Final Results

RNS Number : 1195L

Newmark Security PLC

27 July 2011

 



Press Release

27 July 2011

Newmark Security plc

("Newmark" or the "Group")

Final Results

Newmark Security plc (AIM:NWT), a leading provider of electronic and physical security systems, today announces its final results for the year ended 30 April 2011.

Financial Highlights:

·	Turnover decreased 8.3 per cent. to £12,652K (2010: £13,792K)
·	Total net assets increased to £10.8 million (2010: £10 million)
·	Gross profit was £5,312K (42.0 per cent. of sales) compared to £5,980K (43.4 per cent.)
·	Operating profit decreased to £808K (2010: £1,667K)
·	Earnings per share of 0.19 pence (2010: 0.31 pence)
·	Cash flow from operating activities reduced to £1.1 million (2010: £1.7million)
·	Proposed dividend of 0.0275 pence (2010: 0.025 pence)
·	Supply support, repair agreement signed in May 2011 with a major high street bank worth approximately £2 million over a three year period

Commenting on the results, Maurice Dwek, Chairman of Newmark Security plc, said: "The Board is disappointed by the results for the year under review which have been impacted by the current economic slowdown.  Trading in the current year has again been variable to date and therefore the outlook for this financial year is a continuation of last year.  However the Board continues to believe that there are reasons for optimism for the future.  Although the SATEON and ATMP developments will benefit the Group in the longer-term, the sales of OEM products to the US market are expected to grow significantly this year.

"Our dividend policy reflects the Board's confidence for the future and Newmark remains optimistic that the Group is well placed for both medium and longer-term growth."

For further information:

Newmark Security plc
Maurice Dwek, Chairman	Tel: [phone]
Brian Beecraft, Finance Director	www.newmarksecurity.com

Seymour Pierce Limited
Mark Percy / David Foreman, Corporate Finance	Tel: [phone]
	www.seymourpierce.com

Media enquiries:

Abchurch
Henry Harrison-Topham / Mark Dixon	Tel: [phone]
[e-mail]	www.abchurch-group.com

Notes to editors

Newmark Security PLC is a leading provider of electronic and physical security systems, which focus on personal security and the safety of assets.  Operating through two established and wholly owned divisions, Grosvenor Technology (Electronic) and Safetell (Asset Protection), the Group listed on AIM in 1997.

Founded in 1989 Grosvenor Technology provides state of the art access control, security and data acquisition systems delivered via its flagship JANUS access platform and its CUSTOM brand OEM product range.  Clients include BAE Systems, UK Air Traffic Control, BSkyB, Merrill Lynch (Europe, Middle East and Asia) as well as M&S, Morrisons, Tesco, Network Rail, British Royal Palaces, government departments and many universities.  More information can be found at www.gtl.biz

Offering staff and asset protection since 1987, Safetell is the UK's leading provider of fixed and reactive security screens, reception counters, cash management systems and associated security equipment.  Safetell's customers range from leading blue chip organisations to single sites including banks and building societies, police forces and the Post Office, local authorities and government departments, forecourt retailers and supermarket chains.  More information can be found at www.safetell.co.uk

CHAIRMAN'S STATEMENT

Overview

In last year's Chairman's Statement, I commented on the variable level of trading in the first few months of the year under review, but that this position was expected to improve in the second half.  Unfortunately this improvement did not materialise on a consistent basis as we are not immune to the effects of the current economic slowdown.  We expect market conditions to be challenging for all of our businesses in the year ahead, particularly with regard to public sector spending and uncertain trading conditions for UK retail banks.

This has however been a year of significant investment in the future of the Group.  In the medium-term the Board believes that there is significant potential in the US market for Newmark's OEM products as well as for the Wavetec distribution agreement which the Board is confident will generate significant revenue streams for the Group going forward.

In the longer term, the Board anticipates a more positive trading environment for the Group.  The Board expects the Group's substantial investment into the SATEON system will provide significant opportunities for future sales.  In addition, the Group sees increased potential in the longer-term for the ATM Protection ("ATMP") system, which after an extended trial period, will represent a key product in the UK cash protection system market.

Newmark remains committed to investing in developing leading technologies in order to exploit these future opportunities.  The Group expects to strengthen its market positions during the current challenging economic conditions and be well positioned to capture new growth opportunities as they arise.

The record results for the asset protection division for the previous financial year due to the contributions from two major programmes  were always going to be difficult to match in revenue terms.  Whilst there were no major programmes in the year for the product division, the service division was successful in obtaining a new service contract worth £2 million over three years from a major high street bank.  Safetell also signed a new distribution agreement in the year for queue management and information display systems to broaden the product offering of the company.  Sales of these products in the year were minimal but costs were incurred in setting up this new product stream which required some design changes to meet customer requirements in the UK.  Consequently the Board is confident of a significant growth in sales in the current year whilst also providing additional work for the service department.

The new development within ATMP has taken longer than initially expected but the company has incorporated a number of additional features which makes the product substantially superior to that of a year ago when Safetell acquired the business.  The products for the Loomis trial began being shipped in June 2011.

Within the electronic division, sales have been affected by the expenditure restraint imposed by many of our customers.  The development of the SATEON access control system is detailed below but is now going through its final testing for release version #1.0 and the prospects for this in the future remain exciting.  Similarly Newmark has invested substantial amounts of time and effort into selling the Group's OEM range more widely into the US market.  Although there have been no significant sales to date in this market, the Board is optimistic that, with the interest shown and time being spent by Newmark's potential customers, sales should be significantly higher in the current year.

Revenue for the year from continuing businesses was £12,652K compared to £13,792K, a decrease of 8.3 per cent.  Gross profit for the year from continuing operations was £5,312K (42.0 per cent. of sales) compared to £5,980K (43.4 per cent.).  The change in overall gross margin reflects both the mix of sales in both divisions, as well as pricing pressures in the electronic division.

Revenue in the electronic division decreased in the year from £6,325K to £6,142K.  Turnover in the Asset Protection division decreased in the year from £7,467K to £6,510K.

Earnings per share are shown in the income statement as 0.19 pence (2010: 0.31 pence).  However, the earnings per share before legal costs, losses of discontinued operations and abortive acquisition costs are 0.20 pence (2010: 0.33 pence) as calculated in the notes  to the accounts.

As a consequence of the fall in revenue, revenue per employee decreased to £100,413 from £109,460.

The Board believes that the OEM division of Grosvenor and Safetell are the leaders in their particular markets whilst Grosvenor is a major force at the upper price end of the access control market.  There were no environmental issues having a major impact on the Group in the year.

The Group continues to invest in research and development which will benefit the results in the future.

The Group net assets have increased in the year from £10.0 million to £10.8 million.

A detailed review of their activities, results and future developments is set out in the divisional results below.

Financial results

The profit from operations for the year was £808,000 (2010: £1,667,000).

Revenue for the year was £12,652,000 (2010: £13,792,000).  The main commercial factors affecting the results of the divisions are set out below.

Electronic Division

Turnover £6,142,000 (2010: £6,325,000)

Profit from operations £903,000 (2010: £1,402,000)

Profit before tax £882,000 (2010: £1,386,000)

Revenue from access control and OEM Time and Attendance products in Grosvenor Technology was down marginally by 1.2 per cent. to £5,882K (2010: £5,954K), the main pressures having been the global economic situation where strong competition has been chasing fewer major projects with lower margins.

Grosvenor has invested substantially in the development of new CUSTOM IT terminals and has continued to promote the CUSTOM OEM products in the USA where the Board remains very excited about future business in this sector.  Our initial efforts into the US market have expanded to employing a US based sales manager who has considerable experience and an in-depth knowledge of the market and our competitors.  Grosvenor has also established a Florida based managed office and a stores/warehouse in readiness for the large contracts that Grosvenor is hoping to gain. Major players in the USA T&A market are currently integrating our CUSTOM IT products into their software applications for test and evaluation and have shown a serious commitment to Grosvenor.

The SATEON access control development has been more demanding than originally envisaged and the use of new technologies such as Windows Silverlight with access control has produced unforeseen challenges resulting in SATEON being behind plan in its development.  However, SATEON access control version 1.0 was released from development in June 2011 and is now undergoing final testing including planned installations into various 'friendly' sites for 'real-world' stress testing. The Board anticipates that SATEON access control version 1.0, will be commercially released in 2-3 months time and the graphical and video modules will follow before the end of the calendar year.

The business case for SATEON remains strong in international markets.  Apart from the removal of obsolete technology from our core systems Grosvenor has gained multi-lingual support providing significant opportunities for future growth.  Grosvenor has also gained a platform for expected future trends in hosted or installed systems, and a rich, application style product working inside a browser that will quickly become attractive to larger corporations where applications are increasingly not permitted to be installed on client PC's.  Other benefits including open architecture and easier to implement third-party inter-connectivity will add to the overall attractiveness of SATEON and it is the difficulties that we have overcome that have put us ahead of the competition.

In parallel with the SATEON development, Grosvenor is about to submit the product to Underwriters Laboratories (UL) for certification.  This will allow Grosvenor to promote the system in the USA and compete with locally produced systems.  The USA is clearly important for future growth and parallel testing alongside system development will obtain an earlier certification.

SATEON EZ controllers have been designed to substantially save costs on manufacturing and installation.  These savings will help recoup reduced margins in the UK and make the product more competitive in new territories.  Other initiatives such as Power-Over-Ethernet which have been designed into the EZ controller scheme will make the new controllers a compelling prospect for any system sale.

The Board remains confident that in SATEON, Grosvenor has a very special product that will attract keen interest in the security world and that it is on-track to reinforce the Group's competiveness in the UK and to provide a solid and competitive platform to take SATEON to new territories and business partners globally.

Sales in Newmark Technology which consist predominantly of our own brand N-TEC access control have reduced compared to the same period last year (£260K from £371K).  N-TEC, which is sold via Simplex into the Middle East, has struggled against aggressive pricing in the region and language limitations in the product.

Asset Protection Division

Turnover £6,510,000 (2010: £7,467,000)

Profit from operations £531,000 (2010: £919,000)

Profit before tax £511,000 (2010: £897,000)

Safetell's Product Division sales were characterised by a large number of smaller projects with no single, major programme of work and sales affected by budget cuts in both the public and private sectors.  Product sales were 31 per cent. lower than the previous year which was a record year due to the performance of a number of major programmes of work for customers.  Service Division's sales were up 9.7 per cent. from the previous year. Overall total company sales were 12.8 per cent. less than the previous year.

Eclipse Rising Screen sales and reconfiguration work were 20 per cent. lower than the previous year with very few orders received from the public sector customers that traditionally order Eclipse Rising Screens when they open new outlets.  Sales from reconfiguration and refurbishment work exceeded the value of new installations with some significant work for the supply of refurbished screens to a large bank.  Sales of CounterShield and Eye2Eye were far lower than the previous year after several planned installations were delayed until the current financial year.

Cash Handling sales were 34 per cent. down on the previous year being adversely affected by the completion of the Post Office Crown Office refurbishment programme in April 2010.  Sales for the supply of several new Cash Handling products increased in the fourth quarter after the Service Division secured a new 3 year counter maintenance contract worth approximately £2 million over that period with a large high street bank and there is potential for significant growth of these products in the next three years.

Encouragingly, Fixed Glazing installation sales were 15 per cent. more than the previous year, primarily for established petrol retailer customers and Police Forces selecting one or more of the FlexiGlaze products.  The programme to replace damaged bullet resistant glazing by a major retail bank in the last quarter increased sales and we expect this programme to continue with this programme in the current financial year.

The Service Division produced an operating profit 18 per cent. higher than the previous year as a result of the increase in sales and a reduction in divisional overheads.  This was a most creditable performance achieved in a particularly competitive environment accompanied by cost reduction demands from Safetell's blue chip customer base.

The use of 'state of the art' technology applied to stocking systems and tracking systems combined with increasing call numbers, drove down unit operating costs.  The award of a £2 million support contract over three years from a large high street bank provides comfort on trading levels for the foreseeable future.  The CCTV maintenance and installation initiatives continue with NACOSS Gold accreditation being achieved in the year. New product initiatives from the Product Division will again generate business for the Service division.  The business is fortunate to offer not only an innovative product delivery model but also with a national service network making our total offer a very attractive risk free proposition.

Product order intake and quotations for the 1st and 2nd quarters of 2011 have been better than the same period last year but the absence of any major programme from established customers will result in the reliance of sales to new customers.  Safetell successfully renegotiated the Post Office supply contract of Cash Handling Equipment for three years, but in the absence of any major programme of works, will continue to supply replacement equipment rather than receive bulk orders.

The long term prospects for CounterShield and Eye2Eye are good and with increased marketing efforts during this financial year we have secured several new customers who have long term counter security upgrade programmes.

Although the number of bank robberies and crime has reduced in recent years, the number of violent attacks on members of staff serving the public has increased and in recent months we have seen an increase in armed bank raids. The vulnerability of banks and building societies as well as petrol stations and forex traders with open counters will continue to be targets for opportunistic robberies which should result in increased orders for our ever increasing range of counter security products.

Safetell will continue to develop new products and seek service and maintenance opportunities for our own and third party products with existing and new clients and will continue to focus on product re-engineering and improved efficiencies to improve gross margin.

Safetell introduced a new product line in the 4th quarter after concluding an exclusive distribution agreement with Wavetec FCO based in Dubai to provide its Queue Management Systems and Information Display Systems in the UK and Europe. Sales of the Linear Queue Management products are expected to increase gradually during the current financial year and sales of the Diffused Queue Management products and Information Display Systems are due to produce results in the 3rd and 4th quarters respectively. Safetell has successfully negotiated to service and maintain the existing 3rd party queue management products for a large retail group as well as a large retail bank and these contracts should also result in new equipment sales to these clients.

The T9 Cash Transit Case in its current design is a much improved version of the concept purchased in April 2010, and with the assistance of the Loomis security team, the T9 Cash Transit Case has been developed to offer improved protection when cash is transferred across the pavement to customer premises. The T9 Cash Transit Case offers an audit trail of every event and can be activated remotely to bond the cash instantly with glue damaging the bank notes beyond use. Therefore although there were no sales in the period, the Board remains confident of the long term success of this project.

Balance sheet and cash flow

Cash flow from operating activities fell in the year from £1.7 million to £1.1 million reflecting the decline in profits in the year. Whilst we were able to reduce our holding of inventories again, trade debtors increased due to the timing of sales and the increased problem of collecting cash in the year. We have however managed to maintain tight credit control and the level of bad debts has been minimal. The major item in the cash flow in the year has again been the level of development expenditure where the Group has been investing in the future in three main areas:

·      SATEON access control,

·      OEM developments where the Group is now beginning to see the start of a successful sales campaign,

·      ATMP development programme where the boxes have started their trial period with the customer

This level of development expenditure has again affected the tax charge for the year due to the availability of tax reliefs.

These factors contributed to the increase in net assets from £10.0 million to £10.8 million. During the year the Group restructured its financing with the full support of our bankers to reflect this investment for the longer term.

Employees

The Board would like to thank all staff for their efforts, particularly during this new development phase which is so important to the continuing success of the Group.

Dividend

In line with the Board's confidence in the longer-term prospects for the Group, the dividend strategy has been maintained and the Directors are recommending a final dividend for the year ended 30 April 2011 of 0.0275 pence per share for the year (2010: 0.0275 pence).

Outlook

The Board is disappointed by the results for the year under review which have been impacted by the current economic slowdown.  Trading in the current year has again been variable to date and therefore the outlook for this financial year is a continuation of last year.  However the Board continues to believe that there are reasons for optimism for the future.  Although the SATEON and ATMP developments will benefit the Group in the longer-term, the sales of OEM products to the US market are expected to grow significantly this year.

Our dividend policy reflects the Board's confidence for the future and Newmark remains optimistic that the Group is well placed for both medium and longer-term growth.

M DWEK

Chairman

27 July 2011

CONSOLIDATED INCOME STATEMENT for the year ended 30April 2011 Revenue Cost of sales Gross profit	Note	2011 £'000 12,652 (7,340)	2010 £'000 13,792 (7,812)
		5,312	5,980
Administrative expenses pre abortive acquisition costs		(4,464)	(4,243)
Legal costs		(40)	-
Abortive acquisition costs		-	(70)
Administrative expenses - total		(4,504)	(4,313)
Profit from operations		808	1,667
Finance costs		(102)	(89)
Profit before tax		706	1,578
Tax  credit/(expense)		151	(154)
Profit for the year from continuing operations		857	1,424
Post-tax loss related to discontinued operations		-	(15)
Profit for the year		857	1,409
Attributable to:
- Equity holders of the parent		857	1,409
Earnings per share
- Basic (pence)	2	0.19p	0.31p
- Diluted (pence)	2	0.18p	0.30p
Continuing operations
- Basic (pence)	2	0.19p	0.32p
- Diluted (pence)	2	0.18p	0.31p
Discontinued operations
- Basic and diluted (pence)	2	-	(0.01p)

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME for the year ended 30 April 2011
	2011	2010
	£'000	£'000
Profit for the year	857	1,409
Foreign exchange (losses)/profits on retranslation of overseas operations	(8)	7
Total comprehensive income for the year	849	1,416
Attributable to:
- Equity holders of the parent	849	1,416

CONSOLIDATED STATEMENT OF FINANCIAL POSITION at 30 April 2011

		2011 £'000	2011 £'000	2010 £'000	2010 £'000
ASSETS
Non-current assets
Property, plant and equipment		788		730
Intangible assets		10,142		9,313
Total non-current assets		10,930		10,043
Current assets
Inventories		1,469		1,503
Trade and other receivables		2,885		2,402
Cash and cash equivalents		-		211
Total current assets		4,354		4,116
Total assets			15,284		14,159
LIABILITIES
Current liabilities
Trade and other payables		2,936		2,958
Other short term borrowings		457		312
Corporation tax liability		-		160
Provisions		117		123
Total current liabilities		3,510		3,553
Non-current liabilities
Long term borrowings		486		68
Provisions		84		100
Deferred tax		454		412
Total non-current liabilities		1,024		580
Total liabilities			4,534		4,133
TOTAL NET ASSETS			10,750		10,026
Capital and reserves attributable to equity holders of the company
Share capital		4,504		4,504
Share premium reserve		502		502
Merger reserve		801		801
Foreign exchange difference reserve		(175)		(167)
Retained earnings		5,078		4,346
			10,710		9,986
Non-controlling interest			40		40
TOTAL EQUITY			10,750		10,026

CONSOLIDATED STATEMENT OF CASH FLOWS for the year ended 30 April 2011
		2011		2011		2010	2010
		£'000		£'000		£'000	£'000
Cash flow from operating activities
Net profit after tax		857				1,409
Adjustments for:
Depreciation and amortisation		616				526
Interest expense		102				89
Income tax expense		(151)				154
Share option charge		-				8
Operating cash flows before changes in working capital		1,424				2,186
(Increase)/decrease in trade and other receivables		(375)				2
Decrease in inventories		34				201
Increase/(decrease) in trade and other payables		109				(550)
Cash generated from operations				1,192			1,839
Income taxes paid				(78)			(143)
Cash flows from operating activities				1,114			1,696
Cash flow from investing activities
Payments for property, plant & equipment		(203)				(239)
Sale of property, plant & equipment		6				13
Research & development expenditure		(1,108)				(1,003)
Intangible asset expenditure		-				(1)
Acquisition of subsidiary, net of cash acquired		(156)				(20)
				(1,461)			(1,250)
Cash flow from financing activities
Proceeds new bank loan		450				-
Repayment of bank loans		(210)				(501)
Repayment of finance lease creditors		(126)				(138)
Dividends paid		(125)				(113)
Interest paid		(102)				(89)
				(113)			(841)
Decrease in cash and cash equivalents				(460)			(395)

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

	Share capital	Share premium	Merger reserve	Foreign exchange reserve	Retained earnings	Minority interest	Total equity
	£'000	£'000	£'000	£'000	£'000	£'000	£'000
1 May 2009	4,504	502	801	(174)	3,042	40	8,715
Dividends	-	-	-	-	(113)	-	(113)
Share based payment	-	-	-	-	8	-	8
Total comprehensive income	-	-	-	7	1,409	-	1,416
30 April 2010	4,504	502	801	(167)	4,346	40	10,026
1 May 2010	4,504	502	801	(167)	4,346	40	10,026
Dividends	-	-	-	-	(125)	-	(124)
Share based payment	-	-	-	-	-	-	-
Total comprehensive income	-	-	-	(8)	857	-	848
30 April 2011	4,504	502	801	(175)	5,078	40	10,750

NOTES TO THE ACCOUNTS

1. Basis of preparation

While the financial information included in this preliminary announcement has been prepared in accordance with the recognition and measurement principles of International Financial Reporting Standards as endorsed for use in the European Union (IFRSs), this announcement does not contain sufficient information to comply with IFRSs.

This preliminary financial information does not constitute the company's statutory accounts for the years ended 30 April 2011 or 2010, but is derived from those accounts. Statutory accounts for 2010 have been delivered to the Registrar of Companies and those for 2011 will be filed following the company's annual general meeting.

The auditors have reported on those accounts. Their report for the year ended 30 April 2011 was unqualified, did not include references to any matters to which the auditors drew attention by way of emphasis without qualifying their reports and did not contain a statement under Section 498(2) or 498(3) of the Companies Act 2006.

2.   Earnings per share	2011 £'000	2010 £'000
Numerator
Earnings used in basic and diluted EPS	857	1,409
Earnings used in basic and diluted EPS - continuing operations	857	1,424
	No.	No.
Denominator
Weighted average number of shares used in basic EPS
- continuing and discontinued operations	450,432,316	450,432,316
Effect of employee share options	19,800,000	19,800,000
Weighted average number of shares used in diluted EPS - continuing and discontinued operations	470,232,316	470,232,316

Certain employee options have also been excluded from the calculation of diluted EPS as their executive price is greater than the weighted average share price during the year (i.e. they are out-of-the-money) and therefore it would not be advantageous for the holders to exercise those options.

The basic earnings per share before results of discontinued operations and abortive acquisition costs has also been presented since, in the opinion of the directors, this provides shareholders with a more appropriate measure of earnings derived from the Group's businesses. It can be reconciled to basic earnings per share as follows:

	2011 pence	2010 pence
Basic earnings per share (pence) - basic	0.19	0.31
Legal costs	0.01	-
Abortive acquisition costs	-	0.01
Earnings per share before legal costs and abortive acquisition costs	0.20	0.32
Losses of discontinued operations	-	0.01
Earnings per share before legal costs, results of discontinued operations, and abortive acquisition costs - basic
	0.20	0.33
	2011	2010
	£'000	£'000
Reconciliation of earnings
Profit used for calculation of basic earnings per share	857	1,409
Legal costs	40	-
Abortive acquisition costs	-	70
Earnings before abortive acquisition costs	897	1,479
Losses of discontinued operations	-	15
Earnings before results of discontinued operations and abortive acquisition costs
	897	1,494

- Ends -

 

END

 

 

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