TIDMNWT
RNS Number : 6717M
Newmark Security PLC
25 January 2021
This announcement contains inside information for the purposes
of Regulation 11 of the Market Abuse (amendment) (EU Exit)
Regulations 2019/310.
Newmark Security plc
("Newmark", the "Company" or the "Group")
Interim Results
for the six months ended 31 October 2020
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
2020 ("HY 2020").
HIGHLIGHTS
Financials
-- Revenue decreased by 23% to GBP7.9m (HY 2019: GBP10.1m)
-- Operating loss of GBP0.2m (HY 2019: profit of GBP0.7m)
-- Loss before tax of GBP0.3m (HY 2019: profit of GBP0.6m)
-- Loss per share of 0.05 pence (HY 2019: earnings of 0.23 pence)
-- Cash inflow from operating activities was GBP0.4m (HY 2019: outflow of GBP0.1m)
People and Data Management division
-- Revenue decreased by 22% to GBP5.56m (HY 2019: GBP7.11m)
-- Human capital management revenue decreased by 15% to GBP4.1m (HY 2019: GBP4.9m)
-- Access control revenue decreased by 37% to GBP1.4m (HY 2019: GBP2.26m)
Physical Security Solutions division
-- Revenue decreased by 24% to GBP2.30m (HY 2019: GBP3.03m)
Commenting on the results, Maurice Dwek, Chairman of Newmark,
said:
"Whilst inevitably impacted by the global pandemic and
associated restrictions in the UK and internationally, the Group
has performed better than we originally anticipated, which has
enabled investment activities to continue with only slight delays
experienced. We have entered the second half of the financial year
with far more optimism than at the start of the year which is also
helped by the UK securing a Brexit deal. For the full year, the
Board expects the Group to show a reduction in revenue compared to
last year although this reduction is expected to be materially less
than what we experienced in the first half of the year. On behalf
of the Board, I would like to extend my thanks for all the hard
work and resilience shown from the team throughout this period
."
Copies of the interim results for the six months ended 31
October 2020 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 (Corporate
Finance)
Amrit Nahal (Sales & Corporate broking)
CHAIRMAN'S STATEMENT
I am pleased to announce the Group's unaudited interim results
for the six months ended 31 October 2020 ("H1 2020"). Despite
commencing the period under lockdown conditions, the Group has
responded proactively to the global pandemic and has seen trading
activity continue to recover strongly as we moved into the second
half of the year. We expect to finish the year behind last year in
terms of revenue, but we consider that the Group has traded
commendably through the period given the circumstances and
challenges faced.
The impact of COVID-19 and the related lockdowns and
restrictions put in place has impacted the Group in several ways.
As a Group we quickly transitioned into working remotely utilising
existing technology. We also carried out online training and
proactively communicated with our stakeholders. A common factor for
both divisions is the delay of some customer projects. The UK's
response to COVID-19 has meant that the Access Control line of
business, within the People and Data Management division, and the
Physical Security Solutions division have been impeded by the
ability for installers to attend sites. The impact has not been
quite as significant for HCM (Human Capital Management), within our
People and Data Management division, which involves us providing
technical solutions and hardware without the need for us to
physically attend a site.
Six months Six months
31 October 31 October Increase/ Percentage
Revenue 2020 2019 (decrease) change
GBP'000 GBP'000 GBP'000 %
People and Data Management
division 5,560 7,114 (1,554) (22%)
Physical Security Solutions
division 2,297 3,033 (736) (24%)
Group revenue 7,857 10,147 (2,290) (22.6%)
------------ ------------ ------------ -----------
There was a decrease in Group revenue of 22.6% to GBP7,857,000
(H1 2019: GBP10,147,000). Revenue has shown a steadily improving
trend through the year with a peak month of August benefiting from
the UK recovering from the first lockdown and enabling some element
of delayed trading activities to be recovered. A series of cost
reduction initiatives were implemented by the Group including
furloughs, temporary pay cuts and redundancies. This supported
gross profit margins at a level of 37.2% (H1 2019: 39.7%).
Administrative expenses reduced by 11.1% to GBP3,143,000 (H1 2019:
GBP3,535,000) from the initiatives mentioned above and other cost
savings. The Group made a marginal operating loss before
exceptional items of GBP50,000 (H1 2019: profit of GBP683,000). For
H1 2020 the Group made a loss per share of 0.05 pence (H1 2019:
earnings per share of 0.23p).
People and Data Management Division - Grosvenor Technology
Six months Six months
31 October 31 October Increase/ Percentage
2020 2019 (decrease) change
GBP'000 GBP'000 GBP'000 %
People and Data Management
division
Legacy Janus 701 845 (144) (17%)
Sateon Advance 629 1,335 (706) (53%)
Janus C4 91 83 8 10%
Total Access Control 1,421 2,263 (842) (37%)
------------ ------------ ------------ -----------
HCM Rest of world 1,534 1,758 (224) (13%)
HCM US 2,605 3,093 (488) (16%)
Total HCM 4,139 4,851 (712) (15%)
------------ ------------ ------------ -----------
Division revenue 5,560 7,114 (1,554) (22%)
------------ ------------ ------------ -----------
Our People and Data Management division, Grosvenor Technology,
operates in two primary markets: Human Capital Management and
Access Control. Following significant growth in the previous three
years, Grosvenor Technology revenues decreased by 22% overall,
against the corresponding period last year. The reduction in
revenues was felt across both lines of business as COVID-19
impacted clients' end-user projects and through the anticipated
reduction in HCM sales to Ultimate Software.
Human Capital Management ("HCM")
Revenue decreased by 15% to GBP4,139,000 (2019:
GBP4,851,000)
HCM sales in North America reduced by GBP488,000 to
GBP2,605,000, largely because of the previously reported merger of
Ultimate Software Group and Kronos ("Ultimate"). Despite this,
sales to Ultimate remain higher than anticipated and consequently,
revenues have held well.
During the period, Grosvenor Technology onboarded a new client
onto its GT4 timeclock, a HCM software company which provides HR
and Payroll solutions to over 30,000 businesses. The contract is
initially for a period of three years, with a minimum contract
value of cGBP760k over this period.
In a separate win, one of our existing partners has entered into
an agreement to supply the GT10, our flagship hardware device, to
an international retailer. The project, which we have now started
to supply, is expected to last three years and to generate revenues
of c. GBP2.9m.
We continue our engagement with several Tier 1 target HCM
software providers and potential clients are speaking to us about
the possibility of GT Clocks (the Company's trading name in the US)
providing its next generation hardware.
In our Rest of World HCM business, we have also continued
negotiations with several Tier 1 clients for both products and
services. While we have seen the effects of COVID 19 impacting our
revenues, particularly in Europe, revenues were depleted less than
anticipated, reducing 13% to GBP1,534,000 as compared to the
corresponding period in the previous year.
Product Development - Hardware and Software
We continue to invest in development of both hardware and
software platforms to support our anticipated further growth in the
HCM market globally. Development of our latest Android based
timeclock, the GT8 which is scheduled to be released in H2 of the
current financial year, continued to be a focus for our hardware,
electronics, and embedded software teams. Additionally, focus
remained on developing added-value services, intended to be
provisioned on an 'as a service' basis, increasingly cloud-based,
aiding software vendors to reap additional value from their
hardware post-deployment.
We continue to see growth in the HCM market being facilitated
through the technology 'drivers' of high-speed internet
availability and the subsequent mass shift to Cloud based
computing. We are developing our HCM software platforms with a
Cloud and Application Programming Interface ("API") first approach.
A Cloud and API first approach prioritises utilising a Cloud
infrastructure along with APIs to provide seamless connectivity and
integration between back-end and front-end systems for
customers.
During the period, three of our longstanding US HCM clients
agreed to subscribe to our Cloud provisioned software, remotely
connecting new and/or existing timeclock devices with our platform.
By the close of the period, c5,400 'edge' devices globally were
connected to our platform.
Access Control
Revenue decreased by 37% to GBP1,421,000 (H1 2019:
GBP2,263,000)
Revenues from our Access Control lines of business undoubtedly
suffered from the impact of the COVID 19 pandemic. The vast
majority of sales from our three product families are derived from
the UK and the national lockdown that began in March 2020, combined
with continued regional restrictions throughout the summer, meant
that many of our installation partners were only carrying out
essential maintenance, rather than new installs. As a result,
demand for products fell dramatically.
Sales of the legacy Janus product range decreased 17%, which was
in line with management expectations as this platform is no longer
installed in 'new' systems as it is based on a now unsupported
version of a MS Windows(TM) Web browser. There are however, many
end-user sites with legacy Janus products in use, and the expansion
and maintenance of these sites continue to generate revenues,
albeit at a diminishing rate.
Our latest access control platform, which could be considered a
Security Management System (SMS) - Janus C4, has enjoyed some
growth, with sales increasing 10% in the period, but from a very
modest base. The anticipated growth, through onboarding new
partners, has been severely hampered by the inability to conduct
face to face visits and the lack of new installations taking place
during the period.
Sateon (our previous flagship access control platform) sales
also decreased during the period. A reduction was always
anticipated, given the sales and business development focus on
Janus C4, but the fall in demand during this period was higher than
original management expectations. Sateon product family sales
include an OEM variant of Sateon Advance hardware to third parties
for non-proprietary integration with their own access control
platforms. The largest of these partners is based in Belgium and
has seen its business severely disrupted through the restrictions
brought about because of the pandemic.
Physical Security Solutions Division - Safetell
Six months Six months
31 October 31 October Increase/ Percentage
2020 2019 (decrease) change
GBP'000 GBP'000 GBP'000 %
Physical Security Solutions
division
Projects 1,221 1,425 (204) (14%)
Maintenance and call outs 906 1,436 (530) (37%)
Supply only 170 172 (2) (1%)
Division total 2,297 3,033 (736) (24%)
------------ ------------ ------------ -----------
Revenue GBP7,857,000 (H1 2019: GBP10,147,000)
Safetell revenue was 23% lower than the corresponding period
last year. This was as a result of both COVID-19 impact on trading
activity and the expected reduction in the volume of work relating
to the Post Office Network Transformation. During the period the
team adapted quickly and efficiently to minimise the impact of the
pandemic in enormously challenging circumstances. Existing client
relationships were further cemented, and new project wins were
executed with those customers whose businesses remained in
operation through the initial UK lockdown.
COVID-19 significantly impacted the ability for our service and
technical engineers to work onsite safely during the lockdown and
revenues were further hampered by delays to many of our customers'
projects. The Company did however, successfully leverage new
opportunities because of changing customer needs with regard to
creating safe workspaces. Notably, there has been increased demand
for products such as hygiene screens and night-pay hatches as our
clients seek to create contactless environments to protect staff
and their customers alike.
In the previous financial year management had identified new
markets, products and customers that complement Safetell's existing
offering. Market launch of these new products has been delayed,
although other work has been conducted, including the construction
of a full demonstration facility, which we look forward to
welcoming customers into as restrictions allow.
We continue to maintain a high level of quote activity and a
significant order book which includes our expanded product range
and a wider customer base which we are looking forward to
fulfilling as the year progresses.
Balance sheet and cash flow
Following a detailed review of the potential impact of COVID-19
on the business Newmark entered into a Coronavirus Business
Interruption Loan Agreement with HSBC for a loan facility of
GBP2,000,000 at a fixed rate of interest of 4.69% p.a. for a period
of six years with the first year being interest free under the
Business Interruption Payment Scheme. The facility has been fully
drawn down and has enabled the business to continue with core
development activities that we consider will support future growth.
The drawdown has enabled us to repay our existing invoice
discounting facility to reduce interest charges.
The Group holds GBP1,696,000 of cash with unutilised facilities
for invoice discounting and bank overdraft which would provide c.
GBP1,000,000 of additional cash.
Working capital has fluctuated as a direct response to a period
of reduction in trade at the start of the period with increased
trade activity towards the end of the period. This has resulted in
increased trade debtor balances because of improved sales.
A tax cash credit of GBP0.5m was received as a result of the
R&D claim review carried out at the end of the previous
financial year countered by GBP0.1m of tax paid in the US. Lease
payments have reduced whilst we discuss terms on our UK leased
properties.
Directors
I am pleased to welcome Terence Yap as a new Independent
Non-Executive Director following his appointment in May 2020. He
has more than 25 years' experience in various industries, including
Telecommunications, Security and Smart Cities Development, and is
the Chairman of Guardforce AI, a group focusing on delivering
technologically innovative security solutions within the Asia
Pacific region. Terence further enhances the skill sets across the
Board, and we will benefit greatly from his strategic advice as we
plan the next phase of Newmark's growth.
Outlook
Despite the challenges facing us, the Board is pleased with the
progress the Group has made in the first half of the year. Although
the second half of the year is expected to show an improved
performance the first half revenue has been impacted along with a
reduction in profit margin as costs have not reduced in line with
the decrease in revenue contributing to the net loss experienced.
The Board has welcomed the Government's initiatives which the Group
has utilised, although we have had to make some difficult decisions
along the way. As the pandemic unfurled, we worked closely with
HSBC and prepared rolling forecasts and scenarios of the potential
impacts. We obtained support by way of the CBILS loan based on our
early forecasts. Whilst inevitably impacted by the global pandemic
and associated restrictions in the UK and internationally, the
Group has performed better than we originally anticipated which has
enabled investment activities to continue with only slight delays
experienced. We have entered the second half of the financial year
with far more optimism than at the start of the year which is also
helped by the UK securing a Brexit deal. For the full year, the
Board expects the Group to show a reduction in revenue compared to
last year although this reduction is expected to be materially less
than what we experienced in the first half of the year. On behalf
of the Board, I would like to extend my thanks for all the hard
work and resilience shown from the team throughout this period.
M DWEK
Chairman
25 January 2021
CONSOLIDATED INCOME STATEMENT
For the six months ended 31 October 2020
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
31 October 31 October 30 April
2020 2019 2020
Notes GBP'000 GBP'000 GBP'000
Revenue 7,857 10,147 18,767
Cost of sales (4,933) (5,926) (11,318)
Gross Profit 2,924 4,221 7,449
Administrative expenses (3,143) (3,535) (7,144)
(Loss)/profit from operations before
exceptional items (50) 686 638
Exceptional redundancy costs (169) - (167)
Other exceptional costs - - (132)
-------------------------------------- ------ ----------- ----------- ---------
(Loss)/profit from operations (219) 686 305
Finance costs (48) (38) (74)
(Loss)/profit before tax (267) 648 231
Tax credit/(charge) 2 18 434 896
(Loss)/profit for the period/year (249) 1,082 1,127
----------- ----------- ---------
Attributable to:
- Equity holders of the parent (249) 1,082 1,127
----------- ----------- ---------
(Loss)/earnings per share
- Basic (pence) 3 (0.05) 0.23 0.24
- Diluted (pence) 3 (0.05) 0.23 0.24
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the six months ended 31 October 2020
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
31 October 31 October 30 April
2020 2019 2020
GBP'000 GBP'000 GBP'000
(Loss)/profit for the period/year (249) 1,082 1,127
Foreign exchange on the retranslation
of overseas operation (59) (13) 26
Total comprehensive income for the
period/year (308) 1,069 1,153
----------- ----------- ---------
Attributable to:
- Equity holders of the parent (308) 1,069 1,153
----------- ----------- ---------
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
At 31 October 2020
Unaudited Unaudited Audited
31 October 31 October 30 April
2020 2019 2020
GBP'000 GBP'000 GBP'000
ASSETS
Non-current assets
Property, plant and equipment 1,123 1,471 1,262
Intangible assets 5,237 4,775 5,234
Deferred tax 328 449 329
Total non-current assets 6,688 6,695 6,825
----------- ----------- ---------
Current assets
Inventory 2,405 2,527 2,544
Trade and other receivables 3,581 3,870 3,664
Cash and cash equivalents 1,696 406 620
Total current assets 7,682 6,803 6,828
----------- ----------- ---------
Total assets 14,370 13,498 13,653
----------- ----------- ---------
LIABILITIES
Current liabilities
Trade and other payables 3,270 3,222 3,246
Other short-term borrowings 601 814 1,351
Total current liabilities 3,871 4,036 4,597
----------- ----------- ---------
Non-current liabilities
Long term borrowings 2,405 1,154 654
Provisions 100 100 100
Total non-current liabilities 2,505 1,254 754
----------- ----------- ---------
Total liabilities 6,376 5,290 5,351
----------- ----------- ---------
TOTAL NET ASSETS 7,994 8,208 8,302
----------- ----------- ---------
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 (165) (145) (106)
Retained earnings 2,078 2,272 2,327
7,954 8,168 8,262
Minority interest 40 40 40
TOTAL EQUITY 7,994 8,208 8,302
----------- ----------- ---------
CONSOLIDATED CASH FLOW STATEMENT
For the six months ended 31 October 2020
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
31 October 31 October 30 April
2020 2019 2020
Notes GBP'000 GBP'000 GBP'000
Cash flow from operating activities
Net profit after tax from ordinary activities (249) 1,082 1,127
Adjustments for: Depreciation, amortisation
and impairment 453 332 1,022
Exceptional items 169 - 299
Interest expense 48 38 74
Gain on sale of property, plant and equipment (3) (47) (58)
Share based payment - - 13
Income tax (credit)/expense 2 (18) (434) (896)
Operating profit before changes in working
capital and provisions 400 971 1,581
(Increase)/decrease in trade and other receivables (357) (601) 290
Decrease/(increase) in inventories 115 (113) 71
Increase /(decrease) in trade and other
payables 35 (128) (675)
Cash generated from operations before exceptional
items 193 129 1,267
Exceptional items (169) (228) (362)
Cash generated from operations 24 (99) 905
Income taxes received 397 - -
Cash flows from operating activities 421 (99) 905
Cash flow from investing activities
Acquisition of property, plant and equipment (88) (203) (150)
Sale of property, plant and equipment 5 28 43
Research and development expenditure (228) (167) (886)
(311) (342) (993)
----------- ----------- ---------
Cash flow from financing activities
Bank loans received 2,000 - -
Principal paid on lease liabilities (111) (230) (475)
(Repayments) / Proceeds from invoice discounting (863) 72 212
Interest paid on lease liabilities (32) (23) (44)
Interest paid (16) (15) (30)
978 (196) (337)
----------- ----------- ---------
Decrease in cash and cash equivalents 1,088 (637) (425)
Cash and cash equivalents at beginning of
period/year 620 1,041 1,041
Exchange differences on cash and cash equivalents (12) 2 4
Cash and cash equivalents at end of period/year 1,696 406 620
----------- ----------- ---------
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Amounts
attributable
Foreign to owners
Share Share Merger exchange Retained of the Non-controlling Total
capital premium reserve reserve earnings parent interest equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 May 2020 4,687 553 801 (106) 2,327 8,262 40 8,302
(Loss) for the
period - - - - (249) (249) - (249)
Other
comprehensive
income - - - (59) - (59) - (59)
Total
comprehensive
income for
the
period - - - (59) (249) (308) - (308)
-------- -------- -------- --------- --------- ------------- ---------------- --------
As at 31
October
2020 4,687 553 801 (165) 2,078 7,954 40 7,994
-------- -------- -------- --------- --------- ------------- ---------------- --------
At 30 April
2019 4,687 553 801 (132) 1,165 7,074 40 7,114
Impact of IFRS
16 Lease
transition - - - - 25 25 - 25
At 1 May 2019
as restated 4,687 553 801 (132) 1,190 7,099 40 7,139
Profit for the
period - - - - 1,082 1,082 - 1,082
Other
comprehensive
income - - - (13) - (13) - (13)
Total
comprehensive
income for
the
period - - - (13) 1,082 1,069 - 1,069
-------- -------- -------- --------- --------- ------------- ---------------- --------
As at 31
October
2019 4,687 553 801 (145) 2,272 8,168 40 8,208
-------- -------- -------- --------- --------- ------------- ---------------- --------
NOTES TO THE ACCOUNTS
1. BASIS OF ACCOUNTS
The financial information for the six months ended 31 October
2020 and 31 October 2019 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 ending 30 April 2021
and are unchanged from those disclosed in the Group's Annual Report
for the year ended 30 April 2020.
The comparative financial information for the year ended 30
April 2020 included within this report does not constitute the full
statutory accounts for that period. The statutory Annual Report and
Financial Statements for 2020 have been filed with the Registrar of
Companies. The Independent Auditors' Report on that Annual Report
and Financial Statement for 2020 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 nil (H1 2019: GBP0.1m) and a recognition of
deferred tax asset related to previously unrecognised losses of nil
(H1 2019: 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 (H1 2019: 468,732,316).
4. DIVIDENDS
No interim dividend is proposed (H1 2019: Nil).
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END
IR BRGDBBXDDGBD
(END) Dow Jones Newswires
January 25, 2021 02:00 ET (07:00 GMT)
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