Final Results for the Year to 30th June 2010 (9160W)

TIDMCMG

RNS Number : 9160W

Croma Group PLC

29 November 2010

CROMA GROUP PLC

("Croma" or "the Group")

FINAL RESULTS

FOR THE YEAR TO 30TH JUNE 2010

The Board of Croma, the AIM listed asset protection, avionics, and access security and installation systems specialist, is pleased to announce its final results for the year to 30th June 2010 which reflect a further improvement in trading and operating profit and an increased pre tax profit.

KEY POINTS

-- A pre tax profit of GBP90,227 compared to GBP11,711 in the previous year.

-- Turnover increasing by 8% to GBP7.04 million.

-- An improvement in gross profit of GBP234,892 and improvement in operating profit of GBP44,996.

-- The effect of contract wins not fully reflected in 2010 accounts and will impact on current year.

-- The cash generation from operating businesses has improved significantly and all are profitable.

-- Discussions continuing over potential sale of RDDS Avionics subsidiary.

Nick Hewson, Non-Executive Chairman of Croma, said "The year represented another year of steady and positive progress. The successful restructuring of the Group has now been completed and we can for the first time show two successive years of profitable results. The three key business areas of the Group, asset protection including man guarding and key holding (Vigilant), avionics (RDDS), and access security and installation systems (Photobase), all showed their strengths during the period.

Perhaps the most telling point to make about the three businesses is the level to which all three continue to report strong sales despite the current economic climate. Overall, margins have improved, although certain of the new business of the avionics subsidiary, RDDS, carries lower margins, but it spreads the customer net wider, which is a positive step in these markets."

An electronic copy of the annual report is available from the Group's website www.cromagroup.co.uk and copies have been sent to shareholders together with the Notice of AGM.

For further information, contact;

 
 Sandy Fraser, Brewin Dolphin (NOMAD)   Tel: [phone] 
 Sebastian Morley, Croma Group          Tel: [phone] 
  PLC, CEO 
 

CHAIRMAN'S STATEMENT

FOR THE YEAR ENDED 30 JUNE 2010

I have pleasure in announcing the results of the Group for the year ended 30 June 2010.

Financials

The year represented another year of steady and positive progress. The successful restructuring of the Group has now been completed and we can for the first time show two successive years of profitable results.

Sales improved comfortably during the year reaching over GBP7m against GBP6.52m for 2009. Gross profit was increased to GBP2.19m (2009: GBP1.95m) and profit from operations was ahead at GBP292k (2009: GBP247k). Due to lower finance charges, the pre-tax profit for the year was over GBP90k against the prior year at GBP12k.

The profit attributable to shareholders for the year is GBP90,227 due to no tax charge for the year, against the profit attributable for 2009 of GBP52,902 which was assisted in part by a GBP41k tax credit. Due to the continued improvement in trading, we have now exhausted most of our tax losses within the subsidiaries, and we expect to have a higher effective tax rate in future periods.

Business Review and outlook

The three key business areas of the Group, asset protection including man guarding and key holding (Vigilant), avionics (RDDS), and access security and installation systems (Photobase), all showed their strengths during the period and the financial results of those business are set out in more detail in the Directors' Report.

Perhaps the most telling point to make about the three businesses is the level to which all three continue to report strong sales despite the current economic climate. Likewise, margins have improved, although certain of the new business of the avionics subsidiary, RDDS, carries lower margins, but it spreads the customer net wider, which is a positive step in these markets.

The Vigilant security business won its largest ever contract during the period and the success of the implementation of that contact and its geographical location in the South of England, together with the fact that it is an important contract with the private sector, both widens the national reach of the business as well as broadens the client base away from MOD and quasi-government or local government business which the Board currently feels may be more under threat from potential central government initiatives to find cost savings in budgets generally from April 2011.

The new business won by Vigilant, worth over GBP3.5m on an annualised basis, has only contributed to the period under review since May 2010 so we can expect that new business to make a considerable difference to the results to the half year to December 2010 and the full year to June 2011 and of course thereafter.

The Board is constantly reviewing opportunities to improve the effectiveness and efficiencies within the three subsidiaries, as well as considering more strategic opportunities as and when they may arise. After the year end, the Board took the decision to target the facilities services sector as the engine of the Group's future growth, primarily based upon the continuing success of Vigilant in expanding its spread of clients and contracts. We announced on 28 July 2010 that we had entered into discussions to sell the RDDS subsidiary, and talks are ongoing in this respect and I look forward to reporting further progress in due course.

The restructuring of the business has enabled Croma to perform robustly in challenging times and the Group has continued to grow profitability and improve cash flows. The Group has taken the opportunity to repay more expensive non convertible loan finance in the period under review and as discussed more fully in the notes to the accounts is actively considering the most appropriate means of managing the upcoming redemption dates on its convertible loan notes which may be assisted by the banking sector which is now offering finance at more sensible rates.

The Group is now profitable and well placed to act when and where the right opportunities come along. The success of our new business gained over the period under review is testament to this. This is in no small way due to the efforts of our management and staff and I thank them wholeheartedly.

Nick Hewson

Non-executive Chairman

26 November 2010

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 30 JUNE 2010

 
                                            2010            2009 
                                             GBP             GBP 
 
 Revenue                               7,036,860       6,519,436 
 
 Cost of sales                       (4,848,573)     (4,566,041) 
                                   -------------   ------------- 
 Gross profit                          2,188,287       1,953,395 
 
 Administrative expenses             (1,896,394)     (1,706,498) 
                                   -------------   ------------- 
 Profit from operations                  291,893         246,897 
 Finance income                                -           2,231 
 Finance expense                       (201,666)       (237,417) 
                                   -------------   ------------- 
 Profit before tax                        90,227          11,711 
 
 Tax credit                                    -          41,191 
                                   -------------   ------------- 
 Profit and total comprehensive 
  income                                  90,227          52,902 
                                   -------------   ------------- 
 Profit for the year and 
  total comprehensive income 
  attributable to owners 
  of the parent                           90,227          52,902 
                                   -------------   ------------- 
 Earnings per share for 
  profit attributable to 
  the ordinary equity holders 
  of the parent during the 
  year 
 
 Basic and diluted (pence)                  0.05            0.03 
 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 30 JUNE 2010: COMPANY NUMBER 3184978

 
                                2010          2010          2009          2009 
                                 GBP           GBP           GBP           GBP 
 Assets 
 Non-current assets 
 Property, plant and 
  equipment                                233,863                     180,653 
 Goodwill                                2,148,650                   2,148,650 
                                      ------------                ------------ 
 
                                         2,382,513                   2,329,303 
 
 Current assets 
 Inventories                 189,385                     282,035 
 Trade and other 
  receivables              2,271,121                   1,720,618 
 Cash and cash 
  equivalents                187,248                       3,674 
                          ----------                ------------ 
 
                                         2,647,754                   2,006,327 
                                      ------------                ------------ 
 Total assets                            5,030,267                   4,335,630 
 Liabilities 
 Non-current liabilities 
 Convertible loan notes    (379,856)                 (1,339,120) 
 Provisions                 (28,900)                    (15,000) 
 Trade and other 
  payables                  (32,162)                           - 
 Deferred tax                (1,373)                     (2,828) 
                          ----------                ------------ 
                                           442,291                   1,356,948 
 Current liabilities 
 Convertible loan notes    (965,068)                           - 
 Trade and other 
  payables                 (313,412)                   (353,926) 
 Tax                       (450,609)                   (241,325) 
 Accruals and deferred 
  income                   (413,853)                   (358,660) 
 Bank overdrafts and 
  loans                    (632,342)                   (561,383) 
                          ----------                ------------ 
 
                                       (2,775,284)                 (1,515,294) 
 Total liabilities                       3,217,575                   2,872,242 
                                      ============                ============ 
 Net assets                              1,812,692                   1,463,388 
                                      ============                ============ 
 Issued capital and 
  reserves attributable 
  to owners of the 
  parent 
 Share capital                             189,338                     177,384 
 Share premium                             247,123                           - 
 Profit and loss reserve                 1,188,150                   1,097,923 
 Other reserves                            188,081                     188,081 
                                      ------------                ------------ 
 
 Total equity                            1,812,692                   1,463,338 
                                      ============                ============ 
 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 30 JUNE 2010

 
 2010 
                                               Profit and 
                   Share         Share         loss          Other     Total 
                   Capital       Premium       reserve       Reserve   equity 
                           GBP           GBP           GBP       GBP         GBP 
 At 1 July 2009        177,384             -     1,097,923   188,081   1,463,388 
----------------  ------------  ------------  ------------  --------  ---------- 
 Changes in 
 equity for 
 year                   11,954       247,123             -         -     259,077 
----------------  ------------  ------------  ------------  --------  ---------- 
 Profit and 
 total 
 comprehensive 
 income for the 
 year                        -             -        90,227         -      90,227 
                  ------------  ------------  ------------  --------  ---------- 
 Total 
 recognised 
 income and 
 expense for the 
 year                        -             -        90,227         -      90,227 
 Balance at 30 
 June 2010             189,338       247,123     1,188,150   188,081   1,812,692 
                  ============  ============  ============  ========  ========== 
 
 
 2009 
                                               Profit and 
                   Share         Share         loss          Other     Total 
                   Capital       Premium       reserve       Reserve   equity 
                           GBP           GBP           GBP       GBP         GBP 
 At 1 July 2008      9,161,453     1,388,522   (9,274,118)   188,081   1,463,938 
 Profit and 
 total 
 comprehensive 
 income for the 
 year                        -             -        52,902         -      52,902 
                  ------------  ------------  ------------  --------  ---------- 
 Total 
 recognised 
 income and 
 expense for the 
 year                        -             -        52,902         -      52,902 
 Capital 
 reduction and 
 re-organisation   (8,984,069)   (1,388,522)    10,372,591         - 
 Share option 
 credit                      -             -      (53,452)         -    (53,452) 
 Balance at 30 
 June 2009             177,384             -     1,097,923   188,081   1,463,388 
                  ============  ============  ============  ========  ========== 
 
 

CONSOLIDATED STATEMENT OF CASHFLOWS

FOR THE YEAR ENDED 30 JUNE 2010

 
                                                     2010         2009 
                                                      GBP          GBP 
 Cashflows from operating activities 
 Profit before taxation                            90,227       11,711 
 Adjustments for: 
 Depreciation                                      75,516       44,499 
 Loss on sale of property, plant and 
  equipment                                         6,706        8,077 
 Amounts relating to share based payments               -     (53,452) 
 Onerous lease provision                           13,900       15,000 
 Financial income                                       -      (2,231) 
 Financial expenses                               201,666      237,417 
                                              -----------  ----------- 
 Cashflows from operating activities 
  before changes 
 in working capital and provisions;               388,015      261,021 
 Decrease in inventories                           92,650       17,284 
 Increase in trade and other receivables        (550,503)    (236,215) 
 Increase/(decrease) in trade and 
  other payables                                  217,803    (191,187) 
                                               __________   __________ 
 Cash generated from operations                   147,965    (149,097) 
 Interest received                                      -        2,231 
 Interest paid                                  (158,995)    (194,145) 
 Income taxes                                           -       28,603 
                                               __________   __________ 
 Net cashflows used in operating activities      (11,030)    (312,408) 
 
 Investing activities 
 Purchase of property, plant and equipment      (139,432)     (52,817) 
 Proceeds on disposal of property, 
  plant and equipment                               4,000       54,148 
                                               __________   __________ 
 Net cash used in investing activities          (135,432)        1,311 
 Cash flows from financing activities 
 Issue of loan notes                                    -      150,000 
 Repayment of borrowings                        (150,000)     (40,722) 
 Issue of share capital - cash issue              259,077            - 
                                               __________   __________ 
 Net cash from financing activities               109,077      109,278 
                                               __________   __________ 
 Net decrease in cash and cash equivalents       (37,385)    (201,799) 
                                               __________   __________ 
 Cash and cash equivalents at beginning 
  of year                                       (407,709)    (205,910) 
                                               __________   __________ 
 Cash and cash equivalents at end 
  of year                                       (445,094)    (407,709) 
                                                =========    ========= 
 

Note 1 - Basis of preparation

The financial information set out above does not constitute the company's statutory accounts for 2009 or 2010. Statutory accounts for the year to 30 June 2009 and 30 June 2010 have been reported on by the Independent Auditors. The Independent Auditors' Report on the Annual Report and Financial Statements for 2009 was unqualified, did not draw attention to any matters by way of emphasis, and did not contain a statement under 498(2) or 498(3) of the Companies Act 2006. The Independent Auditors' Report on the Annual Report and Financial Statements for 2010 was unqualified, but did draw attention to matters by way of emphasis relating to the basis of preparation which are reproduced below, and did not contain a statement under 498(2) or 498(3) of the Companies Act 2006. Statutory accounts for the year ended 30 June 2009 have been filed with the Registrar of Companies. The statutory accounts for the year ended 30 June 2010, prepared under IFRS, will be delivered to the Registrar in due course.

Note 2 - Going Concern

The Group's activities are funded by a combination of long term equity capital, convertible loan notes, and short term invoice discounting and bank overdraft facilities. The day to day operations are funded by cash generated from trading and primarily invoice discounting facilities.

In considering the ability of the Group to meet its obligations as they fall due, the directors have considered the following matters: the expected trading and cash requirements of the group and the potential cash outflows associated with the convertible loan notes whose 5 year maturity schedule commences in June 2011.

From a trading perspective, whilst there are inevitable pressures from the current general economic climate, the Board remains positive about the retention and outlook of its main trading operations. The full year effect of recent contract wins have been factored into the Board's profit and cash flow projections, as have reasonably possible changes from the current economic climate. These projections suggest that the Group will meet its obligations as they fall due with the use of existing uncommitted invoice discounting facilities, notwithstanding the additional funds required for refinancing or repaying the convertible loan notes discussed below. As the invoice discounting and overdraft facilities fall due for review in the coming year, based on the informal discussions the Board has had with these finance providers, they have an expectation that these facilities will continue to be available to the Group for the foreseeable future.

In consideration of the potential cash outflows associated with the convertible loan notes, the holders of the loan notes have the option to either convert their debt into equity in the Group or repayment in cash on the due dates. Given the current share price the Directors consider it is unlikely that the debt will be converted into shares. The redemption profile is as follows:

-- GBP800,000 on 20 June 2011

-- GBP200,000 on 30 June 2011

-- GBP120,000 on 20 December 2012

-- GBP200,000 on 29 January 2013

-- GBP100,000 on 28 February 2013

The Group's cash flow from operations are not expected to be sufficient to finance the redemptions on the due dates and accordingly either new funding facilities will need to be put in place to finance the redemptions, the redemption dates deferred or funds generated from other sources. The Directors have obtained indications of intent from various parties who may be willing to provide such finance as may be required to fund the loan note redemptions due for June 2011, but these indications have not been formalised as contractual offers to provide such funds.

The Board maintain a close working relationship with the holders of these loans and expect to discuss maturity options with the loan note holders in the near future and have obtained indications of a willingness to enter into such negotiations from the note holders. The Board note that if the RDDS Avionics subsidiary is disposed of, it is likely sufficient cash will be raised to meet the June 2011 maturity payments. However, no sale has yet been agreed.

The Directors are confident that adequate funds will be raised to fund the redemption or redemption dates deferred; however, there can be no guarantee that these funds will be raised or redemption dates deferred.

The financial statements do not reflect the adjustments that would be necessary were the trading performance of the Group to deteriorate and/or the funding available from invoice discounting and the overdraft was not available. Furthermore, the reliance by the Group to raise additional funding to finance the loan note redemption or to successfully negotiate the redemption date of its loan notes indicates the existence of a material uncertainty which may cast significant doubt about the Group's ability to continue as a going concern. The financial statements do not include the adjustments that would result if the Group was unable to continue as a going concern.

This information is provided by RNS

The company news service from the London Stock Exchange

END

FR EAKFKADDEFFF