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Good to see only around £15k's worth of shares bought this morning having a nice effect on the share price.
Encouraging news this morning that CSSG are being proactive and presenting via Investor Meet on November 13th - not something they've done before as far as I'm aware. Perhaps they're now confident they have a good story to tell:
Https://uk.advfn.com/stock-market/london/croma-security-solutions-CSSG/share-news/Croma-Security-Solutions-Group-PLC-Notice-of-Investor-Presentation/92492815
Good to see a mere £800 moving the share price up. Hopefully indicates not much stock around.
In June we were told we would get cash on completion of a min of £1,073k. In the accounts today it states we received only £670k plus £380k shares were essentially cancelled and placed in Treasury (to give to the BOD in bonuses in the future?) .
So that comes to £1,050k - £23k short.
Not massive but as the terms of the sell were so attractive to Morley and Co you would think they could at least pay the full amount.
By letting them essentially pay only 10% upfront this has eliminated the potential of a special dividend, which would have helped the SP.
Agree, good results and a really positive forward looking statement (and they are already 4 months into the new year, so will have a good feel on H1 numbers).
Only slightly disappointment for me (and also clearly the market, based on SP action since the Vigilant sell) is the low amount paid upfront and the need to wait 3 years before full payment is received.
WH Ireland aren't yet publishing full forecasts following the Vigilant disposal, but anticipate doing so, and note that a rating "on an EV/EBITDA basis below 5x does not seem overly demanding".
They summarise:
"Croma Security Solutions (CSSG) – Corporate – FY results reflect continuing strong momentum
Market Cap: £5.8m
FY results from CSSG this morning reflect very healthy growth from the continuing business following the disposal of Vigilant. The company is a leading provider of specialist security products, notably locks and related devices; and beyond this, of electronic security products and monitoring services, with 14 security centres in the UK.
Continuing revenues for the year to June ’23, at £8.03m 38% ahead YoY, included significant underlying growth of 21%, while the overall underlying (ex-Vigilant) gross margin has also moved ahead YoY at 46.7% (was: 43.9%).
Overall EBITDA at £0.954k was 78% ahead YoY, and continuing PBT / EPS also well ahead – £0.4m continuing PBT plays £0.1m in the prior year.
Net cash is very healthy at £2.1m, notwithstanding substantial investments – and further substantial payments are to be expected in respect of Vigilant, with a £0.5m cash payment in March ’24 to be followed by a further nine payments of c.£0.4-0.5m each, and the redemption of £1.3m of Vigilant shares anticipated for July 2024.
Overall, the results suggest that the group is making excellent progress in its new shape, while encouragingly, current trading is said to be good."
Also:
"The company is a beneficiary of underlying drivers, notably concerns over rising crime, increasing corporate risk aversion and regulation, and CSSG’s ability to meet changing demands from its customer base."
"Moreover, CSSG’s core market offers fertile opportunities for consolidation, and with a meaningful funding stream deriving from the disposal, we view the company as extremely well-placed to pursue further accretive acquisitions in line
with its stated strategy."
A rather positive tone to this morning's prelims.
CSSG achieved £950k continuing EBITDA against the £7m m/cap (and £427k PBT), with a £2.14m cash pile plus a further £5.43m receivable from the sale of Vigilant in the form of Loan Notes and redeemables.
CSSG generated almost £1.3m cash from continuing operations in the year.
Plus:
- there's also a 2.2p final dividend
- more acquisitions are in the pipeline
- ILOQ sales are already at £0.32m with further orders secured
Most importantly, the outlook statement is nicely positive:
"Outlook
The year has started well with a number of new commercial orders and the continued success of ILOQ. We believe that we will be able to drive sales growth organically through new sales and marketing initiatives, expanding our network of sales people, and focusing on the development of our online presence. We will also expand the network via acquisition - the pipeline is promising. The Croma balance sheet is strong, we are cash generative, and we are well-placed to take advantage of the opportunities ahead."
Last year we had a trading update in Sept and final results in October for YE 30/6, so we are overdue an update.
Back it June when the disposal was announced we were told
"the Group has continued to trade well and we have had a strong second half to the year which ends in June 2023 and we expect to report overall trading comfortably ahead of last year".
Hopefully the one off disposal costs (legal fees etc) will not be excessive.
Well the deferred payment for the disposal hasn't gone down well, despite the excellent price - a £7m business elling 1/3 of its EBITDA foe £7m looks excellent business IMHO.
So what will get this moving?
- Good H1 numbers (with limited one off disposal/consultancy costs) and a healthy cash balance will be a good start
- use this money to make one or two decent acquisitions to complement the core business
- receive the 1st payment 9 months after disposal (so end of March 2024)
- get the £1.3m paid in July 2024
Almost out lol
Excellent - CSSG have a new major shareholder.
Russell Long has bought 872,054 shares and now owns 6.4% of CSSG:
Https://uk.advfn.com/stock-market/london/croma-security-solutions-CSSG/share-news/Croma-Security-Solutions-Group-PLC-Holdings-in-Com/91746671
Mythril LLP, of which he's a member, holds 400,000 of these shares. They appear to have almost £10m of net assets, so reasonably substantial:
Https://suite.endole.co.uk/insight/company/OC412091-mythril-llp
Another 110,000 shares just gone through at 45p - I assume another buyback.
A whopping buyback of 400,000 shares at 45p should be good news for the EPS going forward assuming the "strong" trading previously reported is continuing.
I note that the shares bought back might be used to part fund future acquisitions, so hopefully more corporate action is on the cards:
Https://uk.advfn.com/stock-market/london/croma-security-solutions-CSSG/share-news/Croma-Security-Solutions-Group-PLC-Transaction-in/91732584
If the disposal has completed how much upfront money has Croma received? Surely this should have been announced at the same time?
"will now receive" lol
[immense] execution risk involved
Good news - the Vigilant sale has completed smoothly.
We now know that this £7.6m m/cap company, which already had £0.65m net cash, will now receive over time a further £7.6m with between £2.1m and £3.4m receivable immediately.
Plus we already know that trading has been "strong" this H2 and the period to 30th June will report good figures ahead of last year.
Mucho undervalued imho.
These deals were my bread and butter
Step in rights without voting rights looks odd...you'd have to look at the Shareholders Agreement and Mem of Arts to know what is going on (and I doubt we'll see those) and therefore to make a proper judgement
So vigilant sold for an EBITDA multiple of 9.46.
Croma made EBITDA of just under £0.5m in H1 so if we assume £1m for full year that's a value of £9.46m.
Even if we think that is a bit top heavy so reduced it by c30% that's still almost £7m.
Add in money coming in for Vigilant etc surely this should be lowly valued at £10m min or c70p per share.
Not sure why you think it's odd. Company valued at c£7.5m is selling a legacy division of which the EBITDA is c50% of companies total EBITDA for c£7m.
This will allow Croma to focus on the smaller, but more profitable and growing parts of the business.
The only disappointment is the length of time it will take to get full payment.
However, if there are issues with the loan note these are covered as per the clauses below:
· if the Buyer defaults on the payment of any principal or interest payable under the Loan Notes default interest will accrue at a rate of 4 per cent. above the base interest rate of 4.5 percent. Such interest would accrue from day to day and be compounded quarterly;
· in the event that the Buyer defaults on any one payment due to the Company under the Loan Notes the Company shall have step-in rights to enable the Company to assume control of Vigilant at board and shareholder level.
Why is the loan note not also secured on the shares in MAW?
Swapping full control for none
getting not much cash upfront
how is loan note secured?
For the record here's WH Ireland's summary of the deal - the sale "looks to us like a good outcome for CSSG" on a historic EBITDA of 9.46:
"Croma Security Solutions (CSSG) – Corporate – Successful disposal of Vigilant,
subject to shareholder approval
Market Cap: £7.1m Share Price 47.5p
CSSG’s announcement this morning brings to a successful conclusion, subject to
shareholder approval, the disposal process for Vigilant, its manned guarding
operation, announced at the company’s AGM at the start of December last year (2022). The overall strategy behind the disposal recognises the disparity between
the ongoing CSSG businesses (Security Systems and Locks) on the one hand and
Vigilant on the other, and the relative lack of cross-selling opportunities between
the sides of the business prior to the disposal. In addition, in terms of the
fundamentals, notably, firstly, the ongoing businesses are higher margin operations than Vigilant, which operates at the upper end of the mid-single digit operating margin level typical of manned guarding businesses. Secondly, we note the consolidation opportunities which CSSG perceives in the wider locksmith market in particular, lending further logic to the deal from the company’s perspective.
The company also updates on FY23E trading in the eleven months to June ‘23, which is said to be ahead both consecutively – H2-23E as against the half year to
December ’22 – and on a full year basis, and across the business. Positive news,
this suggests resilience / growth in the underlying markets for the ongoing group,
with further market penetration a consistent theme.
WHI view:
In terms of the disposal price, CSSG has disclosed revenues, EBITDA and operating profit for Vigilant of £29.3m, £0.8m and £0.7m respectively for year to June ‘22. Given the effective overall sale price of £7.57m, based on a consideration of £6.5m plus inter-company balances of £1.07m, the implied historical ratio of 9.46x EBITDA looks to us like a good outcome for CSSG. Subject to details of the final deal structure, CSSG within the overall £7.57m will receive on completion either £3.4m or £2.1m in cash, with further cash payments starting at March 31st 2024 and over the following nine quarters. Following the recent Safecell announcement, the company has already announced its intention to continue to take advantage of the consolidation opportunities in its markets as it grows its national footprint, with further acquisition opportunities identified. With no forecasts in the market at this point, we await developments post-the General Meeting announced for June 30th."
The headline sale price is great, especially as there are no payments linked to future performance, which i expected.
However, the complex payment structure is both confusing and not guaranteed. The Loan note is being done at a very attractive price for the buyer (interest at the current base rate) and repayment is over a 3 year period.
The upfront payment is just over £2.1m or £3.4m if a redeemable share is not issued. No idea what this redeemable share is.
I honestly thought the SP might go up 50% based on the headline price being received. The fact that the SP rise is only 10% appears to show that the market doesn't quite get it.
However, with current trading going well, with a healthy cash position and now cash to be paid to us every 3 months surely this is massively undervalued.
Today's RNS confirms the sale of Vigilant for an excellent £7.57m of total cash receipts including intercompany repayments - compared to the £7.1m m/cap.
Pretty good for a business which made £0.7m operating profit in the last full year and only £0.13m PBT in the last six months.
Plus CSSG retain the growing security centre business which made almost £0.5m EBITDA in the last 6 months.
There's a lot of deferred consideration in one form or another, but this strikes me as a rather good deal.
And today's trading update reads very well:
"Separately, the Group has continued to trade well and we have had a strong second half to the year which ends in June 2023 and we expect to report overall trading comfortably ahead of last year."
"Following the Disposal the Continuing Group's business will comprise Croma Locks and Croma Systems where margins are high (relative to Vigilant) and cash generation remains strong and where the Board believes there are good opportunities for profitable growth."
https://uk.advfn.com/stock-market/london/croma-security-solutions-CSSG/share-news/Croma-Security-Solutions-Group-PLC-Proposed-Dispos/91250081
Yes you were quite right - price looks good- what will Mr Market make of it though? Its not all cash and mo returns offered to us long term suffering shareholders. We will see but move makes total sense.