CROMA SECURITY SOLUTIONS GROUP PLC
REPORT AND FINANCIAL STATEMENTS
30 June 2018
CONTENTS
Company information
Chairman’s statement
Strategic report
Corporate Governance
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
15
24
25
28
29
34
35
36
37
38
67
Parent company financial statements
70 - 78
1
COMPANY INFORMATION
Directors
Registered office
(Executive Chairman)
S J F Morley
(Group Chief Executive)
R M Fiorentino
(Finance Director)
R A Juett ACA
(Executive Director)
P Williamson
C N McMicking
(Non-Executive)
A N Hewson MA FCA (Non-Executive)
Unit 7&8 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
Neville House
Steelpark Road
Halesowen B62 8HD
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 2018
Introduction
This has been a highly successful year for the business and I am delighted to report Croma Security
Solutions Group Plc’s (“Croma” or the “Group”) Final Results for the 12 months to 30 June 2018,
which show Group revenues increasing by 59.2% to £35.1m and Group EBITDA increasing by more
than three times to £2.5m, a very strong financial performance driven by a number of factors which
bode well for our future.
Demand across the UK for security solutions from both the private and public sector has grown
significantly. Institutions have responded to the perceived and real increases in crime and terror
occurrences and together with government bodies are choosing to outsource security. Alongside this
growth in demand, Croma is winning an increasing share of the security market as institutions opt for
a premium service delivered by our team, run with a strong ex-military ethos.
While FY 2018 has been flattered by unusually high levels of project work, the overall trends are
positive, and the current year will benefit from an increase in levels of ongoing contracted revenues
together with a more normalised level of project work.
Premium Positioning
Our success in winning an increasing share of our market comes from being able to provide total
security solutions for large corporations and institutions utilising some of the most advanced and
innovative security technology available to the commercial market. Perhaps most importantly, and
distinct from any other competitor in our market place, Croma’s premium service is delivered under the
control and direction of ex-military security professionals. The contrast with providing capable, well
trained and highly motivated officers compared with the more traditional model of the low paid and
lowly motivated officer, is stark. Once this is put into today’s security context, it is understandable why
an increasing number of clients are opting for Croma’s premium service.
In addition, the Group’s understanding and ability to incorporate commercially available security
technology (which tends to lag behind military grade technology) is another key competitive advantage.
Trading Performance
All main divisions have performed well in the year under review, delivering significant increases in
organic led growth. 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.
Delivering a significant 77% uplift in revenues, Croma Vigilant, our manned guarding division has had
a very good year. Our strategy of providing ex-military professionals to protect the assets of our
customers has worked well and we are seeing the benefits of our growing reputation for providing a
reliable and a premium level of service. Growing customer trust is enabling us to increasingly position
ourselves as a total security solutions provider so that we can bring in expertise from other parts of the
Group to existing Croma Vigilant clients. In addition to providing manned guarding solutions, Croma
Vigilant also provides complementary police services to local councils under the ‘Community Safety
Accreditation Scheme’, a growing incremental revenue stream.
3
CHAIRMAN’S STATEMENT (continued)
FOR THE YEAR ENDED 30 JUNE 2018
A combined 9.6% increase in revenues for Croma Security Systems and Locksmiths demonstrated the
increasing demand for innovative technical security solutions. During the year, this division benefitted
from a strong performance by Croma Locksmiths, a retail chain acquired in 2015 together with winning
a significant new 3-year contract with a major UK utility company. Croma Biometrics remains a
significant opportunity for the Group with FastVein™ coming to the forefront as a potent biometric
high-speed human identifier.
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.
Dividend
Reflecting the excellent financial performance over the year the Board is pleased to recommend a final
dividend to shareholders of 1.0p per share (total 1.6p per share for the year) and subject to approval at
the Annual General Meeting to be held on 28 November, the final dividend will be paid on 30 November
2018 to all shareholders on the register at the close of business on 9 November 2018. The shares will
be marked ex-dividend on 8 November 2018.
Outlook
Given the platform provided by the significant improvement in the financial performance and trading
position of the Group over the last two years, the Directors believe the outlook Croma is extremely
positive.
In the current financial year, we can expect to replicate some but not all of the project income we
received in FY 2018 due to some large exceptional projects that are unlikely to be repeated. However,
there has been a substantial increase in contracted income and this together with the expectation of some
further project work make the Board confident of achieving a good result for the year, consistent with
the underlying growth in the business.
Finally, I would like to thank all employees of the Group for their tremendously hard work over the last
year and I look forward to working together again this year to achieve another excellent performance.
Sebastian Morley
Chairman
19 October 2018
4
STRATEGIC REPORT
FOR THE YEAR ENDED 30 JUNE 2018
Operational Review
The Group’s strategic objectives are:
•
•
•
•
to deliver market leading full-service security offerings to the upper quartile end of both large
corporations and government. Achieved by maintaining quality of service as a priority, focusing
on meeting the full range of our clients’ security needs, and leveraging our brand and client base;
to produce consistent growth in 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;
to develop and bring to market new technologies, and;
to deliver attractive 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 expand the services to long-term 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 to develop overseas opportunities in particular in the Middle East. Whilst these
require a high level of input, Croma believes this market will be an important future market.
5
STRATEGIC REPORT (continued)
FOR THE YEAR ENDED 30 JUNE 2018
The performance of each business segment is discussed below:
Croma Vigilant
Croma Vigilant, our largest division, saw a 77% top line growth, with sales increasing to £29.0m (2017:
£16.40m) and operating profit increasing five-fold to £2.59m (2017: £0.47m).
Croma Vigilant provides manned guarding for assets and individuals. The division now employs over 1,000
security personnel throughout the UK.
A combination of increased public and private concerns over security, lack of public resources and Croma
Vigilant’s strengthening market reputation for providing a professional, premium service has been behind
this record performance. As ever, our customers consistently refer to the reassurance that comes from
knowing that the execution of our services is performed significantly by ex-military personnel.
Following previous patterns, the split between private and public revenues remains an approximate two
thirds/one third split. During the year, Croma Vigilant division won six new contracts from both public and
private organisations of which two were one-off projects and boosted financial performance, however, the
balance of contracts are long-term and one contract in particular with a major UK local authority is the largest
the Group has ever won. The contract is for six years providing a range of security services and is worth
approximately £27m in total.
In March 2018 we were proud to publish our gender pay gap reports for the first time. These indicate that
there is no significant pay gap between men and women in our organisation, demonstrating our commitment
to providing an environment in which all employees have equal opportunities for development and
progression.
May 2018 saw the launch of a new service, PRO-ception, aimed at providing front of house excellence for
commercial buildings whatever their use. PRO-ception is an innovative concept, making the modern
reception part of a building’s security. Led by ex-policewoman Ruth McGowan, PRO-ception provides
security trained receptionists to both manage the front desk and play an active role in security. The response
to what is a new concept has been very encouraging.
In our half year results announcement, we confirmed Vigilant had completed the Community Safety
Accreditation Scheme so enabling the division to provide private security within communities using mobile
and foot patrol officers. Reduced government budgets have increased the focus on outsourcing and to meet
the reduction in the number of police officers patrolling the streets, our highly disciplined force of security
personnel is well placed to support the regular police and local communities. In January 2018, Vigilant won
a long-term contract to support the police in one of London’s largest boroughs.
The current year has begun well with a good pipeline of new business opportunities.
Croma Security Systems
Croma Security Systems grew sales by 13% to £2.67m (2017: £2.36m) and operating profit by 2.6% to
£0.48m (2017: £0.47m). The division has completed a successful 12 months expanding its presence in the
leisure, education, utilities and construction sectors. In support of the Group’s focus on providing total
security solutions, Croma Security Systems continues to provide a full range of electronic security solutions
from CCTV, high security locks to FastVein biometrics technology for high speed human identification.
6
STRATEGIC REPORT (continued)
FOR THE YEAR ENDED 30 JUNE 2018
Croma Locksmiths
Recovering from a challenging previous year, Croma Locksmiths, which operates through 7 retail outlets on
the South Coast of the UK and centrally through the Group, delivered a strong performance for the year and
sales grew by 6.9% to £3.15m (2017:£2.95m). With an excellent contribution from the Access Locksmiths
retail outlets acquired in 2015, this performance was further enhanced by the securing of a 3-year contract
with a major utility company to supply security solutions for their multiple sites across the UK. Looking
ahead, investment is being made to enable the retail sites to evolve into security centres so they can act as
both showrooms for the wider Groups’ security capabilities and continue as retail outlets.
Croma Biometrics
Croma Biometrics turnover fell slightly to £308k (2017: £346k) with an operating loss of £267k (2017: 186k).
Our FastVein™ biometrics technology provides significant future potential for the Group. Currently
deployed across the retail, education and construction sectors it provides customers with quick, easy to use,
accurate and cost-effective data. FastVein™ has clear commercial advantages and we are continuing to invest
in further developing the technology and expanding the marketing of this exciting product. Interest from
future potential customers in FastVein™ has been strong and we anticipate increasing the number of
FastVein™ contracts in the current year.
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 operations
Dividend paid per share
2018
£000's
35,119
7,149
20.4%
2,500
2,013
9.89p
11,077
2,689
0.6p
2017
£000's
22,058
4,025
18.2%
799
431
2.13
10,305
1,233
0.5p
Cashflow has been exceptionally strong with cash generated from operations at £2.69m (2017: £1.2m) and
the Group has been able to repay all medium-term borrowings and also to complete the purchase of own
shares from a former director. Although the existing invoice discounting facility of up to £1m remains
available to fund short term requirements, this has hardly been used in the second half of the year and as a
result overall borrowing costs have reduced by 49% to £38k.
The Board maintains the progressive dividend policy adopted in previous periods and is pleased to
recommend a final dividend to shareholders of 1.0p per share. During the year an interim dividend of 0.6p
per share was paid at a cost of £89k.
7
STRATEGIC REPORT (continued)
FOR THE YEAR ENDED 30 JUNE 2018
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.
8
STRATEGIC REPORT (continued)
FOR THE YEAR ENDED 30 JUNE 2018
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 may be compromised.
Controls and mitigating strategies
Responsibility for credit control is delegated to experienced staff in our operating divisions. Through invoice
discounting we are able to 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.
9
STRATEGIC REPORT (continued)
FOR THE YEAR ENDED 30 JUNE 2018
Executive Directors:
S J F Morley – Executive Chairman
Responsible for the overall direction of the Group, for ensuring the Board operates efficiently, for the
strategic direction and forward order book of Croma Vigilant and for shareholder relations and for
Corporate Governance.
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.
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.
10
STRATEGIC REPORT (continued)
FOR THE YEAR ENDED 30 JUNE 2018
Board meetings
The Board normally 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
S J Morley
R M Fiorentino
A N Hewson
R A Juett
P Williamson
C N McMicking
8
8
9
9
9
8
9
9
9
9
9
9
-
-
2
-
-
2
-
-
2
-
-
2
-
-
2
-
-
2
-
-
2
-
-
2
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.
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.
11
STRATEGIC REPORT (continued)
FOR THE YEAR ENDED 30 JUNE 2018
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.
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.
12
STRATEGIC REPORT (continued)
FOR THE YEAR ENDED 30 JUNE 2018
Key performance indicators
Indicator
Croma Vigilant
Sales
Performance
Sales were ahead of budget reaching a record £29.0M 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.
As a result of cost reduction measures and new contract wins, this year the
gross margin was much improved at £4.7M and was ahead of budget.
Customer retention
Cash
Retention of customers nearing the end of their contract is a priority of the
operations director. Once again, the increase in turnover is 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 2018 the company shows no long-term borrowings
and maintains adequate facilities to meet payroll liabilities falling due
shortly after the year end.
Croma Security Systems
Sales
Sales have seen a 13% increase on 2017 up to £2.7M from £2.4M
Customer retention
Engineers
The company monitors customer satisfaction through surveys and website
feedback. Customer retention remains strong, with our largest customer,
a national Cinema chain, delivering revenues of £684k up 55% on the prior
year.
The engineer market remains very active and engineer retention and
remuneration is constantly monitored. Croma Security has maintained its
pool of engineers during the year so this has not been a constraint to its
business development.
Cash
Croma Security has remained cash generative and at the year-end cash
balances are at £256k with no external borrowings.
13
STRATEGIC REPORT (continued)
FOR THE YEAR ENDED 30 JUNE 2018
Croma Biometrics
Sales/Order pipeline
Croma Locksmiths
Sales
To justify the continued development expenditure, the order pipeline for
FastVein™ is actively monitored. During the year the turnover fell slightly
to £308k, but despite this FastVein™ continues to be an important part of
a suite of products which form part of our access control and time and
attendance offering.
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. Sales improved 6.9% on a like
for like basis and we expect further improvement.
Whilst retail sales are the foundation of our business, our focus and
expertise in servicing our larger utility contracts has yielded positive
results and we intend to concentrate on developing this part of our business
in the coming year.
Shop footfall
In line with may retail businesses, shop footfall continues to be flat on the
high-street. The company continues to employ sales techniques to meet
this challenge but inevitably there continues to be a move to buying on-
line.
Upgraded EPOS systems are now fully implemented which better
integrate with stock control to ensure availability of product, timely
invoicing and cash collection.
Competitive
environment
Now that the existing business has been successfully restructured, we will
look to expand our geographical operations to enhance our service to our
commercial customers and to compete nationally for service contracts by
improving its bank of skilled locksmiths and service engineers.
Roberto Fiorentino
Chief Executive
19 October 2018
14
CORPORATE GOVERNANCE
FOR THE YEAR ENDED 30 JUNE 2018
Statement of Corporate Governance
The Company (and thereby its group (the “Group”)) is ultimately managed by the Board of directors of
the Company (the “Directors” or “Board”), who (individually and as a group) are responsible for
running the Company for the benefit of its shareholders in accordance with their fiduciary and statutory
duties.
The Board comprises, the Executive Chairman; S J F Morley, the Chief Executive Officer; R M
Fiorentino, two Executive Directors and two Non-Executive Directors.
The Biographies of the Directors are set in this report on page 24 and on the website at
www.cssgplc.com. These show the range of business and financial experience upon which the Board
is able to call. The Board’s goal is to ensure that its membership should be balanced between Executives
and Non-Executives and have the appropriate skills and experience and knowledge of the business. The
Board recognises the special position and role of the Chairman under the QCA (“Quoted Companies
Alliance”) Corporate Governance Code and has approved the formal division of responsibilities
between the Chairman and Chief Executive.
Chairman
The Chairman is responsible for the leadership of the Board and ensuring its effectiveness, and the
Chief Executive manages the Group and has the prime role, with the assistance of the Board, of
developing and implementing business strategy.
Non-Executives
One of the roles of the Non-Executive Directors under the leadership of the Chairman is to undertake
detailed examination and discussion of the strategies proposed by the Executive Directors, so as to
ensure that decisions are in the best long-term interests of shareholders and take proper account of the
interests of the Group’s other stakeholders.
The Chairman ensures that meetings of Non-Executive Directors without the Executive Directors are
held.
The QCA guidelines acknowledge for growing companies it may not be possible for boards to meet the
definition of “independence” for Non-Executive Directors, however it sets out that it is important for
the board to foster an attitude of independence of character and judgement.
Based on the QCA guidelines the Board concludes that the Non-Executives are independent in terms
of character and judgement in how they execute their role as Non-Executive Directors.
The Board is mindful of the threat to independence and actively manages the potential risk to ensure
that the Non-Executives provide the independent constructive challenge to help develop the Board’s
proposals on strategy.
15
CORPORATE GOVERNANCE (continued)
FOR THE YEAR ENDED 30 JUNE 2018
Board Committees
The Board has three standing committees (the “Committees”): the Audit Committee, the Remuneration
Committee and the Executive Committee. The Terms of Reference for each of the Committees are
available on the Company’s website.
The Board does not have a formally-established nominations committee. Any nominations are
considered and recommended by the full Board (and are subject to a shareholder vote at the next Annual
General Meeting).
Rules concerning the appointment and replacement of Directors of the Group are contained in the
Articles of Association (“Articles”). Amendments to the Articles must be approved by a special
resolution of shareholders. Under the Articles, all Directors are subject to election by shareholders at
the first Annual General Meeting following their appointment, and to re-election thereafter at intervals
of no more than three years.
Committees of the Board
Executive Committee
The Executive Committee consists of the Executive Directors under the chairmanship of Mr Morley
and is responsible for the development of strategy, annual budgets and operating plans linked to the
management and control of the day-to-day operations of the Group.
The Executive Committee is also responsible for monitoring key commercial opportunities and
relationships, day to day stakeholder engagement and for ensuring that the Board policies are carried
out on a Group-wide basis.
Audit Committee
The Audit Committee consists of the Non-Executive Directors; A N Hewson and C N McMicking. The
Committee meets at least twice a year under the Chairmanship of Mr Hewson who is a Fellow of the
Institute of Chartered Accountants in England and Wales, and has relevant financial experience.
Whilst Mr Hewson has been a member of the Board for more than nine years, the Board nevertheless
considers that Mr Hewson fulfils the roles of Audit Chair and NED with independence of character and
judgment and has concluded that it is appropriate to retain the financial experience, corporate memory
and knowledge of the business possessed by Mr Hewson in his role as Chairman of the Audit
Committee.
The Audit Committee’s duties include monitoring internal controls throughout the Group, approving
the Group’s accounting policies, and reviewing the Group’s interim results and full year financial
statements before submission to the full Board. The Audit Committee also reviews and approves the
scope and content of the Group’s annual risk assessment programme and the annual audit and monitors
the independence of the external Auditors.
16
CORPORATE GOVERNANCE (continued)
FOR THE YEAR ENDED 30 JUNE 2018
The Audit Committee acts to ensure that the financial performance of the Group is properly recorded
and monitored, and in fulfilling its role it meets annually with the Auditors and reviews the reports from
the Auditors relating to accounts and internal control systems.
The Group does not have an independent Internal Audit function, as it is not considered appropriate
given the scale of the Group’s operations. However, the Group operates internal peer reviews, with a
scope of evaluating and testing the Group’s financial control procedures, to standardise processes
around best practice. Any significant issues are reported to the Chairman of the Audit Committee, and
shared with the external Auditors as appropriate.
The Group Finance Director and the external Auditors attend meetings of the Audit Committee by
invitation. The Committee may also hold separate meetings with the external Auditors, as appropriate.
Remuneration Committee
The Remuneration Committee consists of the Non-Executive Directors; Mr McMicking and Mr
Hewson. The Committee meets at least twice a year under the Chairmanship of Mr McMicking.
The purpose of the committee is to review the performance of the full time Executive Directors and to
set the scale and structure of their remuneration and the basis of their service agreements with due
regard to the interests of the shareholders. In fulfilling this responsibility, the Remuneration Committee
is responsible for setting salaries, incentives and other benefit arrangements of Executive Directors and
overseeing the Group’s employee share scheme. During the year the Remuneration Committee engaged
with external advisers to establish a remuneration plan going forward, based on budgets established by
management and approved by the Committee, with a plan to remunerate management measured against
targets in excess of the budgets.
Members of the Remuneration Committee do not participate in decisions concerning their own
remuneration.
Frequency of meetings
The Board meets at least nine times a year and relevant information is distributed to Directors in advance
of the meetings. The Board makes decisions on all material matters including long term and commercial
strategy, annual operating and capital budgets, capital structure and financial and internal controls.
The Group has a formal schedule of matters reserved to the Board which is periodically reviewed and
approved by the Board.
Evaluating board performance
The Board has a number of sources of information from which it judges its own performance and that
of the individual Directors, and these include but are not limited to:
i.
ii.
iii.
iv.
v.
vi.
financial performance indicators including, revenue, order book (including contract wins and
losses), gross margin, net margin, earnings per share and cash flow;
the Company’s share price;
reports from external auditors;
shareholder feedback;
customer feedback; and
employee feedback.
All these factors are considered, and action taken to improve performance as appropriate.
17
CORPORATE GOVERNANCE (continued)
FOR THE YEAR ENDED 30 JUNE 2018
Communication with shareholders
The Board attaches great importance to providing shareholders with clear and transparent information
on the Group’s activities, strategies and financial position, in addition to having regard to its obligations
as a quoted public company and the AIM Rules.
The Group holds meetings with significant shareholders on a regular basis and regards the Annual
General Meeting as a good opportunity to communicate directly with shareholders via an open question
and answer session.
The Group lists contact details on its website should shareholders wish to communicate with the Board.
All announcements and results, including those released via RNS and RNS Reach, are available on the
Group’s website.
Risk management and internal controls
The Board reviews and approves an Annual Budget and Business Plan prior to the start of each financial
year. This includes reviewing the key strategic, operational and financial objectives for the year,
together with a detailed financial budget.
The Executive Committee is accountable to the Board for delivery of the Annual Business Plan. The
Executives report performance against the plan on a monthly basis, which includes detailed analysis of
budgetary variances and updated financial projections.
Each Executive Director is responsible for identifying and managing the risks relating to their respective
areas of responsibility, including the risks relating to strategy, the Annual Business Plan, and day-to-
day business.
To provide a framework for the delivery of the Group’s strategy and plans, the Executive Committee
has developed an organisational structure with clear roles and responsibilities, and clear lines of
reporting.
In addition to day-to-day risk management, the Executive Directors formally assess the major business
risks and evaluate their potential impact on the Group.
These risks and the reporting of the risk assessment is included in the annual report and accounts within
the Strategic Report.
City code on takeovers and mergers
The Company is subject to the City Code on Takeovers and Mergers
18
CORPORATE GOVERNANCE (continued)
FOR THE YEAR ENDED 30 JUNE 2018
QCA Corporate governance code
In accordance with AIM rule 26 the Company has adopted the QCA code and sets out below how it has
adopted and complied with the QCA code.
1. Establish a strategy and business model which promotes long-term value for shareholders
A board must be able to express a shared view of the company's purpose, business model, and strategy,
which sets out how a company intends to deliver shareholder value in the medium to long term. It should
demonstrate that the delivery of long-term growth is underpinned by a clear set of values aimed at
protecting the company from unnecessary risk and securing its long-term future.
The strategy and business model of the Group is expressed more clearly in the Chairman’s Statement
and the Strategic Report.
In summary, the Group seeks to build a recognised brand that is synonymous with the provision of the
highest level of security services. The Group is stringently focused upon delivering outstanding service
delivery for all our clients, and in such a way that in time our clients can have all their security needs
met by one service provider, ourselves.
The values we adopt are largely driven by our ex-military ethos, and we pride ourselves on
endeavouring to engage employees that can deliver a capable, well trained highly motivated service,
with as many as possible with a military background.
We believe that this approach will deliver market leading full-service security offerings to the top end
of the corporate and residential markets, as well as leading public service providers such as utilities,
hospitals and schools.
The business has a reasonable appetite for risk and we actively engage in developing new technologies
to assist our service provisions even where such new technologies have a long development phase. One
example of the success of this has been our ‘Fastvein’ project, harnessing very high technology from
partner suppliers with our own in-house software capabilities.
Our markets are highly regulated, audited and accredited by a number of regulatory bodies, including
the SIA, NSI and CHAS, all of which require our Board and operational employees to be personally
regulated, thus adding to the maintenance of the values and standards we operate to.
2. Seek to understand shareholder needs and expectations
Directors must develop a good understanding of the needs and expectations of all elements of a
company’s shareholder base. A board must manage shareholder’s expectations and it should seek to
understand the motivations behind shareholder voting decisions.
The Board attaches great importance to providing shareholders with clear and transparent information
on the Group’s activities, strategy and financial position. Details of all shareholder communications are
provided on the Group’s website, with copies of the accounts of the Group and other regulatory
communications going back to the earliest days of the existence of the company on the AIM market.
Additionally, the Board holds regular one-to-one meetings with larger shareholders and regards the
Annual General Meeting as a good opportunity to understand the voting decisions and debate the
expectations of shareholders via an open question and answer session.
19
CORPORATE GOVERNANCE (continued)
FOR THE YEAR ENDED 30 JUNE 2018
The Company lists contact details on its website and on all announcements released via RNS, should
shareholders wish to communicate directly with the Board or its advisers.
3. Take into account wider stakeholder and social responsibilities and their implications for long-term
success
Long-term success relies upon good relations with a range of different stakeholder groups both internal
(workforce) and external (suppliers, customers, regulators, and others). A board needs to identify a
company's stakeholders and understand their needs, interests and expectations. Feedback is an essential
part of all control mechanisms. Systems need to be in place to solicit, consider and act on feedback from
all the stakeholder groups.
The Board endeavours to create a platform for delivering a high-quality service and this requires us to
utilise best in class suppliers (such as Hitachi, Assa Abloy, and Bosch), for customers who appreciate
and therefore pay for a higher level of service, and a workforce that is trained to the highest standards
to give of its best at all times.
We operate within the ‘high compliance’ segment of the SIA approved contractor scheme (ACS), which
ensures that the regulatory standards we set ourselves are rigorous and necessary in a highly fragmented
security market, where mistakes are invariably costly in every sense, to all our stakeholders. We expect
to get it right first time, because getting it wrong in a security environment can have consequences that
far outweigh the cost.
We constantly solicit feedback, much of which is on the website of the Company in terms of customer
experiences, and supplier confidence in us and in our operations. Our feedback from our staff is best
expressed by our staff turnover which for our industry is exceptionally low.
The Directors’ Report reports further on the Company’s attitude to Employment for disabled persons,
employee involvement in Group operations, Charitable donations where appropriate, and Group
policies on the environment.
4. Embed effective risk management, considering both opportunities and threats, throughout the
organisation
A board needs to ensure that the companies’ risk management framework identifies and addresses all
relevant risks in order to execute and deliver strategy. Companies need to consider their extended
business, including the company’s supply chain, from key suppliers to end customer. Setting a strategy
includes determining the extent of exposure to the identified risks that the company is able to bear and
willing to take (risk tolerance and risk appetite).
The Board has established an audit committee which also serves as a risk management committee, a
summary of which is set out in the Strategic Report and in the Directors’ Report, and on the website.
The Company has an established internal peer review function led by the group Finance Director,
reporting to the Chairman and Board, in order systematically to review each area of its business and
monitor the effectiveness of internal financial controls.
Additionally, we only work with accredited suppliers able to satisfy our customer requirements for
locking systems for instance that are best in class, and CCTV equipment that is the highest definition.
20
CORPORATE GOVERNANCE (continued)
FOR THE YEAR ENDED 30 JUNE 2018
Additionally, we can only employ security professional who have passed SIA and other regulatory
standards and had all the necessary prior history clearances before SIA accreditation for instance can
be effective. Added to all this, we aim to employ primarily ex-military personnel and indeed two
executive directors are themselves ex-military, trained in the appreciation of and the effective
amelioration of risk.
We have further considered areas of single point dependency within our divisions, examining key
management positions, infrastructure, political issues including Brexit, loss of major contracts, staffing
and supplier failure, technology failure and cyber-attack, health and pandemic risk as well as fire,
weather and reputation risk protection.
We provide regular training programmes to support our business continuity plans so that our business
is prepared for and resilient to emergency and crisis situations.
We anticipate being ISO 22301 accredited by end FY 18/19. This ISO deals with societal security,
business interruption, effectively ensuring business continuity, ensuring that we have a policy for such,
defining roles and responsibilities, combining planning, implementation, and operation, then
performance assessment, management review and improvement. Our documentation processes are
auditable, evidencing our commitment to these processes.
5. Maintain the Board as a well-functioning, balanced team led by the chair
Board members have collective responsibility and a legal obligation to promote the interests of the
company and are collectively responsible for defining corporate governance arrangements. Ultimate
responsibility for the quality of and approach to corporate governance lies with the Chair of the Board.
A board should be provided with high-quality information in a timely manner to facilitate proper
assessment of the matters requiring a decision or insight. A board should have an appropriate balance
between executive and non-executive directors and it should have at least two independent non-
executive directors. Independence is a board judgement. A board should be supported by the appropriate
committees that have the necessary skills and knowledge to discharge their duties and responsibilities
effectively. Directors must commit the time to fulfil their roles.
The Board, the identities and biographies, the Board committees and the timing of Board meetings and
a detailed summary of attendances at those meetings is considered in the Strategic Report the Directors’
Report and elsewhere in the Accounts.
The quality and timeliness of the information the Board considers is itself also detailed elsewhere in the
Accounts, notably the Risk Management and Internal Controls sections of the Strategic Report.
The Board considers that both its non-executive directors are independent and that they have the time
necessary to be able to provide rigorous challenge to the executive directors when necessary as well as
support as needed. Nevertheless, new regulations on time served by a non-executive, changes to over-
board criteria, and the recent substantial increase in volume of the turnover of the business has
encouraged the Board to consider whether or not changes to the non-executive team might be worthy
of consideration in the coming FY 2018/19.
6. Ensure that between them the directors have the necessary up-to-date experience, skills and
capabilities
21
CORPORATE GOVERNANCE (continued)
FOR THE YEAR ENDED 30 JUNE 2018
A board must have an appropriate balance, financial and public markets skills and experience, as well
as an appropriate balance of personal qualities and capabilities. A board should understand and
challenge its own diversity, including gender balance, as part of its composition. A board should not be
dominated by one person or a group of people. Strong personal bonds can be important but can also
divide a board. As companies evolve, the mix of skills and experience required on a board will change,
and board composition will need to evolve to reflect this change.
The Board recognises that balance of capabilities and capacities within itself, as well as the necessity
for all Board members to remain up to speed on relevant industry changes are vital to the proper
functioning of a leadership team in any organisation. The Board is rigorous in reviewing the
performance of each of its directors and where there are actions that need to be taken, the Board is
proactive in carrying out what needs to be done. As businesses grow, changes can be necessary, and
the Board is prepared and stands ready to act should the need arise. Board changes were made in the
previous two financial years of the Company so as to give better effect to the strategic direction of the
Group and these actions have proven to be successful. The Board makes a specific effort to say in
meetings what needs to be said, and a culture of openness and honesty is encouraged both on the Board
and throughout the Group, the result of which is promotion of a healthy corporate culture.
7. Evaluate board performance based on clear and relevant objectives, seeking continuous improvement
A board should regularly review the effectiveness of its performance as a unit, as well as that of its
committees and the individual directors. A board performance review may be carried out internally, or
ideally, externally facilitated from time to time. The review should identify development or mentoring
needs of individual directors or the wider senior management team. It is healthy for membership of the
board to be periodically refreshed. Succession planning is a vital task for boards. No member of the
board should become indispensable.
The Board is in the process of considering succession planning, so that each division has a leader and a
number two, able, effectively, to step into the shoes of the leader, as necessary. The Company is not
associated with any one member of the Board, and recently took external advice on specific
remuneration matters, externally facilitating the process of managing the strategic goals of the business
by division, and the risks and rewards attaching thereto. Discussions between Board members about
key development needs of individual directors are encouraged and debated rigorously in a positive
atmosphere. The effectiveness review of the Board is considered in the Strategic Report.
8. Promote a corporate culture that is based on ethical values and behaviours
A board should embody and promote a corporate culture that is based on sound ethical values and
behaviours and use it as an asset and a source of competitive advantage. The policies set by a board
should be visible in the actions and decisions of the Chief Executive and the rest of the management
team. Corporate values should guide the objectives and the strategy of the company. The culture should
be visible in every aspect of the business, including recruitment, nominations, training and engagement.
The performance and reward system should endorse the desired ethical behaviours across all levels of
22
CORPORATE GOVERNANCE (continued)
FOR THE YEAR ENDED 30 JUNE 2018
the company. The corporate culture should be recognisable throughout the disclosures in the annual
report, website and any other statements issued by the company.
The Board wishes to promote a can-do culture across the Group, whereby a customer need can be
fulfilled, no customer request is too much, and this is how the Group aims to deliver outstanding service.
This is not done at any cost, and the Group is strict on maintaining margin in a low margin industry,
where differentiating the offer is key. Our marketing strategy is assertive and where necessary
aggressive in a very fragmented industry yet with some entrenched relationships where our future
customers have not yet come to appreciate our unique offering.
The Group uses social media where necessary to promote the culture of ‘can-deliver’, both internally
and externally, and monitors the culture and attitude of the staff with regular surveys and staff meetings.
9. Maintain governance structures and processes that are fit for purpose and support good decision-
making by the Board
The company should maintain governance structures and processes in line with its corporate culture
and appropriate to its size and complexity, and its capacity, appetite and tolerance for risk. The
governance structures should evolve over time in parallel with its objectives, strategy and business
model to reflect the development of the company.
The Board meets once a month, in person or where necessary by conference call, and considers monthly
accounts and operational matters, and in addition the audit and remuneration committees of the Board
meet when necessary to consider assurance and risk, and the adequacy of the reward structures of the
Group. With a Board of this size, separate Nominations and other committees are not considered
necessary, nor is the appointment of any one non-executive director as a Senior Independent Director.
10. Communicate how the company is governed and is performing by maintaining a dialogue with
shareholders and other relevant stakeholders
A healthy dialogue should exist between a board and all of its stakeholders, including shareholders, to
enable all interested parties to come to informed decisions about the company. In particular, appropriate
communication and reporting structures should exist between a board and all constituent parts of its
shareholder base. This will assist the communication of shareholders’ views to a board and the
shareholders’ understanding of the unique circumstances and constraints faced by the company. It
should be clear where these communication practices are described (annual report or website).
The Board attaches great importance to providing shareholders with a clear and transparent information
on any group activities, strategy, and financial position. Details of all shareholder communications are
provided on the group website. The Board holds regular meetings with the larger shareholders and
regards the annual general meeting as a good opportunity to communicate directly with shareholders
via an open question and answer session. The company lists contact details on its website and on all
announcements released via RNS, should shareholders wish to communicate with the Board.
23
BOARD OF DIRECTORS
FOR THE YEAR ENDED 30 JUNE 2018
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 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 is a Chartered Accountant and has been on the Board of a number of listed companies since 1986,
more recently in a non-executive capacity. 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 Supermarket 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.
24
DIRECTORS' REPORT
FOR THE YEAR ENDED 30 JUNE 2018
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 2018.
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).
Result for the year
The profit for the year after taxation, was £1.62m. (2017:£0.36m).
Directors
The Directors who have held office since 1 July 2018 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
A N Hewson
C N McMicking
The Non-Executive Directors sit on the Remuneration Committee and on the Audit Committee.
Including immediate relatives, the Directors in office at 30 June 2018 had the following beneficial
interest in the ordinary shares of the Company
S J F Morley
R M Fiorentino
R A Juett
A N Hewson
C N McMicking
P Williamson
2018
575,000
3,902,175
12,500
203,565
50,000
170,639
2017
575,000
4,110,000
12,500
203,565
46,000
165,639
During the year, R M Fiorentino transferred 207,825 ordinary shares to members of his family.
25
DIRECTORS' REPORT (Continued)
FOR THE YEAR ENDED 30 JUNE 2018
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 2018:
Canaccord Genuity Group Inc.
Francis Erard
Liontrust Investment Partners LLP
11.08%
5.03%
3.77%
Purchase of own shares
Under the authority granted at the 2017 Annual General Meeting, during the year, the Company
purchased 2,027,027 of its own ordinary shares at a cost of £760k. The shares had a nominal value of
£101k being approximately 12% of the issued share capital.
These shares were purchased from a director who following his retirement from the Board, no longer
wished to hold a significant shareholding in the Group.
1,013,513 ordinary shares were purchased on 3 December 2017 at 35p per share, which were
subsequently cancelled. A further 1,013,514 ordinary shares were purchased on 28 February 2018 at
40p per share, which were transferred to treasury.
Share options over 17,000 shares were exercised during the year and these were satisfied out of treasury.
At 30 June 2018, 996,514 shares were held in treasury being 6.3% of the issued share capital.
Matters covered in the strategic report
Statutory disclosures required under company law within the Directors report are included where
relevant within the strategic report.
Financial Risk Management
Details of exposure to price, credit, liquidity and cash flow risk are included in notes 15 and 18.
Research and development
Research and development expenditure, including the element of wages and salaries and amounted to
approximately £30,000 (2017: £75,000).
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.
26
DIRECTORS' REPORT (Continued)
FOR THE YEAR ENDED 30 JUNE 2018
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.
The Group operates an approved share option scheme for its employees. During the year 17,000 share
options were exercised.
Political and charitable donations
Charitable donations were £4,800 (2017: £5,618). 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.
Dividends
An interim dividend of 0.6p per share was declared on 28 February 2018 and paid on 9 April 2018. The
total cost was £0.089m. Subject to approval at the AGM, the Board recommends a final dividend of
1.0p per share.
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
19 October 2018
27
STATEMENT OF DIRECTORS’ RESPONSIBILITIES
FOR THE YEAR ENDED 30 JUNE 2018
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
19 October 2018
28
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF CROMA SECURITY
SOLUTIONS GROUP PLC
FOR THE YEAR ENDED 30 JUNE 2018
Opinion
We have audited the group financial statements of Croma Security Solutions Group PLC (the ‘group’)
for the year ended 30 June 2018 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.
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 2018 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, as applied to SME
listed entities, 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.
29
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF CROMA SECURITY
SOLUTIONS GROUP PLC
FOR THE YEAR ENDED 30 JUNE 2018
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
goodwill
other
intangible assets relating
to three cash generating
units.
group’s
The
assessment of carrying
value requires significant
judgement, in particular
flows,
regarding
growth rates, discount
rates
sensitivity
and
assumptions
cash
We challenged the assumptions used in the
impairment model
for goodwill and other
intangible assets described in notes 11 and 12.
As part of our procedures we:
• assessed actual trading performance in the
financial year against budget to determine the
reasonableness of using budgets for the
impairment model
actual
• assessed budgets for the next financial year
trading
against
performance
the
appropriateness of the assumptions concerning
growth rates and inputs to the discount rate
against latest market expectations
year
reviewed
current
then
and
• 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 model and discount rate applied.
30
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF CROMA SECURITY
SOLUTIONS GROUP PLC
FOR THE YEAR ENDED 30 JUNE 2018
Our application of materiality
The materiality for the financial statements of the Group as a whole was set at £526,790. 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 £342,000. This has
been capped at the Group’s performance materiality.
An overview of the scope of our audit
Of the Group’s 7 reporting components, we subjected one to a full scope audit and the other 6
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.
31
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF CROMA SECURITY
SOLUTIONS GROUP PLC
FOR THE YEAR ENDED 30 JUNE 2018
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.
Responsibilities of directors
As explained more fully in the directors’ responsibilities statement set out on page 28 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 2018.
32
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF CROMA SECURITY
SOLUTIONS GROUP PLC
FOR THE YEAR ENDED 30 JUNE 2018
Use of our report
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.
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
19 October 2018
33
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2018
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
Finance expenses
Profit before tax
Tax
Profit for the year from continuing operations
2018
2017
Notes £000's
£000's
£000's
£000's
3
35,119
22,058
(27,970)
(18,033)
7,149
(5,136)
-
2,013
(38)
1,975
(359)
1,616
3
13
12
5
8
2,500
(161)
(326)
2,013
799
(126)
(242)
431
4,025
(3,802)
208
431
(74)
357
3
360
360
Total comprehensive income attributable to owners of the parent
1,616
Earnings per share
9
Basic and diluted earnings per share (pence)
Earnings from continuing operations
9.89
2.13
34
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
FOR THE YEAR ENDED 30 JUNE 2018
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 and other payables
Total liabilities
Net assets
Issued capital and reserves attributable to owners of the parent
Share capital
Treasury Shares
Share premium
Merger reserve
Capital redemption reserve
Retained earnings
Share options
Total equity
Notes
2018
£000's
2017
£000's
11
12
13
14
15
27
20
17
17
17
21
22
22
22
22
22
22
7,213
835
476
8,524
668
6,077
2,154
8,899
7,213
1,161
420
8,794
710
3,804
770
5,284
17,423
14,078
(197)
(12)
(209)
(6,071)
(66)
(6,137)
(6,346)
(238)
(89)
(327)
(3,251)
(195)
(3,446)
(3,773)
11,077
10,305
794
(399)
6,133
2,139
51
2,347
12
11,077
845
-
6,133
2,139
-
1,176
12
10,305
These financial statements were approved and authorised for issue by the Board of Directors on 19 October
and signed on their behalf by
S J F Morley- Director
Croma Security Solutions Group plc - Company Number: 03184978
35
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2018
Cash flows from operating activities
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
Cash flows from financing activities
New share issue
Purchase of treasury shares
Buy back and cancellation of shares
Sale of treasury shares
Decrease in Hire Purchase
Decrease in borrowings
Dividends paid
Interest 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 period
Notes
2018
£000's
2017
£000's
1,975
487
-
263
38
(74)
2,689
-
(264)
47
(217)
-
(406)
(354)
5
(52)
(154)
(89)
(38)
(1,088)
1,384
770
2,154
25
26
26
27
357
368
3
443
74
(12)
1,233
(100)
(114)
7
(207)
5
-
-
-
(56)
(439)
(84)
(74)
(648)
378
392
770
36
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2018
Attributable to owners of parent
At 1 July 2016
New share issue
Profit for the year
Dividends paid
Share option scheme charge
At 30 June 2017
Shares redeemed
Treasury shares acquired
Treasury shares issued
Profit for the year
Dividends paid
At 30 June 2018
Share
Capital
Capital
Redemption
Reserve
Treasury
Shares
Share
Premium
Merger
Reserve
Retained
Earnings
Share
Options
Total
Equity
£000's
£000's
£000's
£000's
£000's
£000's
£000's
£000's
844
1
-
-
-
845
(51)
-
-
-
-
794
-
-
-
-
-
-
51
-
-
-
-
51
-
-
-
-
-
-
-
(406)
7
-
-
(399)
6,129
4
-
-
-
6,133
-
-
-
-
-
6,133
2,139
-
-
-
-
2,139
-
-
-
-
-
2,139
900
-
360
(84)
-
1,176
(354)
-
(2)
1,616
(89)
2,347
9
-
-
-
3
12
-
-
-
-
-
12
10,021
5
360
(84)
3
10,305
(354)
(406)
5
1,616
(89)
11,077
The following notes form part of the primary financial statements
37
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
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 long-term equity capital. The day to day operations are funded by cash
generated from trading.
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 October 2019.
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 cash surpluses from trading.
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.
38
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
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 and service 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
Software licences
Customer relationships
Brand royalties
Research & development
–
–
–
–
39
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
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.
40
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
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
Leasehold property
Plant, computer and office equipment
Motor vehicles
-
-
-
-
4% on cost
Over the term of the lease
Between 10% and 35% on cost
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
statement of financial position 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 statement of financial position date and are
expected to apply when the deferred tax liabilities/ (assets) are settled/ (recovered).
41
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
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.
42
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
1. Accounting policies (continued)
Financial assets
Financial assets are trade receivables and other receivables.
Trade and other receivables 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 effect of discounting on these financial instruments is not considered to be material.
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 de-recognises 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 receivables comprise trade and other receivables and cash and cash equivalents in the statement of
financial position. 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.
43
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
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 to provide returns to shareholders. The Group has no short 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 and deposits held
at call with banks.
44
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
1. Accounting policies (continued)
New and amended standards
No new standards, interpretations and amendments, effective for the first time from 1 July 2017, 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 2018 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” will be effective for the year ending 30 June 2019 onwards, the main
impact being the impairment assessment methodology used to value trade receivables. An assessment of
the full impact of this standard is in progress. The Group's current treatment of financial assets and financial
liabilities is explained within the accounting policies.
- IFRS 15: “Revenue recognition from Contracts with Customers” will be effective for the year ending 30
June 2019 onwards. IFRS 15 requires that revenue is recognised to depict the transfer of promised goods or
services to customers in an amount that reflects the consideration to which the entity expects to be entitled
in exchange for those goods or services. Management anticipate that CSS Total Security Limited will be
the component most affected by this. Management are currently working on the new processes and
systems that will be required to comply with this accounting standard but anticipate this would have
an immaterial impact on Group revenue.
- IFRS 16: “Leases” will be effective for the year ending 30 June 2020 onwards and the impact on the
financial statements will be potentially significant. IFRS 16 requires lessees to recognise a lease liability
reflecting future lease payments and a right-of-use asset for all lease contracts. Therefore, the substantial
majority of the Group's operating lease commitments (£1,604,000 on an undiscounted basis, as shown in
Note 24 of the financial statements) would be brought onto the statement of financial position and amortised
and depreciated separately. There will be no impact on cash flows, although the presentation of the cash
flow statement will also change. Management are currently working on the new processes and systems
that will be required to comply with this accounting standard.
Other standards not listed above are not expected to have an impact on the Group.
45
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
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 value of other intangibles at the statement of financial position date was £835k more details of
which are given at note 12.
46
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
3. Segmental reporting
The Directors consider the following five business segments best represent the business segments of the Group.
47
CromaVigilant(Guarding)CromaSecuritySystems(Electronic)Croma Biometric(FastVein™)Croma Locksmiths(Locks)CentralCostsTotal2018 Business Segments£000's£000's£000's£000's£000's£000'sSegment revenues28,9932,6653083,153-35,119Gross profit4,7441,084911,230-7,149Administrative(2,098)(491)(222)(803)(1,035)(4,649)Amortisation-(61)(136)(129)-(326)Depreciation(52)(49)-(60)-(161)Profit/(loss) on disposal(2)(1)-3--Segment operating profit/(loss)2,592482(267)241(1,035)2,013Segment assets7,9934,789-3,88275917,423Segment (liabilities)(4,832)(674)-(829)(11)(6,346)Segment net assets 3,1614,115-3,05374811,077Additions to non-current assets10865-65-2642017 Business Segments£000's£000's£000's£000's£000's£000'sSegment revenues16,4052,3573462,950-22,058Gross profit1,8611,145104915-4,025Administrative(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)Segment net assets 2,0754,0951172,9951,02310,305Additions to non-current assets6120-20-114
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
3. Segmental reporting (continued)
An analysis of revenue by type is shown below:
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:
2018
£000's
28,793
139
5,574
552
61
2017
£000's
16,219
143
5,086
567
43
35,119
22,058
2018
£000's
2017
£000's
30
2,453
309
161
326
-
75
2,222
304
126
242
3
Audit of parent company and consolidated financial information payable to Nexia
Smith & Williamson
Fees paid to the auditor in respect of tax compliance services
37
-
32
8
48
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
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
Staff cost (for the above persons):
Wages and salaries
Pension
Social security costs
The average monthly number of persons (including Directors) employed by
the Parent Company during the period was:
2018
£000's
2017
£000's
30
8
38
2018
No.
33
945
978
64
10
74
2017
No.
48
589
637
£000's
£000's
25,082
228
2,275
27,585
15,571
102
1,460
17,133
No.
No.
Management and administration
6
4
49
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
7. Directors' and key management personnel remuneration
2018
S J F Morley
R M Fiorentino
P Williamson
R A Juett
A N Hewson
C McMicking
M Whettingsteel (Resigned August 2017)
Salary
and
bonus
£000's
Estimated
value of
benefits
£000's
Fees
£000's
Pension
£000's
Total
£000's
228
296
233
77
10
10
12
866
10
3
11
1
1
-
-
26
-
-
-
-
15
15
-
30
29
-
1
12
-
-
-
42
267
299
245
90
26
25
12
964
M Whettingsteel received £50,000 as compensation for loss of office
P Williamson exercised options over 5,000 shares and realised a gain of approximately £3.3k.
2017
S J F Morley
R M Fiorentino
A N Hewson
M Whettingsteel
R A Juett
C McMicking
P Williamson
Lord James Percy
Estimated
value of
benefits
£000's
Salary
£000's
Fees
£000's
Pension
£000's
Total
£000's
116
177
-
100
54
-
21
8
476
1
3
1
-
-
-
-
-
5
-
-
21
-
-
21
-
-
42
-
-
-
-
-
-
-
-
-
117
180
22
100
54
21
21
8
523
No share-based payments were made to Directors in 2017
Key management personnel compensation comprises only short-term employee benefits which total £1,098k
(2017: £583k).
50
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
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
2018
£000's
2017
£000's
431
(32)
399
(47)
7
359
58
5
63
(23)
(43)
(3)
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 the standard rate of corporation tax in the UK of 19% (2017 -
19.75%). 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% (2017: 19.75%)
Effects of:
Expenses not deductible for tax purposes
Non-taxable income
Adjustment to tax charge for previous periods
Total tax charge/ (credit) for the year
2018
£000's
1,975
375
8
1
(25)
359
2017
£000's
357
71
4
(40)
(38)
(3)
51
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
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)
2018
£000's
2017
£000's
1,616
360
16,339
16,894
Weighted average number of shares used in diluted EPS (000’s)
16,340
16,904
Basic earnings per share
Diluted earnings per share:
Pence
Pence
9.89
9.89
2.13
2.13
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 28 February 2018 the Directors proposed an interim dividend of 0.6p per share. This dividend was paid on
9 April 2018. The total cost was £89K.
Subject to approval at the AGM, the directors recommend a final dividend of 1p per share for the year.
52
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
11. Goodwill
Cost
At 1 July 2017 and 30 June 2018
Impairment
At 1 July 2017 and 30 June 2018
Net book value
At 1 July 2017 and 30 June 2018
Impairment testing
£000's
7,213
-
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 (2017: £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 of each CGU is as follows:
Croma Security Systems
Croma Locksmiths
Croma Vigilant
2018
£000's
3,339
2,478
1,396
7,213
2017
£000's
3,339
2,478
1,396
7,213
53
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
11. Goodwill (continued)
Forecasts, growth and discount rates
The recoverable amount relating to Croma Vigilant, Croma Security Systems and Croma Locksmiths was
determined based on value-in-use calculations, covering a detailed forecast for the five-year period to 30 June
2023, 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% (2017:
11.6%) 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 2018 turnover is 90% higher than in 2012. For
the present period to 30 June 2019 turnover is forecast to increase by 8% which assumes no new contract wins
and turnover from our existing client base to continue at current run rates. 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 2020 to 2023 the following assumptions have been made:
•
•
•
•
Revenue to grow by 3% per annum (2017: 3%)
Direct wages to rise in proportion to revenue
Other direct costs to increase at 2.5% per annum (2017: 2.5%)
Indirect costs to increase at 2% per annum (2017: 2%)
For the year ended 30 June 2024 onwards, net revenues are assumed to increase by 2% per annum.
Based on these assumptions the net present value of future cashflows is considerably in excess of the carrying
value of goodwill.
Croma Security Systems including Croma Biometric
For the year ended 30 June 2018 sales growth of 10% was achieved. However, at the start of the current year
sales have been slow, but in the second half our order book indicates a stronger position. For the year overall,
we still forecast 1% growth in sales and gross margin.
For the period from 2019 to 2023 the following assumptions have been made:
•
•
•
Revenue growth of 3.1% (2017: 4.9%)
Direct cost growth of 2.6% (2017: 4.8%)
Indirect costs growth of 2.06% (2017: 2.4%)
For the year ended 30 June 2024 onwards, net revenues are assumed to increase by 2% per annum.
Based on these assumptions the net present value of future cashflows is £4,446k
54
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
Croma Locksmiths
Based on recent performance and known order pipeline, the Board has forecast turnover for 2019 to increase by
3%. The growth will continue to be serviced out of existing staff resources so direct costs are forecast to increase
by only 1% from 2018 levels.
For the period from 2019 to 2023 the following assumptions have been made:
•
•
•
Revenue growth of 3% (2017: 3%)
Direct cost growth of 2.5% (2017: 2.5%)
Indirect costs growth of 2% (2017: 2%)
For the year ended 30 June 2024 onwards, net revenues are assumed to increase by 2% per annum.
Based on these assumptions the net present value of future cashflows is £3,863k
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 to 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 2018.
55
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
12. Other intangible assets
Fair value
At 1 July 2016
Additions
At 30 June 2017
Additions
At 30 June 2018
Amortisation
At 1 July 2016
Charge for the year
At 30 June 2017
Charge for the year
At 30 June 2018
Carrying Value at 1 July 2017
Carrying Value at 30 June 2018
R&D
£000's
Customer
relationships
£000's
Brands
£000's
Software
licences
£000's
Brand
Royalties
£000's
Total
£000's
84
2
86
-
86
29
29
58
28
86
28
-
1,727
295
222
31
2,359
-
-
-
-
2
1,727
295
222
31
2,361
-
-
-
-
-
1,727
295
222
31
2,361
680
162
842
161
1,003
885
724
124
29
153
31
184
142
111
94
22
116
106
222
106
-
31
-
958
242
31
1,200
-
326
31
1,526
-
-
1,161
835
R&D has been developed internally. The other intangible assets were acquired with the business of CSS Total
Security Limited and CSS Locksmiths Limited in March 2012 and the business of Croma Locksmiths & Security
Solutions Limited 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% (2017: 11.60%) (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 of Croma Locksmiths & Security
Solutions Limited. The useful lives as noted in the accounting policies were considered appropriate. Customer
relationships with a net book value of £724k have a remaining life of between 3.5 to 7.5 years.
56
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
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 4 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 £111k, have a remaining useful life of 4 years.
Software licence
The Biometrics business has not currently achieved the critical mass required for the Board to forecast
profitability over the remaining 4-year life of the software licence and on this basis the book value of £106k at
1 July 2017 has been fully expensed in the year, within administrative expenses in the Statement of
Comprehensive Income.
Research and Development
Research and development costs were fully written down in the year and the costs included within administrative
expenses in the Statement of Comprehensive Income.
57
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
13. Property, plant and equipment
Cost
At 1 July 2016
Additions
Disposals
At 30 June 2017
Additions
Disposals
At 30 June 2018
Depreciation
At 1 July 2016
Charge for the year
On disposals
At 30 June 2017
Charge for the year
On disposals
At 30 June 2018
Carrying value at 30 June 2017
Carrying value at 30 June 2018
Freehold
& leasehold
property
£000's
Plant,
computer and
office
equipment
£000's
Motor
vehicles
Total
£000's
£000's
121
10
-
131
12
-
143
38
6
-
44
22
-
66
87
77
367
87
-
454
129
-
583
264
49
-
313
72
-
385
141
198
353
17
(41)
329
123
(138)
314
97
71
(31)
137
67
(91)
113
192
201
841
114
(41)
914
264
(138)
1,040
399
126
(31)
494
161
(91)
564
420
476
In motor vehicles the following amounts are held under hire purchase agreements, and classified as finance
leases:
At 30 June - Cost
Accumulated depreciation
Net book value
2018
£000's
2017
£000's
152
(84)
68
199
(57)
142
The Group leases various vehicles and machinery under non-cancellable hire purchase agreements with lease
terms up to four years.
58
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
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
2018
£000's
2017
£000's
650
18
668
647
63
710
2018
£000's
2017
£000's
5,707
(35)
5,672
32
373
3,532
(34)
3,498
31
275
6,077
3,804
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
2018
2017
£000’s
£000’s
-
-
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
59
2018
£000's
2017
£000's
215
140
123
478
576
58
10
644
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
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 and credit card liabilities
Finance lease liabilities (due in 1 to 5 years)
Other payables due in more than 1 year
2018
£000's
2017
£000's
5,704
2,154
7,858
2018
£000's
568
93
661
1,548
431
3,431
3,529
770
4,299
2017
£000's
502
92
594
844
105
1,707
6,071
3,251
2018
£000's
2017
£000's
35
31
66
12
-
12
60
135
195
39
50
89
Invoice discounting facilities are secured against the trade debtor book of Croma Vigilant. Finance leases
are secured against the assets to which they relate.
60
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
18. Interest rate and liquidity risk
2018
Fixed rate
Trade and other payables
Finance lease obligations
Accruals and deferred
income
Floating rate
Credit card liabilities
Total
2017
Fixed rate
Trade and other payables
Other payables
Finance lease obligations
Accruals and deferred
income
Floating rate
Invoice discounting facility
Weighted
average
effective
interest
rate
%
Less than
one
month or
on demand
£000's
1-12
months
£000's
1-3
years
£000's
11.40%
2.80%
568
-
-
-
93
35
3,431
31
-
12
-
-
Total
£000's
661
47
3,431
31
568
3,590
12
4,170
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
Total
566
1,931
89
2,586
19. Contingent liabilities
There are no contingent liabilities either at the year-end or up to the date of signing the financial statements.
61
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
20. Deferred tax
2018
£000's
2017
£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
At 30 June 2018 deferred tax has been provided at a rate of 18%
238
7
14
(10)
(52)
197
58
151
(12)
197
303
(43)
-
(4)
(18)
238
44
202
(8)
238
The Group has tax losses of approximately £1.8m (2017: £1.8m) to carry forward. The potential deferred tax
asset arising on these tax losses of £306k (2017: £306k) 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:
Ordinary shares of 5 pence each
2018
£000's
2017
£000's
794
845
2018
Number
000's
2018
£000's
2017
Number
000's
2017
£000's
Issued and fully paid
Ordinary shares of 5 pence at 30 June 2017
16,912
845
16,893
844
Purchase of own shares
(1,013)
(51)
-
-
Ordinary shares of 5 pence at 30 June 2018
15,899
794
16,912
845
62
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
21. Share capital (continued)
The Group operates the 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
2018
Number
2017
Number
19,000
42,000
-
(17,000)
(4,000)
(19,000)
Share options in issue at 30 June
2,000
19,000
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
The charge to the statement of comprehensive income in the year was £nil (2017: £3k)
At date of
grant
Black-
Scholes
2%
5
60%
0%
63
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
22. Reserves
The following describes the nature and purpose of each reserve within equity:
Reserve
Share Premium
Merger Reserve
Description and purpose
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.
Retained Earnings
Cumulative net gains and losses recognised in the statement of
comprehensive income less amounts distributed to shareholders.
Capital Redemption Reserve
The capital redemption reserve arose on the purchase and
cancellation of own shares during the year ended 30 June 2018.
Ordinary Shares
Amount subscribed for share capital at nominal value.
Treasury Shares Reserve
Arose on the purchase of own shares during the year ended 30 June
2018.
Company Share Option Scheme This represents the change in equity relating to the issue of company
share options.
23. 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, together
with their immediate relatives, control 33% 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
£98,500 (2017: £88,000).
64
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
23. Related party transactions (continued)
Director’s loans
During the year a balance of £29k was repaid to M Whettingsteel, a former director
Purchase of own shares
During the year the company purchased 2,027,027 ordinary shares from M Whettingsteel at an aggregate cost
of £760k
Salaries paid to close family members
During the year salaries totalling £40k (2017: £73k) were paid to close family members of key management
personnel.
24. Operating lease commitments
The future aggregate minimum lease payments lease 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
25. Notes supporting the cash flow statement
Net changes in working capital
Decrease/(Increase) in inventories
(Increase) in trade and other receivables
Increase in trade and other payables
65
2018
£000's
2017
£000's
213
629
685
1,527
21
9
-
30
193
430
444
1,067
80
51
-
131
1,557
1,198
2018
£000's
2017
£000's
42
(2,273)
2,494
263
(67)
(358)
868
443
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
26. Reconciliation of liabilities arising from financing activities
Hire Purchase
Invoice discounting and credit card liabilities
Other payables
27. Cash and cash equivalents
Cash at bank and in hand
28. Subsidiary audit exemption
2017
£000's
Cash flows
£000's
2018
£000's
99
135
50
284
(52)
(104)
(50)
(206)
47
31
-
78
2018
£000's
2017
£000's
2,154
770
The wholly-owned subsidiaries of Croma Security Solutions Group Plc: Vigilant Security (Scotland) 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.
66
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF CROMA SECURITY
SOLUTIONS GROUP PLC
FOR THE YEAR ENDED 30 JUNE 2018
Opinion
We have audited the financial statements of Croma Security Solutions Group PLC (the ‘parent
company’) for the year ended 30 June 2018 which comprise the statement of financial position, the
statement of cash flows, the 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).
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 2018;
• 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, as applied to SME listed entities, 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.
67
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF CROMA SECURITY
SOLUTIONS GROUP PLC
FOR THE YEAR ENDED 30 JUNE 2018
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 28 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.
68
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF CROMA SECURITY
SOLUTIONS GROUP PLC
FOR THE YEAR ENDED 30 JUNE 2018
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 2018. This separate auditor’s report on the group financial
statements includes other audit planning and scoping matters that relate to the parent company
audit. There are not deemed to be any Key Audit Matters in relation to the parent company.
Use of our report
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 company’s members as a
body, for our audit work, for this report, or for the opinions we have formed.
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
19 October 2018
69
STATEMENT OF FINANCIAL POSITION
FOR THE YEAR ENDED 30 JUNE 2018
Assets
Fixed assets
Investments
Current assets
Debtors
Cash and bank and in hand
Current liabilities
Creditors: Amounts falling due within one year
Net current assets
Total assets less current liabilities
Notes
2018
£000's
2017
£000's
E
F
8,935
8,935
655
22
677
8,935
8,935
863
38
901
G
(435)
(317)
242
584
9,177
9,519
Issued capital and reserves attributable to owners of the parent
Share capital
Capital redemption reserve
Treasury Shares
Share premium
Merger reserve
Profit and loss account
H
C
794
51
(399)
6,133
2,139
459
845
-
-
6,133
2,139
402
Total equity
9,177
9,519
The company profit for year totalled £502k (Loss 2017:£249k)
These financial statements were approved and authorised for issue by the Board of Directors on 19
October and signed on their behalf by
S J F Morley
Director
Croma Security Solutions Group plc - Company Number: 03184978
70
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2018
Cash flows from operating activities
Profit/(Loss) before taxation
Net changes in working capital
Net cash generated from operations
Cash flows from investing activities
Purchase of investments
Net cash received/(used) in investing activities
Cash flows from financing activities
New share issue
Sale of treasury shares
Purchase of treasury shares
Buy back and cancellation of shares
Dividends paid
Net cash used in financing activities
Net (decrease)/ increase in cash
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of the period
Notes
2018
£000's
J
502
326
828
-
-
-
5
(406)
(354)
(89)
(844)
(16)
38
22
2017
£000's
(249)
445
196
(100)
(100)
5
-
-
-
(84)
(79)
17
21
38
71
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2018
Share
Capital
£000s
Capital
Redemption
Reserve
£000s
Treasury
Shares
£000s
Share
Premium
£000s
Merger
Reserve
£000s
Retained
Earnings
£000s
Total
Equity
£000s
844
1
-
-
845
(51)
-
-
-
-
794
-
-
-
-
-
51
-
-
-
-
51
-
-
-
-
-
-
(406)
7
-
-
(399)
6,129
4
-
-
6,133
-
-
-
-
-
6,133
2,139
-
-
-
2,139
-
-
-
-
-
2,139
735
-
(249)
(84)
402
(354)
-
(2)
502
(89)
459
9,847
5
(249)
(84)
9,519
(354)
(406)
5
502
(89)
9,177
At 1 July 2016
New share issue
Loss for the year
Dividends paid
At 30 June 2017
Shares redeemed
Treasury shares acquired
Treasury shares issued
Profit for the year
Dividends paid
At 30 June 2018
The following notes form part of the primary financial statements
72
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
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 7&8 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 £414k (2017: (£249k)). Dividends of £916k were
received from its subsidiary undertakings (2017: £Nil).
The Company's activities are funded by long term equity capital and by profits and cash generated from
trading.
The financial statements do not reflect the adjustments that would be necessary were the trading
performance of the Company to deteriorate and the Group’s funding from invoice discounting to
become unavailable. However, the Directors have considered expected trading and cash requirements
of the Company until 31 October 2019 and these projections suggest that the Company will meet its
obligations as they fall due at least until this date.
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 statement of financial position
when the Company becomes a party to the contractual provision of the instrument.
73
NOTES FORMING PART OF THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 30 JUNE 2018
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 statement of financial position. Finance costs and gains or losses relating to financial liabilities are included
in the statement of comprehensive income. 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.
74
NOTES FORMING PART OF THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 30 JUNE 2018
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. At the year
end the carrying value of investments totalled £8,935k (2017;£8,935k).
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 profit dealt with in the financial statements of the Company was
£502k (2017: (£249k)).
D. Staff costs
2018
No.
2017
No.
The average monthly number of persons (including Directors)
employed by the company during the period was:
Management and administration
6
4
Staff cost (for the above persons):
£000's
£000's
Wages and salaries
Pension
Social security costs
866
42
62
970
451
-
57
508
75
NOTES FORMING PART OF THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 30 JUNE 2018
E. Fixed asset investments
Cost
At 1 July 2017 and 30 June 2018
Impairment
At 1 July 2017 and 30 June 2018
Net book value at 30 June 2017 and 30 June 2018
Fixed asset investments are as follows:
Shares in
subsidiary
undertakings
£000's
9,059
(124)
8,935
Company
% Ordinary shareholding
Nature of business
Vigilant Security (Scotland) Limited
CSS Total Security Limited
Croma Locksmiths & Security
Solutions Limited
CSS Locksmiths Limited
Centre Security Limited
Access Key and Lock Limited
100% directly
100% directly
100% directly
55% directly 45% indirectly
100% indirectly
100% indirectly
Asset protection and
guarding
CCTV and security systems
Locksmithing, Keys and
Safes
Dormant
Dormant
Dormant
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 Croma Locksmiths &
Security Solutions Limited is Units 7 & 8 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 Centre Security Limited & Access Key and Lock Limited is 2 Pennant Park,
Standard Way, Fareham PO16 8XU
76
2018
£000's
2017
£000's
626
29
655
846
17
863
2018
£000's
2017
£000's
292
28
93
22
435
245
-
34
38
317
2018
£000's
2017
£000's
794
845
NOTES FORMING PART OF THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 30 JUNE 2018
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
Trade creditors
Other creditors
Other taxes and social security
H. Share capital
Authorised, allotted, called up and fully paid:
Ordinary shares of 5 pence each
Issued and fully paid
2018
Number
000's
2018
£000's
2017
Number
000's
2017
£000's
Ordinary shares of 5 pence at 30 June 2017
16,912
845
16,893
844
Purchase of own shares
(1,013)
(51)
-
-
Ordinary shares of 5 pence at 30 June 2018
15,899
794
16,912
845
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 an Approved Company Share Option Scheme. Details are in Note 21 of the
consolidated accounts.
77
NOTES FORMING PART OF THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 30 JUNE 2018
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 33% of the voting shares.
Purchase of own shares
During the year the company purchased 2,027,027 ordinary shares from M Whettingsteel, a former director,
at an aggregate cost of £760k.
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:
2018
£000’s
2017
£000’s
Services provided by service companies for which A N Hewson is a director
and which has been accounted for as Directors’ remuneration.
15
21
Services provided by a service company for which C N McMicking is a
director and which has been accounted for as Directors’ remuneration.
15
21
Full details of compensation to key Management Personnel of the parent company is included in note 7 to
the financial statements.
J. Notes supporting the cash flow statement
Net changes in working capital
Decrease in trade and other receivables
Increase/(decrease) in trade and other payables
2018
£000's
2017
£000's
208
118
326
499
(54)
445
78