CMG Croma Grp

Interim Results Embargoed: 0700hrs 1 March 2005 Croma Group Plc Interim Results for the six months to 31 December 2004 Highlights: * Continued improvement in sales in the period * Turnover for the half year already approximately 42% higher than that of the last full financial year * Sales of approx. �1m - an increase of over 1,600% on the corresponding period last year * New products in development have already secured orders from 3 UK police forces * Investment made in sales and marketing teams * New significant contracts, either won or pending, expected to impact on full year performance including �500,000 order from the MOD John French, Chairman and Chief Executive, commented, "We have made some significant investment during this period in boosting Croma's sales and marketing force. This investment should position us well for a very positive outcome for the full year. In the first two months of the second half, performance is again improving and a number of potentially lucrative orders are expected to materialise in time to impact on the June year end accounts. I am encouraged by the progress throughout the Group, in each subsidiary, and am actively seeking to acquire more businesses in our field to boost the performance further still." Contacts: John French, Chairman & Chief Executive Croma Group Plc, Tel. 07836 722 482 Chris Roberts / Ben Simons Hansard Communications, Tel. 020 7245 1100 Chairman's Statement I am pleased to report the financial results of the Group for the six months to 31 December 2004. The improving sales performance during the final quarter of the year ending June 2004 has continued during the first six months of the current year. The turnover for the six-month period to 31 December 2004 was � 993,594 compared with �61,136 for the same period last year. An increase of approximately 1,625 %. As a result of the investment in additional resources the loss before tax and amortisation of goodwill in the six months to 31 December 2004 is �295,320 compared to �279,353 for the same period last year. In addition, the holding company costs in the period include a full six months costs of running as an AIM listed company. Trading in the first six months of this financial year is already 42% higher than it was during the last full financial year. The improved sales performance is primarily a result of the acquisitions of R&D Design Services Limited and of Shawley Products, the latter now operating as a division of Croma Defence Systems Limited. Both acquisitions have settled in well and are making a valuable contribution to the ongoing performance of the Group. Croma Defence Systems has continued to complete the design of a number of new products of its own and has expanded its list of factored products. This is enabling us to present a broad-based range of products, systems and solutions to various aspects of the overt, covert surveillance and defence related market. Three UK Police forces have already placed orders for a number of new products for trial purposes. Other new products in the course of introduction include a short-range covert monitoring system for use by surveillance operatives in the built environment, able to monitor up to eight personnel at a time. Another new product is a remote sensor, designed for a variety of field surveillance applications. A number of other new products are expected to be announced by Croma Defence Systems in the coming weeks. Shawley products are looking to capitalise on its experience in wireless CCTV. Shaw-Tel is the name of a new system being introduced by Shawley, which allows the transmission of digital video images, combined with digital video recordings and which is an intelligent video reception concept for CCTV surveillance. R&D Design Services continues to benefit from repeat business from existing customers whilst at the same time expanding its international distributor network, thereby strengthening relations with key customers. Agents have been added in Asia and South Africa to service key markets in these regions. The success being achieved by R&D is such that a number of significant appointments have been made during the last few months in terms of marketing and technical management teams to support the increased level of business and indeed the increase in activity resulting from additional new enquiries for R&D's products. This has obviously resulted in the short term in an increase in overhead, but that is more than justified by the extensive order book and activities. As such it is our intention to relocate R&D Design Services to new premises less than three miles from our current location to facilitate the increase in activity. It is hoped that the move will be carried out efficiently with little or no effect on our ability to meet our customers needs and can be completed by the end of April. In the first six months we have added additional software and mechanical design capability with the employment of new engineers at R&D Design Services. The benefits of this investment will materialise in the second half of the current financial year. Following the acquisition of Shawley Products in March 2004, we have now identified cost savings within Croma Defence Systems Limited which will be implemented in the third quarter of this financial year, with full benefits in quarter four of this financial , and the new financial year. These changes include a planned relocation of the development and assembly operations of Croma Defence Systems products from Hereford to the Risca, Newport, the plant of Shawley products. The benefits of this will be seen going forward, and will include lower labour costs and a reduction in other operating costs that relate to premises and establishment. A small unit at Hereford will still be retained as Group Headquarters. Outlook Prospects going forward are encouraging and justify all the changes that are now being introduced with the distinct change in emphasis from product development to sales and marketing as is beginning to be reflected. The second half should see a continuation of the improvement in trading. We hope to see the benefits of a number of outstanding potential orders impacting in the coming months as well as the benefits from our new products being sold. Croma is breaking into new customers and new markets on a regular basis with its innovative products. Of course, the nature of our industry is that some major contracts have a significant lead time from the point of receiving an order to actual delivery, when it can be taken into sales revenue. We have recently secured a number of such contracts which will benefit the ongoing performance partly in the current year and partly in the new financial year. In respect of new business, R&D recently entered into a contract with a major UK defence electronics firm for the supply of 50 video monitors to the MoD. The total contract value is over �500,000 and is scheduled to be completed during 2005 with most, if not all of the work impacting, on the second half of the current financial year. A number of other long-term contracts have been concluded which will impact on following years. Having said that, products from Croma Defence Systems do not all fall in this category and with some of the new products having shorter lead times we expect to see improvement in the sales performance on a short term basis. The ongoing policy of the Group is to continue to seek compatible acquisitions to consolidate the sector. As such we are actively exploring a number of such opportunities at this moment in time. John French Chairman 1 March 2005 CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE SIX MONTHS ENDED 31 DECEMBER 2004 Notes 6 Months ended 6 Months ended Year ended 31 December 31 December 30 June 2004 2003 2004 Unaudited Unaudited Audited � � � Turnover 993,594 61,136 695,320 Cost of Sales (505,081) (38,134) (338,270) __________ __________ __________ Gross Profit 488,513 23,002 357,050 Administrative Expenses (883,933) (284,554) (855,974) __________ __________ __________ Operating loss 3 (395,420) (261,552) (498,924) Interest receivable 300 92 7,192 Interest payable (1,231) (17,893) (5,917) __________ _________ _________ Loss on ordinary activities (396,351) (279,353) (497,649) before taxation Taxation 2 - - 40,090 _________ _________ _________ Loss after taxation and for (396,351) (279,353) (457,559) period ========== ========== ========== Loss per share 4 (0.43)p (1.30)p (1.00)p ========== ========== ========== Fully diluted loss per share 4 (0.43)p (1.30)p (1.00)p ========== ========== ========== CONSOLIDATED BALANCE SHEET FOR THE SIX MONTHS ENDED 31 DECEMBER 2004 6 Months ended 6 Months ended Year ended 31 December 31 December 30 June 2004 2003 2004 Unaudited Unaudited Audited � � � Fixed assets Intangible assets 2,230,740 - 2,331,771 Tangible assets 102,447 51,423 106,632 _________ __________ _________ 2,333,187 51,423 2,438,403 _________ __________ _________ Current assets Stock 556,473 126,722 462,964 Debtors 573,297 237,199 403,081 Cash - 822,268 207,839 __________ _________ _________ 1,129,770 1,186,189 1,073,884 Creditors: Amounts falling due within (789,559) (83,024) (442,538) one year ________ _________ ________ Net current assets 340,211 1,103,165 631,346 ________ _________ _________ Total assets less current liabilities 2,673,398 1,154,588 3,069,749 Creditors: Amounts falling due after (2,185) (15,000) (2,185) one year ________ ________ ________ 2,671,213 1,139,588 3,067,564 ========== ========== ========== Share capital and reserve Called up share capital 4,890,341 2,872,160 4,890,341 Share premium account 1,108,616 1,057,959 1,108,616 Profit and loss account (3,327,744) (2,790,531) (2,931,393) ________ ________ ________ Equity shareholders' funds 2,671,213 1,139,588 3,067,564 ========== ========== ========== This interim financial information was approved by the Board of Directors on 28 February 2005 DJ Bretel Director CONSOLIDATED CASH FLOW STATEMENT FOR THE SIX MONTHS ENDED 31 DECEMBER 2004 Notes 6 Months ended 6 Months ended Year ended 31 December 31 December 30 June 2004 2003 2004 Unaudited Unaudited Audited � � � Net cash outflow from 5 (412,311) (396,413) (761,590) operating activities __________ __________ __________ Return on investments and servicing of financing Interest received 300 92 7,192 Interest paid (1,231) (17,893) (5,917) __________ __________ __________ (931) (17,801) 1,275 __________ __________ __________ Taxation recovered - - 27,640 Capital expenditure and financial investment Purchase of intangible - - (1,000) fixed assets Purchase of tangible fixed (8,803) (7,348) (23,434) assets Proceeds from sale of - - 3,148 tangible fixed assets __________ __________ __________ (8,803) (7,348) (21,286) Acquisitions and disposals __________ __________ __________ Purchase of subsidiary - - (2,500,100) undertaking Net cash acquired with - - 21,529 subsidiary __________ __________ __________ - - (2,478,571) __________ __________ __________ Cash outflow before use (422,045) (421,562) (3,232,532) of liquid resources and financing __________ __________ __________ Financing Issue of equity share - 1,743,213 4,221,467 capital Costs of issue of equity - (236,224) (502,089) share capital Repayment of other loans - (194,358) (209,358) Repayment of the capital (1,630) - (815) element of hire purchase __________ __________ __________ (1,630) 1,312,631 3,509,205 (Decrease)/increase in cash __________ __________ __________ (423,675) 891,069 276,673 ========== ========== ========== NOTES TO THE INTERIM FINANCIAL INFORMATION FOR THE SIX MONTHS ENDED 31 DECEMBER 2004 1.Financial Information The financial information above does note constitute statutory accounts within the meaning of Section 240 of the Companies Act 1985. The interim financial information has not been audited but has been reviewed by the Company's auditors. 2.Taxation No liability to taxation arises due to the loss incurred. 3.Operating loss 6 Months ended 6 Months ended Year ended 31 December 31 December 30 June 2004 2003 2004 Unaudited Unaudited Audited � � � This is stated after charging: Depreciation of tangible 12,988 9,741 23,201 fixed assets Amortisation of intangible 101,031 - 34,410 fixed assets ========== ========== ========== 4.Loss per share The loss per share is based on the loss for the period and the weighted average number of ordinary shares in issue and ranking for dividend. 6 Months ended 6 Months ended Year ended 31 December 31 December 30 June 2004 2003 2004 Unaudited Unaudited Audited � � � Loss for the period (396,351) (279,353) (457,559) ========== ========== ========== Weighted average number of 91,961,744 21,426,363 45,323,440 shares Fully diluted loss per share: ========== ========== ========== Loss for the period (396,351) (279,353) (457,559) ========== ========== ========== Weighted average number of 92,569,143 21,426,363 45,323,440 shares ========== ========== ========== 5.Reconciliation of operating loss to net cash outflow from operating activities 6 Months ended 6 Months ended Year ended 31 December 31 December 30 June 2004 2003 2004 Unaudited Unaudited Audited � � � Operating loss (395,420) (261,552) (498,924) Depreciation of tangible 12,988 9,741 23,201 fixed assets Amortisation of intangible 101,031 - 34,410 fixed assets (Increase) in stock (93,509) (18,723) (63,819) (Increase)/decrease in (170,216) 22,012 (226,751) debtors Increase in creditors 132,815 (147,891) (29,707) __________ __________ __________ Net cash outflow from (412,311) (396,413) (761,590) operating activities ========== ========== ========== END

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