REG - Newmark Security PLC - Final Results
26/09/2023 07:00
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RNS Number : 5968N Newmark Security PLC 26 September 2023
This announcement contains inside information for the purposes of Regulation
11 of the Market Abuse (amendment) (EU Exit) Regulations 2019/310.
26 September 2023
Newmark Security plc
("Newmark", the "Company" or the "Group")
Final Results
for the year ended 30 April 2023
Newmark Security plc (AIM: NWT), a leading provider of electronic, software,
and physical security systems and installations is pleased to announce its
audited results for the year ended 30 April 2023 ("FY23"). The Board of
Newmark is pleased to reiterate a positive momentum and the Group returning to
profitability.
Financial highlights:
· Revenue up 6.1% to £20.3m (2022: £19.1m)
· Gross profit margin increased by 4.1% pts to 37.6% (2022: 33.5%)
· Human Capital Management ("HCM") annualised recurring revenues*
("ARR") increased by 133% year-on-year to £2.1 million for April 2023,
positively contributing to profit margins
· EBITDA of £1.5m (2022: £0.03m loss)
· Operating profit of £0.3m (2022: £1.1m loss)
· Profit after tax of £0.4m (2022: £0.8m loss)
· Earnings per share of 3.77p (2022: 0.32p loss per share)
· Investments in research and development £0.5m (2022: £0.8m)
· Cash at bank of £0.6m at year end (2022: £0.2m)
· Net assets of £7.9m at year end (2022: £7.6m)
Business highlights:
· FY23 year-on-year revenue growth, driven by a strong performance
in the Group's People, Data Management, and Physical Security divisions
· Product innovation and efficient software systems have enhanced
solutions offering, resulting in new client contracts.
· 8th consecutive year of HCM revenue growth due to increases in
both North American and European markets.
· Launched our next generation secure cloud control platform GT
Connect, which will drive future recurring revenue growth.
· Relocated Grosvenor's US headquarters to a much larger facility
in Florida and brought third-party logistics in-house.
· Physical Security division returned to revenue growth in FY23 due
to an increase in service revenues and strong demand for our security-rated
screens and counters in both the retail and public sectors.
· Group returned to profitability and cash flow generation in FY23.
*ARR is calculated by annualising revenue recognised in a given month from all
clients on deployed HCM subscription contracts
Maurice Dwek, Chairman of Newmark, commented:
"It has been a milestone year in several ways, culminating in the Group
returning to full-year profitability. What might look like modest overall top
line growth hides the key story underneath, which is the launch of our
strategic cloud platform, GT Connect. This is vastly more scaleable as a
service offering and is accelerating GT's shift from being a 'hardware only'
to a 'hardware-enabled software and services' business. This, combined with
the return to growth in Safetell, shows the success of our 2025 Growth
Strategy.
"Looking ahead, the business has made a good start to FY24 with its new
revenue pipeline."
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 / Tony Quirke (Sales & Corporate Broking)
About Newmark Security plc
Newmark is a leading provider of electronic, software and physical security
systems and installations 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 see a slow but steady recovery in the macro environment, I am absolutely
delighted to report another year of strong performance, made possible by the
resolute commitment and focus of our talented Newmark teams, as they continue
to execute our 2025 Growth Strategy. As a result, during the year we made
substantial progress in our mission to grow recurring revenues and services,
enabled by key technology investments, achieving an overall increase in
revenues and returning the business to full-year profitability. This careful
balancing act is not to be under-estimated and is a testament to the
leadership team's skill and efforts across the business.
Most notably, our focus on software has been a key evolutionary step in our
strategy, enabling the business to target a large and growing market in people
and data security, and is the result of several years of product and service
innovation that now gives us a valuable strategic advantage in our journey
ahead.
Once again, our proactive approach has demonstrated our ability to manage the
business for the long-term, building credibility with new clients and
strengthening existing relationships through services that set us apart in how
we are able to comprehensively meet their needs. Our ability to provide
technical solutions that include both hardware, software and services without
requiring us to physically attend a site is a huge advantage and will continue
to be an important factor as we scale.
With high confidence in our solutions and a client-focused strategy, we are
driving our business forward with disciplined execution. We will remain agile
and continue to prioritise our investments to create sustainable growth,
converting the many 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 a very impressive year, demonstrating the market-fit of our
solutions and the relevance of our recurring business model. Strengthened by
the increasing traction we are achieving in software-based services, we have
once again positioned ourselves ideally for another tremendous opportunity to
convert this effort into incremental revenue growth across North America, the
UK, Europe and the 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 an experienced 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),
and details on how the Company applies the principles of the QCA Code are set
out in our Corporate Governance section in the Annual Report.
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 remain in a stable position as the slow but steady
global post-pandemic recovery continues, although cash remains a key focus.
Once again, we have taken steps to mitigate the supply chain challenges we
face by retaining some additional inventory and further innovating to help
mitigate the global shortage of components we need to build our products.
During the year the Group increased its UK invoice financing facility by £0.5
million to £2.3 million. This, together with an overdraft facility of £0.2
million has helped finance the Group's working capital needs in the year to 30
April 2023 (FY23). In July 2023 the overdraft facility was increased to
£0.4 million to provide additional working capital headroom as the Group
delivers its strategic growth plan.
The Group's next covenant to be tested for the £2 million HSBC CBILs facility
will be for the year ended 30 April 2024 (FY24) 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 48% and will be tested again when a revised forecast is
completed in October.
The Group is currently trading ahead of this forecast and continues to
generate operating cashflows in FY24.
We are optimistic that our growth will continue in the next 12 months,
supported by the investments we have made in FY23. A full analysis of the
Group's going concern assessment is included in the Directors' Report in the
Annual Report. Accordingly, the directors consider it appropriate to prepare
the accounts on a going concern basis.
Dividend
The Board is not recommending the payment of a dividend for the year ended 30
April 2023 (2022: £Nil).
Outlook
The Group has again demonstrated great resilience in the face of continued
uncertainty affecting the macro-economic environment in the UK and
internationally. I am absolutely delighted with the progress we have made this
year. Despite continued inflationary pressures, we look forward with great
optimism, particularly for the accelerating growth of our human capital
management (HCM) business through new and growing partnerships in North
America, Europe and the Rest of the World. We are already benefitting from the
execution of our 2025 Growth Strategy and will continue to build a greater
proportion of recurring revenues in the year ahead.
Our Physical Security Solutions division, Safetell, is also now
well-positioned to make a greater contribution to this strategy, by growing
its services to achieve national scale efficiencies as well as optimising its
product portfolio and improving its competitive position with broader
manufacturing and supply chain options. Already underway, these initiatives
will see it continue to advance its share of the Entrance Control and
Automatic Door servicing market by pressing its advantage, offering complete
security solutions with services that bring rapid response to customers'
needs, as well as targeting new market opportunities with an enhanced sales
and marketing team.
I remain entirely convinced of the strategy and outlook for growth. We have
worked hard to put ourselves in a strong position in each of our respective
markets and this is beginning to show rewards that will be in further evidence
in the year ahead.
On behalf of the Board, I would like to extend my thanks for all the hard work
and dedication shown by our teams in what has been a highly productive year,
overcoming key challenges with enormous resolve and driving forward with great
confidence in addressing an exciting market opportunity that is expanding
quickly. I look forward to a successful year ahead.
Maurice Dwek
Chairman
25 September 2023
CHIEF EXECUTIVE OFFICER'S REVIEW
Overview
This was another year of solid execution and progress against our strategic
plan, with key improvements across the business driven by the significant
efforts of the whole team, and strong business unit performances within both
our People and Data Management and Physical Security divisions.
Last year's innovation efforts, in particular the development and adaptation
of products and services aimed at generating increasing and new recurring
revenues, has produced extremely positive results.
Specifically, the launch of GT Connect has enabled us to begin to realise our
vision to create larger trusted ecosystems in the workplace that more broadly
connect security device hardware with our secure cloud services, including
Bring Your Own Device (BYOD) tablets and third-party products that greatly
extend the reach of our solutions.
This key software enhancement enables us to push forward with our strategy,
executing with a collective focus to attach services to all our products and
this is yielding a dramatic increase in the recurring proportion of our
revenues, creating a critical foundation and with much further growth to come.
Broadening our product portfolio once again this year, our expert teams have
deployed innovative configuration and design techniques to adapt existing
products and increase the range of our offering, creating a new low-cost clock
solution that will challenge a hitherto under-served segment of the market
with greatly enhanced cloud services.
Our sales and commercial teams have also been hard at work, progressing a very
exciting pipeline of new HCM partners. With several in advanced discussions,
we have been busy lining up a strong and diverse spread of revenue streams to
replace the anticipated loss of UKG in the second half of FY23 who, following
the 2020 merger with clock competitor, Kronos, were always clear on their
intention to pursue an independent market strategy. The fact that they have
used our services and products this far is testament to the quality of
services provided by our team.
As a mark of the progress we have made with our strategy and strongly
anticipated growth, we relocated Grosvenor's US headquarters to a much larger
facility in Florida, and brought third-party logistics in-house. With triple
the floor space and a greatly improved location, this gives us excellent
headroom for growth in both staff and inventory capacity, as momentum
continues to build.
Although the macro environment continues to be challenging, with weaker
exchange rates causing some downside in foreign exchange and rising costs due
to inflation, these have been partially offset by necessary and inevitable
price increases.
Our supply chain continues to show resilience to global impacts, such as the
war in Ukraine, but this has placed greater pressure on retaining our stock of
components across a wider range of devices as our product range continues to
grow and develop. By significantly enhancing our focus on inventory and supply
chain management over the last three years, we have been able to create a
strong competitive position, and this is one from which we can fully support
our customers and meet all the commitments we have undertaken.
I was especially delighted that Safetell returned to growth once more. As the
first step in its transformation, it achieved a modest increase in FY23 with
further growth to come as projects and contracts delayed by Covid began to
recover. However, these projects have been operating significantly behind
schedule, causing some delays in sales of security products that tend to be
fitted at the tail end of infrastructure and building projects. These delays
were offset by the rise in demand for security screens and the significant
increase in income from services. During the year, Safetell developed a
redesigned, cost-effective retail attack-resistant screen for convenience
stores, and this has been subject to strong demand, having rolled out over £1
million of installations for major UK retailers and built a pipeline of over
£2 million for installations for FY24. Our strategic aim, to gather more
service contracts, is also progressing very strongly with commercial
discussions with several major high street brands at an advanced stage. We
have learnt to navigate a number of new post-pandemic approval procedures
instituted by major brands, whilst this has slightly extended sales cycles, at
the same time this has added further competitive advantage, giving us much
increased confidence for the year ahead.
Performance
Group revenue has grown once again, increasing by 6% year-on-year to £20.3
million with gross margin increasing substantially, up 19% to £7.6 million.
This performance was primarily driven by continued success in HCM sales, up by
10% to £12.6 million, with a greatly improved gross margin contribution, up
32% to £6.0 million. At the centre of this success is the rapidly growing
high margin recurring services contribution with Software-as-a-Service (SaaS)
and Clock-as-a-Service (ClaaS) annual recurring revenues (ARR) increasing by
133% to £2.1 million by April 2023. As our clear strategic priority, we
expect growth in HCM to accelerate in FY24 with further significant gains in
annual recurring revenues.
Our Access Control business declined slightly by 3% year-on-year to £3.0
million as it underwent an important re-balancing, transitioning away from the
end-of-life legacy Janus product, with revenues declining by £1 million, and
towards the new Janus C4 Access Control product, with those sales increasing
to £1.7 million, representing an outstanding growth rate of 108%. Together
with a small 5% increase in sales of Sateon Advance to £1.1 million and the
new Janus C4 Ultra product in the pipeline, the future growth outlook in
Access Control is extremely positive.
Safetell revenues grew modestly by 3% to £4.7 million benefitting from its
new leadership and numerous re-organisation measures which started to take
effect. These are expected to have a greater impact as we move forward. With a
number of exciting national opportunities in the pipeline and expected to come
through in FY24, this puts the business in a very strong position to plan for
more aggressive growth in the year ahead.
Financial
The Group's cash at 30 April 2023 was £0.6 million (2022: £0.2 million).
This increase was due to a significant improvement in operation cashflows
driven by higher revenues, increased gross margin percentage and lower
overheads. During FY22, we implemented a programme of strict cost control and
increased prices to mitigate the effect of higher componentry and freight
costs. With a full year of these price rises and cost savings taking effect,
this resulted in improved performance in FY23 as we began to use our recent
investments in products and infrastructure to accelerate growth.
Supply chain challenges have also been successfully managed by building
inventory to satisfy ongoing customer demand. The inventory levels are
expected to ease in FY24, allowing for further cash flow generation.
With the oversight of our CFO, Paul Campbell-White, we continue to exercise
strong governance and appropriate commercial controls, ensuring that sound
financial discipline underpins our operations, and all investment decisions
continue to align with our strategic goals as we accelerate towards our 2025
strategy.
Outlook
People and Data Management division - Grosvenor Technology
Looking ahead to FY24, we anticipate further substantial growth as we continue
to build on the positive momentum we have achieved in all our geographic
markets. With our existing approach demonstrating clear success, the challenge
ahead will be to accelerate the pace with the appropriate discipline required
to scale effectively across every region, and in particular through our
expanded presence in North America.
Our clear intention is to gain an increasing share of the enormous opportunity
we have created as a market leader in secure cloud solutions for Human Capital
Management and innovative products for Access Control. Our priority will be to
continue leveraging GT Connect, our enhanced services, and a broader range of
products as we look to further secure long-term HCM partnerships and onboard
new customers. These efforts will further increase recurring revenues, driving
towards an even more ambitious ARR target.
Similarly, we will drive growth in Access Control across public and private
markets with our recently expanded sales team and with further investment in
next-generation control, completing the development of Janus C4 Ultra, a new
product which is already creating significant new interest and opportunity.
I am extremely grateful for the leadership of Colin Leatherbarrow, and his
talented senior team, for their ongoing commitment to the highest professional
standards, demonstrating great skill in execution and driving an excellent
full-year performance. This has been an exemplary first year for Colin as MD,
stepping up from his former role as CTO in November 2022, bringing his expert
focus to Grosvenor's technical and commercial operations and making a
wholeheartedly positive impact right across the business. As the business
expands, I am confident we have the right team to guide this division to the
success it deserves.
Physical Security Solutions division - Safetell
With new leadership and renewed strategic focus on growing services, the team
has been busy rebuilding its operations to enable it to scale nationally.
Looking ahead, the priority continues to be securing national servicing
contracts, enabling efficient, profitable operations across a growing team of
high quality, professionally certified engineers and service personnel.
With new projects beginning to regain their pre-pandemic momentum and new
partnerships being secured, the business will also continue to optimise its
product portfolio and improve its competitive position, with broader
manufacturing and supply chain options already in place for FY24.
Already underway, these initiatives will see it target larger contracts in
entrance control, build new national scale relationships for our Autodoor
Service Department and convert the significant pipeline we have created for
retail attack-resistant screens as we seek to further extend our
long-established banking experience to meet the growing demand for security
screens across retailers of all sizes.
By offering complete security solutions with services that bring rapid
response to customers' needs, as well as targeting new market opportunities
with an enhanced sales and marketing team, I am equally grateful to Nick
Shannon and his leadership team for achieving revenue growth after a number of
years of decline, and in challenging conditions. Safetell now stands ideally
placed for further solid growth in the year ahead.
Strategy
With data security and compliance driving strong market demand, this is an
opportunity which we will actively pursue to capitalise on the trust in our
operations and reputation for engineering excellence that we have established
over three decades.
Compliance with data remains a strong underpinning core value, and the
business will seek to leverage this in winning new HCM SaaS recurring revenue
business in both the North American, European and Rest of World markets.
Our strategic aim remains to increase recurring revenues and make the powerful
evolution from hardware to hardware-enabled software and services, based on
providing 'secure cloud control'. This strategy is already being realised, and
it will continue to be the core focus underpinning all our growth initiatives
as we seek to use our expertise in data security to generate sustainable, high
quality revenue streams that will scale and extend, over and beyond the
product lifecycle, into the longer-term.
Our valuable objective remains. 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.
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, our strategic focus and
approach are opening a substantial market opportunity in which we now occupy a
commanding position with key partners. Our aim in FY24 is to accelerate how we
scale this model across an expanded partnership channel, securing greater
market share and converting our hard-earned competitive advantage as we
continue to execute our 2025 growth strategy reassured by the essential
feedback of our many happy customers.
Marie-Claire Dwek
Chief Executive Officer
25 September 2023
OUR DIVISIONS - People and Data Management
Revenue information
£'000 2023 2022 Increase/ % change
(decrease)
HCM North America 8,830 8,726 104 1%
HCM Rest of World 3,721 2,716 1,005 37%
Total HCM 12,551 11,442 1,109 10%
Janus C4 1,729 833 896 108%
Sateon Advance 1,063 1,010 53 5%
Legacy Janus 231 1,274 (1,043) (82%)
Total Access Control 3,023 3,117 (94) (3%)
Division Total 15,574 14,559 1,015 7%
Performance overview
Grosvenor Technology (Grosvenor) continues to be a market leader in time, data
capture and access solutions for Human Capital Management and Access Control,
helping organisations to protect and manage their most valuable assets -
people in the workplace.
Once again, it has been another solid year with top line revenue growth of 7%
to £15.6 million, primarily driven by strong growth of the HCM business and
our expanding relationships with software partners, which have been
particularly strengthened in the European market.
The year has been a clear illustration of the value of executing on our 2025
Growth Strategy, evolving our business model to hardware-enabled software and
services. By connecting devices to deliver secure cloud-based control via our
newly upgraded and re-launched software, GT Connect, we have been able to
offer customers and partners enhanced services attached to every connection,
and this now includes third party devices for the first time.
These developments mark a major strategic milestone for Grosvenor, unlocking
enormous market potential across a broader range of connected devices, as well
driving another substantial increase in recurring revenues, as we continue to
build steady, predictable income streams across a fast-growing base of
customers and partners.
As a consequence, HCM annualised recurring revenues (ARR) grew by 133% to
reach an ARR of £2.1 million in April 2023. These revenues represented 12% of
Grosvenor's 2023 revenues (2022: 4%). As a central focus of our strategic
plan, we are confident this continued strong growth trajectory will result in
an even greater share of revenue in FY24 and beyond.
During the year, significant overall HCM growth was achieved in both the North
American and Rest of World (ROW) markets, however another strong US-based
performance was masked by the termination of our partnership with UKG. Whilst
this had always been foreseen following the 2020 merger between Ultimate
Software, our original HCM partner, and Kronos, a competitor in time clock
products, in prior years revenue had significantly increased due to the ease
with which our clocks integrate with the Ultimate software platform. Although
UKG's corporate policy decision was entirely unrelated to the performance of
solutions and services from Grosvenor, the notification in Q3 FY23 left a
shortfall in sales against our original plan that we were able to offset with
substantial gains across our other HCM partnerships, but which combined to
result in an overall flat 1% growth in the region. Progress with European HCM
partners gathered pace, as ROW markets delivered underlying growth of £1.0
million, resulting in a 37% year-on-year improvement, and contributing most of
the 10% growth in HCM revenues overall.
Meanwhile, Access Control solutions underwent an important re-balancing as we
transitioned between new and end-of-life legacy product revenue lifecycles
during FY23. Whilst at a headline level, overall revenues decreased by 3% to
£3.0 million, sales of our new Janus C4 product doubled to £1.7 million
(2022: £0.8 million) and this was supported by a modest 5% growth of Sateon
Advance to £1.1 million (2022: £1.0 million). Although this combination was
not sufficient to offset the decline in revenues from our legacy Janus
product, which reduced to £0.2 million (April 2022: £1.3 million), passing
through the tail-end of this legacy removal cycle clears the way for positive
growth across all product lines in FY24. With additional sales resource
joining this team in FY23, this provides an ideal platform to add new growth
from our Janus C4 Ultra product, planned for launch 2024 and which is already
generating significant customer interest.
By taking further actions to optimise our operations, including putting
through necessary price increases to mitigate the inflationary environment,
and growing recurring revenues, we were able to significantly increase gross
margins to 38.6% (2022: 31.4%).
Below these headline financial results, we made positive operational progress
that produced encouraging growth across all strategic priority areas. With the
successful delivery of an ambitious upgrade to our product strategy,
re-platforming our core cloud control software, GT Connect, and evolving the
service model, the business enters FY24 in a commanding position to address a
far broader market opportunity with substantially enhanced solutions and
competitive advantage.
Evolving partnerships driving HCM growth
Grosvenor's strategic growth continues to be driven through key partnerships
with a variety of HCM providers. The substantial progress made in developing
existing partnerships produced another year of exceptional growth, with some
notable partnership successes.
Our major European partnership grew by 23% with recurring revenue nearly
doubling, driven by increased sales, planned price increases and the
compounding annual effect of growing recurring revenue. As we had anticipated,
this partner also began taking our GT8 product, ordering a significant number
of units during the year.
Direct to end-user business grew in both revenue and margin, onboarding
end-users that included notable high-profile customers such as Shangri-la
hotels (The Shard), Imperial London Hotels, Dorchester Hotels and Refresco
Drinks, and all attracted incremental service revenues.
We achieved major US partner success, migrating a new and large tier 1 HCM
provider to GT Connect, leveraging the full range of features and benefits. By
achieving the required levels of control by their channel partners via the
advanced tenancy architecture, this has started to drive downstream demand via
their channel partner network following a launch at their annual partner
event.
Another major US HCM partner produced an outstanding growth of 27% and this
was achieved through diversification of products and closely supporting larger
projects.
The Grosvenor team also delivered a significant foundation of the forward
outlook by migrating existing clients from legacy to GT4, including a number
of well-known household name brands. This is essential groundwork for
retaining existing customers in the future.
We continue to actively support another key partner in the US to enhance and
scale their services with customers, and in particular their introduction to
one of the world's largest retailers who we now support directly. Winning a
major national contract to provide transactional cloud services across all
their Mexican stores has delivered a substantial boost to our strategy and
further added to growth in our recurring revenues.
OUR DIVISIONS - Physical Security
Revenue information
£'000 2023 2022 Increase/ % change
(decrease)
Products 2,840 3,131 (291) (9%)
Service 1,900 1,455 445 31%
Division Total 4,740 4,586 154 3%
Performance overview
Safetell continues to develop its presence in the UK as a leading provider and
installer of integrated door solutions and physical security.
FY23 was a pivotal year for the business, with a rapid turn-around conducted
by MD, Nick Shannon, reversing recent years' declining revenues and achieving
a small increase of 3% year-on-year to £4.7 million. This clearly
demonstrated the positive effect of organisational changes implemented in FY22
and the value of our strategy to focus on growing service revenues, up 31%
year-on-year, increasing the proportion of income from services which rose to
40% (2022: 32%). This transformation was achieved despite the continuing
contraction of physical branches in the banking market, reducing demand for
legacy rising screen services.
Our strategy to focus on services and move away from one-off supply of
products had a notable impact, with a 9% contraction in product sales largely
caused by temporary order delays, now planned in Q1 FY24, and which was more
than offset by expected gains in service in the areas we had prioritised.
Although trading throughout the year was in line with expectations, with top
line revenue rising, gross margin decreased to 34% (2022: 40%). This was due
to the under-utilisation of field-based engineers as we grow capacity in order
to build-up services revenue. As we secure additional service contracts in
FY24, we expect this to normalise and return a net contribution.
With challenging economic conditions continuing in the form of inflationary
pressures and increased supply chain volatility, our experienced team made
further adaptations to enhance resilience and secure the way ahead. This
included negotiating price increases in those open tenders and supply
agreements where contract conditions allowed, although in many instances this
was not possible due to either pre-negotiated pricing or market competition.
To provide further mitigation, we sourced two alternative product
manufacturers in China who can deliver at higher quality, substantially lower
cost and with materially reduced lead times compared to previous
'make-to-order' supply arrangements. These advantages will not take effect
until FY24 however, following from last year's enhancements to our product
offering that brought automatic doors and entrance control into our product
portfolio, we have now secured high specification 'standardised' alternatives
across all of the key items in our portfolio. This will make us far more
competitive, improving our speed of delivery and response for the year ahead.
Whilst overall demand for security products and services has recovered to
above pre-pandemic levels, in FY23, we saw residual effects of continued
uncertainty in the business environment causing a long-tail drag on projects,
with some clients taking longer to work through their own transformation plans
as a consequence. This caused a slight delay in project revenues bookings at
the end of FY23, in most cases this has only been by a matter of months. With
those revenues now set to come through in early FY24, this assures a
particularly strong start to the new year. Together with a very positive
demand outlook, evidenced by the strength of an even more rigorously qualified
pipeline, we remain confident that the business is well-positioned to achieve
its ambitious growth strategy.
Focused execution on areas of high demand drives growth and builds positive forward momentum
Executing on our 2025 Growth Strategy, all of our focus areas experienced
strong demand in FY23, enabling us to build on the foundations laid in 2022,
as we continued to drive growth and generate the momentum essential to scaling
the business incrementally, in carefully planned stages.
Our security-rated screens and counters performed exceptionally well
throughout the year both in the retail environment as well as within the
public sector. Key to this success was developing a redesigned, retail
attack-resistant screen for convenience stores which is lightweight, flexible
and cost-effective.
This has received strong demand, having rolled out over £1 million of
installations for major UK retailers and built a pipeline of over £2 million
for installations in FY24. With the current robbery issues in the convenience
store market, we believe we can further grow this order level through 2024.
Our relationship with blue light customers continued to grow with an
additional £0.3 million of projects from one of the UK's largest Police
Forces, following on from our work in 2022. Our development efforts in this
segment were rewarded with orders from five other Police Forces, creating a
strong base from which to expand. Public Sector orders in general were strong
throughout the year, with projects completed in multiple healthcare settings,
where our unique Countershield 'moving screen' remains popular for A&E
departments, as well as prisons, transport hubs and military installations.
Our FY22 entry into the Entrance Control market also gathered pace in FY23,
building on the early wins achieved in 2022 with new installations direct to
end-users as well as through the enlarged construction sector, including
newbuild and refurbishment. The new manufacturing arrangements we have secured
are helping us to fill the gaps in our product range to enable access to
markets where cost effective solutions are required. As we continue to win
market share, we expect our Entrance Control business to grow significantly in
2024, with a number of projects tendered during 2023 moving into the
construction phase in 2024. As before, we remain focused on targeting the
larger contracts available in this area, which bring the dual benefit of the
maintenance services that follow-on from initial installation, helping to grow
our Autodoor Service Department.
Continuing to grow recurring service revenues, with a focus on automatic doors
In line with our strategy, service revenue increases were driven by additional
wins in autodoor servicing and repairs, with new national service contracts
contributing to a nearly five-fold increase in recurring revenues to £0.3
million. We expect this trend of additional autodoor works to continue into
2024, starting strongly with £0.6 million in our pipeline of service and
repair contracts already quoted. With further growth expected, this remains
the clear strategic priority for the future of the business.
Our record in repairing and upgrading customer doors rather than replacing
them has continued to be an advantage. All of our service engineers have been
security cleared to BS7858, the UK standard for vetting of people employed in
the security sector, and this coupled with our 'Repair-not-replace' mentality,
continues to strike a positive chord with our customers, particularly those
with larger national estates. In the last year, we added a further 200 doors
and now provide call-out support across over 2,000 doors, representing a
substantial national footprint.
This market continues to be a strategic priority for Safetell, with autodoor
servicing in the UK estimated at twice the size of Safetell's traditional
markets. Our challenge in FY24 will be to gain a critical mass of contract
volumes to support a more efficient scaling and deployment of our service team
at competitive margins. This transition will be the key factor to overcome as
we transition from high margin one-off projects and a unique legacy rising
screens service to high volume service and repair contracts at reduced margins
but which provide sustainable revenues and long-term stability. Our clear
emphasis is on generating strong recurring revenues, and we expect the
autodoor segment to account for an increasing share of turnover in the coming
years.
Learning how we win, generating insights to accelerate future success
As important as our wins are, understanding why we have lost competitive
tenders in the past has been just as important to us in learning how to
unlock, accelerate and scale the business. Following a detailed review of
current and past commercial submissions in FY23, we now have a much better
understanding of why and how to win in key competitive scenarios, specifically
in the Security Door, Entrance Control & Automatic Door Installation and
Service sectors. The findings from this review are now being channelled into
improved methods, marketing and enhanced products to help us gain additional
market share in 2024 and beyond.
Overall, our pipeline grew steadily throughout the year and, at the outset of
2024, stood at £9.5 million, with a further £4.6 million of quoted
'suspects', compared to a pipeline total of £5.4 million at the outset of
2023.
The planned investment in Sales and Marketing during FY23 enabled the sales
team to achieve against a significantly increased new business sales order
target from 2022, gaining new orders of £3.9 million within the year, against
£3.0 million in 2022. An increased delay in timing between orders being
received and projects commencing served to under-represent the significant
achievements made by our improved team, however we are confident this will
contribute to a stronger FY24 where this will become fully visible.
Creating safe spaces for employees and colleagues
The substantial progress made by a dedicated and committed team has delivered
precisely what we'd hoped for in FY23, returning the business to growth,
focusing on key areas of high demand and organising to compete and win as we
begin to address a much wider market opportunity, particularly in security
doors and entrance control.
The market continues to experience rising demand for high specification
physical security products. Increasing threats from crime and terrorism have
made physical protection and security a priority for businesses in most
sectors, as many businesses prepare to meet the new 'Protect Duty'
legislation.
Responding to the rapid and continuous growth of high security environments,
such as data centres, also provides a significant scaling opportunity for
Safetell, one that we are ready for as we continue to build trusted, long-term
partnerships with Facilities Management providers.
Building our reputation as a trusted service partner for the long-term will
not only translate into success with our immediate growth targets, it
underpins our confidence to take the next steps on the journey we have
planned. Focused execution will continue to prioritise recurring revenues from
services, and this transition lies at the heart of our strategy and approach.
FINANCIAL REVIEW
Revenue 2023 2022 Increase/ Percentage change
(decrease)
£'000 £'000 £'000 %
People and Data Management Division
HCM 12,551 11,442 1,109 10%
Access Control 3,023 3,117 (94) (3%)
15,574 14,559 1,015 7%
Physical Security Solutions Division
Products 2,840 3,131 (291) (9%)
Service 1,900 1,455 445 31%
4,740 4,586 154 3%
Group Revenue 20,314 19,145 1,169 6%
Group revenue increased by 6% to £20.3 million (2022: £19.1 million) driven
by growth in HCM from both North America and Rest of World. This revenue
increase was due to recurring revenues from SaaS (GT Connect) and ClaaS
products. There has also been revenue increase from Services in the Physical
Security Solutions Division. This growth is from traditional bank and building
society clients as well as new auto-door servicing and repairs. Further
commentary and discussion can be found in the relevant divisional sections.
2023 2022 Increase/ Percentage change
(decrease)
£'000 £'000 £'000 %
Gross Profit 7,638 6,419 1,219 19%
Gross Profit Margin 37.6% 33.5%
Gross profit margins have increased to 37.6% (2022: 33.5%) due to the full
year effect of customer price rises and cost savings in the People and Data
Management division. Their gross margins increased to 38.6% (2022: 31.4%). The
Physical Security Solutions division achieved a gross profit of 34.4% (2022:
40.4%) the decrease is primarily caused by the under-utilisation of
field-based engineers as we grow capacity to serve new service contracts.
Administrative expenses and average employees
Administrative expenses before exceptional items have decreased by 2% to £7.4
million (2022: £7.5 million). This has mainly been the result of a decrease
in consultancy costs to support the strategic growth plan. Overall average
employees have decreased to 99 (2022: 103) driven by reductions in Grosvenor
UK. Staff costs (which are included in both cost of sales and administrative
expenses) increased by £0.2 million or 2% to £7.4 million (2022: £7.1
million).
Exceptional costs
There were no exceptional costs during the year. In 2022, £0.1 million of
exceptional costs were incurred relating to continued streamlining of
positions in Grosvenor and Safetell.
Finance costs
Finance costs have increased by £0.1 million to £0.3 million (2022: £0.2 million) due to additional invoice financing borrowings to support higher working capital requirements and higher interest rates.
Profitability
The current year profit from operations before exceptional items was £0.3
million (2022: loss £1.1 million). The increase in profitability was caused
by a combination of increase in gross profits from higher revenues, improved
gross margins percentages and the full year effect of cost savings measures
introduced in the second half of FY22.
Profit after tax for the year was £0.4 million (2022: loss £0.8 million).
This is after tax credits which are discussed in more detail below.
Taxation
A tax credit of £0.4 million (2022: £0.6 million) was recognised in the
year. This resulted from a current tax credit of £0.4 million (2022: £0.4
million) due to the continued R&D claims at Grosvenor and Safetell and a
£44,000 deferred tax credit (2022: £0.2 million). The prior year deferred
tax credit was primarily from the recognition of tax losses.
Earnings per share
Earnings per share was 3.77p (2022: loss 0.32p) being an increase of 4.09p.
The decrease was due to the increase in profitability in FY23.
Balance sheet
Net assets have increased by £0.3 million to £7.9 million (2022: £7.6
million). Property, plant and equipment increased by £0.8 million to £2.9
million mainly from right of use buildings (renewal of Safetell lease and new
Grosvenor Florida office), right of use motor vehicles and ClaaS clocks.
Inventory has increased by £0.2 million to £4.2 million with additional
purchases of finished goods to allow extra cover for any further supply chain
delays. Trade and other receivables increased by £1.0 million primarily due
to a rise in trade receivables in the Physical Security Solutions Division.
Cash and cash equivalents increased by £0.4 million to £0.6 million (2022:
£0.6 million). Trade and other payables increased by £1.5 million as result
of higher activity in Q4 FY23 in the Physical Security Solutions division. The
£0.4 million increase in short term borrowings to £3.4 million was due to
drawing down of the UK invoicing financing facility and increase in lease
payments.
Research & Development (R&D)
The Group has decreased its R&D investment to £0.5 million (2022: £0.8
million) in the People and Data Management division. The reduction is due the
completion of the development of GT Connect, our upgraded SaaS platform which
was launched in the second half of FY23.
Cashflow
During the year cash increased by £0.4 million to £0.6 million (2022: £0.2
million). Cash generated from operating activities increased by £2.8 million
to £2.1 million (2022: outflow £0.7 million) mainly driven by an increase in
operating profits and a £1.7 million improvement working capital due to lower
inventories and creditor outflows. There was also a net tax receipt of £0.4
million (2023: £0.4 million) from R&D tax credits. Cashflow from
investing activities decreased by £0.5 million to £0.8 million (2022: £1.3
million) primarily due to the reduction in investment in research and
development as mentioned above. The financing movements related to the
drawdown of £0.3 million of invoice financing from the UK facility (2022:
£2.3 million from UK and US facilities), lease principal repayments of £0.4
million (2022: £0.4 million) and £0.4 million of repayments from the
Coronavirus Business Interruption Loan Scheme ("CBILS") which started to be
paid back from September 2021 over a 5-year term. There was also £0.3
million of interest paid on the debt facilities (2022: £0.1 million).
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 2023
2023 2022
Note £'000 £'000
Revenue 20,314 19,145
Cost of sales (12,676) (12,726)
Gross profit 7,638 6,419
Administrative expenses (7,354) (7,633)
Profit/(loss) from operations before exceptional items 284 (1,090)
Exceptional redundancy costs - (124)
Profit/(loss) from operations 284 (1,214)
Finance costs (348) (220)
Loss before tax (64) (1,434)
Tax credit 3 417 630
Profit/(loss) for the year 353 (804)
Attributable to:
- Equity holders of the parent 353 (804)
Earnings/(loss) per share
- Basic (pence) 3.77 (0.32)
- Diluted (pence) 3.69 (0.32)
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
2023 2022
£'000 £'000
Profit/(loss) for the year 353 151
Foreign exchange on the retranslation of overseas operation (22) (196)
Total comprehensive profit/(loss) for the year 331 (661)
Attributable to:
- Equity holders of the parent 331 (661)
The notes in the annual report and accounts form part of these financial
statements.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION AT 30 APRIL 2023
2023 2022
ASSETS Note £'000 £'000
Non-current assets
Property, plant and equipment 2,914 2,088
Intangible assets 5,450 5,564
Deferred tax 3 454 410
Total non-current assets 8,818 8,062
Current assets
Inventory 4,150 3,983
Trade and other receivables 4,978 3,979
Cash and cash equivalents 581 157
Total current assets 9,709 8,119
Total assets 18,527 16,181
LIABILITIES
Current liabilities
Trade and other payables 4,559 3,105
Other short-term borrowings 3,402 2,958
Total current liabilities 7,961 6,063
Non-current liabilities
Long term borrowings 2,537 2,447
Provisions 100 100
Total non-current liabilities 2,637 2,547
Total liabilities 10,598 8,610
TOTAL NET ASSETS 7,929 7,571
Capital and reserves attributable to equity holders
of the company
Share capital 4,687 4,687
Share premium reserve 553 553
Merger reserve 801 801
Foreign exchange difference reserve (181) (159)
Retained earnings 2,029 1,649
Total attributed to equity holders 7,889 7,531
Non-controlling interest 40 40
TOTAL EQUITY 7,929 7,571
The financial statements were approved by the Board of Directors and
authorised for issue on 25 September 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 2023
2023 2022
£'000 £'000
Cash flow from operating activities before exceptional items
Profit/(loss) after tax 353 (804)
Adjustments for: Depreciation, amortisation and impairment 1,201 1,248
Exceptional items - 124
Finance cost 348 220
Gain on sale of property, plant and equipment (37) (30)
Share based payment 27 7
Corporation tax credit (417) (630)
Operating profit before changes in working capital and provisions 1,475 135
Increase in trade and other receivables (999) (29)
Increase in inventories (167) (856)
Increase/(decrease) in trade and other payables 1,384 (658)
Cash generated from operations before exceptional items 1,693 (1,408)
Exceptional items - (124)
Cash generated from operations after exceptional items 1,693 (1,532)
Corporation tax recovered 400 871
Cash flow from operating activities 2,093 (661)
Cash flow from investing activities
Acquisition of property, plant and equipment (405) (561)
Sale of property, plant and equipment 37 30
Acquisition of intangible assets (462) (766)
(830) (1,297)
Cash flow from financing activities
Bank loans paid (400) (267)
Principal paid on lease liabilities (394) (424)
Proceeds on invoice discounting 290 2,263
Interest paid (299) (84)
(803) 1,488
Increase/(decrease) in cash and cash equivalents 460 (470)
Cash and cash equivalents at beginning of year 157 484
Exchange differences on cash and cash equivalents (36) 143
Cash and cash equivalents at end of year 581 157
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 2022 4,687 553 801 (159) 1,649 7,531 40 7,571
Profit for the year - - - - 353 353 - 353
Other comprehensive income - - - (22) - (22) - (22)
Total comprehensive income/(loss) - - - (22) 353 331 - 331
for the year
Transactions with owners
Share based payment - - - - 27 27 - 27
As at 30 April 2023 4,687 553 801 (181) 2,029 7,889 40 7,929
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 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
The notes in the annual report and accounts form part of these financial
statements.
1. Accounting policies
Newmark Security (the "Company") is a public limited company, limited by
shares, registered number 03339998 in England & Wales. The consolidated
financial statements of the Company comprise the Company and its subsidiaries
(together referred to as the "Group").
The financial statements are for the year ending 30 April 2023 (2022: year
ended 30 April 2022).
Basis of preparation
The primary economic environment in which the Group operates is the UK and
therefore the consolidated financial statements are presented in pounds
sterling ('£').
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 UK adopted international
accounting standards ("IFRS") 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.
For the year ended 30 April 2023 the covenant returned to the original
pre-debt service cashflow of 1.2 times the level of debt service commencing,
based on audited accounts. The 2023 calculation was 1.45 so 121% of the
target. No other financing facilities of the Group have any covenant
requirements.
In January 2023, the Group increased its UK HSBC invoice financing facility to
£2.3 million to provide additional working capital headroom. At 30 April
2023, £2.0 million was being utilised.
In February 2022, the Group secured a 3 year $2 million invoice financing
facility with Seacoast National Bank against invoices raised from our US
operation. At 30 April 2023, $0.6 million of the facility was being
utilised. The level of invoice financing available varies with the open book
of trade debtors at any point in time and therefore the level of financing
fluctuates.
At 30 April 2023 the Group had a £0.2 million overdraft facility with its
bankers, HSBC, although none was utilised as the Group had a positive bank
balance of £0.6 million at year end. This overdraft facility increased to
£0.4 million on 27 July 2023.
The Group's going concern assessment is based on the Group continuing to
generate operating cashflows the year to 30 April 2024 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 48%. 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 48% headroom in
the latest covenant calculation it would take a large reduction in gross
material margin to cause in a covenant breach at April 2024.
However, management are confident that the shortfalls will not occur but are
undertaking regular reviews and forecasts to ensure this.
The Group is currently trading ahead of budget and continues to generate
operating cashflows in FY24.
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 September 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 financing facilities and also extend the
overdraft facility. Accordingly, the Directors consider it appropriate to
prepare the financial statements on a going concern basis.
2. 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 77% (2022: 76%) 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 23% (2022: 24%) 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
2023 2023 2023
£'000 £'000 £'000
Revenue from external customers 15,574 4,740 20,314
Finance cost 154 58 212
Depreciation 341 230 571
Amortisation 572 - 572
Segment profit/(loss) before income tax 2,196 (685) 1,510
Additions to non-current assets 1,299 463 1,933
Disposal of non-current assets 457 484 976
Reportable segment assets 13,556 3,739 17,295
Reportable segments liabilities 4,980 3,518 8,498
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/modification 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
Reconciliation of reportable segment revenues, profit or loss, assets and
liabilities to the Group's corresponding amounts:
2023 2022
£'000 £'000
Revenue
Total revenue for reportable segments 20,314 19,145
Profit or loss before income tax expense
Total profit or loss for reportable segments 1,510 209
Parent company salaries and related costs (604) (809)
Other parent company costs (970) (834)
Loss before income tax expense (64) (1,434)
Corporation taxes 417 630
(Loss)/profit after income tax expense 353 (804)
Assets
Total assets for reportable segments 17,295 15,392
Parent company assets * 1,261 789
Group's assets 18,556 16,181
Liabilities
Total liabilities for reportable segments 8,498 6,252
Parent company liabilities ** 2,128 2,358
Group's liabilities 10,626 8,610
*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
2023 2022
£'000 £'000
UK 7,280 7,092
USA 1,084 560
8,364 7,652
PLC Group Totals Reportable PLC Group Totals
segment
totals
Reportable
segment
totals
2023 2023 2023 2022 2022 2022
£'000 £'000 £'000 £'000 £'000 £'000
Other material items
Additions to non-current assets 1,761 171 1,933 1,443 7 1,450
Disposals and modifications of non-current assets 942 34 976 623 - 623
Depreciation and amortisation 1,146 55 1,201 1,235 13 1,248
3. Tax and Deferred tax
2023 2022
£'000 £'000
Current tax
UK corporation tax on profit for the year - (338)
Overseas corporation tax (25) -
Adjustment to provision in prior periods (348) (88)
(373) (426)
Deferred tax
Origination and reversal of temporary differences (16) (159)
Effect of change in corporation tax rate - (61)
Adjustment to provision in prior periods (28) 16
(44) (204)
Total tax credit (417) (630)
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:
2023 2022
£'000 £'000
Loss before tax (64) (1,434)
Expected tax credit based on the standard rate of corporation tax in the UK of (12) (272)
19.49% (2022: 19.0%)
Research and development allowances (347) (142)
Effects on profits on items not taxable or deductible for tax purposes 17 24
Effects of corporation tax change - (61)
Movement in deferred tax not recognised 190 -
Remeasurement of deferred tax for changes in tax rate 3 4
Fixed asset differences (14) 6
Foreign tax credits (25) 25
Adjustments in respect of prior period (247) (71)
Adjustments in respect of prior period (deferred tax) (28) (143)
Other movements 46 -
Total tax credit (417) (630)
The Group has the following tax losses, subject to agreement by HMRC Inspector
of Taxes, available for offset against future trading profits as appropriate:
2023 2022
£'000 £'000
Management expenses and loan relationship deficits 240 170
Trading losses 5,622 5,203
5,862 5,373
2023 2022
A deferred tax asset has not been recognised for the following: £'000 £'000
Management expenses 240 170
Trading losses 1,425 732
1,665 902
Deferred tax
Deferred tax is calculated in full on temporary differences under the
liability method using a tax rate of 25% (2022: 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 Fixed Assets Other temporary and deductible differences Available losses
Asset/(liability)
At 1 May 2022 410 (639) - 1,049
Income statement (charge)/credit 44 (25) 69 -
At 30 April 2023 454 (664) 69 1,049
Asset/(liability)
At 1 May 2021 206 146 (526) 586
Income statement (charge)/credit 204 (785) 526 463
At 30 April 2022 410 (639) - 1,049
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.
There are unrecognised deferred tax assets as listed above, which have not
been recognised due to the uncertainty of the timing of future profits.
4. Dividends
The Directors are not proposing a dividend for 2023 (2022: nil pence).
5. Subsequent events
The Directors are not aware of any material events which occurred after the
reporting data of these financial statements which will significantly affect
the financial position of the Group or the results of its operations.
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