |
Movement in inventory | (1,219) | (1,059) | (754) |
Movement in trade and other receivables | (1,407) | (719) | (2,443) |
Movement in trade and other payables | 2,260 | 1,142 | 2,045 |
Movement in provisions | (739) | (15) | 374 |
Cash flows from operating activities | 886 | (226) | 1,550 |
Interest paid | (1,219) | (97) | (239) |
Income tax paid | (9) | 25 | 21 |
Net cash (outflow)/inflow from operating activities | (342) | (298) | 1,332 |
Cash flows from investing activities | |||
Acquisition of subsidiary undertaking (net of cash acquired) | (744) | (325) | (400) |
Acquisition of property, plant and equipment | (584) | (1,024) | (2,154) |
Dividends received from jointly controlled entity | - | 308 | 308 |
Interest received | 1 | (72) | (84) |
Net cash outflow from investing activities | (1,327) | (1,113) | (2,330) |
Cash flows from financing activities | |||
Payment of finance lease liabilities | - | (103) | (155) |
Repayment of borrowings | (1,760) | (1,063) | (2,069) |
Proceeds from issuance of shares | 6,799 | - | - |
Net cash inflow/(outflow) from financing activities | 5,039 | (1,166) | (2,224) |
Net increase/(decrease) in cash and cash equivalents | 3,370 | (2,577) | (3,222) |
Cash and cash equivalents at the start of the period | 2,575 | 5,974 | 5,974 |
Effect of exchange rate fluctuations on cash | (44) | (148) | (177) |
Cash and cash equivalents at the end of the period |
5,901 |
3,249 |
2,575 |
(1) The losses for the period include 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 2014.
The following new standards, amendments to standards and interpretations issued by the International Accounting Standard's Board became effective and have been applied during the period, but have had no material effect on the Group's financial statements:
· IFRS 10 - Consolidated Financial Statements
· IFRS 11 - Joint Arrangements
· IFRS 12 - Disclosure of Interests in Other Entities
· IAS 27 (2011) - Separate Financial Statements
· IAS 28 (2011) - Investments in Associates and Joint Ventures
· Offsetting Financial Assets and Financial Liabilities - Amendments to IAS 32
· Recoverable amount disclosures for non-financial assets - Amendments to IAS 36
The other amendments to standards and interpretations effective for the first time in the period, being Investment Entities (Amendments to IFRS 10, IFRS 12 and IAS 27), IFRIC 21 Levies, and Continuing hedge accounting after derivative novations - Amendments to IAS 39, are not relevant to the Group.
The Group meets its day to day working capital requirements through a positive cash balance (£5,901,000 at 30th September 2014) and its bank facilities with JP Morgan Chase ("Chase") which include a revolving credit facility of $2 million that was unutilised at 30th September 2014. The Group also had an outstanding term loan of $9,239,000 at 30th September 2014.
After taking into account expected trading and cash flows for at least the next 12 months, the existing cash balance and the facilities with Chase, the Directors have a reasonable expectation that the Group has adequate resources to continue to operate 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 2014 has not been audited or reviewed by the auditors.
The comparative figures for the financial year ended 31st March 2014 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.
OpSec Security Group plc
Notes to the Interim Statement
3. Segment Information | Six months ended | Six months ended |
Year ended | |||
30-Sep-14 | 30-Sep-13 | 31-Mar-14 | ||||
unaudited | unaudited | audited | ||||
£'000 | £'000 | £'000 | ||||
a) Revenue by geographic segment | ||||||
American operations | 20,871 | 17,482 | 35,806 | |||
EMEA operations | 10,703 | 10,830 | 21,405 | |||
Intersegment sales | (1,801) | (874) | (1,685) | |||
29,773 | 27,438 | 55,526 | ||||
b) Revenue by market sector | ||||||
Government Protection | 7,564 | 5,794 | 12,360 | |||
Brand Protection | 14,990 | 16,190 | 32,456 | |||
Transaction Cards | 7,219 | 5,454 | 10,710 | |||
29,773 | 27,438 | 55,526 | ||||
c) Operating profit by geographic segment | ||||||
American operations | 1,979 | 299 | 1,767 | |||
EMEA operations | 504 | 1,017 | 1,811 | |||
Jointly Controlled Entity | 113 | 226 | 479 | |||
Corporate costs | (1,019) | (792) | (1,748) | |||
Adjusted Operating profit | 1,577 | 750 | 2,309 | |||
Intangible amortisation | (1,050) | (1,131) | (2,227) | |||
Exceptional items | (561) | (1,147) | (2,035) | |||
Equity settled share based payments | (132) | (105) | (234) | |||
Operating loss | (166) | (1,633) | (2,187) | |||
OpSec Security Group plc Notes to the Interim Statement
4. Operating expenses | |||||
Six months ended | Six months ended |
Year ended | |||
30-Sep-14 | 30-Sep-13 | 31-Mar-14 | |||
Unaudited | unaudited | audited | |||
£'000 | £'000 | £'000 | |||
Distribution and Selling Costs | |||||
Selling and marketing costs | 4,852 | 4,484 | 8,825 | ||
Administrative Expenses | |||||
Technical support | 443 | 452 | 867 | ||
Research and development costs | 1,724 | 1,592 | 3,046 | ||
Administrative expenses | 3,087 | 3,039 | 6,338 | ||
Exceptional administrative expenses | 561 | 1,147 | 2,035 | ||
Intangible amortisation | 1,050 | 1,131 | 2,227 | ||
6,865 | 7,361 | 14,513 | |||
Total Operating Expenses | 11,717 | 11,845 | 23,338 | ||
Exceptional items included within administrative expenses | |||||
Acquisition and other corporate restructuring costs |
- |
116 |
117 | ||
Reorganisation costs | 274 | 1,031 | 1,708 | ||
Provision for bad debt and inventory for South American customer |
- |
- |
210 | ||
Rationalisation of manufacturing facilities | 287 | - | - | ||
561 | 1,147 | 2,035 |
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 2014. The operating profit of 3dcd is subject to taxation in the accounts of its partners.
|
OpSec Security Group plc
Notes to the Interim Statement
6. Finance income and expense | |||||||||
Six months ended | Six months ended |
Year ended |
| ||||||
30-Sep-14 | 30-Sep-13 | 31-Mar-14 |
| ||||||
unaudited | unaudited | audited |
| ||||||
| |||||||||
£'000 | £'000 | £'000 |
| ||||||
Financial income |
| ||||||||
| |||||||||
Interest income | - | - | 1 |
| |||||
Foreign exchange gains/(losses) on foreign currency deposits | 1 | (72) | (85) |
| |||||
1 | (72) | (84) |
| ||||||
| |||||||||
Financial expenses |
| ||||||||
| |||||||||
Interest expense | (393) | (420) | (817) |
| |||||
Amortisation of debt advisor fees | (64) | (65) | (130) |
| |||||
(457) | (485) | (947) |
| ||||||
7. Taxation | |||||||||
The charge for taxation is calculated by applying the Directors' best estimate of the annual effective tax rate to the result for the period. | |||||||||
8. (Loss)/Earnings per share | |||||||||
The calculations of (loss)/earnings per share are based upon the following earnings and numbers of shares. | |||||||||
Six months ended | Six months ended |
Year ended | |||||||
30-Sep-14 | 30-Sep-13 | 31-Mar-14 | |||||||
unaudited | unaudited | audited | |||||||
(Loss)/Earnings | £'000 | £'000 | £'000 | ||||||
Loss for the financial period | (442) | (2,152) | (2,254) | ||||||
Exceptional items | 561 | 1,147 | 2,035 | ||||||
Intangible amortisation | 1,050 | 1,131 | 2,227 | ||||||
Share-based payments | 132 | 105 | 234 | ||||||
Adjusted earnings for the financial period | 1,301 | 231 | 2,242 | ||||||
| |||||||||
Weighted average number of shares | No. of shares | No. of shares | No. of shares | ||||||
For Basic (loss)/earnings per share | 96,147,601 | 77,485,571 | 77,485,571 | ||||||
Effect of share options and other awards | 131,482 | 1,029,889 | 55,000 | ||||||
For Diluted (loss)/earnings per share | 96,279,083 | 78,515,460 | 77,540,571 | ||||||
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