I would also add that I think they are now too small a company to stay listed given the costs and complexity of a listing and it would be easy to see a management buyout here of the simplified business or someone else making an offer to take this private. I am not seeing any real benefit to staying listed but maybe the uncertainty of future payments might stop that happening, at least for a while. If you were confident on receiving the 5 million deferred consideration then offering 90 p to100p now seems reasonable. |
 My valuation is as follows, so feel free to pick holes in it and I tend to be conservative in my approach whilst having to make predictions on some issues.
EBITDA on continuing business is basically £1 million.
A conservative PE of 6 gives a £6m valuation, but they are seeing strong growth and margin improvement so it is easy to make an argument for a higher PE but let's stick to 6. That gives a valuation of £6 million.
Cash is about £2 million, so that increases the valuation to £8m on a conservative basis and that is the current market cap according to ADVFN (£8.19m).
So it is conservatively valued right now but that is fine and this excludes assets such as the freeholds, and I am happy with that as they improve profit by being freehold (no rent to pay) so you can't count that twice, but the recent freehold purchases should lead to higher profits next year.
However, they are due over £5 million in deferred consideration from the Vigilant sale this year and should receive that over 3 years. It is not ideal to be dependent on another company for your future profits, but that company is well known and was bought by management. If you assume they get 100% paid then that means the current market cap should be about £13 million, ie about 40% increase from the current price 3 years from now (or even now if you assume 100% certainty of payment)and markets look ahead.
It seems reasonable to assume growth in profits in that time too, so my estimate assuming all goes well with repayment is that the company would be worth circa £16 million at least in 3 years or 100% higher than it is now and I think that is fairly conseervative as long as there are not horrible business events in the interim.
Also paying a dividend of 4% on the current price which is nice to see.
Just one ot hold for me and my hope is for 120p plus over the next 24 months or so as I tend to underestimate the top (and bottom) of most moves. |
Good to see a mere £800 moving the share price up. Hopefully indicates not much stock around. |
Anyone willing to put a valuation on the shares ?
P/e excluding cash for these results = ?
...me to do it ?
apologies but I'm busy today so I can't until this evening. |
WH Ireland have their own woes to contend with. |
WH Ireland aren't yet publishing full forecasts following the Vigilant disposal, but anticipate doing so, and note that a rating "on an EV/EBITDA basis below 5x
does not seem overly demanding".
They summarise:
"Croma Security Solutions (CSSG) – Corporate – FY results reflect continuing
strong momentum
Market Cap: £5.8m
FY results from CSSG this morning reflect very healthy growth from the continuing
business following the disposal of Vigilant. The company is a leading provider of
specialist security products, notably locks and related devices; and beyond this,
of electronic security products and monitoring services, with 14 security centres
in the UK.
Continuing revenues for the year to June ’23, at £8.03m 38% ahead
YoY, included significant underlying growth of 21%, while the overall underlying
(ex-Vigilant) gross margin has also moved ahead YoY at 46.7% (was: 43.9%).
Overall EBITDA at £0.954k was 78% ahead YoY, and continuing PBT / EPS also well
ahead – £0.4m continuing PBT plays £0.1m in the prior year.
Net cash is very healthy at £2.1m, notwithstanding substantial investments – and further substantial payments are to be expected in respect of Vigilant, with a £0.5m cash payment in March ’24 to be followed by a further nine payments of c.£0.4-0.5m each, and the redemption of £1.3m of Vigilant shares anticipated for July 2024.
Overall, the results suggest that the group is making excellent progress in its new shape, while encouragingly, current trading is said to be good."
Also:
"The company is a beneficiary of underlying drivers, notably concerns over
rising crime, increasing corporate risk aversion and regulation, and CSSG’s ability
to meet changing demands from its customer base."
"Moreover, CSSG’s core market offers fertile opportunities for consolidation, and
with a meaningful funding stream deriving from the disposal, we view the
company as extremely well-placed to pursue further accretive acquisitions in line
with its stated strategy." |
A rather encouraging tone to this morning's prelims.
CSSG achieved £950k continuing EBITDA against the £7m m/cap (and £427k PBT), with a £2.14m cash pile plus a further £5.43m receivable from the sale of Vigilant in the form of Loan Notes and redeemables.
CSSG generated almost £1.3m cash from continuing operations in the year.
Plus:
- there's also a 2.2p final dividend
- more acquisitions are in the pipeline
- ILOQ sales are already at £0.32m with further orders secured
Most importantly, the outlook statement is nicely positive:
"Outlook
The year has started well with a number of new commercial orders and the continued success of ILOQ. We believe that we will be able to drive sales growth organically through new sales and marketing initiatives, expanding our network of sales people, and focusing on the development of our online presence. We will also expand the network via acquisition - the pipeline is promising. The Croma balance sheet is strong, we are cash generative, and we are well-placed to take advantage of the opportunities ahead." |
Worth roughly two and a half times as much? |
Excellent - CSSG have a new major shareholder.
Russell Long has bought 872,054 shares and now owns 6.4% of CSSG:
Mythril LLP, of which he's a member, holds 400,000 of these shares. They appear to have almost £10m of net assets, so reasonably substantial: |
If Vigilant can't afford to pay the full £7.xm and CSSG then have the right to "step in", they're not stepping into something very desirable, one might think! |
CSSG have already received £2.14m of cash from the buyers of Vigilant. The likelihood on any reasonably optimistic view of the future is that the rest will be paid, particularly as on any default CSSG have the right to step in and take control of Vigilant.
Vigilant made £0.7m operating profit last year and only £0.28m EBITDA in H1'22 due to investment in the large new contract win. Given this, £7.6m appears to me to be a rather good price for a company in Vigilant's sector, and a bird in the hand for CSSG rather than waiting for new contracts to pay off. |
Was the price they got for Vigilant really so miserable? I guess with some of those long term contracts they signed recently the future could be bright for them but then by the same token I thought a number of their contracts were also coming up for renewal so there's also some uncertainty. |
"We now know that this £7.6m m/cap company, which already had £0.65m net cash, will now receive over time a further £7.6m"
Sadly this simply isn't true. Just rampy nonsense IMO. Exchange the "will" for "may" and it's perfectly reasonable IMO.
If those receipts were 100% certain, why on earth did they sell Vigilant for such a miserable price? At least some of those receipts depend of the survival and sufficient success of Vigilant...
"The Consideration will be satisfied as to (i) £1,073,314 payable in cash on Completion; (ii) £4,126,686 by the issue of the Loan Notes; and (iii) either (at the Buyer's sole discretion) the payment of an additional £1,300,000 in cash on Completion or the issue of the Redeemable Share on Completion. In addition, inter-company balances of £1,067,913 owed by Vigilant to the Company will be settled on Completion. Therefore on Completion the Company will receive in aggregate cash of either £2,141,227 if the Redeemable Share is issued or £3,441,227 if the Redeemable Share is not issued." |
Another 110,000 shares just gone through at 45p - I assume another buyback. |
RNS just out - a whopping buyback of 400,000 shares at 45p should be good news for the EPS going forward assuming the "strong" trading previously reported is continuing.
I note that the shares bought back might be used to part fund future acquisitions, so hopefully more corporate action is on the cards: |
Good news - the Vigilant sale has completed smoothly.
We now know that this £7.6m m/cap company, which already had £0.65m net cash, will now receive over time a further £7.6m with between £2.1m and £3.4m receivable immediately.
Plus we already know that trading has been "strong" this H2 and the period to 30th June will report good figures ahead of last year.
Mucho undervalued imho. |
Who sells 22 shares in Croma? With trading costs I don't think you would get any money back. |
So what's going on? A sell sends the share price up 1.6p why? |
For the record here's WH Ireland's summary of the deal - the sale "looks to us like a good outcome for CSSG" on a historic EBITDA of 9.46:
"Croma Security Solutions (CSSG) – Corporate – Successful disposal of Vigilant,
subject to shareholder approval
Market Cap: £7.1m Share Price 47.5p
CSSG’s announcement this morning brings to a successful conclusion, subject to
shareholder approval, the disposal process for Vigilant, its manned guarding
operation, announced at the company’s AGM at the start of December last year (2022). The overall strategy behind the disposal recognises the disparity between
the ongoing CSSG businesses (Security Systems and Locks) on the one hand and
Vigilant on the other, and the relative lack of cross-selling opportunities between
the sides of the business prior to the disposal. In addition, in terms of the
fundamentals, notably, firstly, the ongoing businesses are higher margin operations than Vigilant, which operates at the upper end of the mid-single digit operating margin level typical of manned guarding businesses. Secondly, we note the consolidation opportunities which CSSG perceives in the wider locksmith market in particular, lending further logic to the deal from the company’s perspective.
The company also updates on FY23E trading in the eleven months to June ‘23, which is said to be ahead both consecutively – H2-23E as against the half year to
December ’22 – and on a full year basis, and across the business. Positive news,
this suggests resilience / growth in the underlying markets for the ongoing group,
with further market penetration a consistent theme.
WHI view:
In terms of the disposal price, CSSG has disclosed revenues, EBITDA and operating profit for Vigilant of £29.3m, £0.8m and £0.7m respectively for year to June ‘22. Given the effective overall sale price of £7.57m, based on a consideration of £6.5m plus inter-company balances of £1.07m, the implied historical ratio of 9.46x EBITDA looks to us like a good outcome for CSSG. Subject to details of the final deal structure, CSSG within the overall £7.57m will receive on completion either £3.4m or £2.1m in cash, with further cash payments starting at March 31st 2024 and over the following nine quarters. Following the recent Safecell announcement, the company has already announced its intention to continue to take advantage of the consolidation opportunities in its markets as it grows its national footprint, with further acquisition opportunities identified. With no forecasts in the market at this point, we await developments post-the General Meeting announced for June 30th." |
First payment for selling the Vigilant subsidiary.
When should that be in the bank account of CSSG ? |
...bull and bear opinions....no problem with that
but can we phps all try to put the past behind us and all be polite from now on. |
charming, not !! |
Notwithstanding what others have said about the terms of the deal / possible mates' rates etc., this would still seem to be a real opportunistic valuation if all goes ahead and they're right about the opportunities presented by the remaining higher margin areas of the business?
Will have to make acquisitions though as the remaining parts' current turnover would be too nothingy? |
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