CROMA SECURITY SOLUTIONS GROUP PLC
REPORT AND FINANCIAL STATEMENTS
30 June 2017
CONTENTS
Company information
Chairman’s statement
Strategic report
Board of Directors
Directors’ report
Statement of Directors’ responsibilities
Independent auditor's report
Consolidated statement of comprehensive income
Consolidated statement of financial position
Consolidated statement of cash flows
Consolidated statement of changes in equity
Notes to the financial statements
Independent auditor’s report for the parent company
Page
2
3
5
18
19
22
23
27
28
29
30
31
59
Parent company financial statements
62 - 71
1
COMPANY INFORMATION
Directors
Registered office
S J F Morley
(Executive Chairman)
R M Fiorentino
(Group Chief Executive)
R A Juett ACA
(Finance Director)
P Williamson
(Executive Director)
(Non – Executive)
C N McMicking
A N Hewson MA FCA (Non – Executive)
Unit 6 Fulcrum 4
Solent Way
Whiteley
Fareham
Hampshire
PO15 7FT
Registered number
03184978
Nominated advisers and brokers
WH Ireland Limited
24 Martin Lane
London
EC4R 0DR
Registered independent
statutory auditor
Nexia Smith & Williamson
Cumberland House, 15-17 Cumberland Place, Southampton,
SO15 2BG
Solicitors
Registrars
Principal bankers
Shoosmiths
Russell House,
Solent Business Park
Whiteley, Fareham
Hampshire
PO15 7AG
Neville Registrars Limited
18 Laurel Lane
West Midlands
B63 3DA
Lloyds Banking Group plc
PO Box 1000
London BX1 1LT
Svenska Handelsbanken AB
3 Thomas More Square
London E1W 1WY
Website
www.cssgplc.com
2
CHAIRMAN’S STATEMENT
FOR THE YEAR ENDED 30 JUNE 2017
I am pleased to report Croma Security Solutions Group’s final results for the year to 30 June 2017.
The year has once again delivered on our core strategy of organic growth, coupled with innovation and
strictly targeted acquisitions.
Financial prudence and responsibility are central to our ongoing strategy in order to shape an
outstanding security services group that delivers for clients, staff and shareholders.
The growth in the Group has been driven in the Croma Vigilant and Croma Security Divisions while
Croma Locksmiths continues to develop following our acquisition of Access Locksmiths in December
2015.
Our aim is to build a recognised brand that is synonymous with the provision of the highest level of
total security services. We are stringently focused on quality and outstanding service delivery for our
clients. More clients are seeing the benefit of having all of their security needs provided by one
contractor and we are delivering tangible benefits to them.
Croma Vigilant has seen 14% top line growth, winning contracts in the private and public sectors with
particularly strong growth in the property management and infrastructure sectors. We have invested
heavily in our personnel this year in training standards and capability.
The guarding industry is changing fast and we are leading the charge. The traditional model of the low
paid, lowly motivated officer is over and the current security climate demands capable, well trained and
highly motivated officers. Croma Vigilant, where we utilise ex-military security professionals, has
created a niche in a mediocre market place and our clients and potential clients welcome it.
Croma Security continues to deliver a significant level of new works for Odeon Cinemas and our second
cinema chain continues to develop. In addition to the leisure industry, Croma Security has continued to
win and compete for high end security solutions for high net worth individuals and we are becoming a
provider of choice in this community. Croma Security has seen an increase in turnover this year and we
see this trend continuing as our strategy evolves.
Croma Biometrics has been involved this year with a number of larger opportunities to bring
FastVein™ to the forefront as a potent biometric high-speed human identifier. Identity management is
a highly topical area and with our unique FastVein™ system, we are placed to benefit from this as a
Group. Following the successful installation of FastVein into St Mary's Ascot School major systems
have been installed at Cheltenham Ladies College, West Hill Park School and further along the UK
Coast in Brighton. This year has also seen FastVein™ deployed in the construction sector. FastVein™
has seen considerable investment from the Group and although the concept is still in its early stages of
development, we see it is a key part of our offering to clients.
Croma Locksmiths has been subject to a slowdown in general trade and a delay to the anticipated start
date for our major contract, although this has now commenced. This impacted the numbers significantly
and has led to a further restructuring of the business.
3
CHAIRMAN’S STATEMENT(Continued)
FOR THE YEAR ENDED 30 JUNE 2017
The focus of the Group remains that of delivering sustained growth by our unique offering to the
security market. We aim to be a Group apart, a true one stop offering where clients can have all of their
security requirements serviced by one vertically integrated Group. The security market remains
fragmented and flat footed and we aim to capitalise on this by outstanding service delivery and
aggressive marketing.
OUTLOOK
The Group has started the new financial year with trading considerably ahead of the equivalent period
last year and we look forward to continuing this momentum and updating the market in due course.
I would like to thank all employees of the Group for their hard work over the last year. Putting a Group
together by acquisition has had its challenges but our staff and our clients are seeing something
luminous and refreshing, a Group that lives by outstanding service delivery while stringently managing
its finances and delivering growth and return for its shareholders.
Sebastian Morley
Chairman
3 November 2017
4
STRATEGIC REPORT
FOR THE YEAR ENDED 30 JUNE 2017
The Group’s strategic objectives are:
•
•
•
•
to deliver market leading full service security offerings to the top end of the corporate and
residential markets. This will be achieved by maintaining quality of service as a priority, focusing
efforts on those clients who appreciate our differentiated offering, and leveraging our brand and
client base;
to produce consistent growth in clients and financial performance, by maintaining our margins
and managing our costs. Acquisitions will be pursued only when they can be seen clearly to add
value to the Group without imposing excessive burdens of operational consolidation;
to develop and bring to market new technologies where feasible, and;
to deliver meaningful shareholder returns.
Each company has Key Performance Indicators which are monitored and reported to the executive
Directors on a monthly basis. These are discussed below.
The Group’s longer term objectives are to grow our core offerings in the UK and abroad until we are the
security provider of choice to leading large corporates, to expand our service offering to include e-
security, and to develop specific high-end national projects.
The maintenance and expansion of solutions to the present client base is fundamental. The Group
continues to develop historical clients, some of whom currently use a diverse range of contractors, in
order to bring all their needs under one roof when this makes good business sense for both parties.
The Group also continues developing overseas opportunities in particular in the Middle East. Whilst
these require a high level of input, Croma see that this market will be a large contribution to overall future
expansion.
5
STRATEGIC REPORT (continued)
FOR THE YEAR ENDED 30 JUNE 2017
The performance of each business segment is discussed below:
Croma Vigilant
Croma Vigilant saw 14% top line growth with sales increasing to £16.40M (2016: £14.29M)
Operating profit decreased to £0.47M due to client driven training requirements after the succession of
terror attacks. This level of training will not recur in the present year.
The year has seen the biggest change in the industry in our 20 years of trading. The reality of the terror
threat in public places has started something of a revolution in how security services are seen and
delivered. Most of our security officers operate in high footfall areas and with strong encouragement from
us, our clients are buying into a more capable and well-trained security service working with and
alongside the police.
Croma Vigilant’s ex-military high grade offering has always been at the cutting edge of the U.K. guarding
market and the general lifting of the bar for the industry will be extremely beneficial to us.
Our aim is to grow organically, gaining contracts from private and public organisations who demand the
best.
Croma Security Systems
Croma Security Systems has seen turnover improve with continued orders in the leisure and education
and construction sectors. Although client budgets remain tight there is a very promising pipeline.
Turnover for the year has risen modestly by 4% to £2.36M (2016: £2.27M), with operating profit up to
£0.47M (2016: £0.41M).
Last year Croma Security Systems adjusted the sales effort by bringing on board an existing internal and
highly experienced engineer. This is allowing the current team to pass over smaller items to a technically
capable individual. This was a very successful move and this year we have brought over another member
of staff to further grow our sales effort.
Croma Security Systems continues to provide a full range of electronic security solutions for a wide range
of clients. Both of our Cinema client contracts have improved upon last year with more new works
placed. A number of new projects and refurbishment contracts have materialised and our pipeline
continues to look positive. The increased level of works in this sector has brought about an additional
dedicated member of staff to support the client account manager. The education sector has featured
heavily in our sales this year as Croma continues to offer expertise and differentiation to these clients.
Croma Biometric - FastVein™
As per our statement last year Croma Biometrics continues to develop and turnover has improved to
£0.35M (2016: £0.17M). There has been continued investment in developing new software, client
applications and marketing. Whilst development expenditure continues to outstrip revenues, again we
remain highly confident that the current development and future opportunities justify the on-going
investment.
6
STRATEGIC REPORT (continued)
FOR THE YEAR ENDED 30 JUNE 2017
We have delivered further projects in the education sector and we continue our plan to deliver further
installations into this sector, we see the retail sector as an opportunity especially in the monitoring of staff
attendance in addition to controlling access to sensitive areas thus offering demonstrable savings to our
clients. This year has also seen a major construction application for FastVein™ and we plan to expand
on this success in the near future.
In addition to major enhancements to our software capabilities and the availability of additional software
engineers Croma Biometrics delivered a high-end external housing that finally places the FastVein™
device on the radar of our more discerning clients.
Croma Locksmiths
Croma Locksmiths has again seen a large change this year following the acquisition of a South Coast
competitor which brought the total number of retail outlets to seven between Brighton and
Poole/Bournemouth. Turnover increased to £2.95M (2016: £2.31M) and operating profit improved to
£0.2M (2016: £0.09M), however this improvement was due mainly to the reversal of contingent
consideration arising on the acquisition of Access Locksmiths in 2015. Without this reversal operating
profit would have been at break even.
Sales have continued to be slow and a major contract that was scheduled to commence during the year
was delayed into the present financial year, with many costs including additional staff hired in anticipation
of the contract commencement.
M Whettingsteel, the operations director of Croma Locksmiths, resigned from the business in
August 2017. His operational duties will now be covered by existing management.
Croma Locksmiths will be concentrating on delivery of the major contract whilst continuing with
operational system changes.
Opportunity for consolidation in the sector still exists.
Outlook and priorities
The Group remains focused on driving growth, predominantly in the UK and overseas.
An enhanced sales team straddling the entire Group is in place and awareness of the Croma brand within
the target market is increasing.
Croma Group’s web presence continues actively to promote services along with email, social media, and
exhibitions.
Croma Vigilant continues to see strong evidence that the high quality of their service offering is being
well received and that intelligent and discerning companies will pay a premium for a reliable and effective
guarding service.
7
STRATEGIC REPORT (continued)
FOR THE YEAR ENDED 30 JUNE 2017
Croma Security Systems is predominantly focused on providing integrated and reliable security systems.
Corporate clients represent the company’s best opportunities and best returns in terms of turnover and
margin. In the year to 30 June 2018 the merging of Croma Locksmiths and Croma Security Systems will
offer efficiencies to the business and increased benefits to our clients.
As a highly respected specialist, Croma Security Systems is directing some attention towards security
systems design and consultancy, an area of great strength which we hope to expand especially with
overseas clients where our depth of knowledge and experience is not only welcomed but projects with
the necessary funding exist.
Croma Biometrics will continue to develop FastVein™ in the Education, Construction and Retail Sector.
In addition, overseas resellers will be sought. Hardware is being redesigned on an on-going basis to
improve the external appearance and reduce controller hardware size and improve efficiency and costs.
Our latest versions allow entry into the high end bespoke installations sector whilst still being able to
accommodate every day solutions.
Group Financials
The Group financials can be summarised as follows:
Revenue
Gross profit
Gross margin %
EBITDA
Operating profit
Earnings per share
Net Assets
Cash generated from/(used in) operations
Dividend paid per share (paid)
2017
£000's
22,058
4,025
18.2%
799
431
2.13p
10,305
1,233
0.5p
2016
£000's
19,031
3,890
20.4%
588
238
0.96p
10,021
(110)
0.4p
The financial results of the Group are broadly satisfactory but improvements must be sought in the present
year.
Revenues have grown by 16% in the year once again, led primarily by growth in our manned guarding
division, Croma Vigilant. There was also growth in Croma Locksmiths because we are now reporting a
full year’s results for five out of 7 of our retail outlets.
The results of our Locksmiths division were disappointing. In particular, we have a seen a fall in retail
sales of around 7% and reduced spending from our business customers. To counter this fall, we are
seeking to improve sales processes at our tills to better integrate with stock control systems. Together
with our security systems division, we have recently taken on a new staff member focusing on sales and
customer development. This is already bearing fruit.
In Locksmiths, we saw a stock shrinkage adjustment of £83k but with improved systems we are confident
this will not recur in the present year. Also we saw the provision against slow moving stock increase to
£122k. The Board feels that this is a sufficient level to allow us to reduce our inventories, so benefiting
cash flow but without further impacts to the profit and loss account.
8
STRATEGIC REPORT (continued)
FOR THE YEAR ENDED 30 JUNE 2017
Gross profit in Croma Vigilant was slightly down from £1,927k to £1,861k. This was due to one-off
costs of £50k, and also the implementation of a client driven training programme after the succession of
terror attacks. These costs will not recur in the present year.
During the year cashflow was much improved with cash generated from operations at £1,233k and
borrowing on our invoice discounting facility down by £404k to £135k. The key driver behind this change
was moving the payment date for many of our employees to after the month for which their earnings
accrued. Year-end cash balances and cash generated from operations were improved by £862k because
of this change which has also allowed us to use our invoice discounting facilities more effectively and
free up cash for investment in the group.
Operating profit was up £193k during the year and we expect more improvement in the present year. The
Board has identified a number of synergies within our Locksmiths and Security Systems businesses which
should see around £200k savings in administrative costs as the two businesses become operationally
merged. The savings will be made in staff costs and in software.
The Board is aiming to maintain the progressive dividend policy adopted in previous periods. During
the year an interim dividend of 0.5p per share was paid at a cost of £84k.
9
STRATEGIC REPORT (continued)
FOR THE YEAR ENDED 30 JUNE 2017
Risk management
The Board has put in place a framework of identified risks and risk management processes.
Regulatory environment
The Group operates in a highly regulated sector and is audited and accredited by a number of regulatory
bodies including the SIA, NSI, and CHAS. An inability to respond and adapt to changes in the sector
and comply with the regulatory requirements would adversely affect our business.
Controls and mitigating strategies
Our regulatory compliance is monitored by key members of staff who work with external consultants to
maintain our processes and procedures at the required standards.
Liquidity and funding
The group requires appropriate borrowing facilities in place for its short-term liquidity and long term
funding.
Controls and mitigating strategies
The group finance director is responsible for reviewing our banking covenants and capital structure.
Robust budgets and cashflow forecasts are prepared and presented to the Board. A good relationship is
enjoyed with our banks.
Health and safety environment
Instances of noncompliance with Health & Safety and Environmental regulations could expose our
people, the environment and our reputation
Controls and mitigating strategies
Responsibility for health and safety compliance is delegated to experienced members of staff who work
with external consultants. Training is provided to all employees.
Fraud and uninsured losses
A significant fraud or uninsured loss could damage the financial performance of our business.
Controls and mitigating strategies
Systems, policies and procedures are in place to segregate duties and minimise any opportunity for fraud.
Timely management reporting of identified anomalies. Where possible, our insurance strategy minimises
other risks.
Customer Service
The failure of our customer services could undermine our business performance.
Controls and mitigating strategies
We undertake regular customer satisfaction surveys with unsatisfactory comments being addressed. Any
complaints received at Board level are dealt with on a timely basis by the affected operating division.
10
STRATEGIC REPORT (continued)
FOR THE YEAR ENDED 30 JUNE 2017
Risk management (continued)
Cyber Security
Failure of the Group’s IT systems and the security of our internal systems, data and our websites can have
significant impact to our business.
Controls and mitigating strategies
Responsibility for all our IT systems is delegated to our in-house IT department who implement and
monitor cyber security across the Group.
Credit Risk
If our customers do not pay on time, our cashflow and liquidity maybe compromised.
Controls and mitigating strategies
Responsibility for credit control is delegated to experienced staff in our operating divisions. Through
invoice discounting we obtain funding of up to 90 days on our sales ledger so late payment from customers
should not adversely affect cashflow provided payment is received within this period.
11
STRATEGIC REPORT (continued)
FOR THE YEAR ENDED 30 JUNE 2017
Statement of Corporate Governance
The Directors recognise the importance of sound corporate governance. As a company whose shares are
traded on the London Stock Exchange (Alternative Investment Market) (AIM), the Company is not
obliged to comply with the corporate governance regime as set out in the UK Corporate Governance
Code, but it does support the principles of the Code.
It intends to comply with the Corporate Governance Code for Small and Mid-Size Quoted Companies
(the QCA Code) insofar as it is reasonably practicable for a public company of its size and nature.
The Directors have adopted a code of conduct for dealings by Directors and Employees which complies
with the AIM Rules and are committed to maintaining the highest standards of corporate governance. The
Company is subject to the UK City Code on Takeovers and Mergers.
The Group is governed by the Board of Directors, comprising four Executive Directors and two Non-
Executive Directors. The Group adheres to the requirements of the QCA Code to keep the roles of
Chairman and Chief Executive separate.
Executive Directors:
S J F Morley – Executive Chairman
Responsible for the overall direction of the Group, for ensuring the Board operates
efficiently, and for shareholder relations and for Corporate Governance. Mr Morley also
oversees the daily operations of Croma Vigilant.
R M Fiorentino – Chief Executive
Responsible for overseeing the implementation of the Group’s strategy, and for delivering
the coordinated service approach. In addition, Mr Fiorentino oversees daily operations of
Croma Security, Croma Locksmiths and Croma Biometrics
R A Juett – Finance Director
Responsible for overall financial strategy and for ensuring timely production of management
and statutory information.
P Williamson
Oversees daily operations and development of Croma Vigilant
Non-Executive Directors:
A N Hewson
Chairman of the Audit Committee and a member of the Remuneration Committee.
C N McMicking
Chairman of the Remuneration Committee and a member of the Audit Committee.
12
STRATEGIC REPORT (continued)
FOR THE YEAR ENDED 30 JUNE 2017
Matters reserved for the Board
The Board reserves formulation, dissemination and implementation of strategy. It also handles
stakeholder relations, dividend policy, and oversight of cash management.
Other operational matters are devolved to Directors and managers, with the exception of investment –
level decisions involving material balances which require Board consideration.
Any Director needing independent professional advice in the furtherance of his duties may obtain this
advice at the expense of the Group.
Board meetings
The Board meets monthly in person or by telephone to review and discuss strategy, financial results,
business planning, sales, operations and HR matters.
Directors’ attendance at Board and Committee meetings during the year was as follows:
Board Meetings
Audit Committee
Remuneration
Committee
Attended Eligible Attended Eligible Attended
Eligible
9
9
9
9
2
8
8
1
9
9
9
9
4
9
9
4
-
-
1
-
-
-
1
-
-
-
1
-
-
-
1
-
-
-
1
-
-
-
1
-
-
-
1
-
-
-
1
-
S J Morley
R M Fiorentino
A N Hewson
R A Juett
P Williamson
M Whettingsteel
C N McMicking
Lord James Percy
Internal control and risk assessment
The Board is responsible for maintaining an appropriate system of internal controls to safeguard the
shareholders' investment and Group assets.
The Directors continue to review the financial reporting procedures and internal controls of the Group
companies to ensure they are robust enough to deliver timely, detailed reporting that will allow accurate
monitoring of the Group’s performance.
Internal financial control procedures undertaken by the Board include:
•
•
•
review of monthly financial reports and monitoring performance
approval of all significant expenditure including all major investment decisions review and
approval of treasury policy.
13
STRATEGIC REPORT (continued)
FOR THE YEAR ENDED 30 JUNE 2017
In the context of the Group’s overall strategy the Board undertakes risk assessment as well as the review
of internal controls. The review covers the key business, operational, compliance and financial risks
facing the Group. In arriving at its judgement of what risks the Group faces, the Board has considered
the Group’s operations in the light of the following:
•
•
•
•
the nature and extent of risks which it regards as acceptable for the Group to bear within its
overall business objective
the threat of such a risk becoming a reality
the Group’s ability to reduce the incidence and impact of risk on its performance
the cost and benefits to the Group of operating the relevant controls.
The Board has reviewed and is satisfied with the operation and effectiveness of the Group's system of
internal control and risk assessment for the financial year and the period up to the date of approval of
these financial statements.
14
STRATEGIC REPORT (continued)
FOR THE YEAR ENDED 30 JUNE 2017
Relations with shareholders
Communication with shareholders is given a high priority by the Board and the Directors are available to
enter into dialogue with shareholders. All shareholders are encouraged to attend and vote at the Annual
General Meeting during which the Board is available to discuss issues affecting the Group.
Audit committee matters
The terms of reference of the Audit Committee are to assist the Board in discharging its collective legal
responsibility for ensuring that:
•
•
•
the Group’s financial and accounting systems provide accurate and up-to-date information on its
current financial position;
the Group’s published financial statements represent a true and fair reflection of this position;
and the external audit, which the law requires in order to provide independent confirmation that
these legal responsibilities are being met, is conducted in a thorough, efficient and effective
manner.
The external auditor may attend Audit Committee meetings.
Key performance indicators
Indicator
Performance
Croma Vigilant
Sales
Sales were ahead of budget reaching a record £16.4M for the year. The division
continues to bid for and win new work on a regular basis. Performance is monitored
by the Operations director and business development manager reporting to the
Chairman.
Gross margin
Gross Margin remains a highly relevant measure in a low margin industry. This
year the gross margin was steady at £1.9M and was below budgets and expectations.
In the present year we are taking steps to address this.
Customer retention
Cash
Retention of customers nearing the end of their contract is a priority of the
operations director. The increase in turnover testament to our quality service
offering.
Croma Vigilant continues to be cash generative for the Group with borrowing
facilities and cash resources being utilised to fund group overheads. At 30 June
2017 the company shows no long term borrowings and maintains adequate facilities
to meet payroll liabilities falling due shortly after the year end.
15
STRATEGIC REPORT (continued)
FOR THE YEAR ENDED 30 JUNE 2017
Croma Security systems
Sales
Sales have seen a 4% increase on 2016 up to £2.4M from £2.3M
Customer retention
The company monitors customer satisfaction through surveys and website
feedback. Customer retention remains strong, with our largest customer Odeon
delivering revenues of £441k up 34% on the prior year.
Engineers
Cash
Croma Biometrics
Sales/Order pipeline
The engineer market is very active and engineer retention and remuneration is
constantly monitored.
Despite cash resources being used to help fund Group activity Croma Security has
remained cash generative and at the year-end cash balances are at £136k.
To justify the continued development expenditure, the order pipeline for FastVein™
is actively monitored. In 2017 the division achieved a turnover increase of over
100% to £346k and came close to landing a significant contract with a major UK
supermarket.
16
STRATEGIC REPORT (continued)
FOR THE YEAR ENDED 30 JUNE 2017
Croma Locksmiths
Sales
Sales are monitored weekly for retail, and monthly for commercial sales.
Emphasis is placed on individual performance of the outlets with regular visits
and meetings with branch managers. Like for like sales have seen an overall
decrease particularly so in the retail market which shows a 7% drop.
In the present period, we have already seen improvements and our major water
utility contract will yield considerable revenue uplifts.
Shop footfall
Shop footfall continues to slow with a shift to on-line sales. The company
continues to employ sales techniques to meet this change in consumer practice
including an improved e-commerce website and state of the art trade counters.
Changes in front of shop advertising and layout improvements will be introduced
in an effort to entice more customers into our shops and upgraded EPOS systems
will better integrate with our stock control to ensure more timely invoicing and
cash collection.
Competitive
environment
Although the priority in the short term will be to turn around the existing
business, the Group will still look to expand its geographical operations that
enhance our service to our commercial customers and to compete nationally for
service contracts by improving its bank of skilled locksmiths.
Roberto Fiorentino
Chief Executive
3 November 2017
17
BOARD OF DIRECTORS
FOR THE YEAR ENDED 30 JUNE 2017
Sebastian Morley - Executive Chairman
Having enjoyed a successful military career, Sebastian worked with organisations in the surveillance
and security sector before he established Vigilant in 2001. Sebastian joined the Board on the acquisition
of Vigilant Security (Scotland) Limited in February 2006 and became Group Chairman in 2012.
Roberto Fiorentino - Chief Executive Officer
Roberto has been involved in the security industry for over 36 years and has been responsible for a
number of ground breaking technological advances within the electronic security sector, including the
installation of High Security Master Key Locking systems, Vehicle Alarm Systems, Access Control,
CCTV with transmission systems, Video Analytics and most recently FastVein™. As a result of this
Croma is ideally placed to offer high level security design and consultancy services
Richard Juett - Finance Director
Richard is a Chartered Accountant and has previously held finance roles in industry with B&Q Plc, Kia
Motors and in practice with Ernst & Young and BDO. Richard oversees the financial affairs of the
Group and its operating subsidiaries.
Paul Williamson – Executive Director
Paul joined the Board in April 2017. Paul founded Vigilant Security in 1997 having served in the Army
from 1987 to 1992 and worked in a number of commercial operations thereafter.
Nick Hewson MA FCA - Non-Executive Director
Nick has been on the Board of a number of listed companies since 1986, more recently in a non-
executive capacity. Nick has concentrated on grooming and growing smaller businesses in the public
and private arenas, and has a particular interest in low carbon and carbon reduction initiatives in
business. He has been an investor in Croma since the very early days of the Group’s corporate life.
Nick is also a Non-Executive Director and Chairman of the Audit Committee of Redrow plc, and
Chairman of Superrmarket Income REIT.
Charles McMicking - Non-Executive Director
Charles is Chairman of RailSimulator.com and director of Coburg Capital and F4G Software. Charles
has specialised in financing and developing dynamic fast-growth companies, and was previously Head
of Private Equity at Noble Group.
18
DIRECTORS' REPORT
FOR THE YEAR ENDED 30 JUNE 2017
The Directors submit their report and the audited annual financial statements of Croma Security Solutions
Group PLC and its subsidiary undertakings for the year ended 30 June 2017.
Principal activities
The Group’s principal activities are the provision of manned guarding and asset protection services (Croma
Vigilant); CCTV security, fire and alarm systems (Croma Security Systems); Identity management and access
control (Croma Biometrics); Locksmithing Keys, Locks and Safes (Croma Locksmiths).
Results and dividends
The profit for the year after taxation, was £0.360M (2016: £0.153M). During the year a dividend of 0.5p per
share was proposed and paid (2016: 0.4p per share).
Directors
The Directors who have held office since 1 July 2016 and up to the date of signing of these financial statements
are as follows:
Executive Directors:
Non-executive Directors:
S J F Morley
R M Fiorentino
R A Juett
P Williamson (appointed 20 April 2017)
M Whettingsteel (resigned 11 August 2017)
A N Hewson
C N McMicking
Lord Percy (resigned 16 December 2016)
The Non-Executive Directors sit on the Remuneration Committee and on the Audit Committee.
The Directors in office at 30 June 2017 had the following beneficial interest in the ordinary shares of the
Company
S J F Morley
R M Fiorentino
M Whettingsteel
R A Juett
A N Hewson
C N McMicking
P Williamson
2017
575,000
4,110,000
2,027,027
12,500
203,565
46,000
165,639
2016
535,000
3,750,000
2,027,027
-
203,565
46,000
-
19
DIRECTORS' REPORT (Continued)
FOR THE YEAR ENDED 30 JUNE 2017
Major shareholdings
Apart from the interests of the Directors referred to above, the Company has received the following
notifications of holdings of more than 3 per cent of the ordinary share capital of the Company as at 30 June
2017:
Hargreave Hale Limited
Liontrust Investment Partners LLP
Matters covered in the strategic report
5.00%
3.32%
Statutory disclosures required under company law within the Directors report are included where relevant
within the strategic report.
Research and development
Research and development expenditure, including the element of wages and salaries and amounted to
approximately £75,000 (2016: £82,000).
Employment of disabled persons
The Group gives full consideration to applications for employment from disabled persons where the
candidate’s particular aptitudes and abilities are consistent with adequately meeting the requirements of the
job. All necessary assistance with initial training courses is given. Once employed, a career plan is
developed so as to ensure suitable opportunities for each disabled person. Arrangements are made, wherever
possible, for retraining employees who become disabled, to enable them to perform work identified as
appropriate to their aptitudes and abilities.
Employee involvement
The Group's policy is to consult and discuss with employees, through staff councils and at meetings, matters
likely to affect employees' interests. Information on matters of concern to employees is given through
information bulletins and reports which seek to achieve a common awareness on the part of all employees
of the financial and economic factors affecting the Group's performance.
Political and charitable donations
There were charitable donations of £5,618 (2016: £4,650). There were no political donations in the current
or prior year.
Environmental policy
The Group recognises the importance of environmental responsibility. The nature of its activities has a
minimal effect on the environment but where it does the Group aims to act responsibly and is aware of its
obligations at all times.
20
DIRECTORS' REPORT (Continued)
FOR THE YEAR ENDED 30 JUNE 2017
Dividends
An interim dividend of 0.5p per share was declared on 1 March 2017 and paid on 7 April 2017. The total
cost was £0.084M.
Post balance sheet events
The Company has entered into a contract with a former director for the buy-back of shares, which will then
be cancelled. The contract is conditional on the ratification of shareholders at the AGM. The total
consideration of £760k will be funded out of existing resources.
Auditors
A resolution proposing the reappointment of Nexia Smith & Williamson Audit Limited will be put to the
shareholders at the forthcoming Annual General Meeting.
Statement of disclosure to auditor
Each of the persons who is a Director at the date of approval of this report confirms that:
a) so far as they are aware, there is no relevant audit information of which the company's auditors are
unaware; and
b) they have taken all the steps that they ought to have taken as Directors in order to make themselves
aware of any relevant audit information and to establish that the company's auditors are aware of that
information.
By order of the Board
R A Juett
Finance Director
3 November 2017
21
STATEMENT OF DIRECTORS’ RESPONSIBILITIES
FOR THE YEAR ENDED 30 JUNE 2017
Directors’ responsibilities
The Directors are responsible for preparing the Directors’ report and the Group and Parent company
financial statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each financial year. Under that law
the Directors have elected to prepare the Group financial statements in accordance with International
Financial Reporting Standards (IFRSs) as adopted by the European Union and the parent company financial
statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom
Accounting Standards and applicable law including FRS 102, the Financial Reporting Standard applicable
in the UK).
Under company law the Directors must not approve the financial statements unless they are satisfied that
they give a true and fair view of the state of affairs of the Group and Company and of the profit or loss of
the Group for that period.
In preparing these financial statements, the Directors are required to:
select suitable accounting policies and then apply them consistently
•
• make judgements and accounting estimates that are reasonable and prudent
•
state whether applicable accounting standards have been followed subject to any material
departures disclosed and explained in the financial statements
• prepare the financial statements on the going concern basis unless it is inappropriate to presume
that the Company and the Group will continue in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and
explain the Company’s transactions and which disclose with reasonable accuracy at any time the financial
position of the Company, and Group, and enable them to ensure that the financial statements comply with
the requirements of the Companies Act 2006. They are also responsible for the Group’s system of internal
financial control, safeguarding the assets of the Group and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
Website publication
The Directors are responsible for ensuring the annual report and the financial statements are made available
on a website. Financial statements are published on the Group's website in accordance with legislation in
the United Kingdom governing the preparation and dissemination of financial statements, which may vary
from legislation in other jurisdictions. The maintenance and integrity of the Company's website is the
responsibility of the Directors. The Directors' responsibility also extends to the on-going integrity of the
financial statements contained therein.
Signed on behalf of the Board
R A Juett
Finance Director
3 November 2017
22
INDEPENDENT AUDITORS' REPORT TO THE SHAREHOLDERS OF CROMA SECURITY
SOLUTIONS GROUP PLC
FOR THE YEAR ENDED 30 JUNE 2017
Opinion
We have audited the group financial statements of Croma Security Solutions Group PLC (the ‘group’)
for the year ended 30 June 2017 which comprise the consolidated statement of comprehensive
income, the consolidated statement of changes in equity, the consolidated statement of financial
position, the consolidated statement of cash flows and the notes to the group financial statements,
including a summary of significant accounting policies. The financial reporting framework that has
been applied in their preparation is applicable law and International Financial Reporting Standards
(IFRSs) as adopted by the European Union.
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of
Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to
the company’s members those matters we are required to state to them in an auditor’s report and
for no other purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the company and the company’s members as a body, for our
audit work, for this report, or for the opinions we have formed.
In our opinion, the group financial statements:
• give a true and fair view of the state of the group’s affairs as at 30 June 2017 and of its profit
for the year then ended;
• have been properly prepared in accordance with IFRSs as adopted by the European Union; and
• have been prepared in accordance with the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and
applicable law. Our responsibilities under those standards are further described in the Auditor’s
responsibilities for the audit of the group financial statements section of our report. We are
independent of the group in accordance with the ethical requirements that are relevant to our audit
of the group financial statements in the UK, including the FRC’s Ethical Standard, and we have
fulfilled our other ethical responsibilities in accordance with these requirements. We believe that
the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Conclusions relating to going concern
We have nothing to report in respect of the following matters in relation to which the ISAs (UK)
require us to report to you where:
• the directors’ use of the going concern basis of accounting in the preparation of the group
financial statements is not appropriate; or
• the directors have not disclosed in the group financial statements any identified material
uncertainties that may cast significant doubt about the group’s ability to continue to adopt
the going concern basis of accounting for a period of at least twelve months from the date
when the group financial statements are authorised for issue.
23
INDEPENDENT AUDITORS' REPORT TO THE SHAREHOLDERS OF CROMA SECURITY
SOLUTIONS GROUP PLC (continued)
FOR THE YEAR ENDED 30 JUNE 2017
Key audit matters
We identified the key audit matter described below as that which was most significant in the audit
of the financial statements of the current period. Key audit matters include the most significant
assessed risks of material misstatement, including those risks that had the greatest effect on our
overall audit strategy, the allocation of resources in the audit and the direction of the efforts of
the audit team.
In addressing this matter, we have performed the procedures below which were designed to address
the matter in the context of the financial statements as a whole and in forming our opinion thereon.
Consequently we do not provide a separate opinion on this individual matter.
Key
matter
audit
Description of risk
How the matter was addressed in the audit
Carrying value
and impairment
of goodwill and
other intangible
assets
and
The group has material
other
goodwill
intangible assets relating
to three cash generating
units.
Group’s
The
assessment of carrying
value requires significant
judgement, in particular
regarding
flows,
growth rates , discount
sensitivity
and
rates
assumptions
cash
We challenged the assumptions used in the
for goodwill and other
impairment model
intangible assets described in notes 11 and 12.
As part of our procedures we:
• considered historical trading performance by
comparing recent growth rates of revenue and
actual costs expended
• assessed
the
appropriateness
the
assumptions concerning growth rates and
inputs to the discount rate against latest
market expectations
of
• considered management’s assertions about the
future utilisation of assets following a review
of the business strategic plan by the CGU’s
• considered sensitivity analysis of key variables
included within the value in use calculations
In performing our procedures, we used our internal
valuation specialists to assess the appropriateness
of the discount rate applied.
Our application of materiality
The materiality for the financial statements of the Group as a whole was set at £330,870. This has
been determined with reference to the benchmark of the Group’s turnover, which we consider to
be one of the principal considerations in assessing the performance of the Group. Materiality
represents 1.5% of turnover.
The materiality for the financial statements of the Parent as a whole was set at £215,000. This has
been capped at the Group’s performance materiality.
24
INDEPENDENT AUDITORS' REPORT TO THE SHAREHOLDERS OF CROMA SECURITY
SOLUTIONS GROUP PLC (continued)
FOR THE YEAR ENDED 30 JUNE 2017
An overview of the scope of our audit
Of the Group’s 6 reporting components, we subjected one to an audit for Group reporting purposes
and the other 5 reporting components to specific audit procedures where the extent of our audit
work was based on our assessment of the risk of material misstatements and of the materiality of
the component.
The components within the scope of our work covered 100 per cent of Group revenue, 100 per cent
of Group profit before tax and 100 per cent of Group net assets.
Other information
The other information comprises the information included in the report and financial statements
other than the group and parent company financial statements and our auditor’s reports thereon.
The directors are responsible for the other information. Our opinion on the group financial
statements does not cover the other information and, except to the extent otherwise explicitly
stated in our report, we do not express any form of assurance conclusion thereon.
In connection with our audit of the group financial statements, our responsibility is to read the other
information and, in doing so, consider whether the other information is materially inconsistent with
the group financial statements or our knowledge obtained in the audit or otherwise appears to be
materially misstated. If we identify such material inconsistencies or apparent material
misstatements, we are required to determine whether there is a material misstatement in the group
financial statements or a material misstatement of the other information. If, based on the work
we have performed, we conclude that there is a material misstatement of this other information,
we are required to report that fact.
We have nothing to report in this regard.
Opinion on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
•
•
the information given in the strategic report and the directors’ report for the financial year
for which the group financial statements are prepared is consistent with the group financial
statements; and
the strategic report and the directors’ report have been prepared in accordance with
applicable legal requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the group and its environment obtained in the
course of the audit, we have not identified material misstatements in the strategic report or the
directors’ report.
We have nothing to report in respect of the following matters where the Companies Act 2006
requires us to report to you if, in our opinion:
• certain disclosures of directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
25
INDEPENDENT AUDITORS' REPORT TO THE SHAREHOLDERS OF CROMA SECURITY
SOLUTIONS GROUP PLC (continued)
FOR THE YEAR ENDED 30 JUNE 2017
Responsibilities of directors
As explained more fully in the directors’ responsibilities statement set out on page 22 the directors
are responsible for the preparation of the group financial statements and for being satisfied that
they give a true and fair view, and for such internal controls as the directors determine is necessary
to enable the preparation of group financial statements that are free from material misstatement,
whether due to fraud or error.
In preparing the group financial statements, the directors are responsible for assessing the group’s
ability to continue as a going concern, disclosing, as applicable, matters related to going concern
and using the going concern basis of accounting unless the directors either intend to liquidate the
group or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the group financial statements
Our objectives are to obtain reasonable assurance about whether the group financial statements as
a whole are free from material misstatement, whether due to fraud or error, and to issue an
auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is
not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered
material if, individually or in the aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these group financial statements.
A further description of our responsibilities for the audit of the group financial statements is located
on the Financial Reporting Council’s website at: www.frc.org.uk/auditorsresponsibilities. This
description forms part of our auditor’s report.
Other matter
We have reported separately on the parent company’s financial statements of Croma Security
Solutions Group Plc for the year ended 30 June 2017.
Julie Mutton
Senior Statutory Auditor, for and on behalf of
Nexia Smith & Williamson
Statutory Auditor
Chartered Accountants
Cumberland House
15 – 17 Cumberland Place
Southampton
Hampshire
SO15 2BG
6 November 2017
26
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2017
Continuing operations:
Revenue
Cost of sales
Gross profit
Administrative expenses
Other operating income
Operating profit
Analysed as:
Earnings before interest, tax, depreciation amortisation
Depreciation
Amortisation of intangible assets
Operating profit
Finance expenses
Profit before tax
Tax
Profit for the year from continuing operations
Total comprehensive income for the year attributable to
owners of the parent
Earnings per share
Basic and diluted earnings per share (pence)
Earnings from continuing operations
Notes
2017
£000's
2016
£000's
3
22,058
19,031
(18,033)
(15,141)
4,025
3,890
3
(3,802)
208
431
(3,675)
23
238
13
12
5
8
9
799
(126)
(242)
431
(74)
357
3
360
588
(109)
(241)
238
(61)
177
(24)
153
360
153
2.13
0.96
Diluted Earnings per share (pence)
2.13
0.95
27
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
FOR THE YEAR ENDED 30 JUNE 2017
Assets
Non-current assets
Goodwill
Other intangible assets
Property, plant and equipment
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Total assets
Liabilities
Non-current liabilities
Deferred Tax
Trade and other payables over 1 year
Current liabilities
Trade and other payables
Borrowings
Total liabilities
Net assets
Issued capital and reserves attributable to owners of the parent
Share capital
Share premium
Merger reserve
Retained earnings
Share options
Total equity
Notes
2017
£000's
2016
£000's
11
12
13
14
15
26
20
17
17
17
21
22
22
22
22
7,213
1,161
420
8,794
710
3,804
770
5,284
7,213
1,401
442
9,056
643
3,446
392
4,481
14,078
13,537
(238)
(89)
(327)
(3,251)
(195)
(3,446)
(303)
(140)
(443)
(2,433)
(640)
(3,073)
(3,773)
(3,516)
10,305
10,021
845
6,133
2,139
1,176
12
844
6,129
2,139
900
9
10,305
10,021
These financial statements were approved and authorised for issue by the Board of Directors on 3 November
2017 and signed on their behalf by
S J F Morley
Director
Croma Security Solutions Group plc - Company Number: 03184978
28
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2017
Notes
2017
£000's
2016
£000's
Cash flows from operating activates
Profit before taxation
Depreciation amortisation and impairment
Loss on sale of property, plant and equipment
Net changes in working capital
Financial expenses
Corporation tax paid
Net cash generated from operations
Cash flows from investing activities
Purchase of business including acquisition costs net of cash
acquired
Purchase of property, plant and equipment
Proceeds on disposal of property, plant and equipment
Net cash used in investing activities
25
Cash flows from financing activities
New share issue
Decrease in Hire Purchase
(Decrease)/increase in borrowings
Dividends paid
Interest paid
Net cash used in financing activities
Net increase/(decrease) in cash
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
26
357
368
3
443
74
(12)
1,233
(100)
(114)
7
(207)
5
(56)
(439)
(84)
(74)
(648)
378
392
770
177
350
10
(672)
61
(36)
(110)
(712)
(73)
67
(718)
-
(38)
539
(59)
(61)
381
(447)
839
392
29
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2017
Attributable to owners of parent
At 1 July 2015
New share issue
Profit for the year
Dividends paid
Share option scheme charge
At 30 June 2016
New share issue
Profit for the year
Dividends paid
Share option scheme charge
At 30 June 2017
The following notes form part of the primary financial statements
Share
Capital
£000's
Share
Premium
£000's
Merger
Reserve
£000's
Retained
Earnings
£000's
Share
Options
£000's
Total
Equity
£000's
5,230
899
-
-
-
6,129
4
-
-
-
6,133
2,139
-
-
-
-
2,139
-
-
-
-
2,139
806
-
153
(59)
-
900
-
360
(84)
-
1,176
6
-
-
-
3
9
8,924
1,000
153
(59)
3
10,021
-
-
-
3
12
5
360
(84)
3
10,305
743
101
-
-
-
844
1
-
-
-
845
30
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
1. Accounting policies
The Group financial statements have been prepared and approved by the Directors in accordance with
International Financial Reporting Standards (IFRS’s), International Accounting Standards and Interpretations
(collectively IFRS) issued by the International Accounting Standards Board (IASB) as adopted by the
European Union (“adopted IFRS’s”).
Going concern
The Group’s activities are funded by a combination of long term equity capital, 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 Board has considered the
expected trading and cash requirements of the Group until the end of November 2018.
The Board remains positive about the retention of customers and outlook of its main trading operations. The
Board’s profit and cash flow projections suggest that the Group will meet its obligations as they fall due with
the use of existing uncommitted invoice discounting facilities. The main invoice discounting facilities were
reviewed in September 2017 for another year, and the Board is confident the facilities will be more than
adequate based on current and forecast trading of the Group.
Basis of consolidation
Where the Company has the power, either directly or indirectly, to govern the financial and operating policies
of another entity or business so as to obtain benefits from its activities, it is classified as a subsidiary. The
consolidated financial statements present the results of the Company and its subsidiaries (“the Group”) as if
they formed a single entity. Inter-company transactions and balances between Group companies are therefore
eliminated in full.
Segment reporting
The Directors consider there to be four operating segments namely ‘Croma Vigilant’ which comprises the
business of Vigilant Security (Scotland) Limited; ‘Croma Security Systems’ which comprises the business of
a division of CSS Total Security Limited; ‘Croma Locksmiths’, which comprises the business of CSS
Locksmiths Limited and Croma Locksmiths & Security Solutions Limited and Croma Biometrics which is a
division of CSS Total Security Limited.
The operating segments identified above are reported in a manner consistent with the internal reporting
provided to the chief operating decision maker. The chief operating decision maker, who is responsible for
allocating resources and assessing performance of the operating segments, has been identified as the executive
Directors collectively.
Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable, and represents amounts
receivable for goods supplied, stated net of discounts, returns and value added taxes. The Group recognises
revenue when the amount of revenue can be reliably measured, when it is probable that future economic
benefits will flow to the entity, and when specific criteria have been met for each of the Group's activities, as
described below. The Group bases its estimate of return on historical results, taking into consideration the
type of customer, the type of transaction and the specifics of each arrangement.
31
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
1. Accounting policies (continued)
- Revenue in respect of security personnel services is recognised over the term of the contract or, where
sales contracts are on a “cost plus” basis, at the point at which manpower services have been provided.
- Keyholding income is recognised in equal instalments over the period of the contract.
- Sale of goods is recognised at the point that they are delivered to client’s premises on signature of a
goods received note.
- Maintenance fees are recognised over the term of the contract leading to deferred income which is
held under ‘Accruals and deferred income’ in the statement of financial position.
- The fair value of any revenues associated with the sale of software licences is recognised over the
period of the licence.
Cost of sales
Cost of sales are the direct costs relating to customer generated revenue and comprise direct labour payroll
costs, other costs associated with direct labour, stock purchases, installation and subcontracted costs all sold
on to customers.
Intangible assets
(a) Goodwill
Goodwill represents the excess of the cost of a business combination over the interest in the fair value of
identifiable assets, liabilities and contingent liabilities acquired. Cost comprises the fair value of assets given,
liabilities assumed and equity instruments issued.
Goodwill is capitalised as an intangible asset with any impairment in carrying value being charged to the
consolidated statement of comprehensive income. Where the fair value of identifiable assets, liabilities and
contingent liabilities exceed the fair value of consideration paid, the excess is credited in full to the
consolidated statement of comprehensive income on the acquisition date.
(b) Other intangible assets
Intangible assets acquired separately are carried initially at cost. An intangible asset acquired as part of a
business combination is recognised separately from goodwill if the asset is separable or arises from contractual
or other legal rights and its fair value can be measured reliably.
Intangible assets with a finite life are amortised on a straight line basis over their expected useful life as follows
•
•
•
•
over the duration of the legal agreement
10 years
4 years
3 years
licences
customer relationships
royalty income
capitalised research & development
–
–
–
–
32
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
1. Accounting policies (continued)
(c) Internally-generated intangible assets - research and development expenditure
Expenditure on research activities is recognised as an expense in the period in which it is incurred. An
internally-generated intangible asset arising from the Group's development activity is recognised only if all of
the conditions of IAS 38 are met.
Internally-generated intangible assets are amortised on a straight-line basis over their useful lives. Where no
internally-generated intangible asset can be recognised, development expenditure is recognised as an expense
in the period in which it is incurred.
Impairment testing
Impairment tests on goodwill and other intangible assets with indefinite useful economic lives are undertaken
annually at the financial year end. Other non-financial assets are subject to impairment tests whenever events
or changes in circumstances indicate that their carrying amount may not be recoverable. Where the carrying
value of an asset exceeds its recoverable amount (i.e. the higher of value in use and fair value less costs to
sell), the asset is written down accordingly.
Where it is not possible to estimate the recoverable amount of an individual asset, the impairment test is carried
out on the asset’s cash-generating unit (i.e. the lowest group of assets in which the asset belongs for which
there are separately identifiable cash flows). Goodwill is allocated on initial recognition to each of the Group’s
cash-generating units that are expected to benefit from the synergies of the combination giving rise to the
goodwill.
Impairment charges are included separately in the consolidated statement of comprehensive income. An
impairment loss recognised for goodwill is not reversed.
Business combinations
The consolidated financial statements incorporate the results of business combinations using the acquisition
method. In the consolidated statement of financial position, the acquiree’s identifiable assets, liabilities and
contingent liabilities are initially recognised at their fair values at the acquisition date. The results of acquired
operations are included in the consolidated statement of comprehensive income from the date on which control
is obtained.
Contingent consideration
Any contingent consideration to be transferred by the Group is recognised at fair value at the acquisition date.
Subsequent changes to the fair value of the contingent consideration that is deemed to be an asset or liability
is recognised in accordance with IFRS 3 in the consolidated statement of comprehensive income.
33
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
1. Accounting policies (continued)
Property, plant and equipment
Property, plant and equipment are stated at costs less depreciation. Depreciation is provided on all property,
plant and equipment at rates calculated to write off the cost of each asset less its estimated residual value
evenly over its estimated useful life, as follows;
Freehold property - 4% on cost
Plant and equipment - 25% on cost
Computer equipment - 33% on cost
Office equipment - 15% on cost
Motor vehicles - 25% on cost
Inventories
Inventories are valued at the lower of cost and net realisable value. Cost is based on the cost of purchase on a
first in first out basis together with costs in bringing it to its present condition and location. Work in progress
and finished goods include attributable overheads. Net realisable value is based on estimated selling price less
additional costs to completion and disposal.
Dividends
Dividends are recognised when they become legally payable. In the case of interim dividends to equity
shareholders, this is when interim dividends are paid. In the case of final dividends, this is when approved by
the shareholders at the AGM.
Taxes
Tax expense recognised in profit or loss comprises the sum of deferred tax and current tax not recognised in
other comprehensive income or directly in equity. Current income tax assets and/or liabilities comprise those
obligations to, or claims from, fiscal authorities relating to the current or prior reporting periods, that are unpaid
at the reporting date. Current tax is payable on taxable profit, which differs from profit or loss in the financial
statements. Calculation of current tax is based on tax rates and tax laws that have been enacted or substantively
enacted by the end of the reporting period.
Deferred tax assets and liabilities are recognised where the carrying amount of an asset or liability in the
balance sheet differs from its tax base, except for differences arising on:
•
•
•
the initial recognition of goodwill
the initial recognition of an asset or liability in a transaction which is not a business combination and
at the time of the transaction affects neither accounting or taxable profit
investments in subsidiaries and jointly controlled entities where the Group is able to control the
timing of the reversal of the difference and it is probable that the difference will not reverse in the
foreseeable future.
Recognition of deferred tax assets is restricted to those instances where it is probable that taxable profit will
be available against which the difference can be utilised. The amount of the asset or liability is determined
using tax rates that have been enacted or substantively enacted by the balance sheet date and are expected to
apply when the deferred tax liabilities/ (assets) are settled/ (recovered).
34
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
1. Accounting policies (continued)
Deferred tax assets and liabilities are offset when the Group has a legally enforceable right to offset current
tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority
on either:
•
• different group entities which intend either to settle current tax assets and liabilities on a net basis, or
to realise the assets and settle the liabilities simultaneously, in each future period in which significant
amounts of deferred tax assets or liabilities are expected to be settled or recovered.
the same taxable Group company; or
Leased assets
Finance leases
The economic ownership of a leased asset is transferred to the lessee if the lessee bears substantially all the
risks and rewards of ownership of the leased asset. Where the Group is a lessee in this type of arrangement,
the related asset is recognised at the inception of the lease at the fair value of the leased asset or, if lower, the
present value of the lease payments plus incidental payments, if any. A corresponding amount is recognised
as a finance lease liability. Leases of land and buildings are classified separately and are split into a land and
a building element in accordance with the relative fair values of the leasehold interests at the date the asset is
recognised initially. See property, plant and equipment accounting policy for the depreciation methods and
useful lives for assets held under finance lease. The corresponding finance lease liability is reduced by lease
payments net of finance charges. The interest element of lease payments represents a constant proportion of
the outstanding capital balance and is charged to profit or loss, as finance costs over the period of the lease.
Operating leases
All other leases are treated as operating leases. Where the Group is a lessee, payments on operating lease
agreements are recognised as an expense on a straight-line basis over the lease term. Associated costs, such as
maintenance and insurance, are expensed as incurred.
Share capital
Financial instruments issued by the Group are treated as equity only to the extent that they do not meet the
definition of a financial liability. The Group’s ordinary shares are classified as equity instruments.
Finance cost
Finance costs of debt are recognised in the profit or loss over the term of such instruments at a constant periodic
rate on the carrying amount.
Share-based payments
The Group measures the cost of equity-settled transactions by reference to the fair value of the equity
instruments at the date at which they were granted. Judgement is required in determining the most appropriate
valuation model for a grant of equity instruments depending on the terms and conditions of the grant.
Management are also required to use certain assumptions in determining the most appropriate inputs to the
valuation model including expected life of the option, volatility, risk free rate and dividend yield. The
assumptions and models used are fully disclosed in note 21.
All share-based remuneration plans are ultimately recognised as an expense in the statement of comprehensive
income with a corresponding credit to the “Share Options” reserve.
35
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
1. Accounting policies (continued)
Financial assets
Financial assets are loans, trade receivables and other receivables.
Loans and receivables assets are non-derivative financial assets with fixed or determinable payments that are
not quoted in an active market. They arise principally through the provision of goods and services to customers
(e.g. trade receivables), but also incorporate other types of contractual monetary asset. They are initially
recognised at fair value plus transaction costs that are directly attributable to their acquisition or issue, and are
subsequently carried at amortised cost using the effective interest rate method, less provision for impairment.
The provision at 30 June 2017 was £34k (2016: £35k). The effect of discounting on these financial instruments
is not considered to be material. Trade receivables are analysed at Note 15.
Trade receivables are recorded at their amortised cost less any provision for doubtful receivables. Impairment
provisions are recognised when there is objective evidence (such as significant financial difficulties on the
part of the counterparty or default or significant delay in payment) that the Group will be unable to collect all
of the amounts due under the terms receivable the amount of such provision being the difference between the
net carrying amount and the present value of the future expected cashflows associated with the impaired
receivable. For trade receivables which are reported net, such provisions are reported in a separate allowance
account with the loss being recognised within administrative expenses in the statement of comprehensive
income. On confirmation that the trade receivable will not be collectable, the gross carrying value of the asset
is written off against the associated provision.
The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset
expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the
asset to another entity. Where the Group has transferred trade receivables under invoice discounting
arrangements and it retains substantially all the risks and rewards of ownership of the transferred trade
receivables, the Group continues to recognise the trade receivables and also recognises a liability for the
proceeds received.
The Group’s loans and receivables comprise trade and other receivables and cash and cash equivalents in the
balance sheet. Cash equivalents are deemed to be deposits that we hold with a maturity of under 3 months.
Cash and cash equivalents include cash in hand, deposits held at call with banks with an original maturity of
less than 3 months, and bank overdrafts. Bank overdrafts are shown within loans and borrowings in current
liabilities on the statement of financial position.
Financial Liabilities
(a) Bank borrowings are initially recognised at fair value net of any transaction costs directly attributable to
the issue of the instrument. Such interest bearing liabilities are subsequently measured at amortised cost using
the effective interest rate method, which ensures that any interest expense over the period to repayment is at a
constant rate on the balance of the liability carried in the statement of financial position. Interest expense in
this context includes initial transaction costs and premiums payable on redemptions, as well as any interest or
coupon payable while the liability is outstanding.
(b) Trade payables and other short-term monetary liabilities, are initially recognised at their fair value and
subsequently at their amortised cost.
36
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
1. Accounting policies (continued)
Provisions
Provisions for product warranties, legal disputes, onerous contracts or other claims are recognised when the
Group has a present legal or constructive obligation as a result of a past event, it is probable that an outflow
of economic resources will be required from the Group and amounts can be estimated reliably. Timing or
amount of the outflow may still be uncertain. Restructuring provisions are recognised only if a detailed formal
plan for the restructuring has been developed and implemented, or management has at least announced the
plan’s main features to those affected by it. Provisions are not recognised for future operating losses.
Provisions are measured at the estimated expenditure required to settle the present obligation, based on the
most reliable evidence available at the reporting date, including the risks and uncertainties associated with the
present obligation. Where there are a number of similar obligations, the likelihood that an outflow will be
required in settlement is determined by considering the class of obligations as a whole. Provisions are
discounted to their present values, where the time value of money is material. Any reimbursement that the
Group can be virtually certain to collect from a third party with respect to the obligation is recognised as a
separate asset. However, this asset may not exceed the amount of the related provision. In those cases where
the possible outflow of economic resources as a result of present obligations is considered improbable or
remote, no liability is recognised.
Capital management
The Group manages capital so as to safeguard its ability to continue as a going concern with the aim of
strengthening its capital base so as in due course to provide returns to shareholders. The Group currently
assigns a part of its Vigilant Security Scotland Limited debtor book as a means of funding short term working
capital, and has some lease funding secured over selected tangible assets, but otherwise has no short term or
long term debt.
The Group considers its capital to comprise its ordinary share capital, share premium, merger reserve, and
accumulated retained earnings.
Cash and cash equivalents
In the consolidated statement of cash flows, cash and cash equivalents includes cash in hand, deposits held at
call with banks.
37
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
1. Accounting policies (continued)
New and amended standards
No new standards, interpretations and amendments, effective for the first time from 1 July 2016, have had a
material effect on the financial statements of the Group.
Standards, interpretations and amendments to published standards that are not yet effective
Certain new standards, amendments and interpretations to existing standards have been published that are
mandatory for the Group’s accounting periods beginning on or after 1 July 2017 or later periods and have not
been early adopted. It is anticipated that these new standards, interpretations and amendments currently in
issue at the time of preparing the financial statements may have a material effect on the consolidated financial
statements of the Group, however the extent of this has not yet been assessed.
-
-
-
IFRS 9 Financial Instruments
IFRS 15 Revenue recognition
IFRS 16 Leases
2. Critical Accounting Estimates and Judgements
The Group makes certain estimates and judgements regarding the future. Estimates and judgements are
continually evaluated based on historical experience and other factors, including expectations of future events
that are believed to be reasonable under the circumstances. In the future, actual experience may differ from
these estimates and assumptions. The estimates and assumptions that have a significant risk of causing a
material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed
below:
Estimates and assumptions:
Impairment of goodwill. Determining whether goodwill is impaired requires an estimation of the value in use
of the cash generating units to which the goodwill has been allocated. The value in use calculation requires
the entity to estimate the future cashflows expected to arise from the cash generating unit and a suitable
discount rate in order to calculate the present value. The carrying amount of goodwill at the statement of
financial position date was £7,213k. Details relating to the allocation of goodwill to cash generating units are
given in note 11.
Other Intangibles. Other Intangible assets, including brands, customer relationships, software licences and
brand royalties are amortised over their expected useful lives, as assessed at the time of their acquisition. The
expected useful lives have been reviewed and found to be reasonable, and no adjustment is felt to be needed.
The carrying amount of other intangibles at the statement of financial position date was £1,133k more details
of which are given at note 12.
Research and development. Included in intangible assets is capitalised research and development, relating to
costs incurred in the research and development of FastVein™ time and attendance. This project has been
assessed against the requirements of IAS 38. In particular, future markets and profitability have been estimated
and found to meet those requirements. The carrying amount of other intangibles at the statement of financial
position date was £28k more details of which are given at note 12.
38
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
3. Segmental reporting
The Directors consider the following five business segments best represent the business segments of the
Group.
39
CromaVigilant(Guarding)CromaSecuritySystems(Electronic)Croma Biometric(FastVein™)Croma Locksmiths(Locks)CentralCostsTotal2017 Business Segments£000's£000's£000's£000's£000's£000'sSegment revenues16,4052,3573462,950-22,058Gross profit1,8611,145104915-4,025Adminstrative(1,343)(568)(239)(733)(550)(3,433)Amortisation-(62)(51)(129)-(242)Depreciation(49)(42)-(34)-(125)Profit/(loss) on disposal-(3)-1-(2)Other Operating income---208-208Segment operating profit/(loss)469470(186)228(550)431Segment assets4,5474,7051173,7001,00814,077Segment (liabilities)(2,472)(610)-(705)15(3,772)Segement net assets 2,0754,0951172,9951,02310,305Additions to non-current assets6120-20-1142016 Business Segments£000's£000's£000's£000's£000's£000'sSegment revenues14,2862,2681702,307-19,031Gross profit1,9271,07150842-3,890Adminstrative(1,197)(530)(253)(621)(714)(3,315)Amortisation-(81)(50)(110)-(241)Depreciation(40)(42)-(27)-(109)Profit/(loss) on disposal-(10)---(10)Other Operating income---23-23Segment operating profit/(loss)690408(253)107(714)238Segment assets3,3124,385585,20557713,537Segment (liabilities)(1,444)(555)-(839)(678)(3,516)Segement net assets 1,8683,830584,366(101)10,021Additions to non-current assets21148-129-298
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
3. Segmental reporting (continued)
Revenues
Security personnel services
Keyholding income
Sale of goods & Installation Services
Monitoring maintenance and service fees
Other income
4. Expenses
Research and development
Amount of inventory expensed as cost of sales
Operating lease expense
Depreciation
Amortisation
Loss on disposal of property, plant and equipment
Auditors’ remuneration:
2017
£000's
16,219
143
5,086
567
43
2016
£000's
14,102
141
4,170
575
43
22,058
19,031
2017
£000's
75
2,222
304
126
242
3
2016
£000's
82
1,922
230
109
241
10
Audit of parent company and consolidated financial information payable to
Nexia Smith & Williamson
Fees paid to the auditor in respect of tax compliance services
32
8
32
8
40
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
5. Finance expense
Interest paid on factoring arrangements
Interest on hire purchase agreements
6. Staff and staff costs
The average monthly number of persons (including Directors) employed by
the Group during the period was:
Management and administration
Service and product provision
2017
£000's
2016
£000's
64
10
74
53
8
61
2017
No.
2016
No.
48
589
637
41
526
567
Staff cost (for the above persons):
£000's
£000's
Wages and salaries
Pension
Social security costs
The average monthly number of persons (including Directors) employed by
the Parent Company during the period was:
Management and administration
15,571
102
1,460
17,133
No.
4
13,443
85
1,185
14,713
No.
4
41
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
7. Directors' and key management personnel remuneration
2017
Estimated
value of
benefits
£000's
Salary
£000's
Fees
£000's
Pension
£000's
Total
£000's
S J F Morley
R M Fiorentino
A N Hewson
M Whettingsteel (Resigned August 2017)
R A Juett
C McMicking
P Williamson (Appointed April 2017)
Lord James Percy (Resigned December
2016)
116
177
-
100
54
-
21
8
476
1
3
1
-
-
-
-
-
5
-
-
21
-
-
21
-
-
42
-
-
-
-
-
-
-
-
-
117
180
22
100
54
21
21
8
523
2016
S J F Morley
R M Fiorentino
A Tetley (Resigned April 2016)
A N Hewson
M Whettingsteel (Appointed December
2015)
R A Juett (Appointed April 2016)
C McMicking
Lord James Percy
Estimated
value of
benefits
£000's
Salary
£000's
Fees
£000's
Pension
£000's
Total
£000's
117
136
74
-
56
7
-
18
408
1
2
1
-
-
-
-
-
4
-
-
-
18
-
-
18
-
36
-
-
-
-
-
-
-
-
-
118
138
75
18
56
7
18
18
448
No share based payments were made to Directors in 2017 or 2016
Key management personnel compensation comprises only short-term employee benefits which total
£583k (2016: £500k)
42
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
8. Taxation
Analysis of the tax charge in the year
Current year tax charge
UK Corporation Tax charge on profit for the year
Adjustments for prior periods
Total current tax
Deferred tax (note 20)
Current year
Adjustments for prior periods
Tax on profit on ordinary activities
Factors which may affect future tax charges
2017
£000's
2016
£000's
58
5
63
(23)
(43)
(3)
71
(1)
70
(39)
(7)
24
Finance Act 2016 includes legislation to reduce the main rate of corporation tax to 17% from 1 April 2020
The tax assessed for the year is lower than (2016 - lower than) the standard rate of corporation tax in the
UK of 19.75% (2016 - 20%). The differences are explained below:
Factors affecting the tax charge for the year
Profit before taxation
Profit multiplied by the standard rate of taxation of 19.75% (2016: 20%)
Effects of:
Expenses not deductible for tax purposes
Non-taxable income
Adjustment to tax charge for previous periods
Total tax (credit)/charge for the year
43
2017
£000's
2016
£000's
357
71
4
(40)
(38)
(3)
177
35
2
(5)
(8)
24
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
9. Earnings per share
The calculation of basic earnings per share is based on the profit attributable to ordinary shareholders, from
continuing operations, divided by the weighted average number of shares in issue during the year, calculated
on a daily basis.
The calculation of diluted earnings per share is based on the basic earnings per share adjusted to allow for the
issue of shares and the post-tax effect of dividends and interest on the assumed conversion of all other dilutive
options and other potential ordinary shares.
Numerator
Earnings for the year on continuing operations and used in basic and diluted
EPS
Denominator
Weighted average number of shares used in basic EPS (000’s)
2017
£000's
2016
£000's
360
153
16,894
16,005
Weighted average number of shares used in diluted EPS (000’s)
16,904
16,012
Basic earnings per share
Diluted earnings per share:
Pence
Pence
2.13
2.13
0.96
0.95
The difference between the number of shares used in the basic EPS calculation and the diluted EPS calculation
relates only to share options.
10. Dividends
On 1 March 2017 the Directors proposed an interim dividend of 0.5p per share. This dividend was paid on 7
April 2017. The total cost was £84K.
44
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
11. Goodwill
Cost
At 1 July 2015
Additions
At 1 July 2016 and 30 June 2017
Impairment
At 1 July 2015, 1 July 2016 and 30 June 2017
Net book value
At 1 July 2015
At 1 July 2016 and 30 June 2017
Impairment testing
£000's
5,867
1,346
7,213
-
5,867
7,213
During the year, goodwill was reviewed for impairment in accordance with IAS 36 "Impairment of Assets".
No impairment charge occurred in the current year (2016: £Nil) as a result of this review. For this review
goodwill was allocated to individual cash generating units (CGU) on the basis of the group's operations.
The carrying value of goodwill be each CGU is as follows:
Croma Security Systems
Croma Locksmiths
Croma Vigilant
2017
£000's
3,339
2,478
1,396
7,213
2016
£000's
3,339
2,478
1,396
7,213
45
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
11. Goodwill (continued)
Forecasts, growth and discount rates
The recoverable amount relating to Croma Vigilant, Croma Security and Croma Locksmiths was determined
based on value-in-use calculations, covering a detailed forecast for the five-year period to 30 June 2022,
followed by extrapolation of expected cashflows for the remaining useful lives using a 2% growth rate. The
present value for the expected cashflows was determined using a pre-tax discount rate of 11.6% (2016: 11.4%)
to each year, to reflect appropriate adjustments relating to market risk and the weighted average cost of capital.
The discount rate was derived using sector averages for similar industries to ourselves.
Cashflow assumptions
Croma Vigilant
The business has achieved strong growth since June 2012, and in 2017 turnover is 90% higher than in 2012.
During the early part of the present period to 30 June 2018 we have seen further growth and as a result turnover
for full year is forecast to increase by 32%. Direct costs are forecast to increase proportionately and
additionally the effects of the apprentice levy and minimum pension increases have been fully costed.
For the period from 2019 to 2022 the following assumptions have been made:
•
•
•
•
Revenue to grow by 3% per annum (2016: 3%)
Direct wages to rise in proportion to revenue
Other direct costs to increase at 2.5% per annum (2016: 2.5%)
Indirect costs to increase at 2% per annum (2016: 2%)
For the year ended 30 June 2023 onwards, net revenues are assumed to increase by 2% per annum.
Based on these assumptions the net present value of future cashflows is £4,356k
Croma Security Systems including Croma Biometric
Based on recent performance and order pipeline the Board forecast turnover for 2018 to increase by 10%. For
the same period direct costs are forecast to increase by 13%.
For the period from 2019 to 2022 the following assumptions have been made:
•
•
•
Revenue growth of 4.9% (2016: 5%)
Direct cost growth of 4.8% (2016: 2.5%)
Indirect costs growth of 2.4% (2016: 2%)
For the year ended 30 June 2023 onwards, net revenues are assumed to increase by 2% per annum.
Based on these assumptions the net present value of future cashflows is £4,973k
46
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
Croma Locksmiths
Based on recent performance and known order pipeline, the Board forecast turnover for 2018 to increase by
12%. The growth will be serviced out of existing staff resources so direct costs are forecast to remain at 2017
levels.
For the period from 2019 to 2022 the following assumptions have been made:
•
•
•
Revenue growth of 3% (2016: 3%)
Direct cost growth of 2.5% (2016: 2.5%)
Indirect costs growth of 2% (2015: 2%)
For the year ended 30 June 2023 onwards, net revenues are assumed to increase by 2% per annum.
Based on these assumptions the net present value of future cashflows is £3,909k
Sensitivities
The Directors have applied sensitivity analysis to future cashflows to estimate the likelihood of future
impairment. This analysis shows that even if long term growth were turn reduce by 1% to 1% (which the
Directors consider unlikely), there would be sufficient headroom to suggest no impairment adjustment would
be necessary.
Having considered the above sensitivities, the Board are of the opinion that the forecasts have been prepared
on a prudent basis with sufficient headroom to indicate that no impairment adjustment is required at 30 June
2017.
47
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
12. Other intangible assets
Fair value
At 1 July 2015
Additions
At 30 June 2016
Additions
At 30 June 2017
Amortisation
At 1 July 2015
Charge for the year
At 30 June 2016
Charge for the year
At 30 June 2017
Carrying Value at 30
June 2016
Carrying Value at 30
June 2017
R&D
£000's
Customer
relationships
£000's
Brands
£000's
Software
licences
£000's
Brand
Royalties
£000's
Total
£000's
84
-
84
2
86
-
29
29
29
58
55
28
1,126
295
601
-
1,727
295
-
-
222
-
222
-
31
1,758
-
601
31
2,359
-
2
1,727
295
222
31
2,361
525
155
680
162
842
1,047
885
95
29
124
29
153
171
142
72
22
94
22
25
6
31
-
717
241
958
242
116
31
1,200
128
106
-
-
1,401
1,161
R&D has been developed internally. The other intangible assets were acquired with the business of CSS Total
Security and CSS Locksmiths in March 2012 and the business of Croma Locksmiths & Security Solutions in
December 2015. At the year end the Directors reviewed intangible assets for impairment;
Customer relationships
Customer relationships extant at the date of acquisition were considered. A forecast was prepared of future
gross revenues from the relationships after giving due consideration to historic attrition rates. A discount rate
of 11.60% (2016: 11.40%) (relating to market risk and weighted average cost of capital) was then applied to
give the present value of these future cashflows.
No impairment adjustment has been found to be necessary against the carrying value of customer relationships
acquired with the business of CSS Total Security Limited and the business or Croma Locksmiths & Security
Solutions. The useful lives as noted in the accounting policies were considered appropriate. Customer
relationships with a net book value of £885k have a remaining life of between 3.5 to 8.5 years.
48
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
12. Other intangible assets (continued)
Brands
The brand of Croma Locksmiths is enduring within its locality. An assessment of the brand value was made
by applying a comparable third-party royalty rate of 7.5% to forecast turnover using a nil rate growth model.
After-tax revenues of the remaining estimated useful life of 5 years were then valued using the same discount
factor noted above and no impairment adjustment to the carrying value of the brand was considered necessary.
The useful life of the asset as noted in the accounting policy note was considered appropriate. Brands with a
net book value of £142k, have a remaining useful life of 5 years.
Software licence
The software licence continues to be valued using an estimate of the costs which would be necessary to re-
create the software if it had to be re-written. The Directors have considered the future revenue streams which
might derive from fully exploiting the software licence and consider the carrying value of the licence not to
be impaired at 30 June 2017. The useful life of the asset as noted in the accounting policy note was considered
appropriate. Software licences with a net book value of £106k, have a remaining useful life of 5 years.
Research and Development
In June 2015 a project to develop a specific time and attendance package linked to FastVein™ was completed.
This constituted a discrete research area within the overall programme. There have been sufficient sales to
give confidence that all the conditions required under IAS 38 Intangible Assets have been met. The Directors
have assessed forecast cashflows for the next 12 months and consider there is no impairment to the assets at
the balance sheet date. The useful life of the asset as noted in the accounting policy note was considered
appropriate. R&D with a net book value of £28k, has a remaining useful life of 1 year.
49
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
13. Property, plant and equipment
Cost
At 1 July 2015
Additions
Assets acquired on business combination
Disposals
At 30 June 2016
Additions
Disposals
At 30 June 2017
Depreciation
At 1 July 2015
Charge for the year
On disposals
At 30 June 2016
Charge for the year
On disposals
At 30 June 2017
Carrying value at 30 June 2016
Carrying value at 30 June 2017
Freehold
& leasehold
Property
£000's
Fixtures,
fittings,
plant and
equipment
£000's
Motor
Vehicles
£000's
Total
£000's
80
-
41
-
121
10
-
131
34
4
-
38
6
44
83
87
319
36
12
-
367
87
-
454
230
34
-
264
49
313
103
141
369
164
45
(225)
353
17
(41)
329
172
71
(146)
97
71
(31)
137
256
192
768
200
98
(225)
841
114
(41)
914
436
109
(146)
399
126
(31)
494
442
420
In motor vehicles the following amounts are held under hire purchase agreements:
At 30 June - Cost
Accumulated depreciation
Net book value
2017
£000's
2016
£000's
199
(57)
142
261
(67)
194
The Group leases various vehicles and machinery under non-cancellable hire purchase agreements with
lease terms up to four years. Ownership of the assets lies with the Group.
50
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
14. Inventories
Raw materials and consumables
Work in progress
15. Trade and other receivables
Trade receivables
Allowance for bad debts
Net trade receivables
Other receivables
Prepayments
Total trade and other receivables
2017
£000's
2016
£000's
647
63
710
628
15
643
2017
£000's
2016
£000's
3,532
(34)
3,498
31
275
3,203
(35)
3,168
24
254
3,804
3,446
Owing to the short term nature of the trade receivables, their fair value is the same as the book value. An
allowance for impairment is made where there is an identified event which, based on previous experience, is
evidence of a reduction in the recoverability of the outstanding amount.
Bad debts written off during the year
2017
2016
£000’s
£000’s
-
14
The level of credit risk is, in the view of the Board, generally low, due to a wide mix of clients in different
trade sectors. The maximum exposure to credit risk at the reporting date is the carrying value of each class of
receivable set out above. No interest is charged on receivables within agreed credit terms. Thereafter, interest
may be charged. There are only immaterial debts due in excess of credit terms. The Directors of the Group
and the subsidiaries review debt collection rates at each Board meeting and close attention is paid to collection
of debt and credit control.
Age profile
Debts past due but not paid
Under 60 days
60-90 days
Over 90 days
51
2017
£000's
2016
£000's
576
58
10
644
481
36
13
530
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
16. Categories of financial asset
Loans and receivables
Trade and other receivables
Cash at bank and in hand
17. Trade and other payables
Trade payables
Other payables
Other taxes and social security
Corporation tax liability
Accruals and deferred income
Total trade and other payables, excluding loans and borrowing
classified as financial liability measured at amortised cost
Interest bearing loans and borrowings due within 1 year
Finance lease liabilities (due in less than 1 year)
Invoice discounting facilities
Finance lease liabilities (due in 1 to 5 years)
Other payables due in more than 1 year
2017
£000's
2016
£000's
3,529
770
4,299
2017
£000's
502
92
594
844
105
1,707
3,192
392
3,584
2016
£000's
585
391
976
840
54
563
3,251
2,433
2017
£000's
2016
£000's
60
135
195
39
50
89
101
539
640
56
84
140
Invoice discounting facilities are secured against the trade debtor book of Croma Vigilant and Croma
Locksmiths
52
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
18. Interest rate and liquidity risk
2017
Fixed rate
Trade and other payables
Other payables
Finance lease obligations
Accruals and deferred income
Floating rate
Invoice discounting facility
Total
2016
Weighted
average
effective
interest
rate
%
Less than
one
month or
on
demand
£000's
1-12
months
£000's
1-3
years
£000's
4.70%
11.40%
2.80%
566
-
-
-
-
-
29
60
1,707
135
50
39
-
-
Total
£000's
616
29
99
1,707
135
566
1,931
89
2,586
Weighted
average
effective
interest
rate
%
Less than
one
month or
on
demand
£000's
1-12
months
£000's
1-3
years
£000's
Total
£000's
Fixed rate
Trade and other payables
Other payables
Finance lease obligations
Accruals and deferred income
Floating rate
Invoice discounting facility
4.70%
11.40%
2.80%
592
-
-
-
-
300
84
101
563
539
55
29
56
-
-
947
113
157
563
539
Total
592
1,587
140
2,319
19. Contingent liabilities
There are no contingent liabilities either at the year-end or up to the date of signing the financial
statements.
53
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
20. Deferred tax
2017
£000's
2016
£000's
The movement on the deferred tax account is shown below
At 1 July
Adjustment for the prior year
Accelerated capital allowances
Short term temporary differences
Arising on fair value adjustments recognised on business combination
At 30 June
The deferred tax provision at 30 June comprises the following temporary
differences:
Capital allowances in advance of depreciation
Arising on fair value adjustments recognised on business combination
Other short term temporary differences
303
(43)
-
(4)
(18)
238
44
202
(8)
238
244
(7)
(39)
-
105
303
198
105
303
At 30 June 2017 deferred tax has been provided at a rate of 18%
The Group has tax losses of approximately £1.8M (2016: £1.8M) to carry forward. The potential deferred
tax asset arising on these tax losses of £306k (2016: £322k) has not been recognised as it is doubtful that it
will be utilised in the foreseeable future.
21. Share capital
Authorised, allotted, called up and fully paid:
2017
£000's
2016
£000's
Ordinary shares of 5 pence each
845
844
Issued and fully paid
Ordinary shares of 5 pence at the
beginning of the year
2017
Number
000's
2017
£000's
2016
Number
000's
2016
£000's
16,893
844
14,866
743
Ordinary shares of 5 pence at the end of
the year
16,912
845
16,893
844
54
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
21. Share capital (continued)
The Group operates CSSG Share Option Scheme 2014 (the Scheme), which is a share option scheme approved
by HMRC. The scheme was initiated on 28 May 2014. The Scheme is open to all employees.
Options are granted by the Board taking into account the need to motivate, retain and recruit high calibre
employees and with regard to the contribution that such employees are expected to make in achieving the
Group’s objectives.
Employment Options vest and become exercisable on the third anniversary of date of grant, and lapse on the
earlier of cessation of employment (or 6 months thereafter if options have vested at cessation date) or the 5th
anniversary of date of grant.
At the start and end of the year, the number of options not exercised is as follows:
Share options in issue at 1 July
Lapsed in the year
Exercised in the year
2017
Number
2016
Number
42,000
57,000
(4,000)
(19,000)
(15,000)
-
Share options in issue at 30 June
19,000
42,000
Exercise price of all share options - 28.5 pence
The fair value of Employment Options was estimated at the date of grant using a Black-Scholes option pricing
model. The following assumptions have been used in calculating the fair value of share options:
Valuation method
Risk free interest rate
Expected life (average years)
Expected volatility
Dividend yield
At date of grant
Black-Scholes
2%
5
60%
0%
The charge to the Income statement in the year was £3k (2016: £3k)
55
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
22. Reserves
The following describes the nature and purpose of each reserve within equity:
Reserve
Description and purpose
Share Premium
Merger Reserve
Retained Earnings
Ordinary Shares
Company Share Option Scheme
23. Related party transactions
Amount subscribed for share capital in excess of
nominal value
less related professional and
regulatory fees.
The merger reserve arose on the acquisition of the
CSS Group to the extent that this was funded by the
issue of new shares.
Cumulative net gains and losses recognised in the
statement of comprehensive income less amounts
distributed to shareholders.
Amount subscribed for share capital at nominal
value.
This represents the change in equity relating to the
issue of company share options in the year.
Identity of related parties
The Parent Company has a controlling related party relationship with its subsidiary companies. The Group
has a related party relationship with its Directors, executive officers, pension funds and trusts, who with their
immediate relatives control 40.7% of the voting shares.
Rental of Premises
R M Fiorentino and his family are beneficiaries of the County Access Systems Limited Retirement Benefits
Scheme from which the Group leases trading and ex-trading premises. The total rental on these premises was
£88,000 (2016: £88,000).
Acquisition consideration – Croma Locksmiths
As noted in last year’s report, deferred consideration being £100,000 of the remaining cash element and
£200,000 (the maximum amount payable) of the earn-out consideration was held in “other creditors” as
payable to M Whettingsteel. None of the earn-out targets were met during the current year and so the earn-
out consideration has been fully released to the profit and loss account with the fixed element of the cash
consideration being settled in the early part of the year.
56
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
23. Related party transactions (continued)
Director’s loans
At the start of the year a loan of £113k from M Whettingsteel carrying an interest rate of 5.13% per annum
was outstanding. During the year £84k was repaid to M Whettingsteel together with £3,064 of interest. At
the year-end £29k remained outstanding.
Salaries paid to close family members
During the year salaries totalling £73k (2016 £96k) were paid to close family members of key management
personnel.
24. Operating lease commitments
2017
£000's
2016
£000's
The future aggregate minimum lease payments lease payments under non-
cancellable operating leases are as follows:
Land & Buildings
No later than 1 year
Between 1 and 5 years
Over 5 years
Other operating leases
No later than 1 year
Between 1 and 5 years
Over 5 years
Total
193
430
444
1,067
80
51
-
131
167
416
404
987
86
76
-
162
1,198
1,149
57
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
25. Notes supporting the cash flow statement
Net changes in working capital
(Increase) in inventories
(Increase) in trade and other receivables
Increase in trade and other payables
26. Cash and cash equivalents
2017
£000's
2016
£000's
(67)
(358)
868
443
2017
£000's
(406)
(1,156)
890
(672)
2016
£000's
Cash at bank and in hand
770
392
27. Subsidiary audit exemption
The wholly-owned subsidiaries of Croma Security Solutions Group Plc: Vigilant Security (Scotland) Limited,
Photobase Limited, CSS Total Security Limited, CSS Locksmiths Limited and Croma Locksmiths and
Security Solutions Limited are exempt from the requirements of Companies Act 2006 relating to the audit of
individual accounts by virtue of section 479A.
28. Post balance sheet events
The Group has entered into a contract with a former director for the buy-back of shares, which will then be
cancelled. The contract is conditional on the ratification of shareholders at the AGM. The total consideration
of £760k will be funded out of existing resources.
58
INDEPENDENT AUDITORS’ REPORT TO THE SHAREHOLDERS OF CROMA SECURITY
SOLUTIONS GROUP PLC
FOR THE YEAR ENDED 30 JUNE 2017
Opinion
We have audited the financial statements of Croma Security Solutions Group PLC (the ‘parent
company’) for the year ended 30 June 2017 which comprise the parent company Statement of
Financial Position, cash flow statement, statement of changes in equity and the parent company
notes to the financial statements, including a summary of significant accounting policies. The
financial reporting framework that has been applied in their preparation is applicable law and
United Kingdom Accounting Standards, including FRS 102 “The Financial Reporting Standard
applicable in the UK and Republic of Ireland” (United Kingdom Generally Accepted Accounting
Practice).
This report is made solely to the parent company’s members, as a body, in accordance with Chapter
3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state
to the parent company’s members those matters we are required to state to them in an auditor’s
report and for no other purpose. To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the parent company and the parent company’s members
as a body, for our audit work, for this report, or for the opinions we have formed.
In our opinion, the parent company financial statements:
• give a true and fair view of the state of the parent company’s affairs as at 30 June 2017;
• have been properly prepared in accordance with United Kingdom Generally Accepted
Accounting Practice; and
• have been prepared in accordance with the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and
applicable law. Our responsibilities under those standards are further described in the Auditor’s
responsibilities for the audit of the parent company financial statements section of our report. We
are independent of the parent company in accordance with the ethical requirements that are
relevant to our audit of the parent company financial statements in the UK, including the FRC’s
Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these
requirements. We believe that the audit evidence we have obtained is sufficient and appropriate
to provide a basis for our opinion.
Conclusions relating to going concern
We have nothing to report in respect of the following matters in relation to which the ISAs (UK)
require us to report to you where:
• the directors’ use of the going concern basis of accounting in the preparation of the parent
company financial statements is not appropriate; or
• the directors have not disclosed in the parent company financial statements any identified
material uncertainties that may cast significant doubt about the parent company’s ability to
continue to adopt the going concern basis of accounting for a period of at least twelve months
from the date when the parent company financial statements are authorised for issue.
59
INDEPENDENT AUDITORS’ REPORT TO THE SHAREHOLDERS OF CROMA SECURITY
SOLUTIONS GROUP PLC (continued)
FOR THE YEAR ENDED 30 JUNE 2017
Other information
The other information comprises the information included in the report and financial statements
other than the group and parent company financial statements and our auditor’s reports thereon.
The directors are responsible for the other information. Our opinion on the parent company
financial statements does not cover the other information and, except to the extent otherwise
explicitly stated in our report, we do not express any form of assurance conclusion thereon.
In connection with our audit of the parent company financial statements, our responsibility is to
read the other information and, in doing so, consider whether the other information is materially
inconsistent with the parent company financial statements or our knowledge obtained in the audit
or otherwise appears to be materially misstated. If we identify such material inconsistencies or
apparent material misstatements, we are required to determine whether there is a material
misstatement in the parent company financial statements or a material misstatement of the other
information. If, based on the work we have performed, we conclude that there is a material
misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Opinion on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
•
•
the information given in the strategic report and the directors’ report for the financial year
for which the parent company financial statements are prepared is consistent with the
parent company financial statements; and
the strategic report and the directors’ report have been prepared in accordance with
applicable legal requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the parent company and its environment obtained
in the course of the audit, we have not identified material misstatements in the strategic report or
the directors’ report.
We have nothing to report in respect of the following matters where the Companies Act 2006
requires us to report to you if, in our opinion:
• adequate accounting records have not been kept by the parent company, or returns adequate
for our audit have not been received from branches not visited by us; or
• the parent company financial statements are not in agreement with the accounting records
and returns; or
• certain disclosures of directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
Responsibilities of directors
As explained more fully in the directors’ responsibilities statement set out on page 22 the directors
are responsible for the preparation of the parent company financial statements and for being
satisfied that they give a true and fair view, and for such internal controls as the directors determine
is necessary to enable the preparation of parent company financial statements that are free from
material misstatement, whether due to fraud or error.
In preparing the parent company financial statements, the directors are responsible for assessing
the parent company’s ability to continue as a going concern, disclosing, as applicable, matters
related to going concern and using the going concern basis of accounting unless the directors either
intend to liquidate the parent company or to cease operations, or have no realistic alternative but
to do so.
60
INDEPENDENT AUDITORS’ REPORT TO THE SHAREHOLDERS OF CROMA SECURITY
SOLUTIONS GROUP PLC (continued)
FOR THE YEAR ENDED 30 JUNE 2017
Auditor’s responsibilities for the audit of the parent company financial statements
Our objectives are to obtain reasonable assurance about whether the parent company financial
statements as a whole are free from material misstatement, whether due to fraud or error, and to
issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of
assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always
detect a material misstatement when it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they could reasonably be expected to
influence the economic decisions of users taken on the basis of these parent company financial
statements.
A further description of our responsibilities for the audit of the parent company financial statements
is located on the Financial Reporting Council’s website at: www.frc.org.uk/auditorsresponsibilities.
This description forms part of our auditor’s report.
Other matter
We have reported separately on the group financial statements of Croma Security Solutions Group
Plc for the year ended 30 June 2017. This separate auditor’s report on the group financial
statements includes the key audit matters and other audit planning and scoping matters that relate
to the parent company audit.
Julie Mutton
Senior Statutory Auditor, for and on behalf of
Nexia Smith & Williamson
Statutory Auditor
Chartered Accountants
Cumberland House
15 – 17 Cumberland Place
Southampton
Hampshire
SO15 2BG
6 November 2017
61
STATEMENTOF FINANCIAL POSITION
FOR THE YEAR ENDED 30 JUNE 2017
Assets
Fixed assets
Investments
Current assets
Debtors
Cash and bank and in hand
Current liabilities
Notes
2017
£000's
2016
£000's
E
F
8,935
8,935
863
38
901
9,135
9,135
1,362
21
1,383
Amounts falling due within one year
G
(317)
(671)
Net current assets
Total assets less current liabilities
584
712
9,519
9,847
Issued capital and reserves attributable to owners of the parent
Share capital
Share premium
Merger reserve
Profit and loss account
Total equity
H
C
845
6,133
2,139
402
844
6,129
2,139
735
9,519
9,847
The company loss for year totalled £249k (2016:£409k)
These financial statements were approved and authorised for issue by the Board of Directors on 6
November 2017 and signed on their behalf by
S J F Morley
Director
Croma Security Solutions Group plc - Company Number: 03184978
62
STATEMENTOF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2017
Cash flows from operating activities
(Loss) before taxation
Provision against investments
Net changes in working capital
Net cash generated from operations
Cash flows from investing activities
Purchase of investments
Dividends received
Net cash used in investing activities
Cash flows from financing activities
New share issue
Dividends paid
Net cash used in financing activities
Net increase in cash
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of the period
2017
£000's
2016
£000's
(249)
-
445
196
(100)
-
(100)
5
(84)
(79)
17
21
38
(409)
124
777
492
(750)
320
(430)
-
(59)
(59)
3
18
21
63
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2017
At 1 July 2015
New share issue
Loss for the year
Dividends paid
At 30 June 2016
New share issue
Loss for the year
Dividends paid
At 30 June 2017
Share
Capital
£000s
Share
Premium
£000s
Merger
Reserve
£000s
Retained
Earnings
£000s
Total
Equity
£000s
743
101
-
-
844
1
-
-
845
5,230
899
-
-
6,129
4
-
-
6,133
2,139
-
-
-
2,139
-
-
-
2,139
1,203
-
(409)
(59)
735
-
(249)
(84)
402
9,315
1,000
(409)
(59)
9,847
5
(249)
(84)
9,519
The following notes form part of the primary financial statements
64
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
A. Significant accounting policies
Croma Security Solutions Group Plc is a public limited company incorporated and domiciled in England
and Wales.
The address of the registered office is Unit 6 Fulcrum 4, Solent Way, Whiteley, Fareham, Hampshire PO15
7FT
The financial statements have been prepared under the historical cost convention and in accordance with
Financial Reporting Standard 102, the Financial Reporting Standard applicable in the United Kingdom and
the Republic of Ireland and the Companies Act 2006.
Basis of accounting
The separate financial statements of the Company are presented as required by the Companies Act 2006.
They have been prepared under the historical cost convention and in accordance with United Kingdom
Accounting Standards and law.
The principal accounting policies are summarised below. They have all been applied consistently
throughout the year and the preceding year.
Going Concern
These financial statements have been drawn up on the going concern basis. The Company made an
operating loss for the year of £249k (2016: loss: £409k)). No dividends were received from its subsidiary
undertakings (2016:£320k). The Company's activities are funded by long term equity capital. The day-
to-day operations are funded by cash generated from trading.
In considering the ability of the Company to meet its obligations as they fall due, the Directors have
considered the expected trading and cash requirements of the Company until 30 November 2018.
The Board remains positive about the retention of customers and the outlook for its main trading operations.
The Board's profit and cash flow projections suggest that the Company will meet its obligations as they fall
due.
The financial statements do not reflect the adjustments that would be necessary were the trading
performance of the Company to deteriorate and funding from invoice discounting to become unavailable.
The financial statements do not include the adjustments that would result if the group was unable to continue
as a going concern.
Investments
Fixed asset investments in subsidiaries are shown at cost less provision for impairment.
Financial instruments
Financial assets and financial liabilities are recognised on the Company's balance sheet when the Company
becomes a party to the contractual provision of the instrument.
65
NOTES FORMING PART OF THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 30 JUNE 2017
A. Significant accounting policies (continued)
Financial liabilities and equity
Financial liabilities and equity instruments are classified according to the substance of the contractual
arrangements entered into. An equity instrument is any contract that evidences a residual interest in the
assets after deducting all of its financial liabilities.
Where the contractual obligations of the financial instruments (including share capital) are equivalent to a
similar debt instrument they are classified as financial liabilities. Financial liabilities are presented as such
in the balance sheet. Finance costs and gains or losses relating to financial liabilities are included in the
profit and loss account. Finance costs are calculated so as to produce a constant rate of return on the
outstanding liability.
Where the contractual terms of share capital do not have any terms meeting the definition of a financial
liability then this is classed as an equity instrument. Dividends and distributions relating to equity are
debited direct to equity.
Taxes
Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the
statement of financial position date. Timing differences are differences between the Company's taxable
profits and its results as stated in the financial statements that arise from the inclusion of gains and losses
in tax assessments in periods different from those in which they are recognised in the financial statements.
A net deferred tax asset is regarded as recoverable and therefore recognised only when, on the basis of all
available evidence, it can be regarded as more likely than not that there will be suitable taxable profits from
which the future reversal of timing differences can be deducted.
Deferred tax is measured on a non-discounted basis at the average tax rates that are expected to apply in
the periods in which the timing differences are expected to reverse.
Equity instruments
Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs.
66
NOTES FORMING PART OF THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 30 JUNE 2017
B. Judgements in applying accounting policies and key sources of estimation uncertainty
Estimates and judgements are evaluated and are based on historical experience and other factors, including
expectations of future events that are believed to be reasonable under the circumstances. The resulting
accounting estimates and assumptions will, by definition, seldom equal the related actual results. The
estimates and assumptions that have a significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the next financial year are discussed below.
Impairment of investments
Determining whether investments are impaired requires an estimation of future cash flows expected to arise
from the investment and a suitable discount rate in order to calculate the present value. The present values
of those cash flows enable an estimate to be made as to whether or not there has been any impairment.
C. Profit attributable to ordinary shareholders
The Company has taken advantage of the exemption under Section 408 of the Companies Act 2006 from
presenting its own profit and loss account. The loss dealt with in the financial statements of the Company
was £249k (2016: loss £409k)
D. Staff costs
2017
No.
2016
No.
The average monthly number of persons (including Directors)
employed by the company during the period was:
Management and administration
4
4
Staff cost (for the above persons):
£000's
£000's
Wages and salaries
Pension
Social security costs
451
-
57
508
393
-
50
443
67
NOTES FORMING PART OF THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 30 JUNE 2017
E. Fixed asset investments
Cost
At 1 July 2016
Adjustment to contingent consideration
At 30 June 2017
Impairment
At 1 July 2016 and 30 June 2017
Net book value at 30 June 2016
Net book value at 30 June 2017
Shares in
subsidiary
undertakings
£000's
9,259
(200)
9,059
(124)
9,135
8,935
The principal fixed asset investments are as follows:
Company
% Ordinary
shareholding
Vigilant Security (Scotland) Limited
Photobase Limited
100% directly
100% directly
CSS Total Security Limited
CSS Locksmiths Limited
Croma Locksmiths & Security Solutions
Limited
100% directly
55% directly 45%
indirectly
100% directly
Nature of business
Asset protection and
guarding
Dormant
CCTV and security
systems
Locksmithing, Keys and
Safes
Locksmithing, Keys and
Safes
In order to accurately assess any potential impairment of investments, the carrying value of the investment
in all companies transferred is considered together against the future cash flows and net asset position of
those companies which received the trade and net assets.
The registered office of CSS Total Security Limited, CSS Locksmiths Limited and Photobase Limited is
Unit 6 Fulcrum 4, Fareham, Whiteley PO15 7FT
The registered office of Vigilant Security (Scotland) Limited is 1st Floor Left, 161 Brooms Road,
Dumfries, Scotland, DG1 2SH
The registered office of Croma Locksmiths & Security Solutions Limited is 2 Pennant Park, Standard
Way, Fareham, Hampshire, PO16 8XU
68
NOTES FORMING PART OF THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 30 JUNE 2017
F. Debtors
Amounts due from subsidiary undertakings, repayable on demand
Prepayments
G. Creditors: Amounts falling due within 1 year
Amounts due to subsidiary undertakings, repayable on demand
Other creditors
Other taxes and social security
2017
£000's
846
17
863
2017
£000's
245
34
38
317
2016
£000's
1,350
12
1,362
2016
£000's
246
358
67
671
69
NOTES FORMING PART OF THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 30 JUNE 2017
H. Share capital
Authorised, allotted, called up and fully paid:
2017
2016
£000's
£000's
Ordinary shares of 5 pence each
845
844
2017
2017
2016
2016
Number
£000's
Number
£000's
Issued and fully paid
000's
000's
Ordinary shares of 5 pence at the beginning of the year
16,893
844
14,866
743
Ordinary shares of 5 pence at the end of the year
16,912
845
16,893
844
Rights attaching to shares
The holders of the ordinary shares of 5 pence each are entitled to receive dividends and a return of capital on
liquidation as well as attend and vote at a general meeting of the Company.
Share option scheme
In 2014 the Group instigated and Approved Company Share Option Scheme. Details are in Note 21 of the
consolidated accounts.
70
NOTES FORMING PART OF THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 30 JUNE 2017
I. Related party transactions
Identity of related parties
The Parent Company has a controlling related party relationship with its subsidiary companies. The Group
has a related party relationship with its Directors, executive officers, pension funds and trusts, who with their
immediate relatives control 40.7% of the voting shares.
The services of certain non-executive Directors were provided to the Company and in the following amounts
which are also disclosed in note 7 of the Group accounts:
2017
£000’s
2016
£000’s
Services provided by service companies for which A N Hewson is a director and
which has been accounted for as Directors’ remuneration.
21
18
Services provided by a service company for which C N McMicking is a director
and which has been accounted for as Directors’ remuneration.
21
18
J. Post balance sheet events
The Company has entered into a contract with a former director for the buy-back of shares, which will then be
cancelled. The contract is conditional on the ratification of shareholders at the AGM. The total consideration
of £760k will be funded out of existing resources.
71