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Opsec Security GroupFinal ResultsRNS Number : 5748J

Opsec Security Group PLC

18 July 2013

18th July 2013

OPSEC SECURITY GROUP PLC("OpSec", "the Company" or "the Group")

Preliminary Announcement of Results for the Year Ended 31st March 2013

OpSec Security Group plc, the supplier of anti-counterfeiting technologies, services and

programmes announces its results for the year ended 31st March 2013.

Highlights

2013 2012

Revenue £51.7m £38.3m

Operating Loss £(2.5)m £(0.6)m

Adjusted Operating Profit* £3.7m £2.3m

Loss Per Share (2.3)p (3.4)p

Adjusted Basic Earnings Per Share* 5.8p 2.0p

* Adjusted for the charges for intangible amortisation and impairment, exceptional charges and share based

payments (notes 2b and 8)

• Results benefitted from the acquisitions of Delta Labelling and the holographicsbusiness of JDSU;;

• Group revenue increased by 35% to £51.7 million: 6% growth ignoring theimpact of acquisitions;;

• Group adjusted operating profit up by 58% to £3.7 million;;• Cash inflow from operating activities of £8.4 million (2012: £1.5 million);;• Closing cash balance of £6.0 million (2012: £4.9 million).

David Mahony, Chairman, said: "The year to 31st March 2013 was an active year for the Group and its management

team. The Board believes that the recent acquisitions and the continued internal

investments have positioned the Company for a period of sustained growth and

profitability."

For further information, please contact: OpSec Security Group plc Mark Turnage, Chief Executive ([email protected]) +1720 394 2803Mike Angus, Finance Director ([email protected])

Shore Capital 0207408 4090Stephane Auton/Patrick Castle



18th July 2013

OPSEC SECURITY GROUP PLC

("OpSec", "the Company" or "the Group")

Preliminary Announcement of Results for the Year Ended 31st March 2013

Chairman's Statement

Introduction

The results for the year to 31st March 2013 were impacted significantly by theacquisitions of Delta Labelling and the holographic security business of JDS UniphaseCorporation ("JDSUH"). Annual Group turnover grew by 35% and adjusted operatingprofit grew by 58% to £3.7 million. Brand Protection, the largest of the market facing groups, achieved a 15% increase inrevenue with the impact of the acquisitions offsetting a 4% reduction in organic sales. This reduction reflects the difficult economic conditions rather than the loss of anysignificant customers. Government Protection revenue increased by 34% (32% excluding acquisitions) due tothe cyclical element inherent in the on-going supply of currency thread to a major Asiancurrency customer and higher sales to a European government. Transaction Cards revenue of £5.7 million was generated from our newly acquiredbusiness, JDSUH. Exceptional Items

A number of major exceptional items impacted the year;; these included the costsrelating to the acquisition of the holographic security business of JDSUH, reorganisationcosts, inventory impairments and adjustments made to the contingent considerationprovisions for both Delta Labelling ("Delta") and JDSUH. Full details of all these itemsare provided below. Acquisitions

Delta is an established supplier of brand protection labels based in the UK and HongKong. During the year the business has been integrated into the OpSec Group andcross selling opportunities have been identified that will enable us to exploit thecomplementary product ranges of OpSec's brand protection activities and Delta's ownrange. The results for Delta were impacted by the administration of a key customer,Republic, late in the financial year. This administration also contributed to an impairmentcharge against the Delta intangible asset and a reduction in the provision for contingentconsideration payable to the vendors of the Delta business. The acquisition of Delta was financed by a placing in April 2012 of 17.3m shares at 45pper share with a number of our major shareholders participating.

The Group completed the acquisition of JDSUH on 12th October 2012 for an initialconsideration of $11.5 million. Further consideration of up to $4 million could becomepayable depending on the extent to which certain performance conditions are achievedduring the 12 month period following completion of the acquisition. The consideration forthe acquisition was satisfied from the Company's existing cash resources and additionalbank facilities with JP Morgan Chase. Since the acquisition the JDSUH business has performed ahead of expectations andconsequently an additional provision has been made for contingent consideration notanticipated at the time of the acquisition.

Outlook

A programme to strengthen the sales and marketing activities of the Group was initiateda year ago and has led to an increase in the number of leads and new contractopportunities. The Board are confident that the benefits of this investment will be seenin the current year. Further investments relating to the integration of the recent



acquisitions and enhancements to the Group's production and technology base continueto be undertaken. The year to 31st March 2013 was an active year for the Group and its managementteam. The Board believes that the recent acquisitions and the continued internalinvestments have positioned the Company for a period of sustained growth andprofitability. DA MahonyChairman18th July 2013

BUSINESS REVIEWChief Executive's Review Introduction OpSec is an international company whose mission is to provide solutions to itscustomers to combat counterfeiting and the related problems of diversion, greymarketing, online brand abuse and fraud. OpSec's customers include numerousgovernments and many of the world's largest corporations. OpSec has traditionally supplied technologies and solutions into two core markets: BrandProtection and Government Protection. In addition, OpSec owns 50% of 3dcd LLC, ajoint venture which licenses technologies for the protection of optical disks (CDs andDVDs). During the year a third market, Transaction Cards, was added via theacquisition of the holographic security business of JDS Uniphase Corporation ("JDSUH"). OpSec's customers are served from its facilities in the USA, the UK, Germany, HongKong, and the Dominican Republic and via a network of over 40 agents worldwide. Strategy OpSec's strategy is to provide world-class authentication technologies and solutions intoits core markets, leveraging its unique technology portfolio, its expertise, and its globaldistribution network. OpSec intends to invest in people, technology, manufacturing anddistribution to continue its growth and broaden its product offerings. The Group will alsocontinue to make acquisitions that fit its core market strategy or enhance its technologyportfolio. Market Sectors OpSec's sales activities are organised by market-facing groups, each addressing itsindividual market with dedicated management, sales, sales support, and technologydevelopment teams. The market facing groups are supported by the operations anddigital operations groups which provides them with products and services from theGroup's facilities in Europe and the USA.

Government Protection Revenue in the Government Protection market sector increased by 34% to £14.8million (2012: £11.1 million). During the year the restructuring of theGovernment Protection group was completed. This involved the merger of theformer ID and Banknote and High Security groups into a single market facinggroup, and the hiring of a number of new management and sales and marketingstaff.

Sales growth during the year was driven primarily by cyclical upturns in a numberof key customer accounts, particularly currency security sales into an Asiancurrency customer and engineered film sales to an Eastern Europeangovernment. This was somewhat offset by lower sales of our ID products,particularly in the USA. The Group acquired several new ID customers as a



result of its purchase of JDSUH. During the year OpSec signed a partnership agreement to jointly market theSecureEtag excise stamp solution with Xerox. Significant sales and marketingefforts have commenced.

Brand Protection

This sector recorded an increase in revenue of 15% for the financial year to£31.2 million (2012: £27.2 million). This included a full year contribution fromDelta Labelling, the company acquired in March 2012. Overall economic conditions in Europe and to a lesser extent in North Americaled to a decline in brand protection sales across many major customers. Whileseveral US sports leagues and brands delivered strong results, this was notsufficient to counteract the significant slowdown in volumes associate with aweaker consumer market. With the addition of Delta Labelling and a small number of brand protectionaccounts acquired from JDSUH sales grew 15% during the period (4% declineadjusted for the impact of acquisitions). During the year OpSec reorganised theBrand Protection division and made significant new hires in sales management,sales and marketing to allow it to more capably serve key markets. Notably, aspart of the Delta acquisition, OpSec acquired an office in Hong Kong to betterserve its brand customers in the region. OpSec continues to be unique in providing brand protection solutions whichencompass both the tagging and tracking of physical product through the supplychain, as well as the online monitoring of brand identity and activity, and theonline sale of merchandise. This combination of online and offline solutions isdriven by market needs for more timely information relating to supply chains, andOpSec believes it is well positioned to meet the needs of the market. Transaction Cards

The Group completed the acquisition of JDSUH on 12th October 2012 for aninitial consideration of $11.5 million. The JDSUH business is primarily focusedon the production and supply of security holograms and related optical-securitydevices for transaction cards. Key clients of the business include MasterCard,VISA and American Express.

Revenue in the new transaction card market sector for the six months since theacquisition was £5.7 million.

Geographical Business Units

Following a reorganisation of the Group's management and operations the Group nowhas two operating segments, each of which is a reportable segment;; these are theGroup's geographic business units. The principal change from the prior year is that theUK and German operations (together with the newly acquired Delta business) now formone operating segment, referred to as EMEA operations;; the comparative figures havebeen restated on the same basis. The JDSUH business acquired in the year ismanaged and integrated with the Group's other American operations so has beenincluded in the American operations segment. These operations cover all the marketsectors referred to above.

American Operations

Revenue in our American operations was $44.3 million, an increase of 19%against the prior year total of $37.4 million and includes the revenue from theJDSUH acquisition mid-year of $9.9 million. The American results were impactednegatively during the year by the weak performance of the Government



Protection group where revenues continued to decline. Gross margins decreased during the year from 40.4% to 34.4% due to theimpact of the JDSUH acquisition which has lower gross margins. Elsewhere inthe American operations savings on material yields were offset by increaseddirect labour costs and the fall in organic sales volumes. Overall adjusted operating profit decreased by 45% from $4.7 million to $2.6million as the impact of lower volumes was compounded by significantinvestment in sales and marketing. EMEA Operations Revenue in the EMEA operations increased from £16.5 million to £24.9 million,principally as a result of deliveries to an established Asian currency customerwhich did not occur in the prior year and strong sales to a European governmentcustomer. These irregular order cycles are a common feature of largegovernment orders received by the Group. The gross margin generated by the EMEA operations rose to 45.3% from 30.5%as a result of sales mix and the increased volumes during the year. Overheads increased as a result of higher sales commissions' payable andinvestment in the sales and marketing team. Adjusted operating profit increasedto £3.4 million from £1.0 million.

3dcd Joint Venture The increased contribution from our joint venture during the year of £0.5 million(2012: £0.4 million) reflected one off equipment sales during the year to its majorcustomer offset by the cost associated with a patent dispute, a settlement ofwhich has now been agreed.

Corporate

The charge for share based payments in the current year was £0.23 million(2012: £0.34 million). Other corporate costs were broadly in line with the prioryear at £1.8 million (2012: £1.9 million).

The JDSUH acquisition On 12th October 2012, the Company acquired the holographic security business of JDSUniphase Corporation ("JDSUH") for an initial consideration of $11.5 million, satisfied incash. The JDSUH Business is primarily focused on the production and supply of securityholograms and related optical-security devices for transaction cards in addition toproducts for secure government documents and other brand protection customers. Inthe 6 months to 31st March 2013 the business generated revenue of £6.3 million andcontributed a net loss of £0.73 million to the Group result for the year, including anexceptional write down of inventory of £0.44 million. This business, which now forms part of the American operations, has performed aheadof expectations since the acquisition. The Delta Labelling acquisition On 31st March 2012, the Company acquired the businesses of Delta Labelling Limited inthe United Kingdom and Delta Labelling (HK) Limited in Hong Kong (together "Delta") for£13.7 million, satisfied in cash and shares. Delta designs, develops and supplies labelsand brand protection products to retailers, apparel manufacturers and leading sportsbrands. The business generated revenue of £4.6 million for the year ended 31st March2013 and contributed £0.425 million to the Group result for the year. The acquisition provides the Group with significant cross-selling opportunities: a newrange of products to sell into the Group's existing customer base for brand protectionproducts, and the opportunity to sell the Group's products to Delta's customers. Theresults for Delta were impacted by the administration of Republic late in the financial



year, and by weaker than expected sales to a major European brand customer. TheRepublic administration also contributed to an impairment charge against the Deltaintangible asset and a reduction in the provision for the contingent consideration payableto the vendors of the Delta business.

People

OpSec has employees operating from its facilities in North America, the United Kingdom,Germany, Hong Kong and the Dominican Republic, as well as its optical laboratories inthe United Kingdom and the corporate office in USA. OpSec believes strongly that employee recruitment, training and retention are critical toits success. The Group remains fully committed to maintaining its health, safety andenvironmental standards. Total Group headcount rose from 332 at the beginning of the financial year to 431 at31st March 2013. MT Turnage

Chief Executive

18th July 2013

BUSINESS REVIEW

Financial Review

Revenue

The year to 31st March 2013 saw Group revenue increase by 35% to £51.7 million(2012: £38.3 million). Of the increase, £10.9 million is attributable to the newacquisitions. The remaining increase came from the Government Protection marketsector due to the cyclical element inherent in the supply of currency thread to a majorAsian currency customer and higher sales to a European government. Gross profit margin

Gross profit margin for the year rose from 39.6% to 40.5%. Exceptional costs

There were exceptional costs during the year of £1.2 million (2012: £2.2 million). Thisrepresents the costs of the JDSUH acquisition, certain Group re-organisation costsarising from the administration at Republic and other integration activities, a write downof inventory at JDSUH and adjustments to the provision for contingent consideration forboth the Delta and JDSUH acquisitions. Operating Profit

Overheads increased by 32% due to the impact of the acquisitions, significantlyincreased sales commissions and increased headcount. Adjusted operating profit(adjusted for the effects of intangible amortisation and impairment, exceptional items



and share based payments) increased to £3.7 million from £2.3 million. Finance expense The net finance cost for the year was £0.7 million (2012: £1.1 million). This reflects theimpact of exchange rate movements and terms of the new financing arrangemententered into with JP Morgan Chase during the previous year. Income Tax The tax credit in the income statement of £1.5 million (2012: charge of £0.1 million)arises predominantly from a carry back of current year tax losses, the utilisation ofdeferred tax assets and the utilisation of tax losses. Earnings per share Basic adjusted earnings per share increased to 5.8p (2012: 2.0p). Adjusted fully dilutedearnings per share increased to 5.7p (2012: 2.0p). Balance sheet Net assets were up £9.4 million at £38.5 million (2012: £29.1 million). The principalmovement arose from the acquisitions made during the year, funded in part by a shareplacing in April 2012.

Cash flow Net cash inflow from operating activities increased to £7.1 million (2012: £0.3 million) asa result of the increased adjusted operating profit and favourable working capitalmovements in the period. In addition, the Group drew down £6.2 million (2012: £5.0million) of additional borrowing, issued shares amounting to £9.8 million (2012: £0.2million), and received dividends from its joint venture amounting to £0.6 million (2012:£0.5 million). The principal cash outflows during the year were the acquisitions of Delta and JDSUH(£18.7 million), property, plant and equipment additions of £2.9 million (2012: £1.3million) and interest and bank fee payments of £0.7 million (2012: £1.2 million). The major capital expenditure planned for the year ending 31st March 2014 is thecontinued implementation of the new ERP system and selective investment intechnology and capital equipment as we integrate the two new acquisitions into theGroup. Overall the net cash inflow for the year was £1.0 million (2012: outflow of £1.0 million). After the positive effect of exchange rate fluctuations on cash of £0.1 million, (2012:negative £0.3 million), net cash and cash equivalents increased to £6.0 million (2012:£4.9 million). Liquidity Risk OpSec seeks to maintain a balance between continuity of funding and flexibility. TheGroup's financing is currently provided by Investcorp Technology Partners ("Investcorp")and JP Morgan Chase Bank. Investcorp hold 34,794,963 ordinary shares and20,000,000 7.5% redeemable convertible preferred ordinary shares of 35 pence pershare. On 12th October 2012 the Group increased its term loan with JP Morgan Chase from$6.3 million to $16.3 million. The additional debt was used to part fund the acquisition ofJDSUH.

Foreign currency risk A significant proportion of OpSec's net assets are in currencies other than Sterling. TheCompany's policy is to limit the translation exposure and the resulting impact onshareholders' funds by matching borrowing currencies to the currencies of its significantnet assets. Throughout the year borrowings were primarily denominated in US Dollars. The



Company does not hedge the translation effect of exchange rate movements on theincome statement. The majority of OpSec's transactions are carried out in the functional currencies of itsoperations and so transaction exposure is limited.

Principal exchange rates

Average Closing 2013 2012 2013 2012

US$: £ 1.58 1.60 1.52 1.60€: £ 1.23 1.16 1.18 1.20HK$:£ 12.28 - 11.82 12.44 The differences between the average and closing exchange rates are such that if theresults for the year ended 31st March 2013 were translated at the closing rates ratherthan the average rates, revenue would be decreased by £0.8 million and operating profitby £0.36 million. MW Angus

Finance Director

18th July 2013


Consolidated Income Statement

Year ended

31-Mar-13

Year ended31-Mar-12

£'000 £'000

Revenue 51,709 38,288Cost of sales (30,766) (23,116)Gross profit 20,943 15,172

Distribution and selling costs (6,829) (4,316)Administrative expenses (11,121)

(1,213)

(1,955)

(2,777)

(9,217) (2,159)(449)-

Exceptional itemsIntangible amortisationIntangible impairmentTotal administrative expenses (17,066) (11,825)

(2,952) (969)

Share of profit of jointly controlledentities

465 360

Operating loss (2,487) (609)

Finance income 139 (38)Finance expenses (851) (1,082)Net finance expense (712) (1,120)

Loss before income tax (3,199) (1,729)

Income tax 1,459 (126)Loss for the year attributable to

equity holders of the parent

(1,740)

(1,855)

Basic loss per share (p) (2.3) (3.4)Diluted loss per share (p) (2.3) (3.4)



Consolidated statement of comprehensive income

Loss for the financial year (1,740) (1,855)Other comprehensive income/(expense)

Foreign exchange translation differences 1,240 (373)Effective portion of changes in fair value ofcash flow hedges

(42)

-

Other comprehensive income/(expense)

for the financial year, net of income tax

1,198

(373)

Total comprehensive expense for the

financial year attributable to equity

holders of the parent

(542)

(2,228)


Consolidated Statement of Changes in Equity

For the year ended 31st March 2013

ShareCapital

Sharepremium

Translationreserve

Hedgingreserve

Retainedearnings

Totalequity

£'000 £'000 £'000 £'000 £'000 £'000

Balance at 1st April 2012 3,000 29,685 2,837 - (6,458) 29,064

Total comprehensive income for

the year

Loss for the period - - - - (1,740) (1,740)

Other comprehensive income - - 1,240 (42) - 1,198 Total comprehensiveincome/(expense) for the period

-

-

1,240

(42)

(1,740)

(542)

Transactions with owners

recorded directly in equity

Share based payments - - - - 230 230Issuance of shares 1,000 8,802 - - - 9,802Own shares sold - - - - - -Own shares purchased - - - - (8) (8) Total transactions with owners

1,000

8,802

-

-

222

10,024

At 31st March 2013 4,000 38,487 4,077 (42) (7,976) 38,546


ShareCapital

Sharepremium

Translationreserve

Hedgingreserve

Retainedearnings

Totalequity

£'000 £'000 £'000 £'000 £'000 £'000

Balance at 1st April 2011 2,802 29,685 3,210 - (4,998) 30,699

Total comprehensive income

for the year

Loss for the period - - - - (1,855) (1,855)

Other comprehensive income - - (373) - - (373) Total comprehensive(expense)/income for the period

-

-

(373)

-

(1,855)

(2,228)

Transactions with owners

recorded directly in equity

Share based payments - - - - 338 338Issuance of shares 198 - - - - 198Own shares sold - - - - 57 57Own shares purchased - - - - - -



Total transactions with owners 198 - - - 395 593

At 31st March 2012 3,000 29,685 2,837 - (6,458) 29,064


Consolidated Balance Sheet

31-Mar-13 31-Mar-12£'000 £'000

ASSETS

Non-current assets

Property, plant and equipment 8,946 7,227Intangible assets 40,407 37,830Investment in jointly controlled entity - 15Deferred tax assets 4,292 3,446Total non-current assets 53,645 48,518

Current assets

Inventory 4,787 4,361Trade and other receivables 9,980 9,006Cash and cash equivalents 5,974 4,914Total current assets 20,741 18,281

Total assets 74,386 66,799

LIABILITIES

Current liabilities

Interest-bearing loans and borrowings (2,296) (1,000)Deferred government grants (20) (20)Provisions (1,221) -Income tax payable (15) (445)Trade and other payables (12,722) (21,564)Total current liabilities (16,274) (23,029)

Non-current liabilities

Interest-bearing loans and borrowings (15,028) (10,794)Derivative financial instruments (42) -Deferred government grants (305) (320)Provisions (1,813) -Deferred tax liabilities (699) (1,658)Other payables (1,679) (1,934)Total non-current liabilities (19,566) (14,706)

Total liabilities (35,840) (37,735)

Net assets 38,546 29,064

EQUITY

Capital and reserves

Issued capital 4,000 3,000Share premium account 38,487 29,685Hedging reserve (42) -

Translation reserve 4,077 2,837Retained earnings (7,976) (6,458)Total equity attributable to equity holders

of the parent

38,546

29,064




Consolidated Statement of Cash Flows

Year ended

31-Mar-13

Year ended31-Mar-12

£'000 £'000Cash flows from operating activities

Loss for the year (1,740) (1,855)Depreciation 2,032 1,879Amortisation of intangible assets 1,955 449Impairment of intangible assets 2,777 -(Profit)/Loss on sale of property, plant andequipment

(18) 6

Release of government grants (26) (25)Equity settled share based expense 230 338Share of profit of jointly controlled entities (465) (360)Finance income (139) 38Finance expenses 851 1,082Income tax (1,459) 126Movement in inventory 1,558 (534)Movement in trade and other receivables 1,000 432Movement in trade and other payables 1,749 (94)Movement in provisions 72 -

Cash from operating activities 8,377 1,482Interest paid (726) (1,158)Income tax paid (598) (20)

Net cash inflow from operating activities 7,053 304

Cash flows from investing activities

Acquisition of subsidiary undertaking (net of cashacquired)

(18,698)

1,278

Acquisition of property, plant and equipment (2,907) (1,314)Proceeds from sale of property, plant andequipment 18 -Proceeds from sale of investment - 12Dividends received from jointly controlled entity 628 479Interest received 139 (38)

Net cash (outflow)/inflow from investing

activities

(20,820) 417

Cash flows from financing activities

Payment of finance lease liabilities (206) (208)Drawdown of borrowings 6,187 4,989Repayment of borrowings (1,024) (6,769)Proceeds from issuance of shares (net of costs) 9,802 198Proceeds from sale of own shares - 57Purchase of own shares (8) -

Net cash inflow / (outflow) from financing

activities

14,751 (1,733)

Net increase / (decrease) in cash and cash

equivalents 984 (1,012)

Cash and cash equivalents at the start of the year 4,914 6,250Effect of exchange rate fluctuations on cash 76 (324)Cash and cash equivalents at the end of the

year

5,974 4,914




Notes to the Preliminary Announcement


1) Basis of preparation

The financial information set out above has been prepared in accordance with the

recognition and measurement criteria of International Financial Reporting Standards

(IFRS) as adopted by the EU (Adopted IFRSs).

The financial information set out above does not constitute the Company's statutory

accounts for the years ended 31st March 2013 or 2012. The financial information for

2012 is derived from the statutory accounts for 2012 which have been delivered to the

registrar of companies. The auditor has reported on the 2012 accounts;; their report was

(i) unqualified, (ii) did not include references to any matters to which the auditor drew

attention by way of emphasis without qualifying their report and (iii) did not contain

statements under section 498 (2) or (3) of the Companies Act 2006. The statutory

accounts for 2013 will be finalised on the basis of the financial information presented by

the Directors in this preliminary announcement and will be delivered to the registrar of

companies in due course.

The Group's business activities, together with the factors likely to affect its future

development, performance and position are set out in the Chief Executive's Review

above. The financial position of the group, its cash flows, liquidity position and borrowing

facilities are described in the Financial Review above.

The Group meets its day to day working capital requirements through its cash balances

and facilities with JP Morgan Chase Bank. Whilst the economic outlook remains

uncertain, the Group's forecasts and projections, taking account of reasonably possible

changes in trading performance, show that the Group should be able to operate within

the level of its agreed facilities.

After making enquiries, the Directors have a reasonable expectation that the Company

and the Group have adequate resources to continue in operational existence for the

foreseeable future. Accordingly they continue to adopt the going concern basis in

preparing the annual report and accounts which will be finalised on the basis of the

financial information presented in this preliminary announcement.

New standards

The accounting policies used in the preparation of the financial information have been

applied consistently throughout the Group and are unchanged from previous years. The

impact of new standards and interpretations effective for the first time in the current year

is not significant.




2) Segment Information

Following a reorganisation of the Group's management and operations the Group now

has two operating segments, each of which is a reportable segment;; these are the

Group's geographic business units. The principal change from the prior year is that the

UK and German operations (together with the newly acquired Delta business) now form

one operating segment, referred to as EMEA operations;; the comparative figures have

been restated on the same basis. The JDSUH business acquired in the year is included

in the American operations segment. Information regarding the results of each reporting

segment is presented below.

2013 2012

£'000 £'000



a) Segment revenue

American operations 28,098 23,344EMEA operations 24,825 16,506Inter-segment revenue (1,214) (1,562)

51,709 38,288

Inter-segment revenue is determined on an arm's length basis.

b) Segment result and reconciliation to loss before income tax

American Operations 1,631 2,946EMEA Operations 3,367 953Segment result 4,998 3,899Jointly controlled entity 465 360Corporate costs (1,775) (1,922)Adjusted operating profit 3,688 2,337Exceptional administrative expenses (1,213) (2,159)Intangible amortisation (1,955) (449)Intangible impairment (2,777) -Share based payments (230) (338)Operating loss (2,487) (609)Financial income 139 (38)Financial expense (851) (1,082)Loss before income tax (3,199) (1,729)




3) Total Operating Expenses

2013

£'000

2012

£'000

Distribution and Selling Costs

Distribution and selling costs

6,829

4,316

Administrative Expenses

Technical support

1,113

998

Research and development costs 2,541 2,027

Administrative costs 7,467 6,192

Exceptional administrative expenses (see below) 1,213 2,159

Intangible amortisation 1,955 449

Intangible impairment 2,777 -

17,066 11,825

Total operating expenses 23,895 16,141

The exceptional costs are detailed below.

2013

£'000

2012

£'000



Acquisition and other corporate restructuringcosts

482 515

Reorganisation costs 227 -Release of provision for contingent consideration -Delta Labelling

(596)

-

Increase in provision for contingent consideration- JDSUH

657

-

Inventory impairment - JDSUH 443 -Costs relating to Investcorp's cash offer for OpSec - 25Prepayment penalty on Investcorp loan note - 1,619

1,213 2,159

4) Share of Profit of Jointly Controlled Entity

The share of profit of jointly controlled entity represents the Group's share of the resultsof 3dcd for the year ended 31st March 2013.

5) Finance Income

2013

£'000

2012£'000

Interest income 2 6Exchange gains/(losses) on foreign currencydeposits

137 (44)

139 (38)




6) Finance Expenses2013

£'000

2012£'000

Interest expense on financial liabilities measuredat amortised cost

(721)

(838)

Amortisation of debt advisor fees (130) (244)(851) (1,082)

7) Taxation2013

£'000

2012£'000

Corporation tax

Overseas taxes - current year 117 10Overseas taxes - prior year - -UK taxes - prior year (43) (99)

Deferred taxes Current year (867) 215Prior year (666) -



(1,459) 126

No corporation tax is payable in the current year by any of the Group's UK based

companies due to existing trading and non-trading losses brought forward. A prior year

credit of £43,000 (2012: £99,000) has been recognised in relation to a loss carry back

claim in one of the Group's UK based companies. The prior year credit was in respect of

an R&D tax credit claim. Current period corporation tax on profits arising in the Group's

American operations comprises state taxes and federal taxes, which have been

substantially eliminated due to losses brought forward from prior years. The majority of

the overseas tax payable relates to activities within the Delta Hong Kong business.

The deferred tax credit arising in the period mainly relates to the utilisation of the

brought forward deferred tax asset in the UK entities and the release of a deferred tax

liability in respect of the Delta business.

At 31st March 2013 the Group had recognised a net deferred tax asset of £4,292,000

(2012: £3,446,000) arising principally from losses available in the UK and America which

can be utilised to offset future profits of the same trades and other short term timing

differences.

At 31st March 2013 the Group also had an additional unrecognised deferred tax asset of

£4,640,000 (2012: £5,845,000) in respect of unutilised tax losses and tax depreciation.

This asset has not been recognised due to uncertainty relating to the utilisation of those

tax assets. The reduction in the asset not recognised arises from a combination of the

utilisation of losses, the change in the UK's mainstream rate of corporation tax rate from

24% to 23% and losses in the US expiring unutilised.

The UK has also announced a phased reduction in the mainstream rate of corporation

tax rate from 23% to 20% by 1st April 2015. If the proposals are enacted as set out, the

value of the unprovided deferred tax asset would be reduced by a further £330,000 to

£4,310,000.




8) Earnings per Share

The calculations of earnings per share are based upon the following profits and numbers

of shares.

2013

£'000

2012

£'000

Earnings

Loss for the financial year (basic and diluted) (1,740) (1,855)

Exceptional administrative costs 1,213 2,159

Intangible amortisation 1,955 449

Intangible impairment 2,777 -

Equity settled share based payments 230 338

Adjusted earnings for the financial year (basic and

diluted)

4,435 1,091

Weighted average number of shares No. of shares No. of shares

For basic EPS 76,611,685 54,827,230

Effect of share options and other awards 818,333 345,889

For diluted EPS 77,430,018 55,173,119



9) A copy of the preliminary statement is available from the Company Secretary, 40

Phoenix Road, Crowther District 3, Washington, Tyne & Wear, NE38 0AD. 10) The preliminary announcement was approved by the Board of Directors for

release on 18th July 2013.

This information is provided by RNS

The company news service from the London Stock Exchange

END

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Documents

Opsec Security Group Final Results RNS Number : 5748J Opsec Security …s3-us-west-2.amazonaws.com/brr-streamguys/files/OSG/... · 2013-09-16 · OpSec Security Group plc, the supplier