21 October 2021

Croma Security Solutions Group Plc

("Croma", "CSSG", the "Company" or the "Group")

Final Results

Positive Trading Performance despite Pandemic

Croma Security Solutions Group plc, the AIM listed total security services provider, announces its final results for the year end ended 30 June 2021.

Financial Highlights

·    13% uplift in EBITDA to £1.98m (2020: £1.75m)

·    Generated revenue of £32.5m (2020: £32.3m) slightly above the prior year

·    Furlough and grant income of £0.76m (2020: £0.62m)

·    Increase in profit before tax to £1.21 m (2020: £0.09m)

·    Strong cash position of £5.4m as at 30 June 2021 (2020: £4.1m)

·    2.6% increase in total dividend for the year to 2.0p (2020: 1.95p) reflecting confidence in the outlook for all Group businesses

Trading Highlights

·    Successfully navigated the challenges arising from the pandemic balancing fulfilling contractual obligations whilst also protecting staff and the general public

·    Consistent demand for the Group's security services from existing customer base augmented by new client wins

·    PROception has developed into a natural extension of man guarding services

·    Signed UK partnership with iLOQ, leading Finnish security firm

·    All retail stores now fully open with trading improving month on month

Trading Outlook

·    Strategy remains focused on creating a national network of Croma Security Centres alongside setting new standards in providing premium guarding services.

·    Recorded positive trading period since year end, positioning the business for a good first half performance in the Group's next financial year.

Sebastian Morley, Chairman of CSSG, said,

"These results were ahead of internal expectations and reflect, in our view, the Group's operational resilience to the challenges generated by the pandemic. The business is well placed to deliver an increasing dividend income to shareholders whilst retaining a sufficiently strong balance sheet to support further investment. The combination is intended to offer our shareholders a combination of future income and capital growth."

For further information visit www.cssgroupplc.com or contact:

Croma Security Solutions Group Plc                                                             Tel: +44 (0)7768 006 909

Sebastian Morley (Chairman)

WH Ireland Limited                                                                                        Tel: +44 (0)207 220 1666

(Nominated Adviser and Broker)

Mike Coe

Jessica Cave

Sarah Mather

Novella                                                                                                              Tel: +44 (0)203 151 7008

Tim Robertson

Fergus Young

This announcement contains inside information as defined in the UK Market Abuse Regulations and is disclosed in accordance with the Company's obligations under those Regulations.

Chairman's Statement

I am very happy to present the trading results for this financial year.

The Group adapted quickly to the unique set of market conditions created by the global pandemic and delivered a resilient trading performance including an 13% increase in EBITDA to £1.98m (2020:£1.75m), and operating profits up to £1.3m (2020: £0.1m).  While revenues increased slightly, the step up in profitability came from a higher margin business mix and operational efficiencies secured in response at the outset of the pandemic which have since been maintained.  The Group also benefited from the UK Government's Job Support Scheme with income of £0.76m (2020: £0.62m).

From a management perspective, we believe the business is well placed with no long-term borrowings and £5.4m of cash to support future investment. All business units are performing well and we are seeing opportunities to expand organically and via acquisition.

Focused on servicing the premium end of the security market, Croma has a strong brand in a fragmented market with the objective of becoming the British security brand in Britain. Demand for the Group's premium security services remains high as individuals and businesses seek to protect themselves and their assets from a range of potential risks. To service this demand, we are creating a national network of Croma Security Centres.

The centres have evolved from the Group's retail stores to provide the full range of the Group's services from manned guarding to CCTV, intruder alarm and advanced security systems as well as high security locks. Currently there are 10 security centres and while the pandemic has slowed the acquisition of new stores there is a good pipeline of potential new sites to be pursued in the coming months.

Innovation and in particular, innovation through technology is a specific focus for the Group. We have a strong track record of early adoption where we see opportunity to differentiate and enhance our services. To this end, we recently signed an agreement to become the UK partner for iLOQ.  iLOQ is a leading Finnish security business with sales in excess of £66 million and within its portfolio of products is a potentially market changing lock which is opened and powered by a mobile phone.  An interesting opportunity for the Group.

Reflecting strong cashflow over the year, the Board is pleased to recommend a final dividend to shareholders of 2p per share and subject to approval at the Annual General Meeting to be held on 24 November 2021, the final dividend will be paid on 26 November 2021 to all shareholders on the register at the close of business on 12 November 2021.  The shares will be marked ex-dividend on 11 November 2021.

Like so many businesses we were tested in new ways by the pandemic, and it is very pleasing to be able to say that the business weathered it well.  Our teams adapted quickly to the new environment, we not only continued to service our client base but were able to win and service new clients.

The next 12 months will bring new opportunities, as there are many companies in our sector who have not fared so well and need to find partners or acquirers to be able to continue to pursue their commercial goals. We are in dialogue with a range of potential partners and acquisition targets, but we are, as ever, cautious in our approach and any decision will be preceded by detailed due diligence.

Looking ahead, the Board is confident in the prospects of business. This is confidence is reflected in the Board's decision to approve a 2.6% increase in the total dividend for the year.

Sebastian Morley - Chairman

20 October 2021

Operational Review

The Directors present the Group Strategic Report for Croma Security Solutions Group plc and its subsidiary companies for the year ended 30 June 2021

The Group's strategic objectives are: 

·    to deliver market leading full-service security offerings to the upper quartile end of both large corporations and government.  Achieved by maintaining quality of service as a priority, focusing on meeting the full range of our clients' security needs, and leveraging our brand and client base;

·    to produce consistent growth in financial performance, by maintaining our margins and managing our costs.  Acquisitions will be pursued only when they can be seen clearly to add value to the Group;

·    to develop and bring to market new technologies; and

·    to deliver attractive shareholder returns.

The Group's longer-term objectives are:

·    to grow our core offerings in the UK and abroad until we are the security provider of choice to leading large corporates;

·    to expand our service offering to include e-security; and

·    to develop specific high-end national projects.

The maintenance and expansion of solutions to the present client base is fundamental.  The Group continues to expand the services to long-term clients, some of whom currently use a diverse range of contractors, in order to bring all their needs under one roof when this makes good business sense for both parties.

The performance of each business segment is discussed below:

Croma Vigilant

Croma Vigilant, our largest division, generated sales of £27.4m (2020: £27.0m) and operating profit of £1.1m (2020: £1.1m).  This is a good result given the backdrop of the ongoing pandemic reflecting consistent demand from existing customers and new clients won over the year.

Croma Vigilant provides manned guarding for assets and individuals and now employs over 900 security personnel throughout the UK. Fundamental to the division's success is the military ethos that pervades all aspects of the way the division is run, and all contact with customers. Alongside this approach is a focus on innovation. In 2019, the Company launched PROception, a new front of house of concept, making the modern reception part of a building's security strategy. An innovative proposition, PROception was successful very quickly and is now a central component of nearly all our new building security contracts where there is a need for front of house services.

Following on from the previous year, our security teams continued to work well together to adapt to the new environment whilst implementing all safety precautions set out by the UK government and operating with the necessary PPE workwear, at all times.

Contracted revenues over a period exceeding one month represented approximately 82% (2020: 84%) of income, ensuring that the Company continues to have good visibility over the reliability of future revenues.  There was a similar split in income to previous years between private and public, of approximately two thirds/one third respectively.

Since the year-end, Croma Vigilant has continued to perform well with demand consistent with internal forecasts.

Croma Security Systems

Croma Security Systems including Croma Biometrics recorded sales of £2.45m (2020: £2.46m) and an operating profit before impairment of £0.54m (2020: £0.28m).

In support of the Group's focus on providing total security solutions, Croma Security Systems continues to provide a full range of electronic security solutions including CCTV, high security locks to FastVein™  biometrics technology for high-speed human identification.

Due to the pandemic, the restrictions and closure of entertainment venues impacted sales and orders from our cinema customers, however maintenance and monitoring income from annual contracts, mainly from Croma installed systems, improved to £0.45m (2020: £0.33m).

Last year, the Company gained a licence from the Financial Conduct Authority ("FCA") to enable the sale of product and services on a deferred payment or credit basis.  This has yet to be fully exploited.

Croma Locksmiths

Croma Locksmiths, which operates through 10 security centres on the south coast of the UK and centrally through the Group, delivered a resilient performance with sales of £2.64m (2020: £2.89m) and operating profit before impairment of £0.34m (2020: £0.36m). 

Due to the pandemic some centres were closed or operating at reduced opening hours.  Following the ending of government restrictions on the retail sector in 2021, trading has been moving back to normalised levels with pleasing levels of orders from our cruise ship customers.

This year the Company agreed to become the UK partner for iLOQ. Specialising in locks, iLOQ has developed a new battery less door lock which can be opened by a smartphone. The lock is powered by the mobile phone opening it, a feature clearly differentiating it from many competing products. The potential applications for the mobile iLOQ are significant across multiple industries given its' advantages relating to security, data collection and central control.  Under the partnership,  Croma will sell, install, integrate, and maintain iLOQ products in the UK.

We remain focused on creating a national chain of modern security centres. The pandemic has limited the ability of the Group to add new stores, however, there is a good pipeline of potential acquisitions which are typically independent security stores often family run. Target stores are all located in affluent areas and are large enough to be converted into security centres. To date, the conversions have all successfully increased revenues and profitability by offering a full range of products and services to both private individuals and commercial customers.

Trading in the security centres is returning to normal following re-opening and unless there is further disruption from Covid-19 the division is well placed to continue to expand.

The Group achieved 13% growth in EBITDA by a combination of a savings in overheads and an increase in other operating income.  Operating profit was not impacted by an impairment charge enabling us to deliver positive earnings per share of 6.56p.

Other operating income comprised mainly income from the UK Government's Job Support Scheme.  The scheme has served its purpose and we do not anticipate any redundancies after the scheme closed on 30 September 2021.

Cash generated from operations remained positive at £2.2m (2020: £3.0m).  The prior year benefited from an influx of cash from the collection of overdue debts and deferment of HMRC liabilities as we entered the first lockdown.

Outlook and future developments

With all operating divisions profitable, and central overheads holding steady, the increase in cash reserves to £5.4m, and with a £1m bank facility secured on the debtor book, the Board believes the Group is a good position to pursue acquisition opportunities, win new contracts and develop its iLOQ partnership, whilst expanding and improving existing refurbishing infrastructure as demand continues to return to pre-pandemic levels.