RE: RNS : another earnings-enhancing acquisition22 Dec 2022 09:30
Cheers shandypants2, good points re the receivables. If you're correct then CSSG could have more cash than the market cap if/when Vigilant is sold!
WH ireland's latest update is out, and once again includes no forecasts, but is at least a decent summary of where CSSG are at following the Safecell acquisition:
"Croma Security Solutions (CSSG) – Corporate – Complementary acquisition in security and locksmiths’s reflects significant m&a opportunities
Market Cap: £8.9m Share Price 55.5p
This morning’s RNS from CSSG provides further colour to the significant m&a /
consolidation opportunities in security systems and locksmith’s following the recent AGM update which outlined the potential divestment of CSSG’s specialist guarding services. A price of c.£0.75m for Safecell Security Group equates to a sub-4x historic PBT multiple based on the eleven months to November 2022, an undemanding multiple in our opinion.
Moreover, based in Manchester, the acquisition is highly complementary from a
geographical point of view, since the company already has activities in Bury, North of Manchester as well as the Safeguard business in Warrington which the company acquired last year.
We view the acquisition, although small, as very supportive of CSSG’s business going forward: (1) We note that experienced management at Safecell is staying with the business; (2) bringing the two Manchester operations together with this one is likely to create operational synergies, (3) cross-sells of the spread of services within the group are likely. Safecell is primarily a security systems business, with margins to match – typically these are 20% or more at an operating level, as reflected in CSSG’s own historic margins.
As a synergistic opportunity, Safecell is likely to enhance the overall margin while, as stated in the announcement, providing earnings enhancement.
WHI view: With significant change at group level waiting potentially in the wings (the disposal of Vigilant removes 83% of sales but less than half of operating profits), the company as a whole is becoming a higher margin business - respectively 14% and 19% at Locksmith’s and Systems in reported FY22A EBIT margins in the prior year, as opposed to the low single digit margins for Vigilant which are typical of a manned guarding business.
As the company has highlighted before, the consolidation opportunities continue to be strong as well as the prospect of building a national security centre. In relation to Vigilant, it is important to remember that disposal discussions are said to be at an early stage and that there is no inevitability to the proposed divestment either to members of the management team or anyone else. However, assuming that the divestment does occur, we read this morning’s announcement as helpful in further highlighting the close match of such opportunities as Safecell."
Sign In
Follow the stocks
