Interim Results

Newmark Security PLC
13 December 2006


                              NEWMARK SECURITY PLC

                                 INTERIM REPORT

                    for the six months ended 31 October 2006

                              CHAIRMAN'S STATEMENT

Turnover in the period for continuing businesses of £6,398,000 was 10 per cent.
ahead of the corresponding period last year £5,825,000.

The Group operating profit for the period was £509,000 (2005: £43,000 restated).
The Group operating profit before amortisation of goodwill and discontinued
operations was £717,000 (2005: £450,000) an improvement of nearly 60 per cent.
The Group has changed its accounting policy for share options to comply with
Financial Reporting Standard No 20, 'Share based payments'. The charge included
in the profit and loss account for the six months ended 31 October 2006 was
£19,000, and the results for the comparative periods have been restated
accordingly (six months ended 31 October 2005: £2,000; year ended 30 April 2006:
£21,000).

Earnings per share are shown as 0.04 pence per share (2005: loss per share 0.09
pence). However, as shown in note 5 to the accounts, the earnings per share
before goodwill amortisation, interest discount and losses of discontinued
operations were 0.12 pence (2005: 0.10 pence).

The four year earn out period relating to the acquisition of Grosvenor
Technology Limited expired on 31 October 2006, and we are delighted that the
vendors have achieved the maximum earn out under the acquisition agreement.
Payment is due by way of loan notes, with cash payment at the holders'
discretion but at the earliest 1 November 2007. Payment will be made from
forecast cash balances and a banking facility.

The £1,500,000 loan notes were settled in the period. The loan note holders
exercised their warrants to acquire ordinary shares in the Company, and
accordingly 75 million new shares were issued at par. The other £750,000 loan
notes were repaid.

The balance sheet reflects the settlement of the loan notes in the period. All
the trading companies are affected by the timing of large orders, and trade
debtors at the period end reflected high levels of sales in October. Stock
levels were also higher than normal due to purchases for orders expected to be
shipped in the second half. These last two factors had an adverse impact on the
net cash flow from operating activities in the period, but should be reversed
out in the second half.

ELECTRONIC DIVISION
Turnover 6 months 31 October 2006: £3,731,000 (2005: £3,161,000)
Operating profit 6 months 31 October 2006 £835,000 (2005: £483,000).

Turnover in the period for the division was 18 per cent. higher than the
corresponding period last year. Turnover in Grosvenor Technology was 20 per
cent. higher, and this resulted in an improvement in gross margin from 50 per
cent. to 56 per cent. due to the fixed element of development salaries included
within cost of sales. This increase in turnover was assisted by a few large
contracts. However, we believe that there are some larger contracts still to
come where our JANUS system has been specified. Due to the size and nature of
these contracts it is very difficult to determine when some will materialize
although they should transpire early to mid 2007.

The larger systems are all using the JANUS eSeries controller that can be
connected directly to a network anywhere in the world. The power and flexibility
of eSeries allows world-wide corporations to easily expand and maintain their
security environment and is the basis of all of the pending large contracts.
UL approvals in the United States for eSeries controllers and JANUS software is
taking longer than expected but we believe is on track for ratification in the
third quarter of 2007, after which JANUS can be sold into the USA and other
markets currently unavailable to us.

Turnover in Newmark Technology was 21 per cent. greater although gross margin
fell due to the mix of business. Sales have generally improved across the board
with Par-Sec, C-Cure and N-TEC access systems and indications suggest that this
will continue into next year as interest remains strong. There is a growing
interest from Simplex Fire (part of the Tyco Group) distributors in Russia which
we are addressing by translating the core N-TEC software into Russian.

Turnover in Custom Micro Products rose by 15 per cent. overall from £1,176,000
to £1,356,000 but within these figures there was a major change in the volumes
of sales to our three main geographic destinations. The recovery in sales to the
US has been maintained with turnover of £429,000 in the first half year compared
to £111,000 in the corresponding period last year. Unfortunately sales within
the UK and sales to Europe have fallen as has happened throughout the industry.
The gross margin percentage dropped slightly due to the costs of redeveloping
the existing product range, developing new products and changes in sales mix.

Custom Micro is changing it's emphasis from manufacturing/assembly to those
areas that we do best, design and technology. To eliminate the majority of
expensive hand assembly work and offer an improved and versatile product range,
we have re-designed all of the existing core products, namely the 2100 and 900
data collection terminals and the 700 series access controller. The new designs
offer shared ancillary components, backwards compatibility with outgoing
products, improved product specifications and greater reliability. External
manufacturing will commence in the first and second quarter 2007 respectively.

The new designs will be marketed as the RS Products (Revised Series) and,
coupled with outsourced production, will provide a cost saving of 30 per cent.
on manufacture. An important focus of the RS range is that standard equipment
can be held in-stock and despatched the same day that we receive a customer
order.

An early showing of the next generation or asp/'internet ready' data collection
terminals has been made to a select group of customers in the USA and Europe.
Interface design work is ongoing with these customers who we expect to place
their initial orders during the second or third quarter 2007. The leading edge
technology employed within this product will open new avenues for data
collection across world markets and is Custom Micro's entry into a rental and
recurring revenue model. The initial product will offer a secure internet hosted
data solution where a small group of select customers can trial the product
using their own server systems. After which, Custom Micro will offer a fully
hosted data service to be rented by customers on a month by month basis.

ASSET PROTECTION DIVISION
Turnover 6 months 31 October 2006: £2,667,000 (2005: £2,664,000)
Operating profit 6 months 31 October 2006 £183,000 (2005: £248,000).

Sales were virtually identical to last year but the product mix was
significantly different with higher sales of lower margin work. Quotations and
orders are 17 per cent. and 21 per cent. more than the same period last year and
that should result in improved sales and profitability for the second half of
the year.

Eclipse rising screen programmes have increased for long-term customers with
some returning to purchasing mode after years without investment in new
branches.

CounterShield sales have been slow in the first half but the programme for the
London Metropolitan Police that was expected last year has now started to flow.
The public service market for CounterShield is always slow until the second half
of their fiscal year and the company has over £400,000 of outstanding quotes in
this area, 45 per cent. more than at the same time last year.

RollerCash sales to the Post Office have been slow relative to last year due to
uncertainty about government funding for the rural sub-post office network.
Lloyds TSB awarded the company a £100,000 contract for trials in 8 branches of
their new retail delivery format. If successful and carried forward, this could
lead to a significant programme in 2007 and beyond, although the judgement of
success will depend on many factors not related to Safetell's product. The final
phase of RollerCash sales to Woolwich branches of Barclays, worth approximately
£300,000, has been secured and scheduled to be completed before the year end.

Eye2Eye Disability Access counter module sales, although small, were five times
last year with a £200,000 (2005: £50,000) backlog of outstanding quotes. New
formats of FlexiGlaze screens have been developed for hospital receptions and
for petrol stations with successful sales to Manchester City Hospital,
Sainsburys and Shell. The latter clients are expected to place repeat orders in
the second half.

Service and maintenance revenue in the period was £1,159,000 (2005: £1,011,000).
The separate service contracts with HBOS to maintain all locks for security
doors and all rising screens have been rolled into a new, single, 5-year
contract to run until 2011.

The start of the Abbey contract in January 2006 has been successful with
compliments received for customer service. The early months of the contract
involved disproportionate expenditure on recruitment and training that depressed
margin but that should recover in the second half. New clients have been
acquired for security related work, notably Shell for the service and repair of
night-pay hatches.

The second half is expected to generate 20 per cent. more sales than in the
first half and the added volume will increase labour efficiencies to improve
margin.

CONCLUSION
We are looking forward to the future with some confidence. We expect an
improvement in the asset protection division in the second half of the year,
whilst the prospects within the Electronic division are exciting. As reported
previously there are large contracts where the JANUS software of Grosvenor has
been specified, and the asp data collection terminals provide great potential
for the future.

CONSOLIDATED PROFIT AND LOSS ACCOUNT
for the six months ended 31 October 2006

                  Notes   Unaudited   Unaudited  Unaudited    Audited  Unaudited
                         Six months  Six months Six months Year ended Six months
                              ended       ended      ended                 ended
                         31 October  31 October 31 October   30 April 31 october
                               2006        2006       2006       2006       2005
                             Before  Goodwill &      Total      Total      Total
                         goodwill & exceptional            (Restated) (Restated)
                        exceptional       items
                              items
                              £'000       £'000      £'000      £'000      £'000

TURNOVER
Continuing                    6,398           -      6,398     11,839      5,825
operations
Discontinued                      -           -          -        320        323
operations

                              6,398           -      6,398     12,159      6,148

Cost of sales               (3,735)           -    (3,735)    (7,317)    (3,759)
Gross profit                  2,663           -      2,663      4,842      2,389

Administrative              (1,962)           -    (1,962)    (4,108)    (2,149)
expenses
Amortisation of                   -       (192)      (192)      (393)      (197)
goodwill

Administrative              (1,962)       (192)    (2,154)    (4,501)    (2,346)
expenses - total

OPERATING PROFIT/
(LOSS)
Continuing                      717       (192)        525        551        253
operations
Discontinued                   (16)           -       (16)      (210)      (210)
operations

                                701       (192)        509        341         43

Loss on closure/                  -           -          -      (192)      (149)
disposal of
subsidiaries

PROFIT/(LOSS)                   701       (192)        509        149      (106)
ON ORDINARY
ACTIVITIES BEFORE
INTEREST AND
TAXATION

Interest                         16           -         16         20         22
receivable
Interest-discount             (131)           -      (131)      (251)      (139)
charge on
deferred
consideration
Interest payable               (65)           -       (65)      (300)       (47)

PROFIT/(LOSS) ON                521       (192)        329      (382)      (270)
ORDINARY
ACTIVITIES BEFORE
TAXATION
Tax on ordinary     2         (175)           -      (175)       (58)       (40)
activities

PROFIT/LOSS FOR                 346       (192)        154      (440)      (310)
THE YEAR AFTER
TAX

Minority interest                 -           -          -          -          -

                                346       (192)        154      (440)

                                                     Pence      Pence      Pence
Earnings/(loss)     5                                 0.04     (0.11)     (0.09)
per share - basic
and diluted

CONSOLIDATED BALANCE SHEET
as at 31 October 2006

                        Notes       Unaudited       Audited       Unaudited
                              31 October 2006 30 April 2006 31 October 2005
                                        £'000    (Restated)      (Restated)
                                                      £'000           £'000
FIXED ASSETS
Intangible assets                       6,247         6,439           6,665
Tangible assets                           981           941             872
                                        7,228         7,380           7,537
CURRENT ASSETS
Stocks                                  1,482         1,256           1,330
Debtors                                 2,889         2,471           1,928
Cash at bank and in                     1,148         1,373           1,300
hand
                                        5,519         5,100           4,558

CREDITORS: amounts                    (3,487)       (4,664)         (3,019)
falling due within one
year
NET CURRENT ASSETS                      2,032           436           1,539
TOTAL ASSETS LESS                       9,260         7,816           9,076
CURRENT LIABILITIES

CREDITORS: amounts                    (4,218)       (3,670)         (5,123)
falling due after more
than one year
Provisions for                          (194)         (208)           (177)
liabilities and charges
Accruals and deferred                   (881)         (891)           (764)
income
NET ASSETS                              3,967         3,047           3,012
CAPITAL AND RESERVES
Called up share capital     3           4,490         3,740           3,617
Share premium               4             493           493             432
Merger reserve              4             801           801             801
Share based                 4              40            21               2
compensation reserve
Profit and loss reserve     4         (1,921)       (2,072)         (1,903)
SHAREHOLDERS' FUNDS                     3,903         2,983           2,949
Minority interest                          64            64              63
                                        3,967         3,047           3,012

CONSOLIDATED CASH FLOW STATEMENT
for the six months ended 31 October 2006

                                   Unaudited       Audited        Unaudited
                            Six months ended    Year ended Six months ended
                             31 October 2006 30 April 2006  31 October 2005
                                       £'000         £'000            £'000

NET CASH INFLOW FROM                     117           850              151
OPERATING ACTIVITIES
RETURNS ON INVESTMENT AND
SERVICING OF FINANCE
Interest received                         16            20               22
Interest paid                           (65)         (101)             (47)
NET CASH OUTFLOW FROM                   (49)          (81)             (25)
RETURNS ON INVESTMENTS AND
SERVICING OF FINANCE
TAXATION                                (21)         (423)            (201)
CAPITAL EXPENDITURE AND
FINANCIAL INVESTMENT
Purchase of tangible fixed             (216)         (469)            (212)
assets
Receipts from sale of                      -            24                -
tangible fixed assets
NET CASH OUTFLOW FROM                  (216)         (445)            (212)
CAPITAL EXPENDITURE AND
FINANCIAL INVESTMENT
ACQUISITIONS
Purchase of subsidiary                     -       (1,925)          (1,825)
undertakings
Costs relating to                          -          (12)                -
acquisition made in
previous year
Net cash acquired on                       -             -                -
purchase of subsidiary
undertakings
NET CASH OUTFLOW ON                        -       (1,937)          (1,825)
ACQUISITIONS
DISPOSALS
Costs related to closure/                  -          (11)                -
sale of subsidiaries
Cash disposed of with                      -          (14)             (11)
business
NET CASH OUTFLOW FROM                      -          (25)             (11)
DISPOSALS
NET CASH OUTFLOW BEFORE USE            (169)       (2,061)          (2,123)
OF LIQUID RESOURCES AND
FINANCING
FINANCING
New finance loans                         73           365              247
Repayment of loans                     (136)         (106)             (29)
NET CASH (OUTFLOW)/INFLOW               (63)           259              218
FROM FINANCING
(DECREASE) IN CASH                     (232)       (1,802)          (1,905)

NOTES TO THE ACCOUNTS

1. BASIS OF ACCOUNTS
The unaudited interim figures for the six months ended 31 October 2006 have been
prepared on a basis consistent with the accounting policies disclosed in the
Group's 2006 Report and Accounts with the exception of the introduction of
Financial Reporting Standard No. 20, 'Share based payments' and do not
constitute statutory accounts within the meaning of Section 240 of the Companies
Act 1985. The results for the year ended 30 April 2006 are an abridged version
of the full accounts, which received an unqualified audit report and have been
filed with the Registrar of Companies.

The Group has changed its accounting policy for share options granted after 7
November 2002 in accordance with Financial Reporting Standard No. 20, 'Share
based payments'. The charge included in the profit and loss account for the six
months ended 31 October 2006 was £19,000. The results for the comparable periods
have been restated accordingly (six months ended 31 October 2005: £2,000; year
ended 30 April 2006: £21,000).

2. TAXATION
The tax charge is disproportionate to the profit for the period due to the
effect on profits of items not deductible for tax purposes, and the use of
losses brought forward.

3. SHARE CAPITAL
During the period, the following shares were issued:

                                          Number of shares    Share capital
                                                                      £'000

Shares in issue at 1 May 2006                  373,957,816        3,739,578
Share issues 1p per share                       75,000,000          750,000
Shares in issue at 31 October 2006             448,957,816        4,489,578

The shares issued in the period related to the exercise of warrants by loan note
holders to subscribe for ordinary shares of 1p each in the Company.

4. SHARE PREMIUM AND RESERVES

            Share premium          Profit & loss          Merger      Share based        Total
                    £'000                reserve         reserve     compensation        Share                     
                                       (restated)          £'000          reserve      premium 
                                           £'000                       (Restated) and reserves
                                                                            £'000        £'000

At 1 May              493                 (2,072)            801               21        (757)
2006
Retained                -                     154              -               19         173
profit for
the period
Exchange                -                     (3)              -                -          (3)
differences
on foreign
currency
investments
As at 31              493                 (1,921)            801               40        (587)
October
2006

5. EARNINGS PER SHARE
                                                      Pence per share £'000

Profit after taxation and minority interest                      0.04   154
Goodwill amortisation                                            0.05   192
Discount charge on deferred consideration                        0.03   131
Losses of discontinued operations                                   -    16
Earnings before goodwill amortisation, interest                  0.12   493
discount, and losses of discontinued operations

The profit per share has been calculated based on the weighted average number of
shares in issue during the period, which was 414,311,077 shares (2005:
361,755,016).

                         Unaudited Six      Audited Year    Unaudited Six
                          months ended    ended 30 April     months ended
                       31 October 2006              2006  31 October 2005
                                 Total             Total            Total
                                 Pence             Pence            Pence

Earnings per share 
before amortisation of 
goodwill, losses of 
discontinued operations,
and discount charge on
deferred consideration            0.12              0.22             0.10

6. DIVIDENDS
No interim dividend is proposed (2005: Nil).

7. A copy of the interim report has been sent to shareholders and copies are
available for inspection at the Company's registered office, 57 Grosvenor
Street, London W1K 3JA, during normal office hours, Saturdays, Sundays and bank
holidays excepted, for one month.



                      This information is provided by RNS
            The company news service from the London Stock Exchange