(CMG) Croma Group

CROMA GROUP PLC

23 November 2011

Final Results

Croma Group plc ("Croma" or the "Group"), the AIM listed total security solutions provider, is pleased to announce its final results for the year ended 30 June 2011, during which the Group has completed the final stage in its restructuring and increased sales substantially.

Highlights

·   Croma has enjoyed a third year of sales growth following the final step in the restructuring of the business

·   Year-on-year sales increased by 67.5% 

·   Pre-tax profit increased by 17.4%

·   The sale of the RDDS Avionics subsidiary resulted in an exceptional charge of £743,000, producing a post-tax loss after exceptional items of £626,000

Extracts from the financial statements follow and a full version is available on the Company's website www.cromagroup.co.uk.

Sebastian Morley, CEO of Croma, commented "This has been a key year in the restructuring and development of the Group. We have now focused the businesses sharply onto the security sector, concentrating on high sensitivity defensive security projects. Our strategic partnership with CSS Group has broadened our offering to a total security services solution for our clients and this has not only enhanced our clients' security operations, it also adds value to the Group in cross marketing opportunities. We look forward to continuing this relationship and creating value for our shareholders going forward."

Notice of Annual General Meeting

Croma Group plc today gives notice that the Annual General Meeting ("AGM") of the Company will be held at Quality Hotel, Edinburgh Airport, Ingliston, Edinburgh EH28 8AU on 16 December 2011 at 10.00 a.m. The notice of AGM has today been posted to shareholders and is available on the Company's website www.cromagroup.co.uk

Annual Report and Accounts

The Company announces that the annual report of the Company for the year ended 30 June 2011 has been posted to shareholders today. The annual report is also available on the Company's website www.cromagroup.co.uk

Further information:

Croma Group Plc

Sebastian Morley +44 7768 006909

Brewin Dolphin

Sandy Fraser +44 (131) 529 0310

Chairman's Statement

I have pleasure in announcing the results of the Group for the year ended 30 June 2011.

Financials

The results demonstrate the last element of the restructuring of the business, which was completed with the sale of the Group's subsidiary, RDDS Avionics Limited ("RDDS").The Group now stands ready to continue to target the security services sector as the engine for its future growth, based on the continuing success of the Vigilant subsidiary.

Sales improved significantly during the year reaching £8.46 million against £5.05 million for 2010 (as re-stated for the sale of RDDS). Gross profit was £1.62 million (2010: £1.38 million) and operating profit was ahead at £322K (2010: £196K). The pre-tax profit from continuing operations for the year was £143K against a prior year loss of £6K.

The sale of RDDS realised £928K plus the possibility of a further £600K in earn-out which the Board has for the time being disregarded. This has required us to make a charge of £743K in the period for the write-off of goodwill.  The net loss attributable to shareholders for the period of £626K (2010: profit £90K) assumes no potential earn-out from the RDDS sale and but for the goodwill write off the remaining businesses delivered a profit attributable to shareholders of £116K against the loss attributable to continuing operations for 2010 of £6K, a substantial increase.

Business Review and outlook

Following the disposal of RDDS in March 2011, the Group has two key business areas, access security and installation systems (Photobase), and asset protection including manned guarding and key holding (Vigilant), and the financial results of those businesses are set out in more detail in the Directors' Report.

Towards the end of the year, Vigilant won its largest ever contract, and since the year end further significant contracts have been added. The benefit of these recent wins will fully impact on current year results. The Directors are satisfied that improved gross margins can be achieved in the coming year. The new contracts continue the strategy of widening the national reach of the business as well as broadening the client base to focus on large private businesses rather than the Ministry of Defence and public sector, which the Board continues to believe may be under threat from central government cost-saving initiatives.

We said last year that the Board would continue to review opportunities to improve efficiencies within the two subsidiaries, as well as consider more strategic opportunities as and when they arise. During the period, the Group announced the strategic framework agreement with the CSS group of companies, which specialises in using technology to add to the mix of security solutions we can offer our clients. This arrangement has proved very fruitful for both Croma and CSS; Photobase in particular has made sales of £450K during the period due to the success of the framework agreement.

The disposal of RDDS in March 2011 has enabled the Group to repay £600K of the convertible loan notes issued in 2006 and it is the intention of the Board to repay the balance of the loan notes as and when the repayment dates fall due between December 2012 and February 2013. The loan note terms are explained more fully in the notes to the accounts.

The Group is now focused, profitable and cash generative and poised to take the opportunity to broaden its activity in the delivery of security solutions. As ever, I thank our management and staff for their efforts over the period in delivering another year of steady growth.

Nick Hewson

Non-executive Chairman

22 November 2011

Consolidated Statement of Comprehensive Income

for the year ended 30 June 2011

Consolidated Statement of Financial Position

as at 30 June 2011

Consolidated Statement of changes in Equity

for the year ended 30 June 2011

Consolidated Statement of Cashflows

for the year ended 30 June 2011

Key Notes to the Accounts

Note 1 - Basis of preparation

The Group financial statements have been prepared and approved by the directors in accordance with International Financial Reporting Standards (IFRSs), International Accounting Standards and Interpretations (collectively IFRS) issued by the International Accounting Standards Board (IASB) as adopted by the European Union ("adopted IFRSs").

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, the level of overheads likely to accrue, repayment of creditors and the potential cash outflows associated with the convertible loan notes which are repayable between December 2012, January 2013 and February 2013.

The Directors have considered a range of scenarios in respect of each of these variables.  Most of these scenarios indicate that the Directors will have to raise some additional finance during the year, although the level of funding required is highly dependent on the assumptions within each scenario. At the date of signing these financial statements the additional finance has not been secured.  The Directors have had discussions with potential funders and believe they will be able to secure the necessary finance.

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. The invoice discounting and overdraft facilities fall due for review on 30^th September 2012.

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:

·                          £400,000 on 20 December 2012

·                          £120,000 on 20 December 2012

·                          £200,000 on 29 January 2013

·                          £100,000 on 28 February 2013

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 Directors are confident that adequate funds will be raised to fund the creditors' repayments, 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 repayment of creditors or 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.