26th Nov 2007 07:00
Opsec Security Group PLC26 November 2007 26th November 2007 OPSEC SECURITY GROUP plc ("OpSec" or "the Group") Interim results for the six months ended 30th September 2007 OpSec Security Group plc, the supplier of anti-counterfeiting technologies andservices, announces interim results for the six months ended 30th September2007. Highlights 2007 2006 unaudited unaudited Group revenue £16.3m £14.4mProfit before tax £859,000 £2,759,000Profit after tax* £4,126,000 £2,210,000Basic earnings per share* 8.2p 4.3pAdjusted earnings per share** 2.6p 4.9p * Including £3,284,000 deferred tax credit on recognition of deferred tax assets in the UK operations. ** Adjusted for the effects of the deferred tax credit, share based payments and the charge for intangible amortisation. • Strong trading performance across the Group • Results in line with expectations, despite absorption of aborted acquisition costs • Group revenue up by 13% and up across all market sectors • Third consecutive year of record results in the European operations • American turnover up by 25%; significant investment in Marketing and Research & Development • 3dcd joint venture ahead of budget but, as expected, down on prior year leading to an overall reduction in operating profit • Order books strong and continued confidence for the full year David Mahony, Chairman, said: "The second half of the current year has started well and we have a solid orderbook for the remainder of the year. The markets for the Group's services remainstrong and the Directors believe that the Group is in line to meet expectationsfor the full year." - Ends - For further information, please contact: OpSec Security Group plc 0191 417 5434Mark Turnage, Chief Executive/Mike Angus, Finance Director Weber Shandwick Financial 020 7067 0700Nick Oborne/Stephanie Badjonat/Charlie Hooper Oriel Securities Limited 020 7710 7600Andrew Edwards/Neil Langford 26th November 2007 OPSEC SECURITY GROUP plc ("OpSec" or "the Group") Interim results for the six months ended 30th September 2007 Chairman's Statement I am pleased to report on a strong first half performance by the Group. All ouroperations traded well and we were able to return financial results in line withour expectations despite absorbing the costs of aborted acquisition activity. Group turnover for the six months was up 13% to £16.3 million (2006: £14.4million). All market sectors showed increased turnover. Operating profit of £875,000 (2006: £2,820,000) was down due to the anticipatedreduction in the contribution from our joint venture, 3dcd. Profit aftertaxation was up from £2,210,000 to £4,126,000 due largely to a taxation creditarising from the recognition of a deferred tax asset in the Group's UK basedcompanies. The weakness of the US dollar has continued to have an impact when the resultsof the American operations and joint venture are translated into sterling. Review of Operations European operations achieved further growth in both revenue and profitability inthe period. These record results together with confidence regarding the futureprospects for this business have led to the recognition of a significantdeferred tax asset related to past trading losses. The installation of thesmaller of two new coaters in the Crowther plant has now been completed and thecommissioning of the larger coater is proceeding to programme. The American operations also achieved strong growth in revenue compared to theprevious year. Much of this increase in revenue was invested in Marketing andResearch & Development projects which should yield incremental future earnings. Within the banknote and high security documents market the emphasis being placedon the revenue protection and tax stamps market has led to some success andfurther new programmes are actively being pursued. Good revenue growth was seenin both the brand protection market and the ID technologies market. The forward order book for all of our markets is robust and it is thereforeexpected that we will trade strongly in the second half of the year. 3dcd's contribution to profits in the first half was ahead of expectations butshowed a return to the levels we would normally anticipate in years notcontaining a major software release by its largest customer. Acquisitions In the first half the Group incurred costs amounting to £235,000 as a result ofaborted acquisition negotiations. While regrettable, the risk of such write-offsis a necessary consequence of our unwillingness to complete transactions onanything other than totally acceptable terms. A number of other interesting acquisition opportunities are being vigorouslypursued. By its nature this activity is difficult to predict as regards timingbut it is hoped that some of these discussions will be successfully concluded inthe second half of the current financial year. Conclusion The second half of the current year has started well and we have a solid orderbook for the remainder of the year. The markets for the Group's services remainstrong and the Directors believe that the Group is in line to meet expectationsfor the full year. DA MahonyChairman26th November 2007 OPSEC SECURITY GROUP plcConsolidated Income Statement Six months Six months ended ended Year ended 30-Sept-07 30-Sept-06 31-Mar-07 unaudited unaudited audited £'000 £'000 £'000 Revenue 16,319 14,442 33,134Cost of sales (9,503) (8,190) (18,581) -----------------------------------------Gross profit 6,816 6,252 14,553 Distribution and sellingcosts (1,994) (1,922) (4,169)-------------------------------------------------------------------------Administrative expenses (4,460) (3,740) (8,369)Intangible amortisation (63) - (109)------------------------------------------------------------------------- Total administrative expenses (4,523) (3,740) (8,478)Other income - - 119 ----------------------------------------- 299 590 2,025 Share of profit ofjoint ventures 576 2,230 3,298 -----------------------------------------Operating profit 875 2,820 5,323 Financial income 37 (8) (10)Financial expenses (53) (53) (139) -----------------------------------------Profit before income tax 859 2,759 5,174 Income tax 3,267 (549) (1,253) -----------------------------------------Profit for the periodattributable to equityholders of the parent 4,126 2,210 3,921 ========================================= Earnings per share (pence) Basic eps 8.2 4.3 7.7 =========================================Diluted eps 7.6 4.1 7.2 =========================================Adjusted eps 2.6 4.9 8.8 =========================================Adjusted diluted eps 2.4 4.7 8.2 ========================================= OPSEC SECURITY GROUP plcConsolidated Statement of Recognised Income and Expense Six months Six months ended ended Year ended 30-Sept-07 30-Sept-06 31-Mar-07 unaudited unaudited audited £'000 £'000 £'000 Foreign exchange translationdifferences (731) (1,340) (2,300) -----------------------------------------Net expense recogniseddirectly in equity (731) (1,340) (2,300) Profit for the period 4,126 2,210 3,921 -----------------------------------------Total recognisedincome for the periodattributable to equityholders of the parent 3,395 870 1,621 ========================================= OPSEC SECURITY GROUP plcConsolidated Balance Sheet 30-Sept-07 30-Sep-06 31-Mar-07 unaudited unaudited audited £'000 £'000 £'000ASSETSNon-current assetsProperty, plant and equipment 7,243 5,812 7,125Intangible assets 10,375 12,166 10,846Investments in joint ventures 670 1,490 920Other investments 18 28 18Deferred tax assets 6,359 3,253 3,194 -----------------------------------------Total non-current assets 24,665 22,749 22,103 ----------------------------------------- Current assetsInventory 2,596 2,109 2,729Trade and other receivables 5,590 5,179 5,600Cash and cash equivalents 1,265 2,715 3,077 -----------------------------------------Total current assets 9,451 10,003 11,406 ----------------------------------------- -----------------------------------------Total assets 34,116 32,752 33,509 ----------------------------------------- LIABILITIESCurrent liabilitiesInterest-bearing loans and borrowings (34) (2,819) (81)Deferred government grants - (10) -Trade and other payables (6,753) (7,093) (8,834) -----------------------------------------Total current liabilities (6,787) (9,922) (8,915) ----------------------------------------- Non-current liabilitiesInterest-bearing loans andborrowings (2,185) - (1,470) -----------------------------------------Total non-current liabilities (2,185) - (1,470) ----------------------------------------- -----------------------------------------Total liabilities (8,972) (9,922) (10,385) ----------------------------------------- -----------------------------------------Net assets 25,144 22,830 23,124 ========================================= EQUITYCapital and reservesIssued capital 2,669 2,669 2,669Share premium 29,309 29,309 29,309Translation reserve (1,982) (291) (1,251)Retained earnings (4,852) (8,857) (7,603) -----------------------------------------Total equity attributable toequity holders of the parent 25,144 22,830 23,124 ========================================= OPSEC SECURITY GROUP plcConsolidated Statement of Cash Flows Six months Six months ended ended Year ended 30-Sept-07 30-Sept-06 31-Mar-07 unaudited unaudited audited £'000 £'000 £'000 Cash flows from operating activitiesProfit for the period 4,126 2,210 3,921Depreciation 635 581 1,239Amortisation of intangible assets 63 - 109Profit on sale of investment - - (119)Release of government grants - (11) (21)Share based payment expense 394 300 413Share of joint venture income (576) (2,230) (3,298)Finance income (37) 8 10Finance expenses 53 53 139Income tax (3,267) 549 1,253 -----------------------------------------Cash flows from operatingactivities before workingcapital movements 1,391 1,460 3,646Movement in inventory 63 (159) (847)Movement in debtors (56) (1,114) (1,626)Movement in creditors (1,865) 662 2,711 -----------------------------------------Cash flowsfrom operatingactivities (467) 849 3,884Interest paid (53) (53) (139)Income taxpaid - overseas (17) (6) (86) -----------------------------------------Net cash (outflow)/inflow fromoperating activities (537) 790 3,659 ----------------------------------------- Cash flows from investing activitiesAcquisition of subsidiaryundertaking 5 (7,485) (7,297)Acquisition of property,plant and equipment (919) (1,543) (3,695)Proceeds from sale of investment - - 130Dividends received from joint venture 786 1,061 2,589Interest received 37 (8) (10) -----------------------------------------Net cash outflow frominvesting activities (91) (7,975) (8,283) -----------------------------------------Cash flows from financing activitiesPayment of finance leaseliabilities - (10) (26)Proceeds from borrowings 715 130 1,470Proceeds from sale of own shares 3 - 133Dividends paid (506) - -Purchase of own shares (1,266) (175) (748) -----------------------------------------Net cash (outflow)/inflow fromfinancing activities (1,054) (55) 829 -----------------------------------------Net decrease in cash andcash equivalents (1,682) (7,240) (3,795) Cash and cash equivalents atthe start of the period 3,073 7,568 7,568Effect of exchange ratefluctuations on cash (126) (432) (700) -----------------------------------------Cash and cash equivalents atthe end of the period 1,265 (104) 3,073 ========================================= OpSec Security Group plcNotes to the Interim Statement 1. Basis of preparation This interim financial information has been prepared applying the accountingpolicies that were applied in the preparation of the Company's publishedconsolidated financial statements for the year ended 31st March 2007. 2. Status of financial information The interim information for the six months ended 30th September 2007 has notbeen audited or reviewed by the auditors. The comparative figures for the year ended 31st March 2007 are not the Company'sstatutory financial statements for that financial year. Those accounts have beenreported on by the Company's auditors and delivered to the Registrar ofCompanies. The report of the auditors was unqualified, did not include referenceto any matters to which the auditors drew attention by way of emphasis withoutqualifying their report and did not contain a statement under section 237(2) or(3) of the Companies Act 1985. 3. Segment Information Six months Six months ended ended Year ended 30-Sep-07 30-Sep-06 31-Mar-07 unaudited unaudited audited £'000 £'000 £'000a) Revenue by geographic segment American operations 9,155 8,063 19,315European operations 8,015 7,278 15,824Intersegment sales (851) (899) (2,005) --------- ---------- --------- 16,319 14,442 33,134 ========= ========== ========= b) Revenue by market sector Banknote and highsecurity documents 4,913 4,847 10,795Brand protection 7,153 6,092 12,645ID Technologies 3,859 3,302 9,081Other 394 201 613 --------- ---------- --------- 16,319 14,442 33,134 ========= ========== ========= c) Operating profit by geographic segment American operations 733 793 2,696European operations 1,163 1,026 2,057Joint Ventures 576 2,230 3,298Corporate costs (1,534) (1,229) (2,619)Intangibleamortisation (63) - (109) --------- ---------- ---------Operating profit 875 2,820 5,323 ========= ========== ========= 4. Operating expenses Six months Six months ended ended Year ended 30-Sep-07 30-Sep-06 31-Mar-07 unaudited unaudited audited £'000 £'000 £'000 Distribution and Selling CostsSelling and marketing costs 1,994 1,922 4,169 --------- ---------- --------- Administrative ExpensesTechnical support 421 454 1,017Research anddevelopment costs 938 630 1,499Administrative costs 3,101 2,656 5,853Intangibleamortisation 63 - 109 --------- ---------- --------- 4,523 3,740 8,478 --------- ---------- --------- Total OperatingExpenses 6,517 5,662 12,647 ========= ========== ========= 5. Share of operating profit of joint venturesThe share of operating profit of joint ventures represents the Group'sshare of the results of 3dcd for the six months ended 30th September 2007.The operating profit of 3dcd is subject to taxation in the accounts of itspartners. 6. Finance income and expense Six months Six months ended ended Year ended 30-Sep-07 30-Sep-06 31-Mar-07 unaudited unaudited Audited £'000 £'000 £'000Financial income Interest income 33 69 96Foreign exchangelosses/(gains) on foreign currency deposits 4 (77) (106) --------- ---------- -------- 37 (8) (10) --------- ---------- -------- Financial expenses Interest expense (64) (53) (139) Foreign exchange losses on foreign currency borrowings 11 - - --------- ---------- -------- (53) (53) (139) --------- ---------- -------- 7. Taxation Charges for taxation relate to State taxes of £17,000 in America. These chargeshave been offset by the recognition of a deferred tax asset of £3,284,000 in theGroup's UK based companies which are now in a position to utilise past tradinglosses against future trading profits. 8. Earnings per share The calculations of earnings per share are based upon the following earnings andnumbers of shares. Six months Six months ended ended Year ended 30-Sep-07 30-Sep-06 31-Mar-07 unaudited unaudited audited Earnings £'000 £'000 £'000 Earnings for the financial period 4,126 2,210 3,921Intangible amortisation 63 - 109Share-based payments 394 300 413Deferred tax credit (3,284) - - ---------- --------- ---------Adjusted earnings forthe financial period 1,299 2,510 4,443 ========== ========= ========= Weighted average number of shares No. of No. of No. of shares shares shares For Basic earnings per share 50,375,875 50,911,445 50,766,763 ========== ========= ========= For Diluted earnings per share 54,180,401 53,362,516 54,406,383 ========== ========= ========= 9. Share capital and reserves Reconciliation of movement in capital and reserves attributable to equityshareholders Attributable to equity shareholders Share Share Translation Retained Total capital premium reserve earnings £'000 £'000 £'000 £'000 £'000 At 31st March 2,669 29,309 (1,251) (7,603) 23,124Total recognised income and expense - - (731) 4,126 3,395Share based payments - - - 394 394Own shares sold - - - 3 3Own shares purchased - - - (1,266) (1,266)Dividends paid - - - (506) (506) ---------------------------------------------------At 30th September 2007 2,669 29,309 (1,982) (4,852) 25,144 =================================================== The interim report has been sent to all shareholders. Further copies areavailable to members of the public from the Company's registered office, 40Phoenix Road, Crowther, District 3, Washington, Tyne & Wear, NE38 0AD. Theinterim report is also available on the Company's website, www.opsecsecurity.com. 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