REG - Newmark Security PLC - Final Results
23/01/2023 07:00
For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20230123:nRSW4732Na&default-theme=true
RNS Number : 4732N Newmark Security PLC 23 January 2023
The information contained within this announcement is deemed by the Company to
constitute inside information pursuant to Article 7 of EU Regulation 596/2014
as it forms part of UK domestic law by virtue of the European Union
(Withdrawal) Act 2018 as amended.
Newmark Security plc
("Newmark", the "Company" or the "Group")
Final Results
Creating the next generation of safe workplace ecosystems
Newmark Security plc (AIM: NWT), a leading provider of electronic and physical
security systems, is pleased to announce its audited results for the year
ended 30 April 2022 ("FY 2022)".
Financial Highlights:
· Revenue up 8.4% to £19.1m (2021: £17.7m)
· Gross profit margin decreased by 4% pts to 33.5% (2021: 37.5%)
· EBITDA loss of £0.03m (2021 EBITDA profit: £1.0m)
· Operating loss of £1.2m (2021: £0.03m)
· Loss before tax of £1.2m (2021: £0.1m)
· Loss after tax of £0.8m (2021 profit: £0.2m)
· Loss per share of 0.32 pence (2021: earnings per share 0.03
pence)
· Investments in research and development £0.76m (2021: £0.74m)
· Net assets of £7.6m (2021: £8.2m)
Key business highlights:
· Well-placed to scale our business driven by product innovation,
accessibility and capacity
· Evolution of our business model increasing traction in North
America (HCM business up by 19%)
· HCM annual recurring revenues increased by over 600% year-on-year
to £0.9m in April 2022
· Setting the right foundations for executing our Strategic
Business Plan
· Delivering recurring income and optimising product mix provides
for sustainable growth
· Focus on cost management initiatives and product innovation
· Enhancing our product offering and end-to-end solutions to drive
customer base expansion
· Navigating our business through inflationary and supply chain
pressures by prudent working capital management and pricing
· The new generation of safe workplace systems will generate high
quality recurring income (subscription based) - beyond the product lifecycle
Operational Highlights:
People and Data Management division - Grosvenor Technology ("Grosvenor")
Revenue information
£'000 2022 2021 Increase/ % change
(decrease)
HCM North America 8,726 6,509 2,217 34%
HCM Rest of World 2,716 3,150 (434) (14%)
Total HCM 11,442 9,659 1,783 18%
Janus C4 833 351 482 137%
Sateon Advance 1,010 1,146 (136) (12%)
Legacy Janus 1,274 1,491 (217) (15%)
Total Access Control 3,117 2,988 129 4%
Division Total 14,559 12,647 1,912 15%
Grosvenor - Hardware-enabled software and services
The business achieved top-line revenue growth of 15% to £14.6 million,
primarily driven by strong North American human capital management ("HCM")
business growth and our expanding relationships with Tier 1 software partners.
Key achievements during the period included re-platforming our core cloud
control software, GT Connect, and evolving warranty and support services with
GT Protect. We have seen substantial progress in our HCM hardware enabled SaaS
strategy with HCM annual recurring revenue ("ARR") increasing by over 600%
year-on-year to £0.9m in April 2022 driven by SaaS and ClaaS.
The success of our North American HCM operations continued to deliver
double-digit growth for the fifth consecutive year, with revenues increasing
by 34% to £8.7 million. The current outlook is very promising, expecting a
new revenue pipeline for next year.
The Rest of World opportunity is more fragmented, and we have attracted a
number of key European partners who have been essential to our local strategy.
We have developed for Protime, our largest European partner, an additional
functionality within our Android feature set that enables them to adopt the
new GT8 time clock.
Internationally, the emerging overlap in HCM and Access Control creates a new
cloud-based opportunity for combined solutions, and together these represent a
very large market for our future growth.
Access Control revenues increased by 4% to £3.1 million, with sales of our
new Janus C4 product beginning to take-off, reaching £0.8 million, up by
137%.
Partnerships
We continued our successful partnership with major software vendors enabling
us to supply directly to their large customer base. We are working with our
partners to increase our share-of-wallet acting as their preferred supplier
and new partnerships are being established to help us deliver our growth
targets. We are pleased to announce we have signed a GT Connect and support
contract with one of the largest US retailers based in Mexico in H2 2023.
This contract will help accelerate our growth in HCM recurring revenues.
Product update
· Advanced facial recognition
· Modular design reduces development costs for new devices
· The new GT Connect secure cloud control platform, scheduled for
broad release in H2 2023, is highly scalable with a modern cloud architecture,
advanced multi-tenanted hosting and an enhanced security model operating on a
microservices framework
· Accelerated product migration of Janus C4, simplifying transition
and released our new advanced driver that enhances the performance at all
sites. In addition, we launched our new software support agreement providing
additional revenue streams
Physical Security Solutions division - Safetell - Diversifying our product portfolio
Revenue information
£'000 2022 2021 Increase/ % change
(decrease)
Products 3,131 3,220 (89) (3%)
Service 1,455 1,791 (336) (19%)
Division Total 4,586 5,011 (425) (8%)
Top line revenue declined by 8% driven by less installation and maintenance
services that decreased by 19% to £1.5 million. This was further impacted by
a contraction in our traditional rising screen market due to an accelerated
reduction in the number of bank branches across the country. Our cost control
initiatives resulted in a cost margin increase to 40.4% (2021: 40.1%).
Demand for security products has normalised in recent months and our return to
growth has already begun. Several delayed projects have now recommenced and
demand for security products and services appears to have recovered to above
pre-pandemic levels. This provides confidence that the business is
well-positioned to achieve its ambitious growth strategy.
Product update
A strategic priority in our long-term plan is to grow service and maintenance
work in the UK autodoor servicing market, estimated at twice the size of
Safetell's traditional target markets.
Major initiatives to strengthen our competitive position in fast-growing security markets:
· Introduction of new product lines
· New strategic partnerships and onboarding of new clients
· Organisational improvements
· Investments in sales and marketing to support the two key areas
(automatic door servicing and entrance control)
Financial position
· Group margins reduced to 32.8% (2021: 37.5%) due to the
significant increase in componentry and freight costs arising from global
supply chain challenges
· We have implemented a programme of strict cost control and
increased prices to mitigate the effect of higher costs. This has resulted in
reduced losses for the second half of the year compared to H1
· Administrative expenses increased by 12.9% to £7.5 million
(2021: £6.7 million) mainly due to the one-off COVID-19 related savings
incurred last year such as furloughs, contractual pay reductions along with
other savings in travel and marketing
· Net loss from operations before exceptional items at £1.3
million (2021: £0.1 million) driven by the impact of supply chain pressures
on gross margins and an increase in costs to execute our plan
· Cashflow from operating activities was an outflow of £0.6
million (2021: £0.4 million inflow) driven by the operating losses and
working capital outflow
· Net assets reduced to £7.1 million (2021: £8.3 million) due to
loss after tax for the year
· Net decrease in cash to £0.2 million (2021: £0.5 million)
· The Group secured a $2 million US invoice financing facility in
February 2022 and in January 2023 increased the UK invoice financing facility
by £0.6 million to £2.3 million. These will provide additional working
capital headroom to support the Group's growth.
Current trading
· Post period end, the Group returned to profitability and positive
operating cashflows during FY 2023, whilst also continuing to grow revenues.
· Transition to a high margin hardware enabled SaaS HCM business is
continuing with a significant increase in ARR
Maurice Dwek, Chairman of Newmark, commented: "Despite the macro challenges of
the year, Newmark continued to grow and deliver against its strategic
priorities. Our business model is now more resilient as our product
initiatives have been carefully designed to increase recurring income, whilst
leveraging our positioning to capture the industry's dynamic growth.
"Through our new solutions, customers will gain the capability to enable and
connect a broad range of internet-enabled devices securely in the cloud with
unified software control - creating a trusted ecosystem in the workplace.
"Our innovative complete product offering, combined with our strategic
initiatives for global expansion, enhanced partnerships and efficient
management of our key resources will transform our business and enable
sustainable growth."
Newmark Security Plc Tel: +44 (0) 20 7355 0070
Marie-Claire Dwek, Chief Executive Officer www.newmarksecurity.com (http://www.newmarksecurity.com/)
Paul Campbell-White, Chief Financial Officer
Allenby Capital Limited Tel: +44 (0) 20 3328 5656
(Nominated Adviser and Broker)
James Reeve / Lauren Wright (Corporate Finance)
Amrit Nahal (Sales & Broking)
About Newmark Security plc
Newmark is a leading provider of electronic, software and physical security
systems that helps organisations protect human capital and provide safe spaces
seamlessly and securely.
From our locations in the UK and US, we operate through subsidiary businesses
positioned in specialist, high-growth markets.
We foster an open and inclusive work environment amongst our c.100 employees,
serving hundreds of blue-chip customers.
Our product portfolio consists of Human Capital Management and Access Control
Systems providing both hardware and software and physical security
installations to various sectors.
Newmark Security plc is admitted to trading on AIM (AIM: NWT).
For more information, please visit: https://newmarksecurity.com/
(https://newmarksecurity.com/)
Safe. Seamless. Secure
Chairman's Statement
Overview
As we emerge from another COVID-impacted year, I am particularly pleased with
the progress we have made in executing our strategy and setting the right
foundations for our continued success. We are delivering on our strategic
targets and achieving recurring revenue growth whilst taking prudent cost
management initiatives that have enabled us to keep focusing on our new
product pipeline. By offering complete solutions that are genuinely
best-in-class, our reputation with clients is highly trusted and growing.
Our proactive approach through the pandemic has demonstrated our ability to
manage the business for the long-term, building credibility with new clients
and strengthening existing relationships through our willingness to be
flexible and adapt to their needs. Our ability to provide technical solutions
and hardware without requiring us to physically attend a site has been a huge
advantage and will be an important factor as we scale.
We have seen the value of staying agile and prioritising our investments to
create sustainable growth. With high confidence in our product portfolio and
client-focused strategy, we have taken the right measures to drive our
business forward with disciplined execution.
By working towards an optimal structure and product mix, we are now extremely
well-placed to scale our business, converting the opportunities we have
already identified, expanding our network of partners, and embedding our range
of solutions as subscriptions that we can jointly promote.
This has been an exciting year in the evolution of our business model,
strengthened by the increasing traction we are achieving in North America,
with solid development progress across all lines of business and a tremendous
opportunity to convert this effort into incremental revenue growth in North
America, the UK and Rest of World markets.
Board and governance
The Board and its Committees continue to maintain a robust governance
framework, led by our Chief Financial Officer, Paul Campbell-White, supported
by the experience of an enhanced leadership team to provide independent
challenge and ensure that good governance is promoted across the Group.
We follow the Quoted Companies Alliance Corporate Governance Code ("QCA
Code").
Going concern
The Board continues to have a reasonable expectation that the Company and the
Group have adequate resources to continue in operational existence for the
foreseeable future. We are in a stable position following market emergence
from the restrictions of COVID-19, although cash remains a key focus. We have
taken steps to mitigate the challenges we face managing our inventory levels
and dealing with the global shortage of components we need to build our
products.
During the year the Group increased its UK invoice discounting facility to
£1.7 million and secured a new $2 million US facility. This, together with an
increased overdraft to £0.7 million has helped finance the Group's working
capital needs in the year to 30 April 2022 ("FY22"). However, as a result of
a combination of customer price rises, cost savings and unwinding of
inventories, the Group has reduced cash outflows at the end of the year and
therefore the overdraft facility has now reverted back to the original £0.2
million.
The Group's first covenant to be tested for the £2 million HSBC CBILs
facility will be for the year ended 30 April 2023 and requires the Group to
deliver a pre-debt service cashflow of 1.2 times the level of debt service.
The latest forecast of the Group results in exceeding the debt service
covenant test by 51% and will be tested again when a revised forecast is
completed in February.
The Group is currently trading ahead of this forecast and has returned to
profit after tax and operating cashflow generation in FY23.
Dividend
The Board is not recommending the payment of a dividend for the year ended 30
April 2022 (2021: £Nil).
Outlook
While the Group has again been affected by the global pandemic and restrictions imposed in the UK and internationally, I am pleased with the progress we have made this year. Despite inflationary pressures, we look forward with cautious optimism, particularly for the continued growth of our HCM business in North America, and we expect to benefit from the execution of our 2025 strategy which will see us build a greater proportion of recurring revenues. The outlook for our HCM business in the Rest of the World is also very promising, as we develop our capabilities, expand a wide range of partnership opportunities and onboard new customers.
Our Physical Security Solutions division, Safetell, will pursue its part of the strategy, growing its share of the Entrance Control and Automatic Door servicing market and by continuing to press its advantage, offering complete security solutions with services that bring rapid response to customers' needs, targeting new markets where demand is strong and growing.
Once again, I am confident we are set up for growth. We are in a strong position to benefit from the exciting opportunities that our teams across the Group have worked hard to develop in the past year. We are forecasting revenue growth for the coming year and year to date results show we are on target to achieve this.
On behalf of the Board, I would like to extend my thanks for all the hard work and resilience shown by our teams in what has been another challenging but highly productive year. I look forward to a successful year ahead.
Maurice Dwek
Chairman
23 January 2023
Chief Executive Officer's Review
Overview
In another very challenging year, the gradual easing of restrictions imposed
by Covid signalled a welcome return and the beginnings of a staged recovery as
traditional businesses began to emerge.
Many of our blue-chip clients were impacted whilst their recovery efforts were
hit by knock-on effects felt right across the supply chain, with the rising
cost of goods and services and, in many cases, delivery and logistical delays.
In this context, Newmark was quick to adapt, taking several bold and critical
steps that have made a significant difference to the speed and profile of our
own recovery and forward momentum.
Throughout this year, we have continuously adapted our products, software and
operations to ensure our long-term partnerships remain well-served and
growing, expanding our product portfolio, investing in hardware adaptations to
accommodate available componentry, building up valuable stock reserves and
further integrating software to accelerate partner take-up and throughput.
In the year ended 30 April 2022 (FY22), following three years of substantial
investment in product innovation and software development, we have enhanced
our solutions offering across all lines of business. This puts the business in
a very strong position to execute on its strategic plan without requiring
significant new development. This is already driving new client contracts and
is building an extremely healthy pipeline for the year ahead.
This enormous effort has been achieved by an extremely committed and resilient
team, to whom I am very grateful and especially proud of their significant
progress and achievements.
Performance
Group revenue has grown once again, increasing by 8% year-on-year to £19.1
million. This was primarily driven by Human Capital Management (HCM) sales in
North America, up by 34% to £8.7 million. HCM has a rapidly growing recurring
services contribution with Software-as-a-Service (SaaS) and Clock-as-a-Service
(ClaaS) annual recurring revenues (ARR) increasing over 600% to £0.9 million
by April 2022. This growth was driven by the first full year of our ClaaS
subscription service.
Our Access Control business grew by 4% year-on-year to £3.1 million which was
in line with expectations in a year that continued to be impacted by
COVID-restrictions on physical site visits, causing delays to new projects and
installations. Despite this, our new Access Control product, Janus C4, has
been well-received by the market and is starting to generate anticipated
returns, with sales up 137% at £0.8 million.
In a similarly difficult environment for physical product sales and servicing,
Safetell, our Physical Security Solutions division, dropped back slightly with
revenues down 8% to £4.6 million. The team responded quickly, undertaking
numerous cost-cutting and re-organisation measures that saw gross margin
levels increase to 40.4%. With a number of new and exciting national
opportunities in the pipeline this puts the business in a very confident
position for a return to top and bottom-line growth in the year ahead.
Outlook
People and Data Management division - Grosvenor Technology
Looking ahead, we will continue to build on the positive momentum we have
achieved in Human Capital Management and Access Control, focusing on
converting a rising number of opportunities in these fast-growing markets with
our newly developed products and software. Our goal, to create longer-term and
higher margin contracts with our partners and customers, will be accelerated
as we launch our upgraded HCM SaaS platform, GT Connect. This will further
increase recurring revenues, driving towards an ambitious ARR target. A key
component of this success will be achieved by maintaining our ongoing
commitment to deliver highly secure data processing, complying with
international standards such as ISO 27001.
To mitigate further supply chain effects and logistics, we are exploring the
establishment of a new manufacturing facility in North America, with the
intention of streamlining the delivery of in-country products in this
fast-growing market.
On behalf of the Board, I would also like to take this opportunity to thank
our outgoing Commercial Director, Andy Rainforth, who wanted to take on a new
challenge closer to home. Andy's significant contribution, particularly
helping the business navigate the recent impacts of the pandemic, has been
tremendous and we are enormously grateful for the 8 years of service he has
given.
I am also delighted to formally welcome Robb Scott, who has joined as interim
MD of Grosvenor Technology, and whose significant leadership experience and
considerable execution track record are already making a positive impact on
our operating performance.
Physical Security Solutions division - Safetell
With access measures easing in recent months, the team has been hugely
productive having successfully launched new products, expanded our client
base, and formed new partnerships. Several delayed projects have now
recommenced as we target larger contracts in entrance control, build national
scale relationships for our Autodoor Service Department and extend our
long-established banking experience to meet the growing demand for security
screens across retailers of all sizes.
We were delighted to welcome Nick Shannon, who joined in February from G4S
Secured Solutions to head up the division. He will lead the strategic focus to
build the services side of the business with the aim of increasing the
proportion of recurring revenues. I am delighted to report that this work is
already well underway and showing early signs of success, targeting
significant growth in the year ahead.
Financial
Whilst sharp increases in componentry and freight costs have impacted Group
margins, we have implemented a programme of strict cost control and increased
prices to mitigate the effect of higher costs. This has resulted in reduced
losses for the second half of the year compared to H1. As we look forward, we
expect to see the full benefit of the price rises and cost savings in the next
financial year (FY23), whilst we start to utilise our recent investments in
products and infrastructure to fuel our accelerating growth.
To facilitate this, we have secured a $2 million US invoice discounting
facility to provide additional working capital headroom. We have also invested
to mitigate supply chain challenges by securing additional inventory to
satisfy ongoing customer demand and stay ahead of the competition. Our working
capital level is expected to ease as we reduce the inventory we are currently
holding, allowing for improved cash flow generation.
As we build on our positive momentum, I am reassured that we have strong
governance in place with appropriate commercial controls to achieve a very
positive market and financial result over the forthcoming year, accelerating
us towards our 2025 strategy.
I am very grateful for the support of our new CFO, Paul Campbell-White, who has made a tremendous contribution, helping to ensure that sound financial discipline underpins our operations, and all investment decisions continue to align with our strategic goals.
Strategy
As a strategic priority, our product initiatives have been carefully designed
to increase recurring revenues, enabling us to make a powerful evolution from
hardware to hardware-enabled software and services, based on providing 'secure
cloud control'.
By offering secure cloud control of people's access, time keeping and identity
data at work, we are shifting the strategic value paradigm, raising the
customer focus from its former dependency on hardware 'clocks' and 'access
terminals', to one that empowers the intelligent enterprise. Through our
solutions, customers will gain the capability to enable and connect a broad
range of internet-enabled devices securely in the cloud with unified software
control - creating a trusted ecosystem in the workplace.
Establishing ourselves as an experienced and trusted security partner on whom
our customers rely, has been an essential factor in our success for over 25
years. Over the past year, we have succeeded in turning this trust into
expanded partnerships that reach beyond pure products and hardware
subscription models, into more complete solutions - increasingly contracted
via ongoing service arrangements that are based on combining hardware
flexibility, secure cloud control and specialist support services. Leveraging
our expertise in data security, our clear strategy is to generate sustainable,
high quality recurring revenues that will scale and extend, over and beyond
the product lifecycle, into the longer-term.
The favourable characteristics of subscription-based business models make them
particularly attractive to our customers, as worldwide consumption of
software-as-service continues to grow strongly. Newmark, and in particular our
People and Data Management Division, continue to follow this servitization
trend with confidence.
As our business model evolution to hardware-enabled software-as-a-service
gathers pace, our focus remains on winning trusted, long-term partnerships
fulfilled by our unique combination of best-in-class products with market
leading software and expert, specialist support services that put customers in
control.
In an increasingly risk-aware enterprise environment, we have been working
hard to broaden our reach and reputation as a trusted security partner,
becoming a go-to brand for customers who are seeking this control to simplify
the growing complexity of security and compliance requirements in the
intersection between physical and digital worlds.
Our strategic focus and approach are opening a substantial market opportunity
in which we now occupy a commanding position with key strategic partners. Our
aim is to scale this model across an expanded partnership channel, matching
this drive with speed of execution to secure greater market share. Converting
our hard-earned competitive advantage will take time and we will continue to
invest in people and infrastructure to drive business growth as we pursue an
ambitious and achievable 2025 market strategy with a strong will to win.
Marie-Claire Dwek
Chief Executive Officer
23 January 2023
Financial Review
Revenue
Key Performance Indicators 2022 2021 Increase/ Percentage change
(decrease)
£'000 £'000 £'000 %
People and Data Management Division
HCM 11,442 9,659 1,783 18.5%
Access Control 3,117 2,988 129 4.3%
14,559 12,647 1,912 15.1%
Physical Security Solutions Division
Products 3,131 3,220 (89) (2.8%)
Service 1,455 1,791 (336) (18.8%)
4,586 5,011 (425) (8.5%)
Group Revenue 19,145 17,658 1,487 8.4%
Group revenue increased by 8.4% to £19.1 million (2021: £17.7 million)
driven by a strong HCM performance in North America. Revenues in the
Physical Security Solutions division were impacted by further lockdown
restrictions and the decline in the traditional rising screens market as more
banks and building societies close. Further commentary and discussion can be
found in the relevant divisional sections.
2022 2021 Increase/ Percentage change
(decrease)
£'000 £'000 £'000 %
Gross Profit 6,419 6,629 (210) (3.2%)
Gross Profit Margin 33.5% 37.5%
Gross profit margins have reduced to 33.5% (2021: 37.5%) due to a rise in
operating costs of the People and Data Management division. Their gross
margins decreased to 31.4% (2021: 36.5%) as a result of the significant
increase in componentry and freight costs arising from global supply chain
challenges. However, customer price rises in the second half of the year have
helped reduce the impact of these cost increases. The Physical Security
Solutions division achieved a gross profit of 40.4% (2021: 40.1%) with the
small increase due to headcount savings.
Administrative expenses and average employees
Administrative expenses before exceptional items have increased by 15% to
£7.5 million (2021: £6.5 million). This has mainly been the result of the
one-off COVID-19 related savings incurred last year such as furloughs, which
saved £0.2 million group-wide contractual pay reductions along with other
savings in travel and marketing. There has also been an increase in
consultancy costs to support the execution of the strategic business plan,
partly offset by a £0.1 million foreign currency gain due to the increase in
the value of the USD versus GDP. Overall average employees have decreased to
103 (2021: 112) driven by reductions in Safetell and Grosvenor UK, partly
offset by an increase in Grosvenor US. Staff costs increased by £0.3
million or 5% to £7.1 million (2021: £6.8 million).
Exceptional costs
During the year exceptional costs of £0.1 million (2021: £0.1 million) were
incurred relating to continued streamlining of positions in Grosvenor and
Safetell. In 2021 there were £0.2 million of restructuring costs and an
exceptional credit of £0.1 million related to the exit of a lease commitment
at Safetell whereby the asset had been written down by £0.1 million in the
prior year.
Profitability
The current year loss from operations before exceptional items was £1.1
million (2021: profit £0.1 million). The decline in profitability was caused
by the impact of global supply chain challenges on gross margins and an
increase in costs to execute the strategic business plan.
Loss after tax for the year was £0.8 million (2021: profit £0.2 million).
This is after tax credits which are discussed in more detail below.
Taxation
A tax credit of £0.6 million (2021: £0.3 million) was recognised in the
year. This resulted from a current tax credit of £0.4 million (2021: £0.4
million) due to the continued R&D claims at Grosvenor of £0.3 million and
for Safetell of £0.1 million and a £0.2 million deferred tax credit (2021:
£0.1 million charge). The credit was primarily from the recognition of tax
losses.
Earnings per share
Loss per share was 0.32p (2021: earnings of 0.03p) being a reduction of 0.35p.
The decrease was due to the reduction in profitability in FY22.
Balance sheet
Net assets have reduced by £0.6 million to £7.6 million (2021: £8.2
million) due to the loss after tax for the year. This is presented as a
decrease in cash and cash equivalents of £0.3 million to £0.2 million (2021:
£0.5 million) and an increase in short term borrowings of £2.4 million to
£3.0 million due to drawing down of invoicing discounting from both the UK
and new $2 million US facility and increase in lease payments. The rise in
property, plant and equipment and long-term borrowings is mainly as a result
of the £0.9 million prior year adjustment to reflect a longer lease term for
a land and buildings lease term. See note 2 of the financial statements for
further details of this adjustment. Inventory has increased by £0.9 million
to £4.0 million with additional purchases of scarce processors and screens to
secure future supply and some impact of the global componentry shortage on
prices. Trade and other receivables decreased by £0.5 million primarily due
to a reduction in corporation tax recoverable related to the R&D tax
credit. At the prior year end there were two years of R&D tax credits due,
whereas there was only one year due at 30 April 2022. Trade and other payables
have decreased by £0.7 million as result of unwinding of prior year creditor
balances.
Research & Development (R&D)
The Group has slightly increased its R&D investment at £0.8 million
(2021: £0.7 million) in the People and Data Management division. The
investment this year has been focused on the cloud development of GT Connect,
our upgraded SaaS platform which will be launched in FY23. There has also been
further development on facial recognition technology for our clocks.
Cashflow
During the year cash reduced by £0.3 million to £0.2 million (2021: £0.5
million). Cash generated from operating activities decreased by £1.0 million
to an outflow of £0.6 million (2021: inflow £0.4 million) mainly driven by a
decrease in operating profits and a £1.2 million working capital outflow due
to higher inventories and creditor outflows. There was also a £0.1 million
outflow from exceptional items and a net tax receipt of £0.8 million (2021:
£0.4 million) due to two years of R&D tax credits. As mentioned above, we
have continued investment in research and development and also property plant
and equipment of £1.3 million (2021: £1.0 million), the increase coming from
investment in ClaaS clocks. The main financing movements related to the
drawdown of £2.3 million of invoice discounting from both the UK and US
facilities (2021: £0.9 million repayment), lease principal repayments of
£0.4 million (2021: £0.5 million) and £0.3 million of interest and
repayments from the Coronavirus Business Interruption Loan Scheme ("CBILS")
which started to be paid back from September 2021 over a 5-year term.
Cashflow forward currency contracts
During the year we executed our foreign exchange strategy by entering into
forward contracts. The strategy effectively hedges 75% of excess USD and
reduces the level of volatility compared to using spot rates. The contracts
manage our currency mismatch between an increasing US Dollars (USD) position
from revenues and the existing cost base in both GBP and Euros. The adopted
process involved currency forecasting three quarters ahead and taking out
tranches of forward contracts for 25% of each of the forecasted quarters
relating to our excess USD position.
CONSOLIDATED INCOME STATEMENT FOR THE YEAR END 30 APRIL 2022
as restated
2022 2021
Note £'000 £'000
Revenue 19,145 17,658
Cost of sales (12,726) (11,029)
Gross profit 6,419 6,629
Administrative expenses (7,633) (6,662)
(Loss)/profit from operations before exceptional items (1,090) 84
Exceptional redundancy costs (124) (181)
Other exceptional credits - 64
Loss from operations (1,214) (33)
Finance costs (220) (113)
Loss before tax (1,434) (146)
Tax credit 4 630 297
(Loss)/profit for the year (804) 151
Attributable to:
- Equity holders of the parent (804) 151
(Loss)/earnings per share
- Basic (pence) (0.32) 0.03
- Diluted (pence) (0.32) 0.03
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME as restated
2022 2021
£'000 £'000
(Loss)/profit for the year (804) 151
Foreign exchange on the retranslation of overseas operation 143 (196)
Total comprehensive loss for the year (661) (45)
Attributable to:
- Equity holders of the parent (661) (45)
The notes in the annual report and accounts form part of these financial
statements.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION AT 30 APRIL 2022
as restated as restated
2022 2021 2020
ASSETS Note £'000 £'000 £'000
Non-current assets
Property, plant and equipment 2,088 2,017 2,186
Intangible assets 5,564 5,505 5,234
Deferred tax 410 206 329
Total non-current assets 8,062 7,728 7,749
Current assets
Inventory 3,983 3,125 2,544
Trade and other receivables 3,979 4,438 3,664
Cash and cash equivalents 157 484 620
Total current assets 8,119 8,047 6,828
Total assets 16,181 15,775 14,577
LIABILITIES
Current liabilities
Trade and other payables 3,105 3,782 3,246
Other short-term borrowings 2,958 602 1,301
Total current liabilities 6,063 4,384 4,547
Non-current liabilities
Long term borrowings 2,447 3,066 1,673
Provisions 100 100 100
Total non-current liabilities 2,547 3,166 1,773
Total liabilities 8,610 7,550 6,157
TOTAL NET ASSETS 7,571 8,225 8,257
Capital and reserves attributable to equity holders
of the company
Share capital 4,687 4,687 4,687
Share premium reserve 553 553 553
Merger reserve 801 801 801
Foreign exchange difference reserve (159) (302) (106)
Retained earnings 1,649 2,446 2,282
Total attributed to equity holders 7,531 8,185 8,217
Non-controlling interest 40 40 40
TOTAL EQUITY 7,571 8,225 8,257
The financial statements were approved by the Board of Directors and
authorised for issue on 20 January 2023.
Paul Campbell-White
Director
The notes in the annual report and accounts form part of these financial
statements.
CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 APRIL 2022
As restated
2022 2021
Note £'000 £'000
Cash flow from operating activities before exceptional items
Net (loss)/profit after tax from ordinary activities (804) 151
Adjustments for: Depreciation, amortisation and impairment 1,248 1,028
Exceptional items 124 117
Finance cost 220 113
Gain on sale of property, plant and equipment (30) (5)
Share based payment 7 13
Income tax credit (630) (297)
Operating (loss)/profit before changes in working capital and provisions 135 1,120
Decrease/(increase) in trade and other receivables (29) (805)
(Increase)/decrease in inventories (856) (652)
(Decrease)/increase in trade and other payables (658) 582
Cash generated from operations before exceptional items (1,408) 245
Exceptional items (124) (244)
Cash generated from operations after exceptional items (1,532) 1
Income taxes received 4 871 369
Cash flow from operating activities (661) 370
Cash flow from investing activities
Acquisition of property, plant and equipment (561) (272)
Sale of property, plant and equipment 30 -
Research and development expenditure (766) (744)
(1,297) (1,016)
Cash flow from financing activities
Bank loans (paid)/received (267) 2,000
Principal paid on lease liabilities (376) (487)
Proceeds/(repayment) on invoice discounting 2,263 (905)
Interest paid on lease liabilities (48) (37)
Interest paid (84) (51)
1,488 520
Decrease in cash and cash equivalents (470) (126)
Cash and cash equivalents at beginning of year 484 620
Exchange differences on cash and cash equivalents 143 (10)
Cash and cash equivalents at end of year 157 484
The notes in the annual report and accounts form part of these financial
statements.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share Share premium Merger reserve Foreign exchange reserve Retained earnings Amounts attributable to owners of the parent Non-controlling interest Total
capital
equity
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
At 1 May 2021 (as restated) 4,687 553 801 (302) 2,446 8,185 40 8,225
Loss for the year - - - - (804) (804) - (804)
Other comprehensive income - - - 143 - 143 - 143
Total comprehensive income/(loss) - - - 143 (804) (661) - (661)
for the year
Transactions with owners
Share based payment - - - - 7 7 - 7
As at 30 April 2022 4,687 553 801 (159) 1,649 7,531 40 7,571
Share Share premium Merger reserve Foreign exchange reserve Retained earnings Amounts attributable to owners of the parent Non-controlling interest Total
capital
equity
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
At 1 May 2020 4,687 553 801 (106) 2,327 8,262 40 8,302
Effect of prior year adjustment - - - - (45) (45) - (45)
At 1 May 2020 (as restated) 4,687 553 801 (106) 2,282 8,217 40 8,257
Profit for the year - - - - 171 171 - 171
Effect of prior year adjustment - - - - (20) (20) - (20)
Profit for the year (as restated) - - - - 151 151 - 151
Other comprehensive loss - - - (196) - (196) - (196)
Total comprehensive income/(loss) - - - (196) 151 (45) - (45)
for the year
Transactions with owners
Share based payment - - - - 13 13 - 13
As at 30 April 2021 (as restated) 4,687 553 801 (302) 2,446 8,185 40 8,225
See note 2 for details of prior year adjustment.
The notes in the annual report and accounts form part of these financial
statements.
1. Accounting policies
Newmark Security PLC (the "Company") is a public limited company, limited by
shares, registered number 3339998 in England & Wales. The consolidated
financial statements of the Company for the year ended 30 April 2022 comprise
the Company and its subsidiaries (together referred to as the "Group").
Basis of preparation
The consolidated financial statements have been prepared on a historical cost
basis.
The principal accounting policies adopted in the preparation of the financial
statements are set out below. The policies have been consistently applied to
all the years presented, unless otherwise stated. These consolidated financial
statements have been prepared in accordance with international accounting
standards in conformity with the requirements of the Companies Act 2006.
The preparation of financial statements in conformity with IFRSs requires
management to make judgements, estimates and assumptions that affect the
application of policies and reported amounts of income and expenses, and
assets and liabilities. These judgements and assumptions are based on
historical experience and various other factors that are believed to be
reasonable under the circumstances, the result of which form the basis of
making the judgements about carrying values of assets and liabilities. Actual
results may differ from these estimates.
These estimates and underlying assumptions are reviewed on an ongoing basis.
Any revisions to the accounting estimates are recognised in the period in
which the revision is made.
None of the new standards or amendments to standards have had any impact on
the accounting policies of the group in the year.
No new standards that are not yet effective have been early adopted or are
expected to have a material impact on the Group's profit or loss.
Going concern
Based on the Group's latest trading, future expectations and associated cash
flow forecasts, the Directors have considered the Group cash requirements and
forecast covenant compliance and are confident that the Company and the Group
will be able to continue trading for a period of at least twelve months
following approval of these financial statements, being the going concern
period.
In August 2020, the Group secured a £2 million financing facility from its
bankers, HSBC, via the Coronavirus Business Interruption Loan Scheme
("CBILS"). This loan is for a term of 6 years, with the first year being
interest, repayment and covenant free under the Business Interruption Payment
scheme. The original covenant required the Group to deliver a pre-debt service
cashflow of 1.2 times the level of debt service commencing for the year end 30
April 2022, based on audited accounts. As a result of the Strategic Business
Plan certain investments were identified and factored into a forward looking
model. Management identified that the investments and cash outlay may result
in a potential default of the covenant and therefore the Directors agreed a
waiver of the debt service ratio to be replaced by a Tangible Net Worth
("TNW") test applicable for the year ended 30 April 2022 based on audited
accounts. This test used the calculation of Net Assets less Intangible Assets
and required the result to exceed £3.1 million. In the year ended 30 April
2022 profitability and cashflows were significantly impacted by the COVID-19
pandemic, increase in freight costs and the global componentry shortage as the
Group had to increase stock levels to meet anticipated demand and pay higher
prices for many components. As a result of this, in January 2022, HSBC agreed
to a waiver of the year ended 30 April 2022 covenant calculation. The first
covenant to be tested will be for the year ended 30 April 2023 and requires
the Group to deliver a pre-debt service cashflow of 1.2 times the level of
debt service commencing, based on audited accounts. No other financing
facilities of the Group have any covenant requirements.
In September 2021, the Group increased its UK invoice discounting facility
with HSBC to £1.7 million to provide additional working capital headroom.
At 30 April 2022, £1.4 million was being utilized. In February 2022, the
Group secured a 3 year $2 million invoice discounting facility with Seacoast
National Bank against invoices raised from our US operation. At 30 April 2022,
$1.1 million of the facility was being utilized. The level of invoice
discounting available varies with the open book of trade debtors at any point
in time and therefore the level of financing fluctuates. In January 2023 the
Group increased the UK invoice discounting facility by another £0.6 million
to £2.3 million.
As at 30 April 2022 the Group had a £0.4 million overdraft facility with its
bankers, HSBC, although none was utilized as the Group had a positive bank
balance of £0.2 million at year end. This overdraft facility was reduced to
£0.2 million on 31 July 2022.
The Group's going concern assessment is based on the Group returning to net
cashflow generation in the year to 30 April 2023. This is forecast to be a
result of the combination of the impact of increasing customer prices in the
second half of the last financial year, continued growth in revenues, cost
savings introduced in May 2022 and stock levels starting to unwind from their
historic high levels.
The latest forecast of the Group results in exceeding the debt service
covenant test by 51% and will be tested more fully when a revised forecast is
completed in February. As a consequence of the revised forecast findings, the
Group would explore the existing covenant test level with our Banking
partners, HSBC, should the covenant headroom fall short of the target. Further
scenario testing and sensitivity analysis was completed to model certain
criteria that would indicate a potential covenant breach against the latest
formally approved budget. Given the 51% headroom in the latest covenant
calculation it would take a large reduction in Gross Material Margin to cause
in a covenant breach at April 2023. However, management are confident that
the shortfalls will not occur particularly given we are only a few months away
from the year end but are undertaking regular reviews and forecasts to ensure
this.
The Group is currently trading ahead of budget and has returned to profit
after tax and operating cashflow generation in FY23.
Management are confident that the Group would be able to meet loan repayments
and working capital needs. The Group is expected to be able to operate within
existing finance facilities, based on Management's detailed monthly cashflow
forecasts to January 2024. Should profits or cashflow movements fall behind
expectations in this period the Group expects to be able to utilise more of
its current UK and US invoice discounting facilities and also extend the
overdraft facility. Accordingly, the Directors consider it appropriate to
prepare the financial statements on a going concern basis.
2. Prior year adjustment
On adoption of IFRS 16 ("Leases") in the year ended 30 April 2020, the initial
recognition of one of the Subsidiary's right of use land and building leases
was based on a 5 year lease term. A subsequent review of this lease during
the year ended 30 April 2022 highlighted that the lease term was in fact 15
years and not 5 years as per the original interpretation of the lease
agreement. The recognition of an additional 10 years of lease term has
resulted in a prior year adjustment to increase right of use land and
buildings asset net book value at 30 April 2020 and 30 April 2021 by £924,000
and £929,000 respectively. The corresponding lease creditor increased at 30
April 2020 and 30 April 2021 by £969,000 and £994,000 respectively. The
lease creditor adjustment is split between short-term and long-term borrowings
as shown in the table below. The overall impact is a reduction in total net
assets and corresponding reduction in retained earnings at these dates of
£45,000 and £65,000 respectively. In respect of the income statement for
the year ended 30 April 2021, this resulted in a reduction in the depreciation
charge of £5,000 and an increase in the lease interest cost of £25,000.
Net impact on the profit before tax is a reduction of £20,000.
Changes to the statement of financial position
As previously reported Adjustment at 1 May 2020 Adjustment at 30 April 2021 As restated at 30 April 2021
Property, plant and equipment £'000 £'000 £'000 £'000
Right of use land buildings
Cost 614 911 - 1,525
Depreciation (294) 13 5 (276)
Net book value 320 924 5 1,249
Other short-term borrowings
Lease creditor (386) 50 (25) (361)
Long-term borrowings
Lease creditor (288) (1,019) - (1,307)
Capital and reserves
Retained earnings 2,511 (45) (20) 2,446
Changes to the income statement
As previously reported Adjustment As restated
£'000 £'000 £'000
Loss from operations is after charging for:
Depreciation of property, plant and equipment (560) 5 (555)
Finance Costs
Lease interest cost (37) (25) (62)
3. Segment information
Description of the types of products and services from which each reportable
segment derives its revenues
The Group has two main reportable segments:
• People and Data Management division - This division is involved
in the design, manufacture and distribution of access-control systems
(hardware and software) and the design, manufacture and distribution of HCM
hardware only, for time-and-attendance, shop-floor data collection, and access
control systems. This division contributed 76.0% (2021: 71.6%) of the Group's
revenue.
• Physical Security Solutions division (previously called the
Asset Protection division) - This division is involved in the design,
manufacture, installation and maintenance of fixed and reactive security
screens, reception counters, cash management systems and associated security
equipment. This division contributed 24.0% (2021: 28.4%) of the Group's
revenue.
Factors that management used to identify the Group's reportable segments
The Group's reportable segments are strategic business units that offer
different products and services. The two divisions are managed separately as
each involves different technology, and sales and marketing strategies.
Operating segments are reported in a manner consistent with the internal
reporting provided to the chief operating decision maker.
Segment assets and liabilities exclude group company balances.
People and Data Management division Physical Security Solutions division Total
2022 2022 2022
£'000 £'000 £'000
Revenue from external customers 14,558 4,587 19,145
Finance cost 99 20 119
Depreciation 304 228 532
Amortisation 703 - 703
Segment profit/(loss) before income tax 312 (103) 209
Additions to non-current assets 1,292 158 1,450
Disposal of non-current assets 488 198 686
Reportable segment assets 13,094 2,299 15,392
Reportable segments liabilities 4,722 1,530 6,252
as restated People and Data Management division Physical Security Solutions division as restated Total
2021 2021 2021
£'000 £'000 £'000
Revenue from external customers 12,647 5,011 17,658
Finance cost 54 18 72
Depreciation 296 246 542
Amortisation 470 - 470
Segment profit before income tax 1,120 161 1,281
Additions to non-current assets* 1,012 254 1,266
Disposal/modification of non-current assets 322 440 762
Reportable segment assets 11,586 2,515 14,101
Reportable segments liabilities 3,569 1,435 5,004
Reconciliation of reportable segment revenues, profit or loss, assets and
liabilities to the Group's corresponding amounts:
as restated
2022 2021
£'000 £'000
Revenue
Total revenue for reportable segments 19,145 17,658
Profit or loss before income tax expense
Total profit or loss for reportable segments 209 1,281
Parent company salaries and related costs (809) (868)
Other parent company costs (834) (534)
Loss before income tax expense (1,434) (121)
Corporation taxes 630 297
(Loss)/profit after income tax expense (804) 176
Assets
Total assets for reportable segments 15,392 14,101
Parent company assets * 789 1,674
Group's assets 16,181 15,775
Liabilities
Total liabilities for reportable segments 6,252 5,004
Parent company liabilities ** 2,358 2,546
Group's liabilities 8,610 7,550
*PLC bank overdraft is set off against other group cash balances and has
therefore been included within the asset line owing to an offsetting
arrangement that is in place with HSBC.
**Parent company liabilities include dormant companies' intercompany balances
which eliminate fully on consolidation therefore do not feature in the
consolidated financial statements.
Geographical information:
Non-current assets by location of assets
as restated
2022 2021
£'000 £'000
UK 7,092 7,522
USA 560 209
7,652 7,731
Reportable PLC Group Totals as restated Reportable PLC as restated Group Totals
segment
segment
totals
totals
2022 2022 2022 2021 2021 2021
£'000 £'000 £'000 £'000 £'000 £'000
Other material items
Additions to non-current assets 1,450 - 1,450 1,266 - 1,266
Disposals and modifications of non-current assets 623 - 623 762 - 762
Depreciation and amortisation 1,235 13 1,248 1,022 16 1,033
4. Tax and Deferred tax
2022 2021
£'000 £'000
Current tax expense
UK corporation tax on profit for the year (338) (337)
Overseas corporation tax - 42
Adjustment to provision in prior periods (88) (125)
(426) (420)
Deferred tax expense
Origination and reversal of temporary differences (159) 169
Effect of change in corporation tax rate (61) -
Adjustment to provision in prior periods 16 (46)
(204) 123
Total tax (credit) / charge (630) (297)
The reasons for the differences between the actual tax credit for the year and
the standard rate of corporation tax in the UK applied to profits for the year
are as follows:
as restated
2022 2021
£'000 £'000
Loss before income tax (1,434) (146)
Expected tax (credit)/charge based on the standard rate of corporation tax in (272) (28)
the UK of 19.0% (2021: 19.0%)
Research and development allowances (142) (199)
Effects on profits on items not taxable or deductible for tax purposes 24 (81)
Effects of corporation tax change (61) -
Losses arising in year where no deferred tax recognised 25 -
Recognition of previously unrecognised deferred tax assets (178) 46
Write-off of previously recognised deferred tax assets 35 -
Difference arising from utilisation of capital allowances 6 71
Different tax rates applied in overseas jurisdictions 4 11
Adjustments for tax credit relating to previous periods (71) (125)
Total tax (credit) (630) (297)
The Group has the following tax losses, subject to agreement by HMRC Inspector
of Taxes, available for offset against future trading profits as appropriate:
2022 2021
£'000 £'000
Management expenses 170 177
Trading losses 5,203 4,591
5,373 4,768
2022 2021
A deferred tax asset has not been recognised for the following: £'000 £'000
Management expenses 170 8
Trading losses 732 1,691
902 1,699
Deferred tax
Deferred tax is calculated in full on temporary differences under the
liability method using a tax rate of 19% (2021: 19%). The March 2021 Budget
announced a further increase to the main rate of corporation tax to 25% from 1
April 2023 and was substantively enacted in May 2021. The £61,000 increase in
net deferred tax assets as a result of this change in tax rate is recorded in
the year ended 30 April 2022.
Deferred tax assets have been recognised in respect of all temporary timing
differences giving rise to deferred tax assets if it is probable that these
assets will be recovered. The movements in deferred tax assets and liabilities
(prior to the offsetting of balances within the same jurisdiction as permitted
by IAS12) during the period are shown below. Deferred tax assets and
liabilities are only offset where there is a legally enforceable right of
offset and there is an intention to settle the balances net.
Details of the deferred tax liability, and amounts (charged)/credited to the
consolidated income statement are as follows:
Total Accelerated capital allowances Other temporary and deductible differences Available losses
Asset/(liability)
At 1 May 2021 206 146 (526) 586
Income statement (charge)/credit 204 (113) (146) 463
At 30 April 2022 410 33 (672) 1,049
Asset/(liability)
At 1 May 2020 329 185 (442) 586
Income statement (charge)/credit (123) (39) (84) -
At 30 April 2021 206 146 (526) 586
Deferred tax assets have been recognised in respect of available losses which
are expected to be matched against future trading profits. Management reviews
the estimate mid-year and assesses whether latest projections impact the level
of recognised deferred tax. Management allow for a fluctuation in projections
and apply a level of cautiousness to recognition so that it allows for profit
fluctuations. A 10% fluctuation in future profitability could result in a
change of £17,000 to the recognition of deferred tax.
There are unrecognised deferred tax assets as listed above, which have not
been recognised due to the uncertainty of the timing of future profits.
5. Dividends
The Directors are not proposing a dividend for 2022 (2021: nil pence).
6. Subsequent events
Robert Waddington, a non-executive director of the Company, decided on 6 July
2022 to step down from the Board of Directors and left the business on 8
September 2022.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END FR SEUFUEEDSEEFRecent news on Newmark Security
See all newsRCS - Newmark Security PLC - North America Partnership Agreement with Synerion
AnnouncementREG - Newmark Security PLC - Holding(s) in Company
AnnouncementREG - Newmark Security PLC - Trading Update
AnnouncementREG - Newmark Security PLC - Holding(s) in Company
AnnouncementREG - Newmark Security PLC Thalassa Holdings - Holding(s) in Company
Announcement