CROMA SECURITY SOLUTIONS GROUP PLC
REPORT AND FINANCIAL STATEMENTS
30 June 2019
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
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24
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28
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33
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35
36
37
65
Parent company financial statements
68 - 76
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 2019
Introduction
I am very pleased to report Croma Security Solutions Group Plc’s (“Croma” or the “Group”) Final
Results for the year ended 30 June 2019. The Group generated revenues of £34.6 million, profit before
tax of £1.4 million and EBITDA of £1.9 million and did so without the benefit of significant levels of
short term, higher margin project work that boosted results in 2018. Instead, trading in 2019 was notable
for the increase in the levels of contracted work which have risen to 79% (2018:72%) of revenues and
thereby provides greater visibility on the normalised run rate for the business which has achieved a step-
change in earnings over the last four years.
At the heart of the Group’s security activities is a strong ex-military ethos. It is this ethos that ensures
Croma provides a premium level approach to every aspect of delivering security services and solutions.
With the increase in demand across the UK for security solutions from both the private and public
sector, Croma has benefitted as these bodies have opted for a premium service to ensure the safety of
individuals, customers, employees and assets.
This increase in demand for recurring work is reflected in the trading performance for 2019 and in the
positive outlook for 2020 and beyond.
Strategy for Growth within UK Security Market
At the beginning of 2019, the Group set out its strategy for establishing Croma as the British security
brand. The increase in demand for Croma’s premium services was recognised as an opportunity to
expand the Group’s market position and create a national network of Croma Security Centres alongside
setting new standards in providing premium guarding services.
The Board believes there is an opportunity in its market to establish a national chain of modern security
centres offering the full range of the Group’s services from manned guarding to CCTV, intruder alarm
and advanced security systems as well as high security locks. The format is proven to work for both
commercial and domestic customers and therefore to create the network the Group intends to acquire
further locksmith premises and convert them into modern security centres. During the year three
locksmiths were acquired and the sites are under conversion.
Croma’s core business is manned guarding and success has come from providing capable, well trained
and highly motivated officers compared with the more traditional model of the low paid and lowly
motivated officer. Known for providing this premium service Croma is focused on continuing to set
new standards across the market. In 2019, the growth and success of PROception is an example of this,
as it is currently transforming the way front of house security is performed in offices, hotels and
government building up and down the country.
Our business strategy has considered the challenges ahead and the changing market place. We are
investing in the appropriate resources and technologies to bring industry leading solutions. We believe
the continuous development and use of data analytics and real time communications will be an essential
part of the future of security services.
3
CHAIRMAN’S STATEMENT (continued)
FOR THE YEAR ENDED 30 JUNE 2019
Trading Performance
All three divisions have performed well in the year under review, delivering good levels of profitability.
Financial prudence and responsibility continue to be central to our ongoing strategy in order to shape
an outstanding security services group that delivers for clients, staff and shareholders.
Croma Vigilant, our manned guarding division had a good year. The division grew contracted revenues
so that they now represent 79% of total revenues. Key client wins were achieved in the estate
management, health and utility sectors and a number of existing client’s contracts have been extended.
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.
Croma Security Systems and Locksmiths performed well reflecting the increased demand for their
services and the ability of the Group to introduce products across the business. Croma Locksmiths in
particular made a strong contribution to both revenues and profits. Croma Biometrics remains a
significant opportunity for the Group with FastVein™ coming to the forefront as a potent biometric
high-speed human identifier.
Dividend
Reflecting the strong financial performance over the year the Board is pleased to recommend a final
dividend to shareholders of 1.1p per share (total 1.8p per share for the year) and subject to approval at
the Annual General Meeting to be held on 27 November 2019, the final dividend will be paid on 29
November 2019 to all shareholders on the register at the close of business on 8 November 2019. The
shares will be marked ex-dividend on 7 November 2019.
Outlook
Heightened concern over the real or perceived threats to security of individuals, customers and assets
has led to an increased requirement for Croma’s services. We view this demand to be long-term and it
has already created a step change in the financial performance of the business.
The future challenge is to use this opportunity to build a larger business with the capability to service
and reach a wider customer base across the UK. We are working to achieve this exciting objective
whilst ensuring we remain a well-balanced business and operate prudently.
Finally, I would like to thank all employees of the Group for their excellent work over the last year and
I look forward to working together again this year to achieve another strong performance.
Sebastian Morley
Chairman 18 October 2019
4
STRATEGIC REPORT
FOR THE YEAR ENDED 30 JUNE 2019
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 performance of each business segment is discussed below:
Croma Vigilant
Croma Vigilant, our largest division, generated sales of £28.5m (2018: £29.0m) and operating profit of £1.4m
(2018: £2.6m). Importantly, from the perspective of sustainable earnings, contracted revenues represented
88% of revenues (2018: 82%) and while 2018 generated exceptional profits for the Group, the reliability of
contracted income provides a stronger base upon which to expand this division.
Croma Vigilant provides manned guarding for assets and individuals and now employs over 750 security
personnel throughout the UK. Fundamental to the division’s success is the military ethos that pervades
through all aspects of the way the division is run to all contact with customers. Croma personnel have a market
reputation for being smart, punctual, professional and courteous on a consistent basis which is in stark contrast
to the average security guard. The growing retained customer base is increasingly opting for Croma’s
premium services and takes reassurance from the high standards and professionalism Croma Vigilant brings.
Following previous patterns, the split between private and public revenues remains an approximately two
thirds/one third respectively. In the period under review, Croma Vigilant increased its market share in five
of its six key target markets the exception being in local government where in 2018 the division had gained
significant high margin income from one-off project work. Local government work remains an important
market, however, income is now primarily contracted as opposed to being short term projects. During the
year the Group recorded key wins in the health, estate management and utilities sector.
5
STRATEGIC REPORT (continued)
FOR THE YEAR ENDED 30 JUNE 2019
Last year, we were proud to publish our gender pay gap reports for the first time which showed that there is
no significant pay gap between men and women in our organisation. This continues to be the case and we
remain focused on ensuring everyone has an equal opportunity across the organisation.
Led by ex-policewoman Ruth McGowan, PROception is the Group’s innovative new front of house concept,
making the modern reception part of a building’s security. PROception provides security trained receptionists
to both manage the front desk and play an active role in security and is transforming the way manned security
services are delivered in offices, hotels and public institutions. Responses from the property and leisure sector
has been excellent with annualised revenues reaching £0.8m since launch. This is an excellent achievement
and bodes well for the future prospects of PROception.
In 2018 Vigilant completed the Community Safety Accreditation Scheme 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.
The current year has begun well with a good pipeline of new business opportunities.
Croma Security Systems
Croma Security Systems recorded sales of £2.70m (2018: £2.97m) and operating profit up over 60% to
£0.34m (2018: £0.21m).
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.
Croma Locksmiths
Croma Locksmiths, which operates through ten retail outlets on the South Coast of the UK and centrally
through the Group, delivered a strong performance for the year growing sales to £3.42m (2018: £3.15m) and
operating profit increased by more than 100% to £0.48m (2018: £0.24m).
In February 2019, the Board set out its strategy to become the British Homeland security brand through
establishing a national chain of modern security centres. These centres offer the full range of Croma’s security
solutions from manned guarding, CCTV, intruder alarm and advanced security systems as well as high
security locks. Conversion of the retail outlets into modern Security Centre is well advanced enabling the
stores to sell the Group’s security capabilities to both domestic and commercial customers.
To establish a national chain of security centres, the Group is looking to acquire locksmith businesses and
convert the premises into a Croma security centre. During the year, three locksmith businesses were acquired
for conversion.
6
STRATEGIC REPORT (continued)
FOR THE YEAR ENDED 30 JUNE 2019
The locksmith market is highly fragmented and relatively unsophisticated in the UK. With demand for
security advice and services increasing, these traditional locksmith stores provide a working base upon which
to build a national network. While still in its formative stage, the initial income increases being achieved
from the three new sites are encouraging, contributing income of £0.21m (£0.55m on an annualised basis).
With the three completed acquisitions, the Company now has ten retail stores which will all be converted to
Croma Security Centres by 2020. The current centres are located in affluent areas close to London in the
South West of the UK.
Croma Biometrics
With no new significant installations during the year, Croma Biometrics turnover fell to £101k (2018: £308k),
however, 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 while sales have slowed
in the period under review, its potential remains unchanged and we are involved in discussions which could
well generate significant long-term income.
Group Financials
The Group financials can be summarised as follows:
Revenue
Gross profit
Gross margin %
EBITDA
Operating profit
Earnings per share (2018 restated)
Net Assets
Cash generated from operations
Dividend per share in relation to the year
2019
£000's
34,599
6,490
18.8%
1,871
1,449
7.82p
11,990
462
1.8p
2018
£000's
35,119
7,149
20.4%
2,500
2,013
10.10p
11,077
2,689
1.6p
While gross profits margins reduced from 20.4% to 18.8%, close control of the Group’s cost base saw
overheads reduce by a noteworthy 2% whilst supporting similar levels of revenue.
Without a one-off benefit from a deferral in its payroll date in 2018, cashflow generated from operations was
£0.46m (2018: £2.69m) and Group remains in a strong financial position with no borrowings and net cash of
£1.7m after funding £0.3m of investments during the period.
The Board maintains the progressive dividend policy adopted in previous periods and is pleased to
recommend a final dividend to shareholders of 1.1p per share (2018:1.0p).
.
7
STRATEGIC REPORT (continued)
FOR THE YEAR ENDED 30 JUNE 2019
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
If needed, the group has 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 2019
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 (when needed) we can obtain funding of up to 90 days on our sales ledger and although there
have been instances where customers have settled beyond these terms, this has not caused us any difficultly.
9
STRATEGIC REPORT (continued)
FOR THE YEAR ENDED 30 JUNE 2019
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 2019
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
11
12
11
12
12
12
12
12
12
12
12
12
-
-
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 2019
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 2019
Key performance indicators
Indicator
Croma Vigilant
Sales
Gross margin
Performance
Sales were £28.5M for the year. The division continues to bid for and win
new work on a regular basis and the investment in our front of house
PROception offering has yielded new work and helped to retain work from
our more significant customers, who may now increasingly demand this
service.
Performance is monitored by the Operations director and business
development manager reporting to the Chairman.
Largely due to the expected reduction in higher margin project work, gross
margin was £3.9M which is down from the record £4.7M seen in the prior
year. The industry remains highly competitive, and the gross margin
performance of each contract is monitored closely to ensure cost savings
are maximised using new technology and ways of working.
Customer retention
Cash
Retention of customers nearing the end of their contract is a priority of the
operations director and the stability in turnover is testament to our quality
service offering.
Croma Vigilant continues to be cash generative with borrowing facilities
which remain unused along with positive cash resources at the year-end of
£1,242k.
Croma Security Systems (including Croma Biometrics)
Sales
In a competitive market, Systems sales have seen 2% reduction on 2018
down to £2.6M, from £2.7M and Biometric sales reduced to £0.1M from
£0.3M.
We continue to invest in our sales team and are now more actively
marketing our Systems business through our chain of security centres.
Customer retention
Customer retention remains strong, with our largest customer, a national
chain, delivering revenues of £861k up 26% on the prior year.
Engineers
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 £209k with no external borrowings.
13
STRATEGIC REPORT (continued)
FOR THE YEAR ENDED 30 JUNE 2019
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 8.5% in the
year to £3.4m including £200k from new business acquisitions and £632k
from servicing our major utility contract.
Our strategy has been to develop our existing geographic coverage by
expanding our branch network and to gain more profitable commercial
contract on the back of this. Our utility contract is an example of how this
can be successful, however our challenge will be to maintain this growth
into the new year.
We are pleased to report that our shops are performing well and now
contribute more enquiries to our Systems division from upgraded security
Centres.
The new EPOS systems are now fully implemented which better integrate
with stock control to ensure availability of product, timely invoicing and
cash collection. We have been able to quickly implement our systems into
our 3 new locksmiths and car key businesses resulting in minimal business
disruption and with no significant increase in our head office resource.
Croma Locksmiths has remained cash generative and at the year-end
cash balances are at £233k with no external borrowings.
Croma Locksmiths
Sales
Retail Performance
Cash
Roberto Fiorentino
Chief Executive
18 October 2019
14
CORPORATE GOVERNANCE
FOR THE YEAR ENDED 30 JUNE 2019
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
can 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 2019
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 ten 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.
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.
16
CORPORATE GOVERNANCE (continued)
FOR THE YEAR ENDED 30 JUNE 2019
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. The Remuneration Committee has 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. In addition,
during the year the Company engaged a third-party business to carry out an external evaluation of Board
performance. The results of this evaluation are set out below:
17
CORPORATE GOVERNANCE (continued)
FOR THE YEAR ENDED 30 JUNE 2019
The Board acknowledges the need to continually monitor and evaluate its own performance and aims to
seek continuous improvement in its effectiveness. The Chairman, in mutual discussion with the Directors,
routinely assesses the performance of the Board and its members to identify and address any problems or
shortcomings. In support of this, the Board asked independent external consultants to assist with the
conduction of a formal Board Effectiveness Review as a rigorous evaluation of its performance. During
the review, feedback was collected from all Directors regarding the performance of the Board.
The evaluation specifically sought thorough feedback on the Board’s composition and processes; and its
activities and behaviours. Following evaluation of the feedback, Conundrum Consulting Ltd presented
findings and recommendations to the Board, the Board discussed these observations and agreed actions
arising. Following the 2019 formal annual evaluation process, the Company considers that the process
for evaluation has been conducted in a professional and rigorous manner and that the Board continues to
provide the effective leadership that is required to drive CSSG forward to meet its ambitious targets.
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.
18
CORPORATE GOVERNANCE (continued)
FOR THE YEAR ENDED 30 JUNE 2019
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
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.
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
19
CORPORATE GOVERNANCE (continued)
FOR THE YEAR ENDED 30 JUNE 2019
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.
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.
20
CORPORATE GOVERNANCE (continued)
FOR THE YEAR ENDED 30 JUNE 2019
The Company has an established internal peer review function led by the group Finance Director,
reporting to the Chairman and Board, in order to systematically 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.
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.
During the year our Guarding division achieved ISO 22301 accreditation and is now working to achieve
accreditation under ISO 27001.
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, guidance 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 means the Board
will keep this under review as necessary.
21
CORPORATE GOVERNANCE (continued)
FOR THE YEAR ENDED 30 JUNE 2019
6. Ensure that between them the directors have the necessary up-to-date experience, skills and capabilities
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 recognises the importance of considering succession planning, and each division has a leader
and deputies, who are able, effectively, to step into the shoes of the leader. The Company is not associated
with any one member of the Board, and seeks 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 above and 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
22
CORPORATE GOVERNANCE (continued)
FOR THE YEAR ENDED 30 JUNE 2019
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 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 2019
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 37 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 Senior Independent Director and Chairman of the Audit and
Nominations Committees 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 2019
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 2019.
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); Locksmithing
Keys, Locks and Safes (Croma Locksmiths).
Result for the year
The profit for the year after taxation, was £1.17m. (2018:£1.62m)
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 2019 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
2019
575,000
3,902,175
12,500
203,565
50,000
170,639
2018
575,000
3,902,175
12,500
203,565
50,000
170,639
25
DIRECTORS' REPORT (Continued)
FOR THE YEAR ENDED 30 JUNE 2019
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 2019:
Canaccord Genuity Group Inc.
Francis Erard
Liontrust Investment Partners LLP
12.19%
5.03%
3.77%
Purchase of own shares
During the prior year, the Company purchased 2,027,027 from a retiring director of its own ordinary
shares at a cost of £760k. The shares had a nominal value of £101k being approximately 12% of the
then issued share capital.
Share options over 2,000 shares lapsed during the year and no new options were issued. There are no
options currently in issue over the company’s shares.
At 30 June 2019, 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 16 and 19.
Research and development
There was no significant Research and development expenditure, during the year (2018: £30,000).
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 2019
Employee involvement
The Group's policy is to consult and discuss with employees, through staff councils and at meetings,
matters likely to affect employees' interests. Information on matters of concern to employees is given
through information bulletins and reports which seek to achieve a common awareness on the part of all
employees of the financial and economic factors affecting the Group's performance.
Political and charitable donations
Charitable donations were £2,265 (2018: £4,800). 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 0.7p per share was declared on 25 February 2019 and paid on 8 April 2019.
The total cost was £0.104m. Subject to approval at the AGM, the Board recommends a final dividend
of 1.1p 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
18 October 2019
27
STATEMENT OF DIRECTORS’ RESPONSIBILITIES
FOR THE YEAR ENDED 30 JUNE 2019
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
18 October 2019
28
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF CROMA SECURITY
SOLUTIONS GROUP PLC
FOR THE YEAR ENDED 30 JUNE 2019
Opinion
We have audited the group financial statements of Croma Security Solutions Group plc (the ‘group’)
for the year ended 30 June 2019 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 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 2019 and of the
group’s 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 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.
Key audit matters
We identified the key audit matters described below as those which were 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 these matters, we have performed the procedures below which were designed to
address the matters 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 these individual matters.
29
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF CROMA SECURITY
SOLUTIONS GROUP PLC
FOR THE YEAR ENDED 30 JUNE 2019
Key audit matter
Description of risk
How the matter was addressed in the audit
Recoverability of
intangibles including
goodwill
The group has
material goodwill and
other intangible assets
relating to three cash
generating units. The
Group’s assessment of
carrying value requires
significant judgement,
regarding cash flows,
growth rates, discount
rates, and sensitivity
assumptions
Revenue recognition and
contract liabilities
The group has multiple
income streams which
can span different
accounting periods
which leads to an
increased risk of error
in the financial
statements. There has
also been the
introduction of IFRS 15
‘Revenue from
contracts with
customers’ which has
impacted the group
for the first time this
period.
We challenged the assumptions used in the
impairment model for goodwill and other
intangible assets described in notes 12 and 13.
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;
assessed budgets for the next financial
year against actual current year
trading
then
reviewed the appropriateness of the
assumptions concerning growth rates
and inputs to the discount rate against
latest market expectations, and;
considered sensitivity analysis of key
variables included within the value in
use calculations.
performance,
and
In performing our procedures, we used internal
valuation specialists to assess the suitability of
the model and discount rate applied.
As part of our procedures we:
-
-
-
-
are
being
Reviewed a sample of transactions
around the year end and agreed that
the goods and services have been
recognised in the correct period.
Reviewed a sample of transactions
throughout the year to ensure that
they
recognised
appropriately;
Agreed a sample of contract liabilities
to invoices raised in advance and
confirmed advanced invoicing terms
to supporting documentation.
Reviewed and agreed a sample of
contract
client
liabilities at year end in 2018 and 2019
ensuring that revenue recognition
remains appropriate under IFRS 15.
calculations
for
Our application of materiality
The materiality for the financial statements of the Group as a whole was set at £519,000. This has
been determined with reference to the benchmark of the Group’s revenue, which we consider to
30
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF CROMA SECURITY
SOLUTIONS GROUP PLC
FOR THE YEAR ENDED 30 JUNE 2019
be one of the principal considerations for members of the company 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 £313,000. This has
been determined with reference to the benchmark of the Parent’s total assets as the company
carries on no trade in its own right. Materiality represents 3% of total assets as presented on the
face of the Statement of Financial Position.
An overview of the scope of the audit
Of the Group’s eight reporting components, we subjected one to a full scope audit and the other
seven 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% of Group revenue, 100% of Group
profit before tax, and 100% 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 report thereon.
The directors are responsible for the other information. Our opinion on the 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 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 financial statements or a material misstatement of the other information. If, based on the
work we have performed, we conclude that there is a material misstatement of this other
information, we are required to report that fact.
We have nothing to report in this regard.
Opinion on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
•
•
the information given in the strategic report and the directors’ report for the financial
year for which the group financial statements are prepared is consistent with the group
financial statements; and
the strategic report and the directors’ report have been prepared in accordance with
applicable legal requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the group and its environment obtained in the
course of the audit, we have not identified material misstatements in the strategic report or the
directors’ report.
We have nothing to report in respect of the following matters where the Companies Act 2006
requires us to report to you if, in our opinion:
• certain disclosures of directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
31
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF CROMA SECURITY
SOLUTIONS GROUP PLC
FOR THE YEAR ENDED 30 JUNE 2019
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 control as the directors determine is necessary
to enable the preparation of 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 financial statements
Our objectives are to obtain reasonable assurance about whether the 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 financial statements.
A further description of our responsibilities for the audit of the 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 2019.
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 parent 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
18 October 2019
32
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2019
Continuing operations:
Revenue
Cost of sales
Gross profit
Administrative expenses
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
2019
2018
Notes
£000's
£000's
£000's
£000's
3
34,599
35,119
(28,109)
(27,970)
6,490
(5,041)
1,449
7,149
(5,136)
2,013
14
13
5
8
1,871
(232)
(190)
1,449
2,500
(161)
(326)
2,013
(2)
1,447
(281)
1,166
(38)
1,975
(359)
1,616
1,616
Total comprehensive income attributable to owners of the parent
1,166
Earnings per share
9
Basic and diluted earnings per share (pence)
Earnings from continuing operations (restated)
7.82
10.1
33
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
FOR THE YEAR ENDED 30 JUNE 2019
Notes
2019
£000's
2018
£000's
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
12
13
14
15
16
28
21
18
18
18
22
23
23
23
23
23
23
7,311
647
668
8,626
825
6,163
1,729
8,717
7,213
835
476
8,524
668
6,077
2,154
8,899
17,343
17,423
(158)
(23)
(181)
(5,126)
(46)
(5,172)
(5,353)
(197)
(12)
(209)
(6,071)
(66)
(6,137)
(6,346)
11,990
11,077
794
(399)
6,133
2,139
51
3,272
-
11,990
794
(399)
6,133
2,139
51
2,347
12
11,077
Total equity
These financial statements were approved and authorised for issue by the Board of Directors on 18 October
2019 and signed on their behalf by
S J F Morley- Director
Croma Security Solutions Group plc - Company Number: 03184978
34
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2019
Cash flows from operating activities
Profit before taxation
Depreciation amortisation and impairment
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
Purchase of treasury shares
Buy back and cancellation of shares
Sale of treasury shares
Payments to reduce Hire Purchase
Payments to reduce borrowings
Dividends paid
Interest 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 period
Notes
2019
£000's
2018
£000's
1,447
422
(973)
2
(436)
462
(245)
(356)
12
(589)
-
-
-
(42)
(1)
(253)
(2)
(298)
(425)
2,154
1,729
26
27
27
28
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
35
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2019
Attributable to owners of parent
At 1 July 2017
Shares redeemed
Treasury shares acquired
Treasury shares issued
Profit for the year
Dividends paid
At 1 July 2018
Profit for the year
Dividends paid
Transfer on lapse of options
At 30 June 2019
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
845
(51)
-
-
-
-
794
-
-
-
794
-
51
-
-
-
-
51
-
-
-
51
-
-
(406)
7
-
-
(399)
-
-
(399)
6,133
-
-
-
-
-
6,133
-
-
-
6,133
2,139
-
-
-
-
-
2,139
-
-
-
2,139
1,176
(354)
-
(2)
1,616
(89)
2,347
1,166
(253)
12
3,272
12
-
-
-
-
-
12
-
-
(12)
-
10,305
(354)
(406)
5
1,616
(89)
11,077
1,166
(253)
-
11,990
The following notes form part of the primary financial statements
36
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
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 2020.
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 three operating segments namely ‘Croma Vigilant’ which comprises the
business of Vigilant Security (Scotland) Limited; ‘Croma Security Systems’ which includes Croma Biometrics
and comprises the business of CSS Total Security Limited; and ‘Croma Locksmiths’, which comprises the
business of Croma Locksmiths & Security Solutions Limited and of Basingstoke Locksmiths Limited.
In prior years, the results of Croma Biometrics were reported as a business segment, however in the current year
the Directors do not consider the business to be a separate operating segment, due to its size.
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 transaction price 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.
37
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
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.
- Sale of goods is recognised at the point that the goods are delivered to a client on signature of a goods
received note or to a customer in one of our retail outlets which is the point that control of over the asset
is transferred.
Installation income is recognised over the period of the installation.
-
- Maintenance and service fees are recognised over a period from the start of the contract until the date
the service has been provided. This is typically a period of three months, leading to contract liabilities
which is held under ‘Accruals and contract liabilities’ in the statement of financial position.
- Monitoring income is recognised over the term of the contract, leading to contract liabilities which is
also held under ‘Accruals and contract liabilities’ in the statement of financial position.
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
–
–
–
–
38
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
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.
39
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
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).
40
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
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:
•
•
the same taxable Group company; or
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.
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. 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 22.
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.
41
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
1. Accounting policies (continued)
Financial assets
Financial assets are trade receivables and other receivables.
Trade receivables are held in order to collect the contractual cash flows and are initially measured at the
transaction price as defined in IFRS 15, as the contracts of the Group do not contain significant financing
components. Impairment losses are recognised based on lifetime expected credit losses in profit or loss.
Other receivables are held in order to collect the contractual cash flows and accordingly are measured at initial
recognition at fair value, which ordinarily equates to cost and are subsequently measured at cost less impairment
due to their short term nature. A provision for impairment is established based on 12-month expected credit
losses unless there has been a significant increase in credit risk when lifetime expected credit losses are
recognised. The amount of any provision is recognised in profit or loss.
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.
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.
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. Excluding credit card and HP borrowings 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.
42
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
1. Accounting policies (continued)
New and amended standards adopted by the group and company
The Group and the Company have adopted “IFRS 9 “Financial instruments” and IFRS 15 “Revenue from
contracts with customers” for the first time this period. These new standards required additional disclosures
which have been provided in notes 3 and 16. The adoption of these new standards has had an immaterial impact
on the consolidated 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 2019 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 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 of £1.359m on an undiscounted basis, as shown in
Note 25 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.
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 £7,311k. Details relating to the allocation of goodwill to cash generating units are given in note 12.
The directors do not consider there to be any key areas of judgement.
43
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
3. Segmental reporting
44
The Directors consider the following four business segments best represent the business segments of the Group.CromaVigilant(Guarding)CromaSecuritySystems(Electronic)Croma Locksmiths(Locks)CentralCostsTotal2019 Business Segments£000's£000's£000's£000's£000'sSegment revenues28,4772,7023,420-34,599Gross profit3,8731,1131,511(7)6,490Administrative expenses(2,392)(629)(827)(771)(4,619)Amortisation-(61)(129)-(190)Depreciation(71)(80)(81)-(232)Profit/(loss) on disposal(4)-4--Segment operating profit/(loss)1,406343478(778)1,449Segment assets8,2594,6005,113(629)17,343Segment (liabilities)(4,168)(802)(1,126)743(5,353)Segment net assets 4,0913,7983,98711411,990Additions to non-current assets112-424-5362018 Business Segments (restated)£000's£000's£000's£000's£000'sSegment revenues28,9932,9733,153-35,119Gross profit4,7441,1751,230-7,149Administrative expenses(2,098)(713)(803)(1,035)(4,649)Amortisation-(197)(129)-(326)Depreciation(52)(49)(60)-(161)Profit/(loss) on disposal(2)(1)3--Segment operating profit/(loss)2,592215241(1,035)2,013Segment assets7,9934,7893,88275917,423Segment (liabilities)(4,832)(674)(829)(11)(6,346)Segment net assets 3,1614,1153,05374811,077Additions to non-current assets1086565-238 NOTES FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
3. Segmental reporting (continued)
An analysis of revenue by type is shown below:
Revenues
Security Personnel Services
Sale of Goods & Installation Services
Monitoring Maintenance and Service fees
Biometric Installation and Maintenances fees
Other income
2019
£000's
28,300
5,513
499
101
186
34,599
2018
£000's
28,793
5,266
552
308
200
35,119
The following is an estimate of future revenues arising from unsatisfied performance obligations based on
contract renewal dates and projected monthly billing:
To be satisfied in the next financial year
To be satisfied in subsequent financial years
2019
£000's
19,887
17,614
37,501
Comparative data has not been disclosed in line with the practical expedients within IFRS 15.
Split of revenue:
At a point in time
Recognised over time
3,420
31,179
34,599
3,153
31,966
35,119
45
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
4. Expenses
Research and development
Amount of inventory expensed as cost of sales
Operating lease expense
Depreciation
Amortisation
Auditors’ remuneration:
2019
£000's
-
2,284
391
232
190
2018
£000's
30
2,453
309
161
326
Audit of parent company and consolidated financial information payable to
Nexia Smith & Williamson
Fees paid to the auditor in respect of tax compliance services
38
5
37
-
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
2019
£000's
2018
£000's
-
2
2
2019
No.
30
925
955
30
8
38
2018
No.
33
945
978
£000's
£000's
24,965
445
2,351
27,761
25,082
228
2,275
27,585
46
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
7. Directors' and key management personnel remuneration
2019
S J F Morley
R M Fiorentino
P Williamson
R A Juett
A N Hewson
C McMicking
Salary
and
bonus
£000's
Estimated
value of
benefits
£000's
Fees
£000's
Pension
£000's
Total
£000's
171
236
140
69
25
25
666
4
3
25
1
1
-
34
-
-
-
-
-
-
-
5
-
1
13
-
-
19
180
239
166
83
26
25
719
There were no share-based payments during the year
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
-
-
-
267
299
245
90
26
25
12
42
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.
Key management personnel compensation
Key management personnel compensation comprises short-term employee benefits which total £789k (2018:
£1,032k) and long-term employee benefits which total £19k (2018: £42k)
47
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
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 21)
Current year
Adjustments for prior periods
Tax on profit on ordinary activities
Factors which may affect future tax charges
2019
£000's
2018
£000's
313
7
320
(28)
(11)
281
431
(32)
399
(47)
7
359
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 higher than the standard rate of corporation tax in the UK of 19% (2018 -
19.75%). The differences are explained below:
Factors affecting the tax charge for the year
Profit before taxation
2019
£000's
2018
£000's
1,447
1,975
Profit multiplied by the standard rate of taxation of 19% (2018: 19%)
275
375
Effects of:
Expenses not deductible for tax purposes
Non-taxable income
Adjustment to tax charge for previous periods
Total tax charge for the year
10
-
(4)
281
8
1
(25)
359
48
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
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 comparative amounts below have been restated to adjust for the purchase and re-issue of treasury
shares during the prior year.
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)
2019
£000's
2018
£000's
(restated)
1,166
1,616
14,902
16,003
Weighted average number of shares used in diluted EPS (000’s)
14,902
16,005
Basic earnings per share
Diluted earnings per share:
Pence
Pence
7.82
7.82
10.1
10.1
The difference between the number of shares used in the basic EPS calculation and the diluted EPS calculation
relates only to share options. There are no share options extant at 30 June 2019.
10. Dividends
A final dividend of 1.0p per share for the year ended 30 June 2018 was paid on 30 November 2018 and an interim
dividend for the year ended 30 June 2019 of 0.7p per share was paid on 8 April 2019. The total costs of dividends
during the year was £253k.
Subject to approval at the AGM, the directors recommend a final dividend of 1.1p per share for the year.
49
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
11. Business Combinations (Acquisitions)
During the year the company purchased three businesses in its Locksmiths division comprising 100% of
the share capital of Basingstoke Locksmiths Limited, the trade and assets of Ascot Locks Limited and
the trade and assets of the Bournemouth Car Key Company.
The fair value of net assets acquired is set out below:
Purchase consideration (satisfied entirely by cash)
Less: the fair value of assets acquired
Tangible fixed assets
Other intangible fixed assets
Stock
Trade and other debtors
Cash
Add: the fair value of liabilities
Trade and other creditors
Goodwill
£000's
252
(46)
(3)
(90)
(37)
(7)
29
98
The residual difference between the total consideration paid and the net value of the recognised assets
acquired has been capitalised as goodwill. The goodwill recognised on the acquisition is mainly
attributable to its workforce skills, property locations and business reputation.
During the period after acquisition, the new businesses contributed £207k to Group revenue and £25k to
Group profits. If all the business acquisitions had been completed on the first day of the financial year, it
is estimated Group revenues would have increased by £554k and that Group profits would have
increased by £82k.
50
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
12. Goodwill
Cost
At 1 July 2018
Additions
At 30 June 2019
Impairment
At 1 July 2018 and 30 June 2019
Net book value
At 1 July 2018
At 30 June 2019
Impairment testing
£000's
7,213
98
7,311
-
7,213
7,311
During the year, goodwill was reviewed for impairment in accordance with IAS 36 "Impairment of
Assets". No impairment charge occurred in the current year (2018: £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 by each CGU is as follows:
Croma Security Systems
Croma Locksmiths
Croma Vigilant
2019
£000's
3,339
2,576
1,396
7,311
2018
£000's
3,339
2,478
1,396
7,213
51
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
12. 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
2024, 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% (2018:
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, and in 2019 turnover has more than tripled from its level in 2012. For
the present period to 30 June 2020 turnover is forecast to increase by 15% including a mixture of new contract
wins and organic growth of our existing customer portfolio. Direct costs are forecast to increase proportionately
and overheads by approximately 14% including scope for an expansion of office space.
For the period from 2020 to 2024 the same assumptions have been made as for the prior year, namely:
•
•
•
•
Revenue to grow by 3% per annum (2018: 3%)
Direct wages to rise in proportion to revenue
Other direct costs to increase at 2.5% per annum (2018: 2.5%)
Indirect costs to increase at 2% per annum (2018: 2%)
For the year ended 30 June 2025 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
Partly due to a weak performance from our Biometric division, for the year ended 30 June 2019 sales fell by
approximately 9% and gross margin by approximately 5%. However, at the start of the current year sales have
improved on a like for like basis, and so for the coming year we forecast a 15% growth in sales, margin and
overheads.
For the period from 2020 to 2024 the following assumptions have been made:
•
•
•
Revenue growth of 3.14% (2018: 3.1%)
Direct cost growth of 2.6% (2018: 2.6%)
Indirect costs growth of 2.06% (2018: 2.06%)
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 £4,174k
52
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
Croma Locksmiths
In the current year the business achieved 8% growth in turnover and nearly doubled operating profits driven by
new business acquisitions and a significant contribution from our work upgrading locks for our utility customer
in a contract which is due to end early 2020. In 2020, the board believe growth can be achieved, however for
the purpose of the impairment review we have assumed turnover unchanged and operating profit to fall by 21%.
For the period from 2020 to 2024 the following assumptions have been made:
•
•
•
Revenue growth of 3.14% (2018: 3%)
Direct cost growth of 2.6% (2018: 2.5%)
Indirect costs growth of 1.97% (2018: 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 £3,746k
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 2019.
53
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
13. Other intangible assets
Fair value
At 1 July 2017
Additions
At 30 June 2018
Additions
At 30 June 2019
Amortisation
At 1 July 2017
Charge for the year
At 30 June 2018
Charge for the year
At 30 June 2019
Carrying Value at 1 July 2018
Carrying Value at 30 June 2019
86
-
86
-
86
58
28
86
-
86
-
-
R&D
£000's
Customer
relationships
£000's
Brands
£000's
Software
licences
£000's
Brand
Royalties
£000's
1,727
-
1,727
-
295
-
295
-
222
-
222
2
31
-
31
-
Total
£000's
2,361
-
2,361
2
1,727
295
224
31
2,363
842
161
1,003
161
1,164
724
563
153
31
184
29
213
111
82
116
106
222
-
222
-
2
31
-
31
-
31
-
-
1,200
326
1,526
190
1,716
835
647
R&D was developed internally. The other intangible assets were acquired with the business of CSS Total
Security Limited, CSS Locksmiths Limited, Croma Locksmiths & Security Solutions Limited and Basingstoke
Locksmiths Limited.
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% (2018: 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 £563k have a remaining life of between 2.5 to 6.5 years.
54
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
13. 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 3 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 £82k, have a remaining useful life of 3 years.
55
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
14. Property, plant and equipment
Cost
At 1 July 2017
Additions
Disposals
At 30 June 2018
Additions
Disposals
At 30 June 2019
Depreciation
At 1 July 2017
Charge for the year
On disposals
At 30 June 2018
Charge for the year
On disposals
At 30 June 2019
Carrying value at 30 June 2018
Carrying value at 30 June 2019
Freehold
& leasehold
property
£000's
Plant,
computer
and office
equipment
£000's
Motor
vehicles
Total
£000's
£000's
131
12
-
143
170
-
313
44
22
-
66
18
-
84
77
229
454
129
-
583
208
-
791
313
72
-
385
114
-
499
198
292
329
123
(138)
314
58
(19)
353
137
67
(91)
113
100
(7)
206
201
147
914
264
(138)
1,040
436
(19)
1,457
494
161
(91)
564
232
(7)
789
476
668
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
2019
£000's
175
(131)
44
2018
£000's
152
(84)
68
The Group leases various vehicles and machinery under non-cancellable hire purchase agreements with lease
terms up to four years.
56
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
15. Inventories
Raw materials and consumables
Work in progress
16. Trade and other receivables
Trade receivables
Allowance for bad debts
Net trade receivables
Other receivables
Prepayments
2019
£000's
2018
£000's
761
64
825
2019
£000's
5,702
(7)
5,695
10
458
650
18
668
2018
£000's
5,707
(35)
5,672
32
373
Total trade and other receivables
6,163
6,077
Owing to the short-term nature of the trade receivables, their fair value is the same as the book value. A provision
for impairment of trade receivables is established using an expected loss model. Expected loss is calculated
from a provision matrix based on the expected lifetime default rates and estimates of loss on default.
Provision for impairment of trade receivables
As at 1 July
Charge for the period
Uncollected amounts written off, net of recoveries
As at 30 June
2019
£000’s
2018
£000’s
35
10
(38)
7
34
3
(2)
35
In the view of the Board the level of credit risk is 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. The Directors review debt collection at each Board meeting and close attention is paid to collection
of debt and credit control. Although there has been some deterioration in cash collection this is largely due to
operational difficulties with our more significant customers and is not an indication of an increase in credit risk.
Age profile
Debts past due but not paid
Under 60 days
60-90 days
Over 90 days
57
2019
£000's
2018
£000's
407
342
37
786
215
140
123
478
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
17. Categories of financial asset
Loans and receivables
Trade and other receivables
Cash at bank and in hand
18. Trade and other payables
Trade payables
Other payables
Other taxes and social security
Corporation tax liability
Accruals and contract liabilities
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)
Credit card liabilities
Finance lease liabilities (due in 1 to 5 years)
Other payables due in more than 1 year
Finance leases are secured against the assets to which they relate.
58
2019
£000's
2018
£000's
5,705
1,729
7,434
2019
£000's
603
103
706
1,253
319
2,848
5,704
2,154
7,858
2018
£000's
568
93
661
1,548
431
3,431
5,126
6,071
2019
£000's
2018
£000's
16
30
46
23
-
23
35
31
66
12
-
12
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
19. Interest rate and liquidity risk
2019
Fixed rate
Trade and other payables
Finance lease obligations
Accruals and contract liabilities
Floating rate
Credit card liabilities
Total
2018
Weighted
average
effective
interest
rate
%
Less than
one
month or
on
demand
£000's
11.40%
2.80%
603
-
-
-
1-12
months
£000's
1-3
years
£000's
103
16
2,848
30
-
23
-
-
Total
£000's
706
39
2,848
30
603
2,997
23
3,623
Weighted
average
effective
interest
rate
%
Less than
one
month or
on
demand
£000's
1-12
months
£000's
1-3
years
£000's
Total
£000's
661
47
3,431
31
Fixed rate
Trade and other payables
Finance lease obligations
Accruals and contract liabilities
Floating rate
Credit card liabilities
11.40%
2.80%
568
-
-
-
93
35
3,431
31
0
12
-
-
Total
568
3,590
12
4,170
20. Contingent liabilities
There are no contingent liabilities either at the year-end or up to the date of signing the financial statements.
59
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
21. Deferred tax
The movement on the deferred tax account is shown below
At 1 July
Charged to the statement of comprehensive income
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 2019 deferred tax has been provided at a rate of 17%
2019
£000's
2018
£000's
197
(39)
158
55
109
(6)
158
238
(40)
197
58
151
(12)
197
The Group has tax losses of approximately £1.8M (2018: £1.8M) to carry forward which could not be utilised
against trading profits. The potential deferred tax asset arising on these tax losses of £306k (2018: £306k) has
not been recognised as it is doubtful that it will be utilised in the foreseeable future.
22. Share capital
Authorised, allotted, called up and fully paid:
Ordinary shares of 5 pence each
2019
£000's
2018
£000's
794
794
2019
Number
000's
2019
£000's
2018
Number
000's
2018
£000's
Issued and fully paid
Ordinary shares of 5 pence at the start of the year
15,899
794
16,912
Cancellation of own shares
-
-
(1,013)
794
(51)
Ordinary shares of 5 pence at the end of the year
15,899
794
15,899
794
60
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
22. 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 considering 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:
2019
Number
2018
Number
Share options in issue at the start of the year
2,000
19,000
Lapsed in the year
Exercised in the year
(2,000)
-
(17,000)
Share options in issue at the end of the year
-
2,000
The charge to the statement of comprehensive income in the year was £nil (2018: £nil)
61
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
23. 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.
Ordinary Shares
Amount subscribed for share capital at nominal value.
Treasury Shares Reserve
Arose on the purchase of own shares
Company Share Option Scheme This represents the change in equity relating to the issue of company
share options.
24. Related party transactions
Identity of related parties
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 £116,500 (2018: £98,500).
Sale of goods
Goods worth £3k (2018:£nil) were sold to R M Fiorentino and his family.
62
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
24. Related party transactions (continued)
Director’s loans
During the prior year £29k was repaid to M Whettingsteel, a former director, in full settlement of an outstanding
loan balance.
Purchase of own shares
During the prior 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 £78k (2018: £40k) were paid to close family members of key management
personnel.
25. 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
26. Notes supporting the cash flow statement
Net changes in working capital
(Increase)/decrease in inventories
(Increase) in trade and other receivables
(Decrease)/Increase in trade and other payables
63
2019
£000's
2018
£000's
282
612
307
1,201
74
84
-
158
213
629
685
1,527
21
9
-
30
1,359
1,557
2019
£000's
2018
£000's
(67)
(49)
(857)
(973)
42
(2,273)
2,494
263
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
27. Reconciliation of liabilities arising from financing activities
Other
payables
£000's
Hire
purchase
£000's
50
(50)
-
-
-
-
99
(52)
47
34
(42)
39
Invoice
discounting
and credit
card
liabilities
£000's
135
(104)
31
-
(1)
30
Total
£000's
284
(206)
78
34
(43)
69
2019
£000's
2018
£000's
1,729
2,154
At 1 July 2017
Cash flows
At 1 July 2018
Assets acquired under hire purchase
Cash flows
At 30 June 2019
28. Cash and cash equivalents
Cash at bank and in hand
29. Subsidiary audit exemption
The wholly-owned subsidiaries of Croma Security Solutions Group Plc: Vigilant Security (Scotland) Limited,
CSS Total Security Limited, CSS Locksmiths Limited, Croma Locksmiths and Security Solutions Limited and
Basingstoke Locksmiths Limited are exempt from the requirements of Companies Act 2006 relating to the audit
of individual accounts by virtue of section 479A.
64
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF CROMA SECURITY
SOLUTIONS GROUP PLC
FOR THE YEAR ENDED 30 JUNE 2019
Opinion
We have audited the financial statements of Croma Security Solutions plc (the ‘parent company’)
for the year ended 30 June 2019 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 International Financial
Reporting Standards (IFRSs) as adopted by the European Union.
In our opinion, the financial statements:
• give a true and fair view of the state of the parent company’s affairs as at 30 June 2019;
• 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 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 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 financial
statements is not appropriate; or
• the directors have not disclosed in the 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 financial statements are authorised for issue.
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 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 financial statements, our responsibility is to read the other
information and, in doing so, consider whether the other information is materially inconsistent
with the 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
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.
65
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF CROMA SECURITY
SOLUTIONS GROUP PLC
FOR THE YEAR ENDED 30 JUNE 2019
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 financial statements are prepared is consistent with the 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, or returns adequate for our audit have not
been received from branches not visited by us; or
• the 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 financial statements and for being satisfied that they give
a true and fair view, and for such internal control as the directors determine is necessary to enable
the preparation of financial statements that are free from material misstatement, whether due to
fraud or error.
In preparing the 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.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the 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 financial statements.
A further description of our responsibilities for the audit of the 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 2019. 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.
66
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF CROMA SECURITY
SOLUTIONS GROUP PLC
FOR THE YEAR ENDED 30 JUNE 2019
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
18 October 2019
67
STATEMENT OF FINANCIAL POSITION
FOR THE YEAR ENDED 30 JUNE 2019
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
2019
£000's
2018
£000's
E
F
8,935
8,935
1,484
47
1,531
8,935
8,935
655
22
677
G
(631)
(435)
900
242
9,835
9,177
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
1,117
794
51
(399)
6,133
2,139
459
Total equity
9,835
9,177
The company profit for year totalled £911k (2018:£502k)
These financial statements were approved and authorised for issue by the Board of Directors on 18
October 2019 and signed on their behalf by
S J F Morley
Director
Croma Security Solutions Group plc - Company Number: 03184978
68
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2019
Cash flows from operating activities
Profit before taxation
Net changes in working capital
Net cash generated from operations
Cash flows from financing activities
Sale of treasury shares
Purchase of treasury shares
Buy back and cancellation of shares
Dividends paid
Net cash used in financing activities
Net increase/(decrease) in cash
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of the period
Notes
J
2019
£000's
911
(633)
278
-
-
-
(253)
(253)
25
22
47
2018
£000's
502
326
828
5
(406)
(354)
(89)
(844)
(16)
38
22
69
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2019
Share
Capital
£000s
Capital
Redemption
Reserve
£000s
Treasury
Shares
£000s
Share
Premium
£000s
Merger
Reserve
£000s
Retained
Earnings
£000s
Total
Equity
£000s
At 1 July 2017
Shares redeemed
Treasury shares
acquired
Treasury shares issued
Profit for the year
Dividends paid
At 30 June 2018
Profit for the year
Dividends paid
At 30 June 2019
845
(51)
-
-
-
-
794
-
-
794
-
51
-
-
-
-
51
-
-
51
6,133
-
-
-
-
-
6,133
-
-
6,133
2,139
-
-
-
-
-
2,139
-
-
2,139
402
(354)
-
(2)
502
(89)
459
911
(253)
1,117
9,519
(354)
(406)
5
502
(89)
9,177
911
(253)
9,835
-
-
(406)
7
-
-
(399)
-
-
(399)
70
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
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
Basis of accounting
The separate financial statements of the Company 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.
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 £389k (2018: £414k). Dividends of £1.3m were
received from its subsidiary undertakings (2018: £916k).
The Company's activities are funded by long term equity capital and by profits and cash generated from
the activity of a holding company.
The financial statements do not reflect the adjustments that would be necessary were the performance
of the Company to deteriorate and the Group’s funding from invoice discounting to become unavailable.
However, the Directors have considered expected cash requirements of the Company until 31 October
2020 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.
71
NOTES FORMING PART OF THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 30 JUNE 2019
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.
72
NOTES FORMING PART OF THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 30 JUNE 2019
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.
The directors do not consider there to be any key areas of estimation uncertainty. Areas of key judgement are
considered below.
Impairment of investments
The directors have considered if there are any areas of impairment and have concluded based on the
performance of the subsidiaries there are no indicators of impairment. At the year end the carrying value of
investments totalled £8,935k (2018:£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
£911k (2018: £502k).
D. Staff costs
The average monthly number of persons (including Directors)
employed by the company during the period was:
Management and administration
Staff cost (for the above persons):
Wages and salaries
Pension
Social security costs
2019
No.
2018
No.
6
6
£000's
£000's
540
15
93
648
866
42
62
970
73
NOTES FORMING PART OF THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 30 JUNE 2019
E. Fixed asset investments
Cost
At 1 July 2018 and 30 June 2019
Impairment
At 1 July 2018 and 30 June 2019
Net book value at 30 June 2018 and 30 June 2019
Shares in
subsidiary
undertakings
£000's
9,059
(124)
8,935
The principal fixed asset investments are as follows:
Company
% Ordinary shareholding
Nature of business
Vigilant Security (Scotland) Limited
CSS Total Security Limited
Croma Locksmiths & Security
Solutions Limited
100% directly
100% directly
100% directly
Basingstoke Locksmiths Limited
CSS Locksmiths Limited
Centre Security Limited
Access Key and Lock Limited
100% indirectly
55% directly 45% indirectly
100% indirectly
100% indirectly
Asset protection and
guarding
CCTV and security systems
Locksmithing, Keys and
Safes
Locksmithing, Keys and
Safes
Dormant
Dormant
Dormant
The registered office of CSS Total Security Limited, CSS Locksmiths Limited, Croma Locksmiths &
Security Solutions Limited, Basingstoke Locksmiths Limited and Centre Security & Access key and Lock
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
74
2019
£000's
1,456
28
1,484
2019
£000's
521
23
51
36
631
2018
£000's
626
29
655
2018
£000's
292
28
93
22
435
2019
£000's
2018
£000's
794
794
NOTES FORMING PART OF THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 30 JUNE 2019
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
2019
Number
000's
2019
£000's
2018
Number
000's
2018
£000's
Ordinary shares of 5 pence at 30 June 2017
and 30 June 2018
15,899
794
16,912
Purchase of own shares
-
-
(1,013)
794
(51)
Ordinary shares of 5 pence at 30 June 2018
and 30 June 2019
15,899
794
15,899
794
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 22 of the
consolidated accounts.
75
NOTES FORMING PART OF THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 30 JUNE 2019
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 31% of the voting shares.
Purchase of own shares
During the prior 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:
2019
£000’s
2018
£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
Services provided by a service company for which C N McMicking is a
director and which has been accounted for as Directors’ remuneration.
-
15
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
(Increase)/decrease in trade and other receivables
Increase in trade and other payables
2019
£000's
2018
£000's
(829)
196
(633)
208
118
326
76