Thing is this company relies more on large contracts in its security work, the checking of vaccinated people maybe be more through a bar coding system installed on ones smartphone as far as tracking concerned. Most establishments already use general doormen with SIA accreditation, unless their Fastvein technology could be modified to be applied. That seems to have fallen by the wayside in application by organisations. |
It occurs to me that with the likely usage of COVID passes/vaccination certificates, in whatever form, and whether for sports/music/any indoor events or even for restaurants/pubs (unlikely imo), there may be a big opportunity for CSSG in terms of the necessity for a huge increase in front of house reception and security staff. |
U might be right, but it is apparent by looking at the company website that very little has been updated since 2019, these are generally the shop window for a company. I should move on from here but it is hard to close a position with the illiquidity in the market, and I am not prepared to get out with no limit. No one else seems to be bothered, the two main directors were paid £400K between them in 2019 alone, that is a considerable amount relative to operating profits. Is that value for money? |
I think that you should sell Croma and move on bookbroker. You don't rate the Chairman, the broker or the company's strategy and your posts, which constitute a third of all the posts on this thread, are just largely repetitive. The CEO, Fiorentino is an experienced player in the security sector and does not appear to have much of a military background.
This is a very illiquid small cap and the shareprice in companies like this can easily rise or fall on very small volumes. Today, there were just 5 trades totalling 14,292 shares and the bid dropped by just 1p on a wide spread. You would probably be more comfortable investing in a larger cap with good liquidity. |
So much for the director purchase, Morley is doing a shocking job of creating value, it’s time this company appointed a businessman to run this company, not have some ex Army officer with no formal accounting qualification. What is going on here? |
RNS - director buying. Whodathunkit :o))
It was an Exec. Director who bought that £10k of shares yesterday to take his holding to almost 200,000 shares. Good to see: |
A tick up :o)) After a £10,000 buy at 74.3p...just needs a little push to look good chart-wise. |
This company needs a little bit more ambition, security is a growth industry, even if this one appears happy to trundle along at a snails pace. I think here management are just satisfied to be in business tomorrow, but sure the security centre side of things could ratchet up its aspirations. They talked about land and expand, so far there is no sign of the landing module, stuck somewhere in outer space I imagine. So the valuation is about where it was, or less, than ten years ago. What is going on, please no more bouncers on the minimum wage, I see there is now a major shortage of them post Covid. |
Not sure if that is the case to be honest, let’s not be hyperbolic! |
CANACCORD clients are dumping. |
Like to know what Canaccord’s agenda is here, increases holding then decreases, and so forth. Noticed the large block go through t’other day. Maybe a Cross trade or someat. This company needs to get its act together, they seem oblivious to shareholder interest, is Morley just shagging arrogant or ignorant. Let’s see some desire for Christ’s sake. |
Curious to know what is holding this company back from investing further in the security centre model, they seem exceedingly cautious when they understand the existing model works ok, a more dynamic approach would be useful. They talk continuously about options, just bloody get on and make a decision rather than analyzing the whole time. |
I've been in touch with the analyst at WH Ireland and pressed him on the production of new forecasts - he was actually extremely responsive and in agreement that these were necessary. He's "keen to reinstate forecasts" in an underpromise and overdeliver manner. Which imo suggests that perhaps it's the company who are reluctant to agree numbers until say the pandemic has begun to ease and things become clearer.
Hopefully we won't have to wait long given the excellent progress with vaccinations. |
Cheers, rivaldo. I wish they would commission WHI to do some proper forecasts, however, this is the second or third "first light" output from them.
On valuation, I do include a credit for what I identify as "excess cash". This is cash projected to 18 months after their last published results, less my assessment of the amount of cash they need to hold as working capital without the dividend coming under threat. This latter figure looks at historical cash drawdowns over successive periods from the cash flow statements, adjusting out any discretionary spend (e.g. acquisitions). I am including credit for £3.2m excess cash using this method. |
 EC, your thoughta are appreciated.
My own valuation would be higher as imo the £3.9m cash pile against the £10.9m m/cap is so substantial that one should produce a valuation which includes this sum rather than just a P/E based target.
Particularly as CSSG are likely to make an earnings-enhancing acquisition using this asset in the near future.
WH Ireland have produced a new note on CSSG - this is a "First Light" note and doesn't include forecasts, so I assume this is an initial take which will be expanded upon soon:
"Croma Security Solutions (CSSG) –Corporate –Half Year Report:
Covid disruption held to minimum; well-placed for the full year
Market Cap £10.7m Share Price 72p
Generating £0.9m EBITDA in the six months to December 2020 (H1-21E), CSSG has produced a highly creditable set of H1 results, particularly set against the backdrop of the second lockdown, which partially impacted their business as before. Sales overall at £16.4m tailed H1-20A by just 6%, while EBITDA saw a £200k-plus reduction YoY –but it is important to note that this includes some one-time business which was in any case in run-off irrespective of Covid / lockdown, as previously flagged by the company. Net cash at £3.6m is meaningfully up by 89% YoY, reflecting the cash-generative qualities of the business even in difficult times. Encouragingly, trading patterns are good in the current calendar year (FY-21E H2 from thecompany’s reporting perspective).
Divisionally, thanks to Covid, this is a tale of varying developments, with the well-respected Vigilant manned guarding operation (manned by ex-military personnel and now offering a well-received front-of-house service) suffering little or no impact from the pandemic –in fact, possibly emerging as a net gainer, and succeeding in growing revenues by as much as 6%. Again, this is highly creditable since we estimate that H1 run-off work may have declined by as much as £100k YoY. In Systems and Locksmiths, revenues fell YoY, inevitably, given that trading was below normal levels due to Lockdown 2; however sales grew strongly as against the second half of the prior year, by some 31%, a tribute to the fact that CSSG’s Locksmith centres were able to open for the whole of the six months to December ’20, as they were not in the first lockdown. That said, Security Systems clients such as entertainment venues remained closed, -bearing everything in mind, we view this as a very decent outcome at the divisional level.
WHI view:
We expect similar dynamics as before to continue to play out in H2, in other words (1) good underlying growth from Vigilant, which continues to fire on all cylinders, (2) the non-underlying business flagged previously to have been concluded, (3) lockdown generating its own security concerns which are answered by manned guarding supporting Vigilant, (4) continued recovery within the Security Systems and Locksmiths businesses, moderated by Lockdown 3. Looking further forward, we view the company as a gainer from renewed economic activity looked for in the second half of calendar 2021, and see future opportunities within the increased emphasis on security, the strong brands within the group (notably Vigilant) and the excellent track record in winning prestigious local authority and other contracts. The company has highlighted potential consolidation opportunities going forward, and this too seems very believable." |
Fully appreciating the low margin element to the business. That is why the retail side should be expanded. |
I have certainly been shown to be wildly optimistic in my first projections in late-2019, with current actual earnings less than half the level that I forecast. As a result, I am currently sitting on a large loss.
I have not sold, however, because I feel that the story behind the six points that I set out in my investment case remains broadly intact.
As to multibagging, CSSG currently has an £11m market cap. I don't see why they shouldn't be able to triple the size of the business over the next five to ten years. Combine that level of growth with operational gearing and multiple expansion and you have a multibagger on your hands.
The fly in the ointment is their failure to grow for three years. I need the management to demonstrate that they can deliver top line growth. |
It certainly has the possibility to develop, the Fastvein technology is a load of hot air, mentioned many times but is irrelevant. They talk a lot about options in their reports, but never seem to grasp the nettle. This time it mentions other businesses approaching them in the security guarding sector to link up, but why do CSSG need to do that, they have enough expertise and reputation to grow their own business by tendering for contracts. It may be a fragmented industry, but the barriers to entry relatively low, certainly to getting SIA certification. Reputation is everything, and companies like Showsec on the the Manchester Arena contract show that their staff are sufficiently trained to deal with such a serious situation. |
You seem to have been wildly optimistic, one of your above comments in the header article saw CSSG as a multi-bagger, so your tune has changed considerably, and I am not sure which part of the business you imagined would make such a meaningful contribution. I believe the security centres have considerable scope for growth, but Morley is so bloody cautious, he needs to appoint some more experienced non-execs to the board if he is not sure how to execute the business plan. |
Header updated as follows:
Revised projections based on the interim results.
Revenue .................. 2021 £33.4m .... 2022 £35.5m
Reported net profit ...... 2021 £0.53m .... 2022 £0.70m
Adjusted net profit ...... 2021 £0.65m .... 2022 £0.78m
Reported EPS ............. 2021 3.55p ..... 2022 4.71p
Adjusted EPS ............. 2021 4.36p ..... 2022 5.25p
Dividend per share ....... 2021 2.15p ..... 2022 2.36p
Net cash ................. 2021 £3.82m .... 2022 £3.88m
The COVID-impacted 2020 H2/2021 H1 have demonstrated that CSSG can perform profitably even under the most trying circumstances, so downside appears to be limited and the business should be able to reliably keep pumping out enough cash to support a gently progressive dividend. However, top line is the issue here. Revenue showed strong growth up to 2018 H1, but then came to a grinding halt. The business is on the cusp of gaining substantial benefits from operational gearing, if and when they are able to resume a meaningful top line growth trend. If they cannot do that organically, which recent years indicate may be the case, then acquisitions are an alternative route. Encouragingly, in this regard, the interim statement notes the "interesting opportunities which have emerged as a result of the pandemic".
My projections assume that revenues recover to historical peak levels by 2022 H2. With these assumptions, and assigning CSSG a target adjusted PE ratio set to 75% of the market average, my valuation increases to 89.5p per share. At 22% above the current price, this represents a BUY under my methodology.
I won't be adding to my holding, however, until I see definitive evidence that revenue is increasing at least in line with my projections. I do believe that the Croma business model presents a real opportunity to grow in a fragmented market and the lack of delivery here in recent years has been disappointing. If management cannot achieve at least £18m of half-year revenue by 2022 H2, then I would advocate that the business be put up for sale. |
Very illiquid with circa 56% of the shares are held by insiders plus 3 external holders.
Insiders
R M Fiorentino (CEO): 26.2%
Other 5 directors: 7.0%
Total Insiders: 33.2%
Other major shareholders
Canaccord Genuity Group Inc: 12.25%
Liontrust Investment Partners LLP: 5.20%
Francis Erard: 5.00%
Sub Total: 22.45% |
Moving up! Looks like a 27k buy at 74p did the trick. |
And thoughts about not paying dividend reflect likelihood of making some sort of acquisition. Growing the security centre side is the most logical thing to do, they can already offer a complete service, so why not expand out of the south east to other large metropolitan areas, areas like Knutsford, Hale, etc. Affluent areas with large gated properties would seem relevant. |
Figures are fine, be nice if they had mentioned expansion of security centre side of business, very cautious management here, talk a lot on an annual basis of growing the business, I’d like to see words put into actions. |
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