1st Dec 2011 07:00
1st December 2011
OPSEC SECURITY GROUP PLC
("OpSec" or "the Group")
Interim results for the six months ended 30th September 2011
OpSec Security Group plc, the supplier of anti-counterfeiting technologies and services, announces interim results for the six months ended 30th September 2011.
Highlights
2011 unaudited | 2010 unaudited
| ||
Group revenue | £19.9m | £19.7m | |
Adjusted operating profit* | £1,420,000 | £1,384,000 | |
Loss before tax | (£1,729,000) | (£394,000) | |
Basic loss per share | (3.3p) | (0.8p) | |
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 8).
·; Adjusted operating profit up by 3% to £1.42 million;
·; Group revenue increased by 1.5% to £19.9 million;
o Banknote and High Security Document revenues up 17%
o Brand Protection revenues up 5%
o ID Solutions revenues down by 35%
·; Completion of acquisition of ID Solutions software business in the Caribbean;
·; Investcorp secured majority stake in the business via a cash offer;
·; New funding arrangements secured with JP Morgan Chase.
- Ends -
For further information, please contact:
OpSec Security Group plc 0191 417 5434
Mark Turnage, Chief Executive/Mike Angus, Finance Director
Shore Capital & Corporate Ltd 020 7408 4090
Stephane Auton/Edward Mansfield
1st December 2011
OPSEC SECURITY GROUP PLC
("OpSec" or "the Company")
Interim results for the six months ended 30th September 2011
Chairman's Statement
There have been a number of significant events which have occurred since the publication of the last Annual Report. Investcorp, having made a cash offer for the Company, increased their shareholding in the Company from 30% to 54%. Following this the Company finalised new banking arrangements with JP Morgan Chase thus enabling the repayment of all sums due under Investcorp's loan facility. The acquisition of a Caribbean based software development company was also successfully completed in the period.
Group revenue for the six months ended 30th September 2011 increased by 1.5% to £19.9 million, (2010: £19.7 million) due to strong ordering from our customers in both the Brand Protection and Banknote and High Security Document sectors. Adjusted Operating Profit (see note 3) increased from £1,384,000 to £1,420,000.
There was an exceptional charge of £1,968,000 in the period which covered Company costs in respect of the cash offer for the business, acquisition costs related to the Caribbean acquisition and a change of control repayment fee on the Investcorp loan facility. The result after taxation was a loss of £1,696,000 (2010: loss of £401,000).
Banknote and High Security Documents
Whilst this market sector benefitted from strong ordering from its American customers this was partially offset by the anticipated slowdown in ordering from an Asian banknote customer secured in the previous year. Overall, revenue increased by 17% over the corresponding period of the preceding year.
Brand Protection
Revenue in this market sector, which is the largest of our three market segments, increased by 5% compared to the same period in the prior year. While it continues to win new business the majority of the growth has come from existing customers with particularly strong ordering in the apparel and Asian tobacco sectors.
ID Solutions
Revenue in the ID Solutions market sector fell by 35% compared to the same period in the prior year, due mainly to the loss of significant government customers in both North America and the UK. The recent acquisition of a business in the Caribbean has enhanced significantly our product offering and this, coupled with the historical bias towards the second half of the financial year, leads us to expect an improved revenue performance by this segment in the balance of the current year.
3dcd
The contribution from our joint venture 3dcd in the period was $239,000 (2010: $376,000). The previous period benefitted from a one off order for equipment.
Operations
Revenue in our American operations increased by 7% to $19.0 million in the first half of the financial year with operating profit increasing by 75% in local currency (62% in sterling). The cost-saving and efficiency measures which we continue to implement contributed to gross margins increasing from 38.5% to 40.3%.
On 24th May 2011 the Company announced the acquisition of a small software development business focusing specifically on developing ID solutions for issuance of passports, national ID cards and other secure credentials. The business is based in the Dominican Republic with an ancillary business in Puerto Rico. Revenue for this business was $94,000 in the four month period ended 30th September 2011 with an operating loss of $178,000. This business has, as anticipated at the time of the acquisition, recently secured a major new customer which should ensure a much stronger performance in the second half of the financial year.
The revenue of our UK operations in the period increased by 1.4% to £7.5 million. Gross margins decreased from 40.8% to 33.0% due to the high proportion of sub contract sales and consequently operating profit decreased by 54% to £448,000.
Revenue in our German operations rose by 7.9% to €1.8 million. Operating profits increased by 37.5% from €251,000 to €346,000 due to an improvement in gross margins from 52.3% to 58.1%.
New Banking Arrangements
On 31st October 2011 the Group repaid all amounts due to be repaid to Investcorp under the loan agreement. The repayment was financed through new banking facilities of up to $11.25m arranged with JPMorgan Chase Bank. The new facilities compromise: a) a three year revolving credit facility of $2m; b) a five year term loan of $8m; and c) a multicurrency overdraft facility of up to $1.25m.
Board Changes
Following the increase in Investcorp's holding in the Company to 54% Glenn Luk, who has hitherto acted as an alternate Director, joined the Board. As of today's date Dick Povey is standing down and Richard Fuller is joining the Board as a Non-Executive Director. On behalf of the Board I would like to thank Dick for his twelve years of service to the Company.
Prospects
The second half of our financial year has historically been stronger than the first half of the year, however political and economic uncertainty in regard to a number of programmes makes it difficult accurately to predict call off volumes in the balance of the year. This is magnified by the problem of forecasting whether certain significant new opportunities, particularly in the ID Solutions area of our business, will be completed and when shipments will commence.
DA Mahony
Chairman
1st December 2011
OPSEC SECURITY GROUP plc
Consolidated Income Statement
Six months ended30-Sept-11 |
Six months ended 30-Sept-10 |
Year ended 31-Mar-11 | |||
Unaudited | Unaudited | Audited | |||
£'000 | £'000 | £'000 | |||
Revenue | 19,949 | 19,659 | 40,360 | ||
Cost of sales | (11,889) | (11,441) | (22,469) | ||
Gross profit | 8,060 | 8,218 | 17,891 | ||
Distribution and selling costs | (2,367) | (2,336) | (5,492) | ||
Administrative expenses | (4,623) | (4,992) | (9,278) | ||
Exceptional Administrative expenses | (1,968) | - | - | ||
Intangible amortisation | (238) | (326) | (649) | ||
Total administrative expenses | (6,829) | (5,318) | (9,927) | ||
(1,136) | 564 | 2,472 | |||
Share of profit of jointly controlled entities | 146 | 244 | 920 | ||
Operating (loss)/profit | (990) | 808 | 3,392 | ||
Finance income | 18 | (168) | (202) | ||
Finance expense | (757) | (1,034) | (1,982) | ||
(Loss)/Profit before income tax | (1,729) | (394) | 1,208 | ||
Income tax | 33 | (7) | 153 | ||
(Loss)/Profit for the period attributable to equity holders of the parent |
(1,696) |
(401) |
1,361 | ||
Earnings per share (pence) | |||||
Basic eps | (3.3) | (0.8) | 2.7 | ||
Diluted eps | (3.3) | (0.8) | 2.5 | ||
Consolidated statement of comprehensive income
| |||||
(Loss)/Profit for the financial period | (1,696) | (401) | 1,361 | ||
Other comprehensive income | |||||
Foreign exchange translation differences | 354 | (1,196) | (1,219) | ||
Other comprehensive income/(expense) for the financial period |
354 |
(1,196) |
(1,219) | ||
Total comprehensive income/(expense) attributable to equity holders of the parent |
(1,342) |
(1,597) |
142 | ||
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 |
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 2010
| Share Capital | Share premium | Translation reserve | Retained earnings | Total equity | |
| unaudited | unaudited | unaudited | unaudited | unaudited | |
| £'000 | £'000 | £'000 | £'000 | £'000 | |
|
|
|
|
|
| |
Balance at 1st April 2010 | 2,802 | 29,685 | 4,429 | (5,938) | 30,978 | |
|
|
|
|
|
| |
Loss for the period | - | - | - | (401) | (401) | |
|
|
|
|
|
| |
Other comprehensive income/(expense) | - | - | (1,196) | - | (1,196) | |
|
-
|
- |
(1,196) |
(401) |
(1,597) | |
|
|
|
|
| ||
Transactions with owners recorded directly in equity |
|
|
|
|
| |
Share based payments | - | - | - | 250 | 250 | |
Own shares sold | - | - | - | 28 | 28 | |
Own shares purchased | - | - | - | (239) | (239) | |
Total contributions by and distributions to owners |
- |
- |
- |
39 |
39 | |
|
|
|
|
| ||
At 30th September 2010 | 2,802 | 29,685 | 3,233 | (6,300) | 29,420 |
OPSEC SECURITY GROUP plc
Consolidated statement of changes in equity
For the year ended 31st March 2011
| Share Capital | Share premium | Translation reserve | Retained earnings | Total equity | |
| audited | audited | audited | audited | audited | |
| £'000 | £'000 | £'000 | £'000 | £'000 | |
|
|
|
|
|
| |
Balance at 1st April 2010 | 2,802 | 29,685 | 4,429 | (5,938) | 30,978 | |
|
|
|
|
|
| |
Profit for the period | - | - | - | 1,361 | 1,361 | |
|
|
|
|
|
| |
Other comprehensive income/(expense) | - | - | (1,219) | - | (1,219) | |
|
|
|
|
|
| |
|
- |
- |
(1,219) |
1,361 |
142 | |
|
|
|
|
| ||
Transactions with owners recorded directly in equity |
|
|
|
|
| |
Share based payments | - | - | - | (210) | (210) | |
Issuance of shares (net of costs) | - | - | - | - | - | |
Own shares sold | - | - | - | 28 | 28 | |
Own shares purchased | - | - | - | (239) | (239) | |
Total contributions by and distributions to owners |
- |
- |
- |
(421) |
(421) | |
|
|
|
|
| ||
At 31st March 2011 | 2,802 | 29,685 | 3,210 | (4,998) | 30,699 |
Additional breakdown of other comprehensive income is provided in the Statement of Comprehensive Income.
OPSEC SECURITY GROUP plc
Consolidated Balance Sheet
30-Sept-11 | 30-Sep-10 | 31-Mar-11 | ||
unaudited | unaudited | Audited | ||
£'000 | £'000 | £'000 | ||
ASSETS | ||||
Non-current assets | ||||
Property, plant and equipment | 7,604 | 8,113 | 7,741 | |
Intangible assets | 25,543 | 25,465 | 24,927 | |
Investment in jointly controlled entity | (39) | 87 | 125 | |
Other investments | - | 17 | 18 | |
Deferred tax assets | 3,619 | 3,850 | 3,662 | |
Total non-current assets | 36,727 | 37,532 | 36,473 | |
Current assets | ||||
Inventory | 3,221 | 2,878 | 3,593 | |
Trade and other receivables | 8,479 | 7,926 | 8,895 | |
Cash and cash equivalents | 4,226 | 4,621 | 6,250 | |
Assets held for sale | - | 926 | - | |
Total current assets | 15,926 | 16,351 | 18,738 | |
Total assets | 52,653 | 53,883 | 55,211 | |
LIABILITIES | ||||
Current liabilities | ||||
Interest-bearing loans and borrowings | (4,493) | - | - | |
Deferred government grants | (20) | (36) | (20) | |
Provisions | - | (38) | - | |
Income tax payable | - | - | - | |
Trade and other payables | (10,522) | (9,202) | (10,212) | |
Total current liabilities | (15,035) | (9,276) | (10,232) | |
Non-current liabilities | ||||
Interest-bearing loans and borrowings | (7,464) | (14,604) | (13,789) | |
Deferred government grants | (192) | (360) | (345) | |
Deferred tax liabilities | (146) | (223) | (146) | |
Total non-current liabilities | (7,802) | (15,187) | (14,280) | |
Total liabilities | (22,837) | (24,463) | (24,512) | |
Net assets | 29,816 | 29,420 | 30,699 | |
EQUITY | ||||
Capital and reserves | ||||
Issued capital | 3,000 | 2,802 | 2,802 | |
Share premium | 29,685 | 29,685 | 29,685 | |
Translation reserve | 3,564 | 3,233 | 3,210 | |
Retained earnings | (6,433) | (6,300) | (4,998) | |
Total equity attributable to equity holders of the parent |
29,816 |
29,420 |
30,699 | |
|
|
|
| |
|
|
|
| |
OPSEC SECURITY GROUP plc
Condensed Consolidated Statement of Cash Flows
Six months ended 30-Sept-11 | Six months ended 30-Sept-10 |
Year ended 31-Mar-11 | |
unaudited | unaudited | Audited | |
£'000 | £'000 | £'000 | |
Cash flows from operating activities | |||
(Loss)/Profit for the period (1) | (1,696) | (401) | 1,361 |
Depreciation | 943 | 1,025 | 1,949 |
Amortisation/impairment of intangible assets | 249 | 326 | 649 |
Profit on sale of property, plant and equipment | 5 | - | 359 |
Release of government grants | (13) | (22) | (35) |
Equity settled share based expense | 204 | 250 | (210) |
Share of profit of jointly controlled entities | (146) | (244) | (920) |
Finance income | (18) | 168 | 202 |
Finance expenses | 757 | 1,034 | 1,982 |
Income tax expense | (33) | 7 | (153) |
Movement in inventory | 440 | 213 | (541) |
Movement in trade and other receivables | 381 | (646) | (1,668) |
Movement in trade and other payables | 276 | (1,891) | (536) |
Cash flows from operating activities | 1,349 | (181) | 2,439 |
Interest paid | (1,114) | (326) | (558) |
Income tax paid - overseas | (16) | (89) | (96) |
Net cash inflow/(outflow) from operating activities |
219 |
(596) |
1,785 |
Cash flows from investing activities | |||
Acquisition of subsidiary undertaking | (183) | (223) | (873) |
Acquisition of property, plant and equipment | (654) | (369) | (980) |
Proceeds from sale of investment | 12 | - | - |
Proceeds from sale of property, plant and equipment | - | - | 560 |
Proceeds from government grants | - | 47 | 47 |
Dividends received from jointly controlled entity | 321 | 473 | 1,095 |
Interest received | 18 | (168) | (202) |
Net cash outflow from investing activities | (486) | (240) | (353) |
Cash flows from financing activities | |||
Payment of finance lease liabilities | (104) | (104) | (209) |
Drawdown of borrowings | - | - | - |
Repayment of borrowings | (1,839) | (1,282) | (1,927) |
Proceeds from issuance of new shares (net of costs) | 198 | - | - |
Proceeds from sale of own shares | 57 | 28 | 28 |
Purchase of own shares | - | (239) | (239) |
Net cash outflow from financing activities |
(1,688) |
(1,597) |
(2,347) |
Net decrease in cash and cash equivalents | (1,955) | (2,433) | (915) |
Cash and cash equivalents at the start of the period | 6,250 | 7,376 | 7,376 |
Effect of exchange rate fluctuations on cash | (69) | (322) | (211) |
Cash and cash equivalents at the end of the period |
4,226 |
4,621 |
6,250 |
(1) The loss for the period ended 30th September 2011 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 2011.
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:
IAS 24 'Related Party Disclosures (revised)' |
IFRIC 14 'IAS 19 The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction' |
IFRIC 19 'Extinguishing Financial Liabilities with Equity Instruments' |
Improvements to IFRSs 2010 |
Following the change of control, and subsequent agreement with Investcorp, all amounts due under the Investcorp loan agreement became payable by 31st October 2011 and are shown within Current liabilities within this Interim Statement. Since the period end all amounts have been duly paid, financed through new banking facilities of up to $11.25m arranged with JP Morgan Chase Bank. Accordingly, and after taking into account expected trading and cash flows for at least the next 12 months, 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 2011 has not been audited or reviewed by the auditors.
The comparative figures for the financial year ended 31st March 2011 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-11 | 30-Sep-10 | 31-Mar-11 | ||||
unaudited | unaudited | audited | ||||
£'000 | £'000 | £'000 | ||||
a) Revenue by geographic segment | ||||||
American operations | 11,692 | 11,661 | 23,045 | |||
UK operations | 7,478 | 7,376 | 16,123 | |||
German operations | 1,543 | 1,366 | 2,686 | |||
Caribbean operations | 59 | - | - | |||
Intersegment sales | (823) | (744) | (1,494) | |||
19,949 | 19,659 | 40,360 | ||||
b) Revenue by market sector | ||||||
Banknote and High Security Documents | 4,481 | 3,831 | 10,026 | |||
Brand Protection | 13,573 | 12,892 | 25,081 | |||
ID Solutions | 1,895 | 2,936 | 5,253 | |||
19,949 | 19,659 | 40,360 | ||||
c) Operating profit by geographic segment | ||||||
American operations | 1,648 | 1,015 | 2,782 | |||
UK operations | 448 | 964 | 1,991 | |||
German operations | 304 | 211 | 377 | |||
Caribbean operations | (116) | - | - | |||
Jointly Controlled Entity | 146 | 244 | 920 | |||
Corporate costs | (3,420) | (1,626) | (2,678) | |||
Operating (loss) / profit | (990) | 808 | 3,392 | |||
Exclude intangible amortisation | 238 | 326 | 649 | |||
Exclude exceptional items | 1,968 | |||||
Exclude equity settled share based payments |
204 |
250 |
(210) | |||
Adjusted operating profit | 1,420 | 1,384 | 3,831 | |||
d) Adjusted operating profit by geographic segment | |||||
American operations | 1,648 | 1,015 | 2,782 | ||
UK operations | 448 | 964 | 1,991 | ||
German operations | 304 | 211 | 377 | ||
Caribbean operations | (116) | - | - | ||
Jointly Controlled Entity | 146 | 244 | 920 | ||
Corporate costs | (1,010) | (1,050) | (2,239) | ||
Adjusted operating profit | 1,420 | 1,384 | 3,831 | ||
OpSec Security Group plc Notes to the Interim Statement
4. Operating expenses | |||||
Six monthsended | Six monthsended |
Year ended | |||
30-Sep-11 | 30-Sep-10 | 31-Mar-11 | |||
unaudited | unaudited | audited | |||
£'000 | £'000 | £'000 | |||
Distribution and Selling Costs | |||||
Selling and marketing costs | 2,367 | 2,336 | 5,492 | ||
Administrative Expenses | |||||
Technical support | 471 | 582 | 1,155 | ||
Research and development costs | 1,051 | 1,093 | 2,129 | ||
Administrative expenses | 3,101 | 3,317 | 5,994 | ||
Exceptional administrative expenses | 1,968 | - | - | ||
Intangible amortisation | 238 | 326 | 649 | ||
6,829 | 5,318 | 9,927 | |||
Total Operating Expenses | 9,196 | 7,654 | 15,419 | ||
Exceptional items included within administrative expenses | |||||
Transaction fees for Caribbean acquisition | 274 | - | - | ||
Cash Offer legal fees | 103 | - | - | ||
Prepayment penalty | 1,591 | - | - | ||
1,968 | - | - |
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 2011. The operating profit of 3dcd is subject to taxation in the accounts of its partners.
6. Acquisitions
On 24th May 2011 the Company acquired 100% of the equity of Marohu Investments S.R.L. and Advantics Corporation in Puerto Rico, (together 'Advantics'). Advantics is a small software development business focusing specifically 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.
The total consideration comprises initial consideration of $303,000 and contingent consideration of up to $5.7m. The estimated fair value of the contingent consideration is $750,000. This gives rise to goodwill of $505,000 and other intangible assets of $434,000.
The acquisition contributed £59,000 to revenue and made a net loss before taxation of £116,000 for the period. |
OpSec Security Group plc
Notes to the Interim Statement
7. Finance income and expense | |||||||||
Six monthsended | Six months ended |
Year ended |
| ||||||
30-Sep-11 | 30-Sep-10 | 31-Mar-11 |
| ||||||
unaudited | unaudited | audited |
| ||||||
| |||||||||
£'000 | £'000 | £'000 |
| ||||||
Financial income |
| ||||||||
| |||||||||
Interest income | 7 | 2 | 6 |
| |||||
Foreign exchange gains on foreign currency deposits | 11 | (170) | (208) |
| |||||
18 | (168) | (202) |
| ||||||
| |||||||||
Financial expenses |
| ||||||||
| |||||||||
Interest expense | (577) | (734) | (1,382) |
| |||||
Amortisation of debt advisor fees | (180) | (300) | (600) |
| |||||
(757) | (1,034) | (1,982) |
| ||||||
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 monthsended | Six months ended |
Year ended | |||||||
30-Sep-11 | 30-Sep-10 | 31-Mar-11 | |||||||
unaudited | unaudited | audited | |||||||
Earnings | £'000 | £'000 | £'000 | ||||||
Earnings for the financial period | (1,696) | (401) | 1,361 | ||||||
Exceptional items | 1,968 | - | - | ||||||
Intangible amortisation | 237 | 326 | 649 | ||||||
Share-based payments | 204 | 250 | (210) | ||||||
Adjusted earnings for the financial period | 713 | 175 | 1,800 | ||||||
| |||||||||
Weighted average number of shares | No. of shares | No. of shares | No. of shares | ||||||
For Basic earnings per share | 52,155,030 | 52,110,473 | 50,940,927 | ||||||
Effect of share options and other awards | 89,361 | 1,934,832 | 2,927,242 | ||||||
For Diluted earnings per share | 52,244,391 | 54,045,305 | 53,868,169 | ||||||
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