TIDMNWT
RNS Number : 3515B
Newmark Security PLC
30 January 2020
Dissemination of a Regulatory Announcement that contains inside
information according to REGULATION (EU) No 596/2014 (MAR).
Newmark Security plc
("Newmark", the "Company" or the "Group")
Interim Results
for the six months ended 31 October 2019
Newmark Security plc (AIM: NWT), a leading provider of
electronic and physical security systems, is pleased to announce
its unaudited interim results for the six months ended 31 October
2019.
HIGHLIGHTS
Financials
-- Revenue from continuing operations increased 3% to GBP10.1m (HY 2018: GBP9.8m)
-- Operating profit from continuing operations of GBP0.7m (HY 2018: GBP0.5m)
-- Profit before tax of GBP0.6m (HY 2018: GBP0.5m)
-- Earnings per share from continuing operations of 0.23 pence (HY 2018: 0.09 pence)
-- Cash outflow from operating activities was GBP0.1m (HY 2018: 0.7m).
Electronic Division
-- Revenue increased by 41% to GBP7.11m (HY 2018: GBP5.06m)
-- Human capital management revenue increased by 60% to GBP4.8m (HY 2018: GBP3.0m)
-- Access control revenue increased by 11% to GBP2.26m (HY 2018: GBP2.03m)
Asset Protection Division
-- Revenue decreased by 36% to GBP3.03m (HY 2018: GBP4.76m)
Commenting on the results, Maurice Dwek, Chairman of Newmark,
said:
"The Board is pleased with the growth achieved in the first half
of the year and the continued Group profitability. The Electronic
Division has achieved improved revenue growth and, whilst its
performance is expected to be slightly first half weighted, it is
anticipated that the profitability of this division will continue
in the second half. The Group's smaller Asset Protection Division's
revenue is also expected to be weighted in the first half of the
year, as in previous years, due to seasonality factors and
therefore having a corresponding impact on full year operating
profit for that division. However, once the initiatives of the
reorganisation and strategic review are fully embedded, Safetell's
performance is expected to improve in the following year. Overall,
the Board expects the Group to show a marginal reduction in revenue
for the full year when compared to last year but with an improved
level of operating profit."
Copies of the interim results for the six months ended 31
October 2019 will shortly be sent to shareholders and will be
available on the Company's website www.newmarksecurity.com.
For further information:
Newmark Security plc
Marie-Claire Dwek, Chief Executive Tel: +44 (0) 20 7355 0070
Officer www.newmarksecurity.com
Graham Feltham, Group Finance Director
Allenby Capital Limited Tel: +44 (0) 20 3328 5656
(Nominated Adviser and Broker)
James Reeve / Liz Kirchner
CHAIRMAN'S STATEMENT
I am pleased to announce the Group's unaudited interim results
for the six months ended 31 October 2019 ("H1 2019"), a period of
continued growth and profitability.
There was an increase in Group revenue of 3.3% to GBP10,147,000
(H1 2018: GBP9,822,000), which included an increase in revenue
within the Electronic Division of 40.7% to GBP7,114,000 (H1 2018:
GBP5,056,000). This continued and extended the strong performance
from the previous financial year. Within this figure, revenue from
Human Capital Management increased by 60.2% to GBP4,851,000 (H1
2018: GBP3,028,000), whilst Access Control revenues increased by
11.6% to GBP2,263,000 (H1 2018: GBP2,028,000). Revenue in the Asset
Protection Division decreased by 36.4% to GBP3,033,000 (H1 2018:
GBP4,766,000). The overall increase in revenue, combined with the
cost cutting measures in the previous year, resulted in an
operating profit of GBP686,000 (H1 2018: GBP486,000). Earnings per
share from continuing operations were 0.23 pence (H1 2018:
0.09p).
Electronic Division - Grosvenor Technology
Revenue GBP7,114,000 (H1 2018: GBP5,056,000)
Grosvenor Technology has two main activities: Human Capital
Management and Access Control. Following significant growth in FY
2018, and following the trend of the last two years, Grosvenor
Technology continued to display good performance, with the period
delivering the highest revenues generated to date in a single
half-year period. This was largely due to the continued ramp-up of
major US customers in the Human Capital Management division.
Human Capital Management ("HCM")
Revenue increased by 60.2% to GBP4,851,000 (2018:
GBP3,028,000)
HCM sales in North America delivered the most significant
growth, with revenues at GBP3,093,000 (H1 2018: GBP1,468,000), an
increase of 111%. This growth was in line with management's
expectations as major US clients continued the roll out of
Grosvenor Technology's 'next generation' hardware.
Following another successful round of trade shows, the number of
enquiries from Tier 1 target customers increased during the period
and negotiations began with two new major US based HCM software
providers. Both clients have expressed interest in the Android
timeclock, the GT-10.
During the period, the US business was rebranded as 'GT Clocks'
and a number of marketing activities, including the launch of a new
website, were conducted. GT Clocks is felt to be a more relevant
name for the US market. The messaging focuses on the provision of
timeclocks alongside the relevant services to both manage and
maintain the devices remotely, but also - increasingly, the secure
management of clients' data.
The Company has continued to increase its resources in marketing
and business development in North America to further take advantage
of the opportunity that exists for additional revenues from both
timeclocks and services in that region.
Grosvenor's UK HCM business serves the rest of the world
("RoW"), outside North America. RoW HCM sales also showed growth,
increasing by 13% to GBP1,758,000 (H1 2018: GBP1,560,000). This
increase was as a result of a general uplift across a number of
customers largely based across Europe, as opposed to significant
growth from any single client.
Continued development of Cloud platforms
In the HCM markets generally, growth continues to be facilitated
through the technology 'drivers' of high-speed internet
availability and the subsequent mass shift to Cloud based
computing. This shift means that the traditionally challenging to
serve and highly fragmented Small and Medium-Sized Business
("SME/SMB") market is now within the reach of HCM providers, who
were previously more focused on a lower volume, yet higher value,
of Enterprise level end clients.
As a consequence of this shift, the provision of the Company's
own HCM services increased across all clients - with the number of
'edge' devices connected remotely to our cloud provisioned
software, rising to over 3,500 units by the close of the period.
Grosvenor Technology's overarching long-term strategy remains the
increase of recurring revenues through the provision of a higher
proportion and number of software sales under a subscription model.
This is generally known as Software as a Service (SaaS).
Internal software development has continued to focus on the
provision of these added services on an 'as a service' basis,
increasingly cloud-based, aiding software vendors to reap
additional value from their hardware post-deployment. During the
period, we increased the resource dedicated to developing our HCM
software platforms with a Cloud and API first approach.
This shift from 'On Premise' to 'Cloud SaaS' also affords the
opportunity of an alternative or additional business model where
Software, Services and Terminals are bundled as a 'Clock as a
Service' (ClaaS) offering, generating further long-term recurring
revenue potential.
Access Control
Revenue increased by 12% to GBP2,263,000 (2018:
GBP2,028,000)
Overall, Access Control revenues increased 12%, with revenues of
GBP2,263,000 compared to GBP2,028,000 in the corresponding period
of the previous year.
As previously reported, the Janus product is no longer installed
in 'new' systems as the platform utilises an historic and now
unsupported version of the MS Windows(TM) operating system. That
said, with our Janus to Sateon upgrade programme now closed, legacy
sites continue to expand and add our products. This, combined with
a number of price increases, has led to Janus revenues in the
period increasing to GBP845,000, a rise of 48% compared to
GBP570,000 in the corresponding period last year.
We completed the launch of our new Security Management System
(SMS) - Janus C4, which was delivered in conjunction with our
software development partner based in Slovakia. The market is
beginning to move away from stand-alone Access Control solutions
towards integrated Access Control, Intruder, CCTV and Fire and
Building Management within a single platform, such as with SMS. The
solution has been well received by both existing and prospective
customers, with strong pipeline growth and early sales of GBP83,000
in the period. As with all new Access Control sales, there is an
inevitable lag between pipeline generation and revenue
recognition.
In addition to acquiring new partners, we are in the early
stages of migrating existing Sateon customers to the platform. To
help facilitate this, we are investing further resources in our
training function, which will be completed towards the end of the
financial year.
With focus now on Janus C4, Sateon revenues decreased to
GBP1,335,000 from GBP1,458,000 in the corresponding period, a fall
of 8.4%. Development of Sateon software is now limited to critical
bug fixes and maintenance. Sateon product family sales continue to
be bolstered by sales of the OEM variant of the Sateon Advance,
which allows third parties to utilise the hardware in a
non-proprietary way on their own access control platforms. We added
a second OEM customer during the period and continue to have
exploratory conversations with a number of global third-party
access control providers in the US and EMEA.
Asset Protection Division - Safetell
Revenue GBP3,033,000 (2018: GBP4,766,000)
Safetell revenue was 36% lower than the corresponding period
last year. This was as a result of the expected reduction in the
volume of work relating to the Post Office Network Transformation
and the continued shrinkage in demand from high street banks and
buildings societies, along with reduced project work in the Service
Division. Compared with the same period last year this has resulted
in reduced revenue in Products by 38% and Service by 34%.
As a result of declining sales in this division and the lack of
repeat programmes of refurbishment from our long- term and
traditional customers, a business reorganisation plan was
implemented in the last quarter of 2019 financial year, resulting
in staff reductions and other cost saving measures.
During the first half of the current financial year, we have
seen the results of the reorganisation being reflected in the
performance of the division delivering improved gross margins and
adding to the profitability of the Group.
Once the business reorganisation was completed, a series of
strategic reviews were undertaken to refocus efforts in sales and
marketing for both the Products and Service divisions. With
increases in crime rates and a continued threat of terrorism,
management believe that there are continued significant
opportunities for Safetell. Following the reviews, management have
identified new markets, products and customers that complement
Safetell's existing product range.
Management have also identified an opportunity to align the
Product and Service resources. Wherever possible, the central teams
have been combined in order to increase efficiency and
effectiveness whilst keeping any Product or Service expertise as
required.
Anton Pieterse, Managing Director of Safetell, resigned on 30
November 2019, after serving 11 years with a focus on the Products
side of the business. I would like to thank Anton for his long
period of service. Paul Lovell takes on the role of Managing
Director. Paul joined Safetell in 1991 working in various
capacities and developing the Service Division from its inception
until today. Paul is a trained accountant, qualifying with KPMG,
and has built up a wealth of experience throughout his career that
will benefit and support Safetell through this period of
change.
Balance sheet and cash flow
During the period, we have recognised the rights of use assets
and related liabilities in accordance with IFRS 16 Leases. This has
had a significant impact on the opening balance sheet with GBP1.2m
being recognised as assets and liabilities with a GBP25,000
differential being adjusted in reserves.
Within working capital, we have consistent inventory levels
compared to the year-end position, increased trade debtors in line
with the trading levels and reduced current liabilities, due to
timing of supplier payments and some impact of reduced trading
levels within Safetell. We continue to utilise our financing
facility to support our working capital requirements.
During the period, we have utilised GBP0.1m of deferred tax
assets and recognised deferred tax assets of GBP0.5m both in
relation to tax losses that we envisage utilising over the short to
mid-term.
Directors
Brian Beecraft retired on 31 October after 21 years with the
Group. The Board thanks him for his tremendous efforts over that
period and wish him a happy retirement. Graham Feltham has been
appointed as Group Finance Director following Brian's retirement.
The Board is pleased to welcome Graham to the Group.
Outlook
The Board is pleased with the growth achieved in the first half
of the year and the continued Group profitability. The Electronic
Division has achieved improved revenue growth and, whilst its
performance is expected to be slightly first half weighted, it is
anticipated that the profitability of this division will continue
in the second half. The Group's smaller Asset Protection Division's
revenue is also expected to be weighted in the first half of the
year, as in previous years, due to seasonality factors and
therefore having a corresponding impact on full year operating
profit for that division. However, once the initiatives of the
reorganisation and strategic review are fully embedded, Safetell's
performance is expected to improve in the following year. Overall,
the Board expects the Group to show a marginal reduction in revenue
for the full year when compared to last year but with an improved
level of operating profit.
M DWEK
Chairman
30 January 2020
CONSOLIDATED INCOME STATEMENT
For the six months ended 31 October 2019
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
31 October 31 October 30 April
2019 2018 2019
Notes GBP'000 GBP'000 GBP'000
Revenue 10,147 9,822 19,583
Cost of sales (5,926) (5,891) (11,878)
Gross Profit 4,221 3,931 7,705
Administrative expenses (3,535) (3,445) (7,419)
Profit from operations before exceptional
items 686 486 638
Exceptional impairment provision
of development costs - - -
Exceptional redundancy costs - - (352)
------------------------------------------- ------ ----------- ----------- ---------
Profit from operations 686 486 286
Finance costs (38) (25) (72)
Profit before tax 648 461 214
Tax credit/(charge) 2 434 (29) (25)
Profit/(loss) for the period/year 1,082 432 189
----------- ----------- ---------
Attributable to:
- Equity holders of the parent 1,082 432 189
----------- ----------- ---------
Earnings per share
- Basic (pence) 3 0.23 0.09 0.04
- Diluted (pence) 3 0.23 0.09 0.04
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the six months ended 31 October 2019
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
31 October 31 October 30 April
2019 2018 2019
GBP'000 GBP'000 GBP'000
Profit for the period/year 1,082 432 189
Foreign exchange on the retranslation
of overseas operation (13) 1 1
Total comprehensive income for the
period/year 1,069 433 190
----------- ----------- ---------
Attributable to:
- Equity holders of the parent 1,069 433 190
----------- ----------- ---------
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
At 31 October 2019
Unaudited Unaudited Audited
31 October 31 October 30 April
2019 2018 2019
GBP'000 GBP'000 GBP'000
ASSETS
Non-current assets
Property, plant and equipment 1,471 486 491
Intangible assets 4,775 4,737 4,753
Deferred tax 449 - -
Total non-current assets 6,695 5,223 5,244
----------- ----------- ---------
Current assets
Inventory 2,527 2,199 2,599
Trade and other receivables 3,870 4,356 3,262
Cash and cash equivalents 406 658 1,041
Total current assets 6,803 7,213 6,902
----------- ----------- ---------
Total assets 13,498 12,436 12,146
----------- ----------- ---------
LIABILITIES
Current liabilities
Trade and other payables 3,222 3,667 3,987
Other short-term borrowings 814 1,192 796
Total current liabilities 4,036 4,859 4,783
----------- ----------- ---------
Non-current liabilities
Long term borrowings 1,154 115 149
Provisions 100 100 100
Deferred tax - 5 -
Total non-current liabilities 1,254 220 249
----------- ----------- ---------
Total liabilities 5,290 5,079 5,032
----------- ----------- ---------
TOTAL NET ASSETS 8,208 7,357 7,114
----------- ----------- ---------
Capital and reserves attributable
to equity holders of the company
Share capital 4,687 4,687 4,687
Share premium reserve 553 553 553
Merger reserve 801 801 801
Foreign exchange difference reserve (145) (132) (132)
Retained earnings 2,272 1,408 1,165
8,168 7,317 7,074
Minority interest 40 40 40
TOTAL EQUITY 8,208 7,357 7,114
----------- ----------- ---------
CONSOLIDATED CASH FLOW STATEMENT
For the six months ended 31 October 2019
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
31 October 31 October 30 April
2019 2018 2019
Notes GBP'000 GBP'000 GBP'000
Cash flow from operating activities
Net profit after tax from ordinary activities 1,082 432 189
Adjustments for: Depreciation, amortisation
and impairment 332 357 619
Interest expense 13 25 72
Gain on sale of property, plant and equipment (47) (20) (32)
Income tax (credit)/expense 2 (434) 29 25
Operating profit before changes in working
capital and provisions 946 823 873
(Increase)/decrease in trade and other receivables (601) (1,506) (414)
(Increase)/decrease in inventories (113) (586) (991)
(Decrease)/increase in trade and other payables (356) 572 937
Cash generated from operations (124) (697) 405
Income taxes paid - (4) (45)
Cash flows from operating activities (124) (701) 360
Cash flow from investing activities
Acquisition of property, plant and equipment (203) (117) (196)
Sale of property, plant and equipment 28 20 53
Research and development expenditure (167) (173) (333)
(342) (270) (476)
----------- ----------- ---------
Cash flow from financing activities
Acquisition and repayment of leased assets (205) (31) (87)
Proceeds from invoice discounting 72 616 246
Interest paid (38) (25) (72)
(171) 560 87
----------- ----------- ---------
Decrease in cash and cash equivalents (637) (411) (29)
Cash and cash equivalents at beginning of
period/year 1,041 1,069 1,069
Exchange differences on cash and cash equivalents 2 - 1
Cash and cash equivalents at end of period/year 406 658 1,041
----------- ----------- ---------
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Foreign
Share Share Merger exchange Retained Non-controlling Total
capital premium reserve reserve earnings interest equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 May 2019 4,687 553 801 (132) 1,165 40 7,114
Impact of IFRS
16 Lease
transition - - - - 25 - 25
Profit for the
period - - - - 1,082 - 1,082
Other
comprehensive
income - - - (13) - - (13)
Total
comprehensive
income for the
period - - - (13) 1,107 - 1,094
--------- --------- --------- ---------- ---------- ---------------- --------
As at 31 October
2019 4,687 553 801 (145) 2,272 40 8,208
--------- --------- --------- ---------- ---------- ---------------- --------
At 1 May 2018 4,687 553 801 (133) 976 40 6,924
Profit for the
period - - - - 432 - 432
Other
comprehensive
income - - - 1 - - 1
Total
comprehensive
income for the
period - - - 1 432 - 433
--------- --------- --------- ---------- ---------- ---------------- --------
As at 31 October
2018 4,687 553 801 (132) 1,408 40 7,357
--------- --------- --------- ---------- ---------- ---------------- --------
NOTES TO THE ACCOUNTS
1. BASIS OF ACCOUNTS
The financial information for the six months ended 31 October
2019 and 31 October 2018 does not constitute the Group's statutory
financial statements for those periods within the meaning of
Section 434(3) of the Companies Act 2006 and has neither been
audited or reviewed pursuant to guidance issued by the Auditing
Practices Board. The annual financial statements of Newmark
Security PLC are prepared in accordance with IFRSs as adopted by
the European Union. The principal accounting policies used in
preparing the interim results are those that the Group expects to
apply in its financial statements for the year ended 30 April 2020
and are unchanged from those disclosed in the Group's Annual Report
for the year ended 30 April 2019.
During the period IFRS 16 Leases was adopted and, as previously
disclosed, GBP1.2m of right of use assets and liabilities were
recognised on 1 May 2019 with GBP25k being adjusted through
retained earnings. In accordance with the standard the lease
payments are set off against the lease liability with both
depreciation and interest relating to the right of use assets being
recognised through the income statement.
The comparative financial information for the year ended 30
April 2019 included within this report does not constitute the full
statutory accounts for that period. The statutory Annual Report and
Financial Statements for 2019 have been filed with the Registrar of
Companies. The Independent Auditors' Report on that Annual Report
and Financial Statement for 2019 was unqualified, did not include
references to any matters to which the auditors drew attention by
way of emphasis without qualifying their report and did not contain
a statement under section 498(2)-498(3) of the Companies Act
2006.
After making enquiries, the directors have a reasonable
expectation that the Company and the Group have adequate resources
to continue in operational existence for the foreseeable future.
Accordingly, they continue to adopt the going concern basis in
preparing the half-yearly condensed consolidated financial
statements.
2. TAXATION
The tax credit includes a utilisation of deferred tax asset
relating to losses of GBP0.1m and a recognition of deferred tax
asset related to previously unrecognised losses of GBP0.5m. The
recognition of the deferred tax assets relating to tax losses is
dependent on management's best estimates of future profitability
and the probability of utilising these losses against the
profits.
3. EARNINGS PER SHARE
The earnings per share has been calculated based on the weighted
average number of shares in issue during the period, which was
468,732,316 shares (2018: 468,732,316).
4. DIVIDS
No interim dividend is proposed (2018: Nil).
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END
IR BRGDBDXDDGGC
(END) Dow Jones Newswires
January 30, 2020 02:00 ET (07:00 GMT)
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