Preliminary Results

Newmark Technology Group PLC 29 August 2000 PRELIMINARY RESULTS CHAIRMAN'S STATEMENT Overview I stated in my report last year that the Group would build upon the solid foundations that had been established in the previous two years, and that we would continue to grow both organically and by acquisition. I was delighted to announce in our interim report that we had completed the acquisition of Safetell International Limited. The Safetell Group specialises in the provision and maintenance of physical security equipment for the protection of staff at transaction counters primarily in banking, retail and public authorities. The main customers for this product are building societies in the UK. At the end of April, we also established Vema Belgium which, like our existing subsidiary company Vema in Holland, operates in the area of electromechanical locking. The company also has a distribution agreement within Belgium for EffEff, the branded electronic lock. The year to 30 April 2000 has also been one of consolidation and reorganisation. In order to provide a clearer focus, the Group's activities have been restructured during the year into three operational divisions: Asset Protection, Secure Locking and Electronic, which incorporate our subsidiary companies as follows: Asset Protection Secure Locking Electronic Ateliers Drion Vema (Holland) Newmark Technology (UK) (Belgium) Safetell Vema (Belgium) Newmark Technology (USA) International (UK) Newmark Security Products (UK) These divisions offer a comprehensive range of products and services which are aimed at ensuring safety of personnel and security of assets. I am delighted to inform you of our distribution arrangement for ParSec, our proprietary access control and access tracking system, with ADT, a subsidiary of Tyco Inc. ADT is the leading electronic security services company in the USA with more than 220 sales and service offices. Newmark is collaborating with ADT both in the UK and the USA to market ParSec through ADT's extensive distribution networks and we are very positive about the effect of this arrangement on expected sales of ParSec systems. Financial results and developments Profit before taxation was £160,000 before amortisation of goodwill compared to £218,000 in the preceding year on a restated basis. Turnover for the year was £9.9 million (1999: £8.0 million). The results include a two month contribution from Safetell, plus a full year's profits from Drion compared to two weeks in the preceding year. During the year, your Board decided to change the accounting policy in respect of development costs. Previously expenditure had been capitalised when incurred to be amortised later against relevant income streams from those projects. The Board has now decided to adopt what it feels is a more prudent policy of writing off development costs as incurred. The prior years figures in the accounts have been restated on the same basis. The amount of such expenditure written off in the year under review was £142,000. The results have also been affected by the strength of sterling on the translation of the results of our operations in Holland and Belgium. The profit before tax for the year would have been £85,000 greater if the exchange rates for 1998/99 had continued to apply. Asset Protection Division This division specialises in physical security equipment for the protection of staff at transaction counters, including pay boxes, glass security screens and doors, and safes. As I commented in the interim report, Drion's main customers historically have been blue chip companies in the Belgian banking sector. However, due to the consolidation within the banking sector, activity has been lower than anticipated at the time of acquisition. There are signs of increased activity in the current year. I also reported at the interim that a further major contract was expected to be completed in Algeria during the second half of the year. However, due to changes in the customer's requirements, a substantial proportion of the contract was not completed and shipped until after the year end. As the work involved represents short term contracts, profit is not taken until the work is completed and installed. These contracts will be completed and installed, and the profits thereon included in the results for the current year. We believe that there will be further export opportunities in the future. Safetell has traded satisfactorily in the two months since acquisition. The company has major blue chip customers in the financial sector in the UK, and is also benefiting from the increased range of products in its portfolio. The addition of Safetell, based in the UK, is already starting to produce opportunities to sell Drion's secure cash handling systems into UK banking clients. In particular, we are now able to provide the alternative solutions of rising screen or fixed glass security to our customers in the UK. We will also explore further the possibility of selling rising screens to mainland Europe. Secure Locking Division This division supplies sophisticated electronic locking systems to a wide variety of high security applications including prisons, hospitals, museums and government offices. In addition to our distribution centres in the UK and the Netherlands, during the year we opened a third centre in Brussels to provide improved access to the Belgian market. Vema Holland has maintained its ability to generate substantial profits and cash, and with the expansion into the Belgian market, we expect further growth this year. Vema Belgium will adopt the successful model for operations used in Holland. The Board believes that this will be a successful new venture, building upon the existing formula of Vema Holland. Electronic Division This division provides integrated security management systems designed to control access of personnel and track asset movements. An updated version of our Omni 4 software access control has been released on the market with substantial improvements over the previous release. We are also developing new packages of the product targeted at different markets, and we believe that this will generate additional revenue. Our proprietary ParSec systems are tailored to provide state-of-the-art integrated asset tracking solutions for the commercial, government and industrial market places. Growth in turnover has been held back until now due to technical and supply problems which have now been overcome. Federal Communications Commission approval has now been obtained in the USA, and with the distribution arrangements in place with ADT, we are expecting sales of ParSec to increase steadily in both the UK and USA. Initial orders have been received and the potential market for this product is very substantial. Balance sheet and cash flow Intangible assets, comprising purchased goodwill, have increased by £1.3 million in the year following the acquisition of Safetell. Purchased goodwill has been capitalised in accordance with Financial Reporting Standard 10, and your Board has decided that this should be amortised over 20 years. Trade debtors have fallen significantly over the year despite the acquisition of Safetell. This primarily reflects the realisation of the exceptionally high level of sales in the last few months of the previous year, as well as the success of our efforts in improving working capital controls and the impact of exchange rates. The increase in borrowings represents the loan for the financing of the acquisition of Safetell. The cash flow statement reflects these movements with net cash inflow from operating activities increasing from £0.2 million in 1999 to £0.8 million for the year just ended. The Board has decided that it would not be prudent to declare a dividend for the year ended 30 April 2000, but will review this policy during the current year. Employees I am pleased to welcome the staff of Safetell to the Group, together with other new employees of our subsidiaries. On behalf of the Board, I wish to congratulate all staff for the progress made in their own companies during the year and to thank them for their hard work. The Future Each division is now focussed on organic expansion of its operations. Asset Protection and Secure Locking are sound, cash generative businesses. The companies have a strong reputation in their markets and a quality client base, providing a solid foundation from which to achieve good organic growth in both existing and new geographical markets. The Electronic division has required much effort and investment to date, however I feel that in ParSec we have now achieved the successful development of a unique and proprietary system for access control and asset tracking. We are very excited about the potential for ParSec and with the distribution strength of ADT behind this product we believe that it will become an increasingly important part of Newmark's operations. Overall, I am very optimistic about the current year. The significant investment we have made to date both internally in product development and externally in strategic acquisitions is starting to reap rewards and the difficulties which have inhibited our progress in previous years are now overcome. The refocussing and strengthening of our Asset Protection, Secure Locking and Electronic divisions have positioned the Group well for the coming year. We look forward to the future with confidence and anticipate strong growth and value creation. MAURICE DWEK Chairman NEWMARK TECHNOLOGY GROUP PLC Unaudited results for the year ended 30 April 2000 Consolidated profit and loss account Year ended 30 Year ended 30 April 2000 April 1999 (restated) (unaudited) (audited) Notes £000 £000 Turnover 3 Continuing operations 9,303 7,729 Acquisitions 560 276 --------- --------- 9,863 8,005 Cost of sales (5,548) (4,931) --------- --------- Gross profit 4,315 3,074 --------- --------- Administrative expenses before amortisation of (4,044) (2,760) goodwill Amortisation of goodwill (70) - --------- --------- Administrative expenses-total (4,114) (2,760) --------- --------- Operating profit 201 314 --------- --------- --------- --------- Continuing operations 157 243 Acquisitions 44 71 --------- --------- Interest payable (111) (96) --------- --------- Profit on ordinary activities before taxation 90 218 Tax on ordinary activities 4 (320) (282) --------- --------- Amount withdrawn from reserves (230) (64) ========= ========= Pence Pence Earnings per share 5 (0.2)p (0.1)p STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES Loss for the financial year (230) (64) Currency translation difference on foreign currency net investments (158) 18 --------- --------- Total recognised gains and losses relating to the year 2 (388) (46) ========= ========= NEWMARK TECHNOLOGY GROUP PLC Unaudited results for the year ended 30 April 2000 Consolidated balance sheet 30 April 30 April 2000 1999 (restated) Notes (unaudited) (unaudited) £000 £000 Fixed Assets Intangible assets 2,480 1,152 Tangible assets 1,244 1,300 ---------- ---------- 3,724 2,452 ---------- ---------- Current Assets Stocks 1,260 1,316 Debtors 2,628 3,417 Cash at bank and in hand 759 912 ---------- ---------- 4,647 5,645 Creditors:amounts falling due within one year (3,047) (3,519) ---------- ---------- Net current assets 1,600 2,126 ---------- ---------- Total assets less current liabilities 5,324 4,578 Creditors: amounts falling due after more than one year (2,591) (1,825) Provisions for liabilities and charges (511) (143) ---------- ---------- Net assets 2,222 2,610 ========== ========== Capital and reserves Called up share capital 5,510 5,510 Share premium 5,051 5,051 Profit and loss reserve (8,339) (7,951) ---------- ---------- Equity shareholders' funds 6 2,222 2,610 ========== ========== NEWMARK TECHNOLOGY GROUP PLC Unaudited results for the year ended 30 April 2000 Consolidated cash flow statement Year ended 30 Year ended April 2000 30 April 1999 (restated) (unaudited) (audited) Notes £000 £000 Net cash inflow from operating activities 7 818 195 Net cash outflow from returns on investments and servicing of finance (111) (96) Taxation (309) (729) Net capital expenditure and financial investment (180) (143) Net cash outflow from acquisitions (1,280) (923) Net cash inflow from financing 1,247 2,302 ---------- ---------- Increase in cash 185 606 ========== ========== Reconciliation of net cash flow to movement in net debt Increase in cash in year 185 606 Cash inflow from increase in debt (1,247) (549) ---------- ---------- Change in net debt arising from cashflows (1,062) 57 Exchange movements 31 (4) ---------- ---------- Movement in net debt in period (1,031) 53 Net debt at start of year (425) (478) ---------- ---------- Net debt at end of year (1,456) (425) ========== ========== 1. The financial information for the year ended 30 April 1999 does not comprise full accounts. The results have been extracted from the published accounts which have been filed with the Registrar of Companies; the auditors issued an unqualified report thereon. 2. The financial statements have been prepared in accordance with the accounting policies applied in previous years with the exception of intellectual property rights and development costs. In previous years these costs were capitalised and depreciated/amortised over the useful life of those costs. Intellectual property rights and development costs are now written off to the profit and loss account as incurred. This change of accounting policy has been accounted for as a prior year adjustment. The results for the previous year have been restated accordingly and the reported loss for the prior year reduced by £284,000. 3. The geographical analysis of turnover is as follows: 2000 1999 2000 1999 By By By By origin origin destination destination £000 £000 £000 £000 UK 2,970 2,618 2,127 1,556 Europe 6,893 5,387 6,519 5,492 Rest of the World - - 1,217 957 -------- -------- -------- -------- Total 9,863 8,005 9,863 8,005 ======== ======== ======== ======== 4. The tax charge comprises: 2000 1999 £000 £000 UK Corporation taxation - - Overseas taxation (35/40%) 320 290 Overseas taxation prior year - (8) -------- -------- 320 282 ======== ======== 5. The calculation of earnings per ordinary share is based on a loss for the year after tax of £230,000 (1999:loss £64,000) and the weighted average number of shares in issue during the year of 110,208,952 (1999:78,624,067). 6. The movement in shareholders' funds may be reconciled as follows: 2000 1999 (Restated) £000 £000 Loss for the financial year (230) (64) New share capital subscribed (net of issue costs) - 2,353 Goodwill charged to reserves - (115) Currency translation differences on foreign currency net investments (158) 18 -------- -------- Net addition to shareholders' funds (388) 2,192 Opening shareholders' funds 2,610 418 -------- -------- Closing shareholders' funds 2,222 2,610 ======== ======== 7. Reconciliation of operating profit to operating cash flow 2000 1999 (Restated) £000 £000 Operating profit 201 314 Expenditure in year financed by Share issues - 100 Depreciation and amortisation 261 100 Decrease/(increase) in stocks 125 (52) Decrease/(increase) in debtors 1,016 (1,012) (Decrease)/increase in creditors (785) 745 -------- -------- Operating cash flow 818 195 ======== ======== 8. Analysis of net debt April 1999 Cash flow Exchange April 2000 movements £000 £000 £000 £000 Cash at bank and in hand 912 (28) (125) 759 Overdrafts (310) 213 39 (58) -------- -------- -------- -------- 602 185 (86) 701 -------- -------- -------- -------- Debt due after one year (883) (1,092) 98 (1,877) Debt due within one year (144) (155) 19 (280) -------- -------- -------- -------- (1,027) (1,247) 117 (2,157) -------- -------- -------- -------- (425) (1,062) 31 (1,456) ======== ======== ======== ======== 9. Copies of the 2000 Report and Accounts will be sent to shareholders in due course. Further copies will be available from the registered office of Newmark Technology Group PLC, 21/23 Ormside Way, Redhill, Surrey RH1 2NT. FOR FURTHER INFORMATION: NEWMARK TECHNOLOGY GROUP PLC BRIAN BEECRAFT TEL. 01737 788800 SHANDWICK INTERNATIONAL JULIET CLARKE TEL. 0207 3290096

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