REG - Newmark Security PLC - Half-year Report
25/01/2024 07:00
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RNS Number : 8329A Newmark Security PLC 25 January 2024
This announcement contains inside information for the purposes of Regulation
11 of the Market Abuse (amendment) (EU Exit) Regulations 2019/310.
25 January 2024
Newmark Security plc
("Newmark", the "Company" or the "Group")
Interim Results for the six months ended 31 October 2023
Increasing sales pipeline has both divisions on track to deliver full year
revenue growth
Newmark Security plc (AIM: NWT), a leading provider of electronic and physical
security systems, is pleased to announce its unaudited interim results for the
six months ended 31 October 2023 ("H1 FY24").
Financial highlights:
· Revenue down 2% to £10.4 million (H1 FY23: £10.6 million)
· Gross profit of £3.9 million (H1 FY23: £4.1 million)
· Underlying revenue up 11% after stripping out the impact of the
anticipated loss of UKG in FY23. Underlying gross profit in H1 FY24 increased
by £0.2 million
· EBITDA of £0.8 million (H1 FY23: £1.1 million)
· Loss after tax of £0.1 million (H1 FY23 profit: £0.5 million)
· Loss per share of 0.54 pence (H1 FY23: earnings per share of 4.89
pence)
· Investment in research and development of £0.2 million (H1 FY23:
£0.3 million)
· Net assets of £8.0 million (31 October 2022: £8.2 million)
Key business highlights:
Grosvenor Technology
· Human Capital Management ("HCM") annual subscription-based
recurring revenues increased by 77 % year-on-year ("YOY") to £2.3 million and
positively contributed to profit margins
· Underling YOY revenue growth for HCM North America was 8%, whilst
the Rest of the World ("ROW") saw growth of 42%
· Won three new HCM clients in North America and expanded Florida
facility to cater for increase in direct fulfilment
· Access Control's new Janus C4 Security Management System achieved
YOY revenue growth of 16%
Safetell
· Sales of entrance control products grew 100%
· Fulfilled a large order of protection screens for one of the UK's
'big four' supermarket chains
· Rolled out five new ballistic protection systems for a new money
exchange client, with 22 more planned
· Multiple new contracts for auto door maintenance covering
universities, a major convenience retailer and a train station operator
Maurice Dwek, Chairman of Newmark, commented:
"It has been another successful period for Newmark with both divisions
continuing to execute their strategies and build a better platform for growth.
This was evident by HCM's annual subscription-based recurring revenues
increasing by 77% YOY and sales of entrance control products growing 100% at
Safetell.
"What is also evident is the quality of our product and services, which is
reflected in the number of blue-chip clients we continue to win across public
and private sectors. Our sales pipeline is expanding and we are on track for
stronger second half, with both divisions set to deliver full year revenue
growth.
"Whilst we are watchful of the macroeconomic outlook and pending elections,
the people and data security market continues to grow and we are confident
that the Group is in a stronger position to capitalise on the opportunities
this will bring. We look forward to updating the market on our further
progress at the full year."
For further information:
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 / Liz Kirchner / 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/) and sign up for RNS email alerts at
https://newmarksecurity.com/investor-relations/rns-alerts/
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Safe. Seamless. Secure
CHAIRMAN'S STATEMENT
I am pleased to announce the Group's unaudited interim results for the six
months ended 31 October 2023 ("H1 FY24" or the "Period").
Operational highlights:
Group performance
Revenue Six months Six months Increase/ Percentage change
to 31 October 2023
to 31 October 2022
(decrease)
£'000 £'000 £'000 %
People and Data Management division 7,629 8,415 (786) (9)%
Physical Security Solutions division 2,737 2,210 527 24%
Group revenue 10,366 10,625 (259) (2%)
Group revenue decreased by 2% YOY to £10.4 million (H1 FY23: £10.6 million),
primarily due to the People and Data Management division losing its partner
UKG in FY23. This impact was partly offset by strong growth in the Physical
Security Solutions division.
As referenced in our FY23 results, our partnership with UKG in our HCM
business came to an end which had been anticipated for some time, as further
recapped below. Excluding the impact of UKG from prior year comparatives (H1
FY23 revenue of £1.3 million and gross margin of £0.5 million), the Group
delivered underlying revenue growth in H1 FY24 of £1.0 million (11%) and a
£0.2 million underlying increase in gross profit. There was minimal trading
from UKG in H2 FY23.
Gross profit percentage decreased slightly to 37.2% (H1 FY23: 38.9%) due to
small declines in both the People and Data Management and Physical Security
Solutions divisions. These have been caused by a combination of higher labour
and amortisation costs as well as product mix timing.
Administrative expenses increased by 5% to £3.8 million (H1 FY23: £3.6
million) driven by additional headcount and inflationary cost rises. Profit
from operations was £0.1 million (H1 FY23: £0.5 million). Finance costs
during the period were £0.18 million (H1 FY23: £0.15 million). This increase
resulted from additional invoice financing borrowings to support higher
working capital requirements and higher interest rates.
For H1 FY24, the Group made a loss per share of 0.54 pence (H1 FY23: earnings
per share of 4.89 pence).
People and Data Management division - Grosvenor Technology ("Grosvenor")
Revenue information
Six months Six months Increase/ Percentage change
to 31 October 2023
to 31 October 2022
(decrease)
£'000 £'000 £'000 %
People and Data Management division
HCM North America 3,887 4,875 (988) (20%)
HCM ROW 2,134 1,507 627 42%
Total HCM 6,021 6,382 (361) (6%)
Janus C4 1,181 1,022 159 16%
Sateon Advance 404 838 (434) (52%)
Legacy Janus 23 173 (150) (87%)
Total Access Control 1,608 2,033 (425) (21%)
Division total revenue 7,629 8,415 (786) (9%)
Human Capital Management
The HCM division recorded revenue of £6.0 million (H1 FY22 £6.4 million)
during the Period. As highlighted above, this slight reduction was expected
due to the ending of the UKG contract, which was due to reduce over time
following the merger in 2020 between Ultimate Software, our original HCM
partner and Kronos, a competitor in time clock products. As previously
disclosed, the timing for this was uncertain but it was a testament to the
quality of services provided by our team that this only happened in Q3 of the
last financial year.
Notwithstanding this, Grosvenor has seen an excellent performance across its
HCM business lines. Removing UKG's contribution of £1.3 million to last
year's revenue, underlying YOY revenue growth for North America was 8%, while
the ROW saw growth of 42% to £2.1 million.
In terms of strategy, the business has continued the rollout of GT Connect and
the transition to a 'hardware-enabled software and services' business, with a
focus on selling its customers a wrapped subscription to build stronger
recurring revenues. Annual subscription-based recurring revenues increased by
77% YOY to £2.3 million and positively contributed to profit margin.
The business has continued to expand its network of HCM partners across its
geographies with the switch to GT Connect. Where partners have previously been
using competitor clock products, GT has been displacing the competition
through its entry-level devices wrapped with recurring revenue services, which
underscores the strength of our proposition and strategy. The other benefit
for customers is the superior cybersecurity of the single GT Connect
ecosystem, with it achieving ISO 9001 certification.
In North America, the business has recently won three new HCM clients with
extensive reach which will help drive revenues in the second half of the year.
As with any new HCM client, it will take time before they reach their full
potential. The business has been aligning itself to grow revenues from direct
fulfilment and has added additional capacity to its Florida facility to enable
this. Grosvenor has been trading in the United States for over a decade and
has built a reputation for excellent products and customer service. It is
pleasing to see the progress being made in this very large market which has
huge potential for us.
The ROW has continued the positive trend from last year, demonstrating
significant growth (up 42%) primarily due to an increase in the share of
client expenditure. The business also works with several multi-national
retailers and has been successfully migrating them to the new GT platform and
negotiating new contracts.
Access Control
After a strong start to the year, some contract negotiations have slowed due
to higher interest rate conditions and customers deciding to prolong their
decisions. This led to revenue decreasing by 21% to £1.6 million (H1 FY23:
£2.0 million).
Despite this slowdown in decision making, Janus C4, our new Security
Management System (SMS), has seen continued YOY revenue growth of 16%, to
£1.2 million. The increase in sales is from net client installations as well
as upgrades from our legacy Sateon and Janus ranges, which has happened for
multiple university customers.
Public sector customers have been quicker to make procurement decisions than
the private sector, which is reflected in the new contracts signed with
hospitals and blue light services. At the same time, the team has continued to
focus on building its sales pipeline and is anticipating a stronger second
half. Looking ahead, the business is on track to complete the development of
its next generation access control product in the next financial year.
Physical Security Solutions division - Safetell
Revenue information
Six months Six months Increase/ Percentage change
to 31 October 2023
to 31 October 2022
(decrease)
£'000 £'000 £'000 %
Physical Security Solutions division
Products 1,839 1,483 356 24%
Service 898 727 171 24%
Division total revenue 2,737 2,210 527 24%
Safetell's revenue increased by 24% to £2.7 million compared to the
corresponding prior period. This increase has been driven by strong growth in
both Products and Service and also reflects the strategy to further diversify
Safetell's product offering by bringing auto door and entrance control into
the product portfolio to counter the impact of fewer physical bank branches
and post offices.
Gross margins have decreased from 41.9% in H1 FY23 to 37.7% in H1 FY24. This
is primarily due to product mix timing with higher margins forecast for the
second half of the year (FY24) compared to the prior year which had lower
margins in H2. Safetell's management has also continued to optimise the
operations team and develop a structure that delivers contracts more
efficiently, which will support margins going forward.
Further reviewing Safetell's performance, sales orders of entrance control
products grew 100% in the period, supported by new contracts with a blue-chip
banking group and a distribution centre, the latter of which is part of a
growing pipeline of sales opportunities in this area of logistics. This has
been helped by our strategy of sourcing alternative product manufacturers in
China that offer a high-quality product at a substantially lower price than
our traditional European providers.
A large Protection Screens order for one of the UK's 'big four' supermarket
chains was fulfilled in the period and the business is in the final stages of
contract negotiations with another constituent of this group. Safetell also
rolled out five new ballistic protection systems for a new money exchange
client, with a further 22 planned for next year. Safetell continues to provide
secure screen, counters and doors to multiple police forces in the UK and
successfully installed a secure wall around an operations room for a major UK
utility company during the period.
The business's auto door maintenance strategy continues to gain traction with
new customers including two universities, a major convenience retailer and a
rolling pilot contract with a train station operator, covering over 250
stations.
Balance sheet and financing
Inventory decreased during the period by £0.4 million to £3.7 million at 31
October 2023 due to a reduction of certain components being held as the global
supply chain challenges experienced in the last two financial years start to
ease.
Cash at 31 October 2023 was £0.01 million, down £0.6 million during the
period since 30 April 2023. The Group had an unused £0.4 million UK overdraft
facility at the balance sheet date.
Total borrowings decreased by £0.3 million in the period to £5.6 million at
the balance sheet date due to CBILS loan and lease repayments. The UK
invoice financing facility remains at £2.3 million and the US invoice
financing facility remains at $2 million.
Current trading
The Group returned to profit after tax in Q2 FY24 after a strong trading
performance and it expects this trend to continue into the second half of the
financial year. The Group's existing financing facilities are sufficient to
execute its current plans and both divisions are anticipating stronger sales
in the second half, supported by a good spread of public and private sector
contracts. As such, we expect both divisions to achieve FY24 revenue growth
despite the loss of the UKG contract in FY23.
CONSOLIDATED INCOME STATEMENT
For the six months ended 31 October 2023
Unaudited Unaudited Audited
Six months Six months Year
ended
ended
ended
31 October 31 October 30 April
2023 2022 2023
Note £'000 £'000 £'000
Revenue 10,366 10,625 20,314
Cost of sales (6,510) (6,491 (12,676)
Gross Profit 3,856 4,134 7,638
Administrative expenses (3,801) (3,616) (7,354)
Profit from operations 55 518 284
Finance costs (181) (147) (348)
(Loss)/profit before tax (126) 371 (64)
Tax credit 75 87 417
(Loss)/profit for the period/year (51) 458 353
Attributable to:
- Equity holders of the parent (51) 458 353
Earnings per share
- Basic (pence) 2 (0.54) 4.89 3.77
- Diluted (pence) 2 (0.54) 4.89 3.69
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the six months ended 31 October 2023
Unaudited Unaudited Audited
Six months Six months Year
ended
ended
ended
31 October 31 October 30 April
2023 2022 2023
£'000 £'000 £'000
(Loss)/profit for the period/year (51) 458 353
Foreign exchange on the retranslation of overseas operation 73 147 (22)
Total comprehensive income for the period/year 22 605 331
Attributable to:
- Equity holders of the parent 22 605 331
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
At 31 October 2023
Unaudited Unaudited Audited
31 October 31 October 30 April
2023 2022 2023
£'000 £'000 £'000
ASSETS
Non-current assets
Property, plant and equipment 2,818 2,115 2,914
Intangible assets 5,281 5,615 5,450
Deferred tax 454 406 454
Total non-current assets 8,553 8,136 8,818
Current assets
Inventory 3,712 3,880 4,150
Trade and other receivables 4,506 4,504 4,978
Cash and cash equivalents 7 63 581
Total current assets 8,225 8,447 9,709
Total assets 16,778 16,583 18,527
LIABILITIES
Current liabilities
Trade and other payables 3,120 3,212 4,559
Other short-term borrowings 3,370 2,390 3,402
Total current liabilities 6,490 6,142 7,961
Non-current liabilities
Long term borrowings 2,217 2,151 2,537
Provisions 100 100 100
Total non-current liabilities 2,317 2,251 2,637
Total liabilities 8,807 8,393 10,598
TOTAL NET ASSETS 7,971 8,190 7,929
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 (108) (12) (181)
Retained earnings 1,998 2,121 2,029
Total attributed to equity holders 7,931 8,150 7,889
Non-controlling interest 40 40 40
TOTAL EQUITY 7,971 8,190 7,929
CONSOLIDATED CASH FLOW STATEMENTS
For the six months ended 31 October 2023
Unaudited Unaudited Audited
Six months Six months Year
ended
ended
ended
31 October 31 October 30 April
2023 2022 2023
£'000 £'000 £'000
Cash flow from operating activities
Net (loss)/profit after tax from ordinary activities (51) 458 353
Adjustments for: Depreciation, amortisation and impairment 713 569 1,201
Finance costs 181 147 348
Gain on sale of property, plant and equipment (3) (15) (37)
Share based payment 20 14 27
Corporation tax credit (75) (87) (417)
Operating profit before changes in working capital and provisions 785 1,086 1,475
Decrease/(increase) in trade and other receivables 358 (525) (999)
Decrease/(increase) in inventories 438 103 (167)
(Decrease)/increase in trade and other payables (1,439) 106 1,384
Cash generated from operations 142 770 1,693
Corporation tax recovered 189 - 400
Cash flows from operating activities 331 770 2,093
Cash flow from investing activities
Acquisition of property, plant and equipment (181) (173) (405)
Sale of property, plant and equipment 3 15 37
Acquisition of intangible assets (170) (304) (462)
(348) (462) (830)
Cash flow from financing activities
Bank loans paid (200) (200) (400)
Principal paid on lease liabilities (206) (184) (394)
(Repayments)/proceeds from invoice financing (12) (34) 290
Interest paid (137) (127) (299)
(555) (545) (803)
(Decrease)/increase in cash and cash equivalents (572) (237) 460
Cash and cash equivalents at beginning of period/year 581 153 157
Exchange differences on cash and cash equivalents (2) 147 (36)
Cash and cash equivalents at end of period/year 7 63 581
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 (181) 2,029 7,889 40 7,929
Profit for the period - - - - (51) (51) - (51)
Other comprehensive income - - - 73 - 73 - 73
Transactions with owners
Share based payment - - - - 20 20 - 20
Total comprehensive income for the year - - - 73 (31) 42 - 42
As at 31 October 2023 4,687 553 801 (108) 1,998 7,931 40 7,971
At 1 May 2022 4,687 553 801 (159) 1,649 7,531 40 4,571
Profit for the period - - - - 458 458 - 458
Other comprehensive income - - - 147 - 147 - 147
Transactions with owners
Share based payment - - - - 14 14 - 14
Total comprehensive income for the year - - - 147 472 619 - (732)
As at 31 October 2022 4,687 553 801 (12) 2,121 8,150 40 8,190
NOTES TO THE ACCOUNTS
1. BASIS OF ACCOUNTS
The financial information for the six months ended 31 October 2023 and 31
October 2022 does not constitute the Group's statutory financial statements
for those periods within the meaning of Section 434(3) of the Companies Act
2006 and has neither been audited or reviewed pursuant to guidance issued by
the Auditing Practices Board. The annual financial statements of Newmark
Security plc are prepared in accordance with IFRSs as adopted by the European
Union. The principal accounting policies used in preparing the interim results
are those that the Group expects to apply in its financial statements for the
year ending 30 April 2024 and are unchanged from those disclosed in the
Group's Annual Report for the year ended 30 April 2023.
The comparative financial information for the year ended 30 April 2023
("FY23") included within this report does not constitute the full statutory
accounts for that period. The statutory Annual Report and Financial Statements
for FY23 have been filed with the Registrar of Companies. The Independent
Auditors' Report on that Annual Report and Financial Statement for FY23 was
unqualified, did not include references to any matters to which the auditors
drew attention by way of emphasis without qualifying their report and did not
contain a statement under section 498(2)-498(3) of the Companies Act 2006.
After making enquiries, the directors have a reasonable expectation that the
Company and the Group have adequate resources to continue in operational
existence for the foreseeable future. Accordingly, they continue to adopt the
going concern basis in preparing the half-yearly condensed consolidated
financial statements.
2. EARNINGS PER SHARE
The loss per share figure has been calculated based on the weighted average
number of shares in issue during the period, which was 9,374,647 shares (H1
FY23: 9,374,647).
3. DIVIDENDS
No interim dividend is proposed (H1 FY23: Nil).
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