1^st December 2011

OPSEC SECURITY GROUP PLC

("OpSec" or "the Group")

Interim results for the six months ended 30^th September 2011

OpSec Security Group plc, the supplier of anti-counterfeiting technologies and services, announces interim results for the six months ended 30^th September 2011.

Highlights

*      Adjusted for the effects of share based payments, exceptional items and the charge for intangible amortisation (see notes 3 and 8).

·     Adjusted operating profit up by 3% to £1.42 million;

·     Group revenue increased by 1.5% to £19.9 million;

o  Banknote and High Security Document revenues up 17%

o  Brand Protection revenues up 5%

o  ID Solutions revenues down by 35%

·     Completion of acquisition of ID Solutions software business in the Caribbean;

·     Investcorp secured majority stake in the business via a cash offer;

·     New funding arrangements secured with JP Morgan Chase.

- Ends -

For further information, please contact:

OpSec Security Group plc                                                                                 0191 417 5434

Mark Turnage, Chief Executive/Mike Angus, Finance Director

Shore Capital & Corporate Ltd                                                                          020 7408 4090

Stephane Auton/Edward Mansfield

1^st December 2011

OPSEC SECURITY GROUP PLC

("OpSec" or "the Company")

Interim results for the six months ended 30^th September 2011

Chairman's Statement

There have been a number of significant events which have occurred since the publication of the last Annual Report.  Investcorp, having made a cash offer for the Company, increased their shareholding in the Company from 30% to 54%.  Following this the Company finalised new banking arrangements with JP Morgan Chase thus enabling the repayment of all sums due under Investcorp's loan facility.  The acquisition of a Caribbean based software development company was also successfully completed in the period.

Group revenue for the six months ended 30^th September 2011 increased by 1.5% to £19.9 million, (2010: £19.7 million) due to strong ordering from our customers in both the Brand Protection and Banknote and High Security Document sectors.  Adjusted Operating Profit (see note 3) increased from £1,384,000 to £1,420,000. 

There was an exceptional charge of £1,968,000 in the period which covered Company costs in respect of the cash offer for the business, acquisition costs related to the Caribbean acquisition and a change of control repayment fee on the Investcorp loan facility. The result after taxation was a loss of £1,696,000 (2010: loss of £401,000).

Banknote and High Security Documents

Whilst this market sector benefitted from strong ordering from its American customers this was partially offset by the anticipated slowdown in ordering from an Asian banknote customer secured in the previous year.  Overall, revenue increased by 17% over the corresponding period of the preceding year. 

Brand Protection

Revenue in this market sector, which is the largest of our three market segments, increased by 5% compared to the same period in the prior year.  While it continues to win new business the majority of the growth has come from existing customers with particularly strong ordering in the apparel and Asian tobacco sectors. 

ID Solutions

Revenue in the ID Solutions market sector fell by 35% compared to the same period in the prior year, due mainly to the loss of significant government customers in both North America and the UK.  The recent acquisition of a business in the Caribbean has enhanced significantly our product offering and this, coupled with the historical bias towards the second half of the financial year, leads us to expect an improved revenue performance by this segment in the balance of the current year.

3dcd

The contribution from our joint venture 3dcd in the period was $239,000 (2010: $376,000).  The previous period benefitted from a one off order for equipment.

Operations

Revenue in our American operations increased by 7% to $19.0 million in the first half of the financial year with operating profit increasing by 75% in local currency (62% in sterling).  The cost-saving and efficiency measures which we continue to implement contributed to gross margins increasing from 38.5% to 40.3%.

On 24^th May 2011 the Company announced the acquisition of a small software development business focusing specifically on developing ID solutions for issuance of passports, national ID cards and other secure credentials.  The business is based in the Dominican Republic with an ancillary business in Puerto Rico.  Revenue for this business was $94,000 in the four month period ended 30^th September 2011 with an operating loss of $178,000.  This business has, as anticipated at the time of the acquisition, recently secured a major new customer which should ensure a much stronger performance in the second half of the financial year.

The revenue of our UK operations in the period increased by 1.4% to £7.5 million.  Gross margins decreased from 40.8% to 33.0% due to the high proportion of sub contract sales and consequently operating profit decreased by 54% to £448,000.

Revenue in our German operations rose by 7.9% to €1.8 million.  Operating profits increased by 37.5% from €251,000 to €346,000 due to an improvement in gross margins from 52.3% to 58.1%.

New Banking Arrangements

On 31^st October 2011 the Group repaid all amounts due to be repaid to Investcorp under the loan agreement.  The repayment was financed through new banking facilities of up to $11.25m arranged with JPMorgan Chase Bank. The new facilities compromise: a) a three year revolving credit facility of $2m; b) a five year term loan of $8m; and c) a multicurrency overdraft facility of up to $1.25m.

Board Changes

Following the increase in Investcorp's holding in the Company to 54% Glenn Luk, who has hitherto acted as an alternate Director, joined the Board.  As of today's date Dick Povey is standing down and Richard Fuller is joining the Board as a Non-Executive Director.  On behalf of the Board I would like to thank Dick for his twelve years of service to the Company.

Prospects

The second half of our financial year has historically been stronger than the first half of the year, however political and economic uncertainty in regard to a number of programmes makes it difficult accurately to predict call off volumes in the balance of the year. This is magnified by the problem of forecasting whether certain significant new opportunities, particularly in the ID Solutions area of our business, will be completed and when shipments will commence.

 DA Mahony

Chairman

1^st December 2011

OPSEC SECURITY GROUP plc

Consolidated Income Statement