Interim Results

RNS Number : 3986Y

Newmark Security PLC

22 December 2010

 



Press Release

22 December 2010

Newmark Security plc

("Newmark" or the "Group")

Interim Results

Newmark Security plc (AIM:NWT), a leading provider of electronic and physical security systems, today announces its interim results for the six months ended 31 October 2010.

Highlights:

Electronic Division

·	Appointment of Lee Abraham to the Board of Grosvenor Technology as Sales and Marketing Director bringing 16 years technical sales experience with both security integrators and manufacturers
·	First working demonstration of SATEON access to be previewed at the Intersec exhibition in Dubai in January 2011
·	Extended Zilog 'EZ' or 'E-Zee' controller range in development and expected to be in production and available to work with SATEON software from May 2011

Asset Protection Division

·	Product sales delivered from the start of a programme of work for a large UK bank requiring Eclipse rising screens and to HBOS for a branch reconfiguration programme
·	Imminent completion of testing of the Cash in Transit protection case in partnership with Loomis.  Production of the first order of 50 units is expected to be completed in March 2011 with a further roll out to other Loomis branches starting after the successful completion of the trial period
·	Exclusive 5-year distribution agreement signed by Safetell with Wavetec, a Dubai based technology company to sell its Electronic Queue Management Systems, Information Display Systems, Information Kiosks and other electronic information display products in the UK and Europe
·	Service and maintenance sales were up 6.5 per cent. due to an increased scope of work offered by the contract with the new Santander Group
·	Support contract with a large financial institution is being finalised which should commence in early 2011 and run for three years

Commenting on the results, Maurice Dwek, Chairman of Newmark Security plc, said: "Trading in the current environment continues to be difficult but the Board anticipates an easing of current market constraints resulting in a more positive second half of the financial year. In the longer term, the Group has many exciting developments including the Cash in Transit protection case, the SATEON access control system, the potential new market in the US for OEM products and the Wavetec distribution agreement in the U.K. and Europe.  These developments will provide Newmark not only with a strong portfolio of products but also valuable revenue streams going forward."

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]
Katie Ratner (Corporate Broking)	www.seymourpierce.com

Media enquiries:

Abchurch
Henry Harrison-Topham / Mark Dixon/ Claire Dickinson	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

The Board is pleased to announce the Group's interim results for the six months ended 31 October 2010.

As stated in the annual report, trading in the first few months of the period was variable due to delays in customers placing orders prior to the general election and the emergency budget. Unfortunately this pattern has continued with the state of the economy affecting most of the Group's customers and in particular the public sector. Revenue in the period for continuing businesses of £6,085,000 was 13 per cent. below the corresponding period last year of £6,993,000.

Earnings per share were 0.08 pence per share (2009: 0.17 pence per share).

A detailed review of the activities, results and future developments of each division is set out below.

FINANCIAL RESULTS

Electronic Division

Turnover for the six months ended 31 October 2010: £2,932,000 (2009: £3,400,000)

Operating profit for the six months ended 31 October 2010: £441,000 (2009: £804,000)

Revenue from JANUS access control systems fell but  the Board consider that the result was better than across the access control market in the UK as a whole during 2010,  and margins were reduced due to pricing pressures and the mix of business. JANUS Enterprise, Grosvenor's current high-end enterprise access solution, remains a key offering with its unique features for the larger client and there is evidence of a growing interest and quote book for this type of system. Health and safety features that are being introduced to JANUS Enterprise, such as advanced people-in-area tracking, employee passport records that include training and induction records, and proactive alerting to managers when training needs to be renewed, are all attracting particular interest.

SATEON access will be previewed at the Intersec exhibition in Dubai in January 2011 including switchable on-the-fly English, Arabic, Turkish and Russian language capabilities. There will also be a preview of a completely new range of access controllers.

In response to market research in both the UK and Middle East, Africa and Russia ("MEAR") the Group is developing an 'Extended Zilog' controller range. The EZ or E-Zee series is expected to be in production and available to work with SATEON software from May 2011. The EZ series will have more advanced features compared to existing JANUS hardware but the key element of the EZ controllers will be that hardware options will need to be added to the basic controller rather than being included arbitrarily as happens with JANUS controllers. The Group expects that this will improve the attractiveness of new system sales in the UK and will reinforce the Group's position in the UK and provide a solid and competitive platform to take SATEON to new territories and business partners globally.

Sales of data collection products in the period were 14 per cent. lower than the same period last year (£1,033,000 compared to £1,202,000), reflecting the problems of economies across the Group's geographical customer base.  However the Board remains very excited about future business in this sector. Negotiations with potential partners in the USA have progressed to the stage where the Group has possible future projects with orders for terminals numbering in the hundreds.  The potential here is considerable with the Group's first three target partners having a combined annual requirement equivalent to 400 per cent. of Grosvenor's last year's total output of data collection terminals. The combination of the CUSTOM IT Linux terminals and CUSTOM Exchange middleware has generated positive reactions from customers. Within the last week we received a first order from one of these target customers (albeit a small one).

Sales of N-TEC Access control systems have diminished partly due to price in a very competitive market, but also because the product lacks local language support such as Arabic and Turkish. Installation engineers can use English versioned software whereas local system operators normally require their own language. However, both of these issues have been addressed with the SATEON version of N-TEC which is expected to be released in May 2011.

I am pleased to announce the recent appointment of Lee Abraham to the Board of Grosvenor Technology as Sales and Marketing Director. Lee is highly regarded for his exceptional management skills and in depth knowledge of how to win new business in competitive and congested markets and is a specialist in the design, sale and deployment of integrated IP network CCTV, access control and alarm based technology systems.  With over 16 years technical sales experience with both security integrators and manufacturers, Lee joins Grosvenor from a leading manufacturer of enterprise end-to-end IP Video and Security Management Systems where he held the position of UK Sales Director.

Asset Protection Division

Turnover 6 months 31 October 2010: £3,153,000 (2009: £3,593,000)

Operating profit 6 months 31 October 2010: £328,000 (2009: £389,000)

Turnover in the Asset Protection Division was 12 per cent. lower than the corresponding period last year mainly due to the completion of the Post Office programme to refurbish Crown Offices in April, and the lack of any new major programme of work to replace this project. In addition, the Government announcements in April that Public Sector spending would be curtailed resulted in a reduction in orders from this sector.  However, the division has delivered product sales including the start of a programme of work for a large UK bank requiring Eclipse rising screens. In addition, sales of Eclipse rising screens to HBOS for a branch reconfiguration programme increased in the period and are expected to continue in the second half of the year.

CounterShield Sales were 50 per cent. lower than the corresponding period last year due to the Public Sector budget cuts and, although Eye2Eye sales were 31 per cent. lower, improved order intake is expected to contribute to sales in the second half. The Post Office sub-post office network continue to place orders for cash handling equipment, but the anticipated roll out of the WH Smith Post Office agency branches has not materialised as expected. Fixed Glazing sales were 3 per cent. lower with orders received from long-standing customers.

The roll out of the ATM Protection (UK) Limited ("ATMPUK") Cash in Transit protection case has been delayed due to product improvement after several months of testing. ATMPUK is working closely with Loomis in the development of the product and testing is expected to be completed in December with production of the first order of 50 units expected to be completed in March 2011. The product improvements should result in a shortened trial period and the roll out to other Loomis branches should start after the successful completion of the trial period.

Safetell has signed an exclusive distribution agreement with Wavetec, a Dubai-based technology company to sell its Electronic Queue Management Systems, Information Display Systems, Information Kiosks and other electronic information display products in the UK and Europe. This five year agreement will open new markets, but also allow Safetell to expand its product offering to its current customer base. Sales of the Queue Management Systems are expected towards the end of the financial year, with sales of Information Display Systems materialising in the new financial year, although we have recently received a first small order for the latter.

Service and maintenance sales were up 6.5 per cent. as the division capitalised on the increased scope of work the new Santander Group contract offers. Our multi-faceted service offering is attractive to blue chip customers who wish to reduce costs associated with having an excessive number of single skilled service providers. A support contract with a large financial institution is being finalised which should commence in early 2011 and run for three years. Safetell is confident that winning the new support contract will result in an increase in product sales to this client. Current initiatives include IT developments to improve stock control systems managing a diverse range of spares with a reduction of the working capital requirement.

Balance sheet and cash flow

Sales have varied over the period by different amounts within both our operating divisions and therefore net working capital has fluctuated significantly. It has been possible to reduce our stock holding still further as the stock for the old product ranges has been run down. Tight control on debtors has been maintained, and with our good communications with customers we have not incurred any bad debts of substance. The total trade debtors figure has not been reduced however due to the fact that many customers have been taking longer to settle our invoices.

The investment in the SATEON development in particular has continued with the forthcoming launching of that product in 2011.

The cash flow includes the payment of £124,000 relating to the payment of elements of the consideration for the acquisition of ATM Protection in April together with the payment of £100,000 to creditors at the date of acquisition which were settled as part of the purchase agreement.

OUTLOOK

Trading in the current environment continues to be difficult but the Board anticipates an easing of current market constraints resulting in a more positive second half of the financial year. In the longer term, the Group has many exciting developments including the Cash in Transit protection case, the SATEON access control system, the potential new market in the US for OEM products and the Wavetec distribution agreement in the U.K. and Europe.  These developments will provide Newmark not only with a strong portfolio of products but also valuable revenue streams going forward.

M DWEK

Chairman

22 December 2010

STATEMENT OF COMPREHENSIVE INCOME 
For the six months ended 31 October 2010

		Unaudited Six months ended 31 October 2010	Audited Year ended 30 April 2010	Unaudited Six months ended 31 October 2009
	Notes	£'000	£'000	£'000
Revenue		6,085	13,792	6,993
Cost of sales		(3,621)	(7,812)	(3,917)
Gross profit		2,464	5,980	3,076
Abortive acquisition costs		-	(70)	-
Administrative expenses		(2,049)	(4,243)	(2,170)
Profit from operations		415	1,667	906
Finance costs		(55)	(89)	(23)
Profit before tax		360	1,578	883
Tax expense	2	(8)	(154)	(130)
Profit for the year from continuing operations		352	1,424	753
Post-tax loss related to discontinued operations		-	(15)	-
Profit and total comprehensive income for the year		352	1,409	753
Attributable to:
- Equity holders of the parent		352	1,409	753
Earnings per share
- Basic (pence)	4	0.08	0.31p	0.17p
- Diluted (pence)		0.08	0.30p	0.17p
Continuing operations
- Basic (pence)		0.08	0.32p	0.17p
- Diluted (pence)		0.08	0.31p	-
Discontinued operations
- Basic and diluted (pence)		0.08	(0.01p)	-
There are no other components of comprehensive income

CONSOLIDATED STATEMENT OF FINANCIAL POSITION
At 31 October 2010

		Unaudited 31 October 2010	Audited 30 April 2010	Unaudited 31 October 2009
	Notes	£'000	£'000	£'000
ASSETS
Non-current assets
Property, plant and equipment		680	730	798
Intangible assets		9,824	9,313	8,394
Total non-current assets		10,504	10,043	9,192
Current assets
Inventories		1,446	1,503	1,883
Trade and other receivables		2,801	2,402	2,721
Cash and cash equivalents		-	211	-
Total current assets		4,247	4,116	4,604
Total assets		14,751	14,159	13,796
LIABILITIES
Current liabilities
Trade and other payables		2,980	2,958	2,808
Other short term borrowings		714	312	791
Corporation tax liability		92	160	218
Provisions		131	123	123
Total current liabilities		3,917	3,553	3,940
Non-current liabilities
Long term borrowings		68	68	111
Provisions		92	100	116
Deferred tax		420	412	274
Total non-current liabilities		580	580	501
Total liabilities		4,497	4,133	4,441
TOTAL NET ASSETS		10,254	10,026	9,355
Capital and reserves attributable to equity holders of the company
Share capital		4,504	4,504	4,504
Share premium reserve	3	502	502	502
Merger reserve	3	801	801	801
Foreign exchange difference reserve	3	(167)	(167)	(174)
Retained earnings	3	4,574	4,346	3,682
		10,214	9,986	9,315
Minority interest		40	40	40
TOTAL EQUITY		10,254	10,026	9,355

CONSOLIDATED CASH FLOW STATEMENTS
For the six months ended 31 October 2010

		Unaudited Six months ended 31 October 2010	Audited Year ended 30 April 2010	Unaudited Six months ended 31 October 2009
	Notes	£'000	£'000	£'000
Cash flow from operating activities
Net profit after tax from ordinary activities		352	1,409	753
Adjustments for: Depreciation and amortisation		274	526	269
Interest expense		32	89	23
Income tax expense		8	154	130
Share option charge		-	8	8
Operating profit before changes in working capital and provisions		666	2,186	1,183
(Increase)/decrease in trade and other receivables		(399)	2	(317)
Decrease/(increase) in inventories		57	201	(179)
Increase/(decrease) in trade and other payables		143	(550)	(371)
Cash generated from operations		467	1,839	316
Income taxes paid		(60)	(143)	(100)
Cash flows from operating activities		407	1,696	216
Cash flow from investing activities
Payment for property, plant and equipment		(59)	(239)	(117)
Sale of property, plant and equipment		-	13	-
Research and development expenditure		(611)	(1,003)	(452)
Intangible asset expenditure		-	(1)	-
Acquisition of subsidiary, net of cash acquired		(124)	(20)	-
		(794)	(1,250)	(569)
Cash flow from financing activities
Repayment of bank loans		(210)	(501)	(281)
Repayment of finance lease creditors		(68)	(138)	(67)
Dividend paid		(124)	(113)	(113)
Interest paid		(32)	(89)	(23)
		(434)	(841)	(484)
Decrease in cash and cash equivalents		(821)	(395)	(837)

NOTES TO THE ACCOUNTS

1.         BASIS OF ACCOUNTS

These condensed consolidated financial statements have been prepared in accordance with IAS 34, "Interim Financial Reporting", as adopted by the European Union. They do not include all disclosures that would otherwise be required in a complete set of financial statements and should be read in conjunction with the 2009 Annual Report. The financial information for the half years ended 31 October 2010 and 31 October 2009 does not constitute statutory accounts within the meaning of Section 434(3) of the Companies Act 2006 and is unaudited.

The annual financial statements of Newmark Security Plc are prepared in accordance with IFRSs as adopted by the European Union. The comparative financial information for the year ended 30 April 2010 included within this report does not constitute the full statutory accounts for that period. The statutory Annual Report and Financial Statements for 2010 have been filed with the Registrar of Companies. The Independent Auditors' Report on that Annual Report and Financial Statement for 2010 was unqualified, did not draw attention to any matters by way of emphasis, and did not contain a statement under 498(2) or 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 charge is affected by the effect of reliefs on research and development expenditure, and the use of losses brought forward.

3.         STATEMENT OF CHANGES IN EQUITY

	Share premium £'000	Merger  reserve £'000	Retained earnings £'000	Foreign exchange reserve £'000
At 1 May 2010	502	801	4,346	(167)
Dividends paid	-	-	(124)	-
Total comprehensive income for the period	-	-	352	-
As  at  31  October  2010	502	801	4,574	(167)

4.         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 450,432,316 shares (2009: 450,432,316).

5.         DIVIDENDS

No interim dividend is proposed (2009: Nil).

- Ends -

 

END

 

 

IR QFLFLBLFZFBQ