Final Results

Newmark Technology Group PLC 29 October 2001 PRELIMINARY RESULTS FOR THE YEAR ENDED 30 APRIL 2001 For further, please contact: Maurice Dwek (Chairman) or Brian Beecraft (Finance Director) Tel: 01737 788 800 OVERVIEW We have had another extremely busy year the highlight of which was the successful flotation of our Dutch subsidiary, Vema N.V., on the Alternative Investment Market ('AIM') in May 2001 giving it a market capitalisation of nearly £6million at that time. The Group received special publicity, as Vema was the first company to list Global Depository Receipts ('GDR's') on AIM, as well as being the first Dutch issuer to float on the market. The GDR allows investors to purchase foreign shares in their domestic market and enables the issuing company to raise capital in overseas markets instead of only its home market. The result of the flotation was that our interest in Vema was reduced to 51 per cent and so the company will continue to be consolidated within our results. Although this process was expensive in terms of time and effort on our part, as well as costly in terms of the services of our professional advisors, I believe that this will assist Vema to develop its product range both organically and through acquisitions, and by targeting new geographical markets. We further believe that the valuation placed by the market on Vema demonstrates that the market capitalisation of the Newmark Group does not reflect the underlying value of the businesses. FINANCIAL RESULTS The loss before amortisation of goodwill and taxation for the year was £ 504,000 (2000 :profit £160,000). Turnover for the year was £12.0m (2000:£9.9 million). The results include a full year's contribution from Safetell, which was acquired in February 2000, compared to only two months in the preceding year. The reasons for the main variations in the results for the various divisions are set out below. ELECTRONIC DIVISION The access control market in the UK was flat during the year, most noticeably with a slow fourth quarter where projects which had originally been planned were deferred by our customers. In addition sales were also affected by the purchasing commitment of Lik On Security in Hong Kong being rescheduled so that shipments are being made over a longer period. The emphasis in the year has been on broadening our product offering which has included the provision of a new software package for the latest hardware controller, AC1. This strategy was expanded to provide a full hardware and software product family to support the low-end system requirements of our dealer base and complement the high end product already on offer.. The introduction of MidiCE/ MidiPlus in the fourth quarter to accompany the AC1 family of control hardware offered the company a new product platform to aggressively target the smaller system market. Our latest Omni5 software, aimed at the mid range on-line systems, was released in May 2001. Furthermore a new dealer plan with more focussed technical support and promotional plans puts the company in a stronger and more flexible position to satisfy a wider range of installers and dealers. Since the launch of this new program and product offering, this has resulted in new dealers with new projects. Newmark Technology moved into the new financial year better prepared in both product offering and support activities with additional products, namely video licence plate recognition, and digital CCTV transmission and recording. Newmark Technology Inc., was formed in the US last year to promote our proprietary ParSec systems designed for asset tracking solutions. We have established our sales and marketing operation in the year and substantial amounts of time and effort have been invested in building long term relationships with the major security companies. The marketing and sales activities were hampered by a new requirement to obtain Underwriters Laboratories ('UL') certification (US approval for access control, asset tagging and alarm systems). Consequently, the sales activities were put on hold pending this certification. I am pleased to report that this has now been obtained in May 2001 but the direct cost of the US operation for the year was £359,000. Although we still remain confident concerning the future of this part of our business, steps have been taken to reduce the level of overhead until the revenue stream has been firmly established. Our major target customer in the USA is ADT Inc., which is by far the largest security installation company in North America. From the outset it had been agreed initially to supply ADT via two distribution routes, Northern Computers Inc., ('NCI') (a subsidiary of the Honeywell Group) and Casi Rusco ( a subsidiary of Interlogix Group). NCI were quick to adopt the product but due to a number of factors, primarily a major restructuring within the Honeywell Group, resulted in only minimal sales to date. Casi Rusco waited until the UL certification was obtained and is now working closely with ADT to open up the market. Sales and technical programs are in progress and we anticipate increased business from them in the second half of the year. We are also targeting other OEM's and we are working with the Ademco Group, Hirsch Electronics, Doortek and others. We have succeeded in obtaining Federal Communication Commission ('FCC') approval for our Personnel ID tag and carried out further modifications to the antenna. The product has been exhibited with our customers at the major exhibitions of ISC and ASIS. SECURE LOCKING DIVISION Vema has developed a significant position in the Dutch market offering customers a complete security locking solution. The company provides a consultancy service in order to meet the customers specific requirements which involves sales and support staff liaising at all stages of a system implementation. These services attract a large amount of repeat business and, together with the wide product range, enable the company to maintain its ability to generate both profits and cash. Vema Belgium, which started trading after the last year end in May 2000, was set up to replicate the successful formula of the Dutch operation. From a start up situation, the level of activity has increased over the year and the company is now profitable on a monthly basis. ASSET PROTECTION DIVISION Until 1999, Drion had focussed only on the Belgian banking sector but since then has embarked on an export policy which resulted in two major export contracts to Algeria together with some smaller ones in Tunisia and Albania. The income from the export market has enabled us to partly offset the fall in the home banking sector caused by the ongoing consolidation of companies within that sector. During the year, we delivered the final portion of the second contract to Algeria and are awaiting the release of the third tender. During the year, we embarked on a new initiative to open up the commercial sector, for example museums, embassies etc., which has resulted in a very encouraging response. We are currently bidding on several major projects and we aim to develop this sector further. Safetell's historical core business activity of Eclipse rising screens was below average for the first six months due to design changes by some of our principal customers and proposed mergers in the retail financial market. However, tight controls on direct and indirect costs improved margins and maintained profitability. Sales increased to maintain a steady level in the early months of 2001 and have shown a noticeable upturn since March. A major export order to the US was secured and delivered before the year end with the possibility of repeat orders in the current year. This is a new market for us and presents exciting possibilities. Although sales in the year were below expectations, the RollerCash product line continues to win new business with customer orders secured from the Derbyshire, Nationwide and Staffordshire Building Societies and good prospects for other new customers. As I reported in our interim statement, Safetell secured The Post Office contract for the supply of cash handling systems for all open plan offices until July 2003. The initial sales under this contract were completed before the end of the financial year and we anticipate an upturn in business under this contract in 2002. The InterScreen and CounterShield product lines retained their market share as niche products with increasing demand from a wider customer base. Sales of these product lines were substantially ahead of plan. Complementary product lines for fixed glazing solutions to add value to product installation contracts were designed, tested and implemented during the year. The requirements of the Disability Discrimination Act for the providers of public services to make adequate provision for the disabled, presents a major opportunity as reception and cash counters are replaced. Safetell has developed and launched a new product line ' Eye 2 Eye' to address this specific market and the first installation was carried out in September 2001 for ARRIVA Trains Merseyside. BALANCE SHEET AND CASH FLOW The Group balance sheet has changed significantly in the year due to; -the reclassification of the bank loan for the original acquisition of Safetell to current liabilities (£1,333,000 at 30 April 2001) as this has been repaid from the proceeds of the Vema flotation after the year end -the inclusion in current liabilities of the last instalment of the consideration for Drion of £817,000 which is payable in April 2002. The balance sheet also takes no account of the proceeds of £2.88m (before expenses) from the subscription by new shareholders of Vema received in May 2001. APPOINTMENT OF NEW NON-EXECUTIVE DIRECTOR As we noted in the interim report, Michel Rapoport has joined the Board as a non-executive director bringing substantial experience of the security industry. Michel was President and Chief Executive Officer in the USA of Mosler Inc.; a full service manufacturer and integrator of security systems for banking, industrial and commercial organisations. Prior to that Michel was with Pitney Bowes and we are delighted to welcome him to the Group. EMPLOYEES On behalf of the Board, I would like to thank all the employees in the Group for their continuing efforts on behalf of the Company. THE FUTURE We have been disappointed by the length of time that it has taken to develop the expected revenue stream in the USA and the state of the market in the UK during the year. With the UL certification, we have made our first shipments in the USA in the first half of the current year and would hope to build upon this in the second half. The UK security market remained flat in the first few months of the current year but the interest in our Omni 5 software is increasing all the time and we look forward to brighter times. The Asset Protection and Secure Locking divisions remain profitable and cash generative businesses with solid bases to produce organic growth in existing and new product and geographical markets. The Vema flotation was a success, and we will continue to seek opportunities to realise value for our shareholders. Current events throughout the world, combined with the state of the stock markets and fears over the economy are obviously of concern. However the events of September 11 also emphasise the urgent need to increase security controls in almost every sector of the market. Although we do not believe that this will translate to immediate additional business, security companies such as ourselves should benefit in the medium term as companies review their security requirements. I have confidence in the Group that we have established from our own developments and acquisitions, and remain optimistic about the future.. NEWMARK TECHNOLOGY GROUP PLC Audited results for the year ended 30 April 2001 Consolidated profit and loss account Year ended Year ended 30 April 30 April 2001 2000 (audited) (audited) £000 £000 Notes Turnover 3 12,049 9,863 Cost of sales (7,037) (5,548) --------- --------- Gross profit 5,012 4,315 Administrative expenses pre amortisation of goodwill (5,310) (4,044) Amortisation of goodwill (116) (70) --------- ---------- Administrative expenses-total (5,426) (4,114) --------- ---------- Operating (loss)/profit (414) 201 Interest payable (206) (111) ------- ------- (Loss)/profit on ordinary activities before taxation (620) 90 Tax on (loss)/profits on ordinary activities 4 (284) (320) -------- ------- Amount withdrawn from reserves (904) (230) ===== ==== Pence Pence Loss per share 5 (0.8) (0.2) ==== ==== STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES Loss for the financial year (904) (230) Exchange difference on translation of net assets and results of subsidiary undertakings 58 (158) ------- ------- Total recognised gains and losses relating to the (846) (388) year ==== ==== NEWMARK TECHNOLOGY GROUP PLC Audited results for the year ended 30 April 2001 Consolidated balance sheet 30 April 30 April 2001 2000 (audited) (audited) Notes £000 £000 Fixed Assets Intangible assets 2,358 2,480 Tangible assets 1,483 1,244 ------- ------- 3,841 3,724 ------- ------- Current Assets Stocks 1,656 1,260 Debtors 2,454 2,628 Cash at bank and in hand 652 759 ------- ------- 4,762 4,647 Creditors:amounts falling due within one year (5,466) (3,186) --------- --------- Net current (liabilities)/assets (704) 1,461 --------- --------- Total assets less current liabilities 3,137 5,185 Creditors:amounts falling due after more than one year (665) (2,544) Provisions for liabilities and charges (403) (419) -------- -------- Net assets 2,069 2,222 ===== ===== Capital and reserves Called up share capital 6,060 5,510 Share premium 5,194 5,051 Profit and loss reserve (9,185) (8,339) ------- ------- Equity shareholders' funds 6 2,069 2,222 ===== ===== NEWMARK TECHNOLOGY GROUP PLC Audited results for the year ended 30 April 2001 Consolidated cash flow statement Year Year ended ended 30 April 30 April 2001 2000 (audited) (audited) Notes £000 £000 Net cash inflow from operating activities 7 236 818 Net cash outflow from returns on investments and servicing of finance (206) (111) Taxation (517) (309) Net capital expenditure and financial investment (402) (180) Net cash outflow from acquisitions - (1,280) Net cash inflow from financing 698 1,247 ------ ----- (Decrease)/increase in cash (191) 185 ==== === Reconciliation of net cash flow to movement in net debt (Decrease)/increase in cash from cash flows in (191) 185 year Cash inflow from increase in debt (5) (1,247) ------ -------- Change in net debt arising from cashflows (196) (1,062) Effect of foreign currency retranslations (21) 31 ------- -------- Movement in net debt in year (217) (1,031) Net debt at start of year (1,456) (425) --------- --------- Net debt at end of year (1,673) (1,456) ===== ===== 1. The financial information contained in this report does not constitute full statutory accounts within the meaning of Section 240 of the Companies Act 1985. The comparative figures for the year ended 30 April 2000 are extracted from the full financial statements for that year which have been filed with the Registrar of Companies; the auditors issued an unqualified report thereon. Copies of the 2001 Report and Accounts are being 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. 2. The 2001 financial statements have been prepared in accordance with the accounting policies applied in previous years. 3. The geographical analysis of turnover is as follows: 2001 2000 2001 2000 By origin By origin By destination By destination £000 £000 £000 £000 UK 4,860 2,970 4,306 2,127 Europe 7,189 6,893 6,727 6,519 Rest of the World - - 1,016 1,217 -------- ------- -------- ------- Total 12,049 9,863 12,049 9,863 ===== ===== ===== ===== 4. The tax charge comprises: 2001 2000 £000 £000 UK Corporation taxation - - Overseas corporation taxation (35/40%) 273 309 Deferred taxation 11 11 --- --- 284 320 === === 5. The calculation of loss per ordinary share is based on a loss for the year after tax of £904,000 (2000: £230,000) and the weighted average number of shares in issue during the year of 116,625,619 (2000: 110,208,952). 6. The movement in shareholders' funds may be reconciled as follows: 2001 2000 £000 £000 Loss for the financial year (904) (230) New share capital subscribed (net of issue costs) 693 - Exchange difference on translation of net assets and results of subsidiary undertakings 58 (158) ------- ------- Net reduction to shareholders' funds (153) (388) Opening shareholders' funds 2,222 2,610 ------- ------- Closing shareholders' funds 2,069 2,222 ==== ==== 7. Reconciliation of operating profit to operating cash flow 2001 2000 £000 £000 Operating (loss)/profit (414) 201 Depreciation and amortisation 352 261 (Increase)/decrease in stocks (338) 125 Decrease in debtors 293 1,016 Increase/(decrease) in creditors 343 (785) ---- ---- Operating cash flow 236 818 === === 8. Analysis of net debt April 2000 Cash flow Exchange movements April 2001 £000 £000 £000 £000 Cash at bank and in hand 759 (135) 28 652 Overdrafts (58) (56) (3) (117) ------ ------ --- ---- 701 (191) 25 535 ------ ------ --- ---- Debt due after one year (1,830) 1,203 (38) (665) Debt due within one year (327) (1,208) (8) (1,543) -------- -------- ------ --------- (2,157) (5) (46) (2,208) -------- --------- ------ --------- (1,456) (196) (21) (1,673) ===== ====== ==== ======

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