Errr if Vigilant doesn´t produce any cash to repay the loan notes then it presumably won´t be worth anything much! Step-in rights to a waste of corporate space! |
EezyMunny,
Anyone using their brain would have read the announcement thoroughly before posting here:
"In the event that the buyer defaults on any one payment due to the company under the loan notes the company shall have step-in rights to assume control of Vigilant at board and shareholder level" |
"given the way cash has exited through the revolving door recently."
can you give some info about that ?
"revolving door"....you infer that the cash that exited then came back ?! |
Anyone using their brain would see the bear case i.e. Vigilant´s new owners not being able to service/repay the loan notes.
8.2m market cap at 55p? Doesn´t set my pulse racing, given the way cash has exited through the revolving door recently. |
Yes, 4.5% p.a. is not inspiring, but all repaid as cash within three years. Also the redeemable preference share is redeemed in one year. So not too long to wait for all the cash. |
Today's RNS confirms the sale of Vigilant for an excellent £7.57m of total cash receipts including intercompany repayments - compared to the £7.1m m/cap.
Pretty good for a business which made £0.7m operating profit in the last full year and only £0.13m PBT in the last six months.
Plus CSSG retain the growing security centre business which made almost £0.5m EBITDA in the last 6 months.
There's a lot of deferred consideration in one form or another, but this strikes me as a rather good deal.
And today's trading update reads very well:
"Separately, the Group has continued to trade well and we have had a strong second half to the year which ends in June 2023 and we expect to report overall trading comfortably ahead of last year."
"Following the Disposal the Continuing Group's business will comprise Croma Locks and Croma Systems where margins are high (relative to Vigilant) and cash generation remains strong and where the Board believes there are good opportunities for profitable growth." |
Pretty much the entire market cap in sale proceeds and inter company loan if I read this right. I don’t hold but those that do must be pleased to know that the remaining businesses are in for free give or take. |
Well the headline looks impressive but I'm not overly impressed by the detail. The rate on those loan notes looks distinctly like mates rates to me. |
So, Croma Security Solutions (LON:CSSG) have sold their Vigilent subsidiary for £6.5m (albeit not all cash up front). The price represents 92% of Croma's market cap, whereas the business sold contributed an average of 36% of Croma's EBITDA over the last two financial years.
The remaining businesses - Croma Locksmiths and Croma Security Systems - are trading "comfortably ahead of last year", although reported results will "be impacted by a number of one-off exceptional costs incurred in relation to Vigilant and the Disposal". The intent is to invest the proceeds of the sale into growing the remaining businesses.
As they stand, the remaining businesses are tiny but, in my opinion, the share is materially undervalued at current levels. |
The H1 results today look pretty good as regards:
- the continuing business is trading well, with revenues and EBITDA up 25% and 18%
- the sale of Croma Vigilant looks set to complete within the next couple of months (before the 30/6 year end)
- CSSG still have a £0.6m cash pile. The m/cap is only £7.5m, yet Vigilant is a business which had almost £16m turnover in H1 and potentially £0.8m or more PBT per annum for a buyer based on prior results - this can surely achieve a sale of anything from £3m at minimum and maybe much more?
- the iLOQ partnership looks to be very good news and has started well
Hopefully the share price is now at the bottom and perhaps can begin to bounce from here. |
You win some, you lose some, darryn. |
Must be a rather painful position here for Effortless Cool who is now down £100,000, or £90,000 after deducting dividends received. It would be difficult to significantly reduce, let alone completely extract from that position since very small caps with a market cap of less than £8 million are so illiquid. |
I wonder if we'll get any news on the disposal of Vigilant in the near future? The market doesn't seem to think it's going to go for a good price but I would hope for around £5m for it. |
 WH ireland's latest update is out, and once again includes no forecasts, but is at least a decent summary of where CSSG are at following the Safecell acquisition:
"Croma Security Solutions (CSSG) – Corporate – Complementary acquisition in security and locksmiths’s reflects significant m&a opportunities
Market Cap: £8.9m Share Price 55.5p
This morning’s RNS from CSSG provides further colour to the significant m&a /
consolidation opportunities in security systems and locksmith’s following the recent AGM update which outlined the potential divestment of CSSG’s specialist guarding services. A price of c.£0.75m for Safecell Security Group equates to a sub-4x historic PBT multiple based on the eleven months to November 2022, an undemanding multiple in our opinion.
Moreover, based in Manchester, the acquisition is highly complementary from a
geographical point of view, since the company already has activities in Bury, North of Manchester as well as the Safeguard business in Warrington which the company acquired last year.
We view the acquisition, although small, as very supportive of CSSG’s business going forward: (1) We note that experienced management at Safecell is staying with the business; (2) bringing the two Manchester operations together with this one is likely to create operational synergies, (3) cross-sells of the spread of services within the group are likely. Safecell is primarily a security systems business, with margins to match – typically these are 20% or more at an operating level, as reflected in CSSG’s own historic margins.
As a synergistic opportunity, Safecell is likely to enhance the overall margin while, as stated in the announcement, providing earnings enhancement.
WHI view: With significant change at group level waiting potentially in the wings (the disposal of Vigilant removes 83% of sales but less than half of operating profits), the company as a whole is becoming a higher margin business - respectively 14% and 19% at Locksmith’s and Systems in reported FY22A EBIT margins in the prior year, as opposed to the low single digit margins for Vigilant which are typical of a manned guarding business.
As the company has highlighted before, the consolidation opportunities continue to be strong as well as the prospect of building a national security centre. In relation to Vigilant, it is important to remember that disposal discussions are said to be at an early stage and that there is no inevitability to the proposed divestment either to members of the management team or anyone else. However, assuming that the divestment does occur, we read this morning’s announcement as helpful in further highlighting the close match of such opportunities as Safecell." |
Taking EC's forecast for this year, and pro-rating in six months of today's acquisition, CSSG would be forecast to make almost 6.5p EPS this year and around 9p EPS next year.
Plus CSSG are likely to have say a £1m-£1.5m cash pile against the £8.5m m/cap, so still headroom for further acquisitions (even before the Vigilant divestment sale proceeds, assuming this happens). |
Another nice earnings-enhancing security centre acquisition - the third this year.
£0.75m consideration will bring in almost £0.2m PBT plus £0.4m net assets. More interestingly, there are insourcing synergies which should increase that profit contribution nicely.
Plus CSSG state they're "hopeful of completing similar earnings enhancing acquisitions in 2023". |
Looking forwards, here's WH Ireland's initial view on the planned divestment - interesting point on the much higher margins in the retained businesses as opposed to the Vigilant guarding business being disposed of:
Extracts:
"Today’s AGM update from CSSG highlights (1) continued inline trading, (2) plans
to continue with the group’s strategy in recent years of consolidating the
locksmith’s market, and (3) potentially a significant divestment (and
accompanying Board changes) which would further that strategy.
The proposal to divest CSSG’s specialist guarding services, which accounted in FY22A for c.83% of sales and c.43% of operating profits (pre central costs) would significantly increase the focus on locksmiths (FY22A: 9% of revenues and 27% of EBIT) and electronic security (7% and 30%), and we note that the company has highlighted the ongoing “multiple̶1; consolidation opportunities, in addition to the success of the two acquisitions made in 11/21 and 07/22, suggesting that funds raised from divesting manned guarding could be deployed further to advance the consolidation process in line with this proposed renewed focus of the business as a whole."
"In terms of the underlying characteristics of the businesses, as the
data provided above makes clear, the proposed ongoing businesses are higher
margin – respectively 14% and 19% in FY22A, as opposed to the low single digit
margins for Vigilant which are typical of a manned guarding business." |
What I said as recently as 11th November
''I was a shareholder in Croma many years ago, met Sebastian Morley and said I was unhappy with the performance of the company.
The company's performance subsequently remained disappointing so sold out and nothing has happened in the intervening years to make me regret that decision. If you look back more than 7 years the share price graph tells you everything you need to know.''
Thank goodness Sebastian Morley is finally on his way out. Leaving a company worth 8/9 million after many, many years in charge and with little or nothing to show for it, no real or believable plan going forward, and effectively nothing for shareholders.
A truly dreadful performance.
All IMHO |
Up 10p now.
There was nothing in the share price for the security manning business anyway, so this will raise CSSG's profile and hopefully pinpoint a cash pile of anything from £8m-£10m.
Whilst also leaving in place a core business making almost £1m operating profit with growth prospects in terms of:
- further store acquisitions
- Fingo biometric partnership
- iLOQ distribution expansion |
The two remaining divisions made £0.9m operating profit between them last year. CSSG would also have post-disposal a cash pile of (say) £8m-£10m.
Which compares pretty well to the £8m m/cap at the current share price.
There's obviously been some hard talking about how to realise value for the PLC going forward, so not bothered if the manned security guys want to go on their own. |
Interesting RNS. Sebastian was the one holding the business together. There will def be repercussions if he leaves. |
Well well....looks like the manned guarding business will be sold off to its management and the focus will be on security systems and locksmiths expansion.
Vigilant made £0.7m operating profit last year, so what might it be sold for - say £5m+?
CSSG already had £2.6m net cash at the year end and this looks like it was rising fast up to November due to debtor collections. |
The core numbers were pretty decent imo in the current climate (it was the headline numbers affected by reduced government pandemic support which perhaps prompted the selling).
The outlook in particular is very confident, as evidenced by the raised dividend and the narrative.
Once again WH Ireland has failed to produce specific forecasts for CSSG, even following the final results! Anyway, here's their summary FYI:
"WHI view:
Growing its contract portfolio, Vigilant has again provided evidence
of its ability to convert pipeline opportunities into contracts, notably with the
major £5m p.a. contract win awarded by a central London property owner and
developer, as well the prestigious Edinburgh St James centre win announced in
H1-21 (£1.3m).
Looking forward, we see a number of positive drivers for FY23E, notably the full year effect of the recent major contract win; the impact of a long list of contract awards secured, mainly within Vigilant, after the year end; the potential benefits of the newly acquired stores; and the potential impact of iLOQ.
We note the healthy level of contracted revenues of 1 month-plus (88%), and
while a significant proportion of sales will need to see contract renewals in the
New Year, CSSG’s track record has generally been very positive from this perspective. Regarding the iLOQ opportunity, group-wide training has now been
completed enabling CSSG’s employees to market and install this product country-
wide (so far one £0.3m contract gained), which we believe could present an
interesting area for growth moving forward." |
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