Half Yearly Report

11th November 2010

OPSEC SECURITY GROUP PLC

("OpSec" or "the Group")

Interim results for the six months ended 30th September 2010

OpSec Security Group plc, the supplier of anti-counterfeiting technologies and services, announces interim results for the six months ended 30th September 2010.

Highlights

* Adjusted for the effects of share based payments and the charge for intangible amortisation (see notes 3 and 8).

• Strong first half performance;

• Adjusted operating profit up by 115% to £1.384 million;

• Group revenue increased by 21% to £19.7 million;

• Banknote and High Security Document revenues up 77%

• Brand Protection revenues up 23%

• ID Solutions revenues down by 18%

• New business secured in the Banknote and High Security Document and Brand Protection markets;

• Gross margins of 41.8% compared to prior year of 39.4%;

• Higher overheads reflect increased turnover and exchange rate movements;

• Interest charges higher due to new funding arrangements and amortisation of fees.

David Mahony, Chairman, said:

"The Board remains confident as to the Group's prospects and the outlook for the current year. The new contracts we have secured in the Banknote and High Security Document market sector and the continuing strong order levels in our Brand Protection market should lead to further growth in the second half of the current financial year. In addition, ID Solutions' traditional bias towards a stronger second half would be reinforced by the successful conversion of a proportion of its significant sales pipeline.

Further progress on operational performance is expected as we continue to implement a number of cost saving and efficiency measures throughout the Group. We remain committed to accelerating growth and further improving operating performance by reinvesting in the Group's facilities and capabilities and will continue to consider small add on acquisitions which support our existing market sectors."

- Ends -

For further information, please contact:

OpSec Security Group plc 0191 417 5434

Mark Turnage, Chief Executive/Mike Angus, Finance Director

Weber Shandwick Financial 020 7067 0700

Nick Oborne/Stephanie Badjonat 

Oriel Securities Limited 020 7710 7600

Michael Shaw/Neil Langford

OPSEC SECURITY GROUP PLC

("OpSec" or "the Group")

Interim results for the six months ended 30th September 2010

Chairman's Statement

The encouraging results for the first half of the current financial year reflect improved trading conditions, the benefit of our previous cost reduction efforts and the impact of the new financing arrangements that were put in place at the end of the prior financial year.

Group revenue for the six months increased by 21% to £19.7 million (2009: £16.3 million). Revenue in the first half benefited from new customers in both the Brand Protection and Banknote and High Security Document ("BNHS") sectors and record ordering in the first quarter from our Brand Protection customers.

Adjusted Operating Profit (see note 3) more than doubled from £645,000 to £1,384,000.

The impact of our new financing arrangements meant that the net interest charge increased from £412,000 to £1,202,000. This included a non-cash charge for amortisation of fees of £300,000 and foreign exchange translation losses of £170,000 on the Group's cash deposits. The result after taxation was a loss of £401,000 (2009: loss of £358,000).

Cash on the balance sheet as at 30th September 2010 amounted to £4,621,000 (2009: £2,716,000).

Banknote and High Security Documents

A number of new customers were secured in this market sector during the first half of the financial year. In particular, a new banknote customer in Asia and a new tax stamp programme in Africa contributed to revenue increasing by 77% over the corresponding period of the previous year. Strong ordering from an Eastern European government also benefitted the first half.

Brand Protection

Revenue in this market sector, which is the largest of our three market segments, increased by 23% compared to the same period in the prior year. The first quarter saw record order levels from existing customers as they refilled their supply chain and maintained levels of consumer spending have led to subsequent order levels being robust. We are continuing to win significant numbers of new Brand Protection customers, particularly in the online segment of this sector.

ID Solutions

Revenue in the ID solutions market fell by 18% compared to the same period in the prior year, due mainly to slow ordering from an Eastern European and a North American Government. This segment has a historical bias towards the second half of the financial year which, coupled with a significant pipeline of potential future business, 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 ahead of expectations at $376,000 (2009: $182,000). Our major software customer has placed a one off order for equipment incorporating a new technology developed by the joint venture. The benefit of this order will be realised across the year as a whole.

Operations

Revenue in our American operations increased by 7% to $17.7 million in the first half of the financial year with operating profit increasing by 13% in local currency (23% in sterling). The cost saving measures which we have implemented progressively over the past two years have led to an increase in gross margins from 37.4% to 38.5%.

The UK operations in the period enjoyed the full impact of the new BNHS customers and consequently revenue was up by 44% compared to the corresponding period of the prior year. Gross margins improved from 33.8% to 40.8% and operating profit increased by 405% to £964,000.

Revenue in our German operations was flat at €1.6 million. Operating profits fell from €511,000 to €251,000 due to costs incurred in software development and the relocation of certain employees to Munich. The restructuring of the management team following the departure of the vendors of P4M post the earn-out period has now been completed successfully.

Prospects

The Board remains confident as to the Group's prospects and the outlook for the current year. The new contracts we have secured in the BNHS market sector and the continuing strong order levels in our Brand Protection market should lead to further growth in the second half of the current financial year. In addition, ID Solutions' traditional bias towards a stronger second half would be reinforced by the successful conversion of a proportion of its significant sales pipeline.

Further progress on operational performance is expected as we continue to implement a number of cost saving and efficiency measures throughout the Group. We remain committed to accelerating growth and further improving operating performance by reinvesting in the Group's facilities and capabilities and will continue to consider small add on acquisitions which support our existing market sectors.

DA Mahony

Chairman

11th November 2010

OPSEC SECURITY GROUP plc

Consolidated Income Statement

OPSEC SECURITY GROUP plc

Consolidated statement of changes in equity

For the 6 months ended 30th September 2010

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 2009

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 2010

Additional breakdown of other comprehensive income is provided in the Statement of Comprehensive Income.

OPSEC SECURITY GROUP plc

Consolidated Balance Sheet

OPSEC SECURITY GROUP plc

Condensed Consolidated Statement of Cash Flows

(1) The acquisition of subsidiary undertakings numbers represent deferred earn out payments

 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 2010.

For the year commencing 1st April 2010 the following standards, amendments and interpretations became effective and were adopted by the Group:

Revised IFRS 3 Business Combinations

Amendments to IAS27 Consolidated and Separate Financial Statements

IFRIC 16 Hedges of a Net Investment in a Foreign Operation

Amendments to IAS 32 Financial Instruments: Presentation - Classification of rights issue

Amendments to IFRS 2 Group Cash-Settled Share-based payments transactions

Improvements to IFRSs 2009

The adoption of the above has not had a significant impact on the Group's results or equity.

2. Status of financial information

The interim information for the six months ended 30th September 2010 has not been audited or reviewed by the auditors.

The comparative figures for the financial year ended 31st March 2010 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.

The interim report has been sent to all shareholders. Further copies are available to members of the public from the Company's registered office, 40 Phoenix Road, Crowther, District 3, Washington, Tyne & Wear, NE38 0AD. The interim report is also available on the Company's website, www.opsecsecurity.com.