TIDMNWT
RNS Number : 3212O
Newmark Security PLC
31 January 2023
This announcement contains inside information for the purposes
of Regulation 11 of the Market Abuse (amendment) (EU Exit)
Regulations 2019/310.
31 January 2023
Newmark Security plc
("Newmark", the "Company" or the "Group")
Interim Results
for the six months ended 31 October 2022
Newmark Security plc (AIM: NWT), a leading provider of
electronic, software, and physical security systems and
installations is pleased to announce its unaudited interim results
for the six months ended 31 October 2022 ("H1 FY23"). The Board of
Newmark is pleased to reiterate positive momentum and the Group
returning to profitability.
Financial highlights:
-- Revenue up 10% to GBP10.6m (H1 FY22: GBP9.7m)
-- Gross profit margin increased by 5.7% pts to 38.9% (H1 FY22: 33.2%)
-- EBITDA of GBP1.1m (H1 FY22 EBITDA loss: GBP0.03m)
-- Operating profit of GBP0.5m (H1 FY22 loss: GBP0.6m)
-- Profit after tax of GBP0.5m (H1 FY22 loss: GBP0.8m)
-- Earnings per share of 4.89 pence (H1 FY22: loss per share 0.17 pence)
-- Investment in research and development GBP0.3m (H1 FY22: GBP0.4m)
-- Net assets of GBP8.2m (H1 FY22: GBP7.6m)
Key business highlights:
-- Returning to profitability is a testament that our strategic
business plan has set the right foundations for sustainable
growth
-- Human Capital Management ("HCM") annual subscription-based
recurring revenues increased by 260 % year-on-year to GBP1.3m
positively contributing to our profit margins
-- Substantially increased net profit margins despite the
inflationary cost pressures and higher cost of funding to fuel our
growth
-- Continued focus on cost management initiatives and product innovation
-- Further customer base expansion driven by our product offering and end-to-end solutions
-- Efficient management of our supply chain makes for stability
and uninterrupted sales, underpinning the Group's competitive
edge
Operational highlights:
Group performance
Six months Six months
to to
31 October 31 October Increase/ Percentage
Revenue 2022 2021 (decrease) change
GBP'000 GBP'000 GBP'000 %
People and Data Management
division 8,415 7,129 1,286 18%
Physical Security Solutions
division 2,210 2,568 (358) (14%)
Group revenue 10,625 9,697 928 10%
------------ ------------ ------------ -----------
Group revenue increased by 10% year-on-year to GBP10.6 million
(H1 FY22: GBP9.7 million), driven by a strong performance in the
People and Data Management division with double-digit growth in
both HCM and Access Control.
Gross profit in value terms is up year-on-year and the gross
profit percentage has substantially increased by over 5.7
percentage points to 38.9% (H1 FY22: 33.2%). This result is due to
a combination of H2 FY22 price rises flowing into higher H1 FY23
revenues, product mix and increased higher margin HCM recurring
revenues.
Administrative expenses have decreased by 11% to GBP3.6 million
(H1 FY22: GBP4.0 million) driven by a number of cost-saving
initiatives. Operating profit before exceptional items of GBP0.5
million (H1 FY22: loss of GBP0.6 million). Finance costs during the
period came to GBP0.15 million (H1 FY22: GBP0.06 million). This
increase resulted from additional invoice financing borrowings to
support higher working capital requirements and higher interest
rates.
Group's earnings per share reached 4.89 pence (H1 FY22: loss per
share of 0.17p).
People and Data Management division - Grosvenor Technology
("Grosvenor") : Hardware-enabled software and services
Revenue information
Six months Six months
to to
31 October 31 October Increase/ Percentage
2022 2021 (decrease) change
GBP'000 GBP'000 GBP'000 %
People and Data Management
division
HCM US 4,875 4,209 666 16%
HCM ROW 1,507 1,249 258 21%
Total HCM 6,382 5,458 924 17%
------------ ------------ ------------ -----------
Janus C4 1,022 270 752 279%
Sateon Advance 838 558 280 50%
Legacy Janus 173 843 (670) (79%)
Total Access Control 2,033 1,671 362 22%
------------ ------------ ------------ -----------
Division total revenue 8,415 7,129 1,286 18%
------------ ------------ ------------ -----------
Human Capital Management ("HCM")
The business achieved revenue growth of 17% to reach GBP6.4
million (H1 FY22 GBP5.5 million), primarily driven by strong HCM
business growth from both the US and Rest of World (ROW) regions as
we have been expanding our relationships with Tier 1 software
partners.
Our growth is driven by strong market demand for reliable data
security solutions and intelligence. We are capitalising on this
opportunity to continue winning in the marketplace by being a
trusted security partner for our customers, offering cutting-edge,
end-to end solutions. Through our advanced secure cloud control
systems of people's access, identity and attendance, we are raising
the quality and speed of intelligence creating the new workplace
ecosystems.
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 increasing by 260% year-on-year to GBP1.3 million in April
2022 driven by SaaS and ClaaS (clocks as a service).
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 the second half of FY23. This contract will help
accelerate our growth in HCM recurring revenues.
Access Control
The Access Control line of business has been another success
story for the first half of the year. Revenue increased by 22% to
GBP2.0 million (H1 FY22: GBP1.7 million).
Janus C4, our Security Management System (SMS), has seen
continued year-on-year revenue growth of 297%, to GBP1.0 million.
The onboarding of new partners has been driven by our ability to
conduct face-to-face sales visits and conduct installations after
many months of disruption. The increase in sales is also due to
upgrades from our legacy Sateon and Janus ranges.
Grosvenor Product update
During H1 FY23, Grosvenor has undertaken the following product
developments:
-- Advanced facial recognition in GT Clocks
-- Changed to a modular design for GT Clocks, which reduces development costs for new devices
-- The new GT Connect secure cloud control platform, released in
the second half of 2023 is highly scalable with 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
Six
months Six months
to to
31 October 31 October Increase/ Percentage
2022 2021 (decrease) change
GBP'000 GBP'000 GBP'000 %
Physical Security Solutions
division
Products 1,483 1,821 (338) (19%)
Service 727 747 (20) (3%)
Division total revenue 2,210 2,568 (358) (14%)
------------ ------------ ------------ -----------
Safetell revenue has decreased by 14% to GBP2.2 million compared
to the corresponding prior period. We are in the process of
transforming the division with a revised strategic plan, led by our
new, highly experienced management and sales team that is setting
the direction for sustainable growth. Our traditional work of
installing and maintaining rising screens has continued to be
impacted by the reduction in the number of bank and post offices
across the country but we have now further diversified our product
offering by bringing auto door and entrance control into our
product portfolio. The demand for these products has been
continuously increasing so we have shifted our product offering to
capture this market opportunity.
We have also seen significant demand for our safety screens in
the retail sector given the current economic climate and the need
to protect their staff. We are pleased with the progress made so
far as we delivered two large retail projects in H1 FY23, with
another one secured for H2.
Despite the revenue decline in the six months to 31 October
2022, gross margins have increased from 38.7% in H1 FY22 to 41.9%
in H1 FY23. This is a result of the implementation of operational
efficiencies and cost saving initiatives.
Safetell 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 have included:
-- Focusing on the retail sector following strong market demand
-- New strategic partnerships and onboarding of new clients
-- Introduction of new product lines
-- Investment in human capital, strengthening our sales organisational structure
-- Investment in sales and marketing to support the two key
areas (automatic door servicing and entrance control)
Balance sheet and financing
Inventory increased during the period by GBP0.1 million to
GBP3.9 million at 31 October 2022 to secure the purchase and
adequate supply of certain components in advance of the usual lead
times in response to the continued global supply chain
challenges.
Cash at 31 October 2022 was GBP0.1 million, down GBP0.1 million
during the period since 30 April 2022. The Group has an unused
GBP0.2 million UK overdraft facility at the balance sheet date.
Total borrowings decreased by GBP0.3 million in the period to
GBP5.1 million at the balance sheet date primarily due to CBILS
loan repayments which started in September 2021. Subsequent to the
balance sheet date, in January 2023, the UK invoice financing
facility was increased by GBP0.6 million to GBP2.3 million to
provide further working capital headroom as the Group continues to
grow. The Group also has a $2 million US invoice financing
facility.
Current trading
-- Robust year-to-date trading performance
-- Increased gross margins and positive operating performance
-- The transition to high-margin hardware-enabled SaaS HCM
business continues, positively contributing to our
profitability
-- Sufficient inventory levels allow us to provide an
uninterrupted supply of products to our customers
Maurice Dwek, Chairman of Newmark, commented:
"I am pleased to announce a strong trading and financial
performance over this period which highlights our focus on our
strategic priorities, customer service excellence, product
innovation and complete product offering. We are effectively
managing the supply chain, pricing and spending across our business
alongside with our focus on efficiency, resulting in these positive
results today.
Looking ahead, we are pleased with our robust commercial
pipeline and trajectory of high-margin recurring income reflected
in the year-to-date performance. Combined with our cost-saving
initiatives, strong global market demand for internet-enabled
software control devices and investment in human capital, we expect
2023 to be a year of profitable growth".
Newmark Security Plc Tel: +44 (0) 20 7355
Marie-Claire Dwek, Chief Executive 0070
Officer www.newmarksecurity.com
Paul Campbell-White, Chief Financial
Officer
Allenby Capital Limited Tel: +44 (0) 20 3328
(Nominated Adviser and Broker) 5656
James Reeve / Lauren Wright (Corporate
Finance)
Amrit Nahal (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/
Safe. Seamless. Secure
CONSOLIDATED INCOME STATEMENT
For the six months ended 31 October 2022
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
31 October 31 October 30 April
2022 2021 2022
Note GBP'000 GBP'000 GBP'000
Revenue 10,625 9,697 19,145
Cost of sales (6,491) (6,474) (12,726)
Gross Profit 4,134 3,223 6,419
Administrative expenses (3,616) (4,043) (7,633)
Profit/(loss) from operations before
exceptional items 518 (637) (1,090)
Exceptional redundancy costs (183) (124)
----------------------------------- ----- ------------- ------------- ---------
Profit/(loss) from operations 518 (820) (1,214)
Finance costs (147) (59) (220)
Profit/(loss) before tax 371 (879) (1,434)
Tax credit 87 104 630
Profit/(loss) for the period/year 458 (775) (804)
------------- ------------- ---------
Attributable to:
- Equity holders of the parent 458 (775) (804)
------------- ------------- ---------
Earnings per share
- Basic (pence) 2 4.89 (0.17) (0.32)
- Diluted (pence) 2 4.89 (0.17) (0.32)
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the six months ended 31 October 2022
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
31 October 31 October 30 April
2022 2021 2022
GBP'000 GBP'000 GBP'000
Profit/(loss) for the period/year 458 (775) (804)
Foreign exchange on the retranslation
of overseas operation 147 43 143
Total comprehensive income for the
period/year 605 (732) (661)
----------- ----------- ---------
Attributable to:
- Equity holders of the parent 605 (732) (661)
----------- ----------- ---------
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
At 31 October 2022
Unaudited Unaudited Audited
31 October 31 October 30 April
2022 2021 2022
GBP'000 GBP'000 GBP'000
ASSETS
Non-current assets
Property, plant and equipment 2,115 1,058 2,088
Intangible assets 5,615 5,630 5,564
Deferred tax 406 205 410
Total non-current assets 8,136 6,893 8,062
----------- ----------- ---------
Current assets
Inventory 3,880 3,689 3,983
Trade and other receivables 4,504 4,188 3,979
Cash and cash equivalents 63 211 157
Total current assets 8,447 8,088 8,119
----------- ----------- ---------
Total assets 16,583 14,981 16,181
----------- ----------- ---------
LIABILITIES
Current liabilities
Trade and other payables 3,211 3,306 3,105
Bank overdraft - 448 -
Other short-term borrowings 2,930 1,604 2,958
Total current liabilities 6,141 5,358 6,063
----------- ----------- ---------
Non-current liabilities
Long term borrowings 2,151 1,965 2,447
Provisions 100 100 100
Total non-current liabilities 2,251 2,065 2,547
----------- ----------- ---------
Total liabilities 8,392 7,423 8,610
----------- ----------- ---------
TOTAL NET ASSETS 8,190 7,558 7,571
----------- ----------- ---------
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 (12) (259) (159)
Retained earnings 2,121 1,736 1,649
Total attributed to equity holders 8,150 7,518 7,531
Non-controlling interest 40 40 40
TOTAL EQUITY 8,190 7,558 7,571
----------- ----------- ---------
CONSOLIDATED CASH FLOW STATEMENTS
For the six months ended 31 October 2022
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
31 October 31 October 30 April
2022 2021 2022
GBP'000 GBP'000 GBP'000
Cash flow from operating activities
Net profit/(loss) after tax from
ordinary activities 458 (775) (804)
Adjustments for: Depreciation, amortisation
and impairment 569 606 1,248
Exceptional items - 183 124
Interest expense 147 55 220
Gain on sale of property, plant
and equipment (15) 2 (30)
Share based payment 14 - 7
Income tax (credit)/expense (87) (104) (630)
Operating profit/(loss) before changes
in working capital and provisions 1,086 (33) 135
(Increase)/decrease in trade and
other receivables (525) (445) (29)
Decrease/(increase) in inventories 103 (545) (856)
Increase/(decrease) in trade and
other payables 106 (87) (658)
Cash generated from operations
before exceptional items 770 (1,110) (1,408)
Exceptional items - (183) (124)
Cash generated from operations 770 (1,293) (1,532)
Income taxes received - 374 871
Cash flows from operating activities 770 (919) (661)
Cash flow from investing activities
Acquisition of property, plant and
equipment (173) (265) (561)
Sale of property, plant and equipment 15 - 30
Research and development expenditure (304) (417) (766)
(462) (682) (1,297)
----------- ----------- ---------
Cash flow from financing activities
Bank loans repaid (200) - (267)
Bank overdraft received - 448 -
Principal paid on lease liabilities (158) (267) (376)
(Repayments)/proceeds from invoice
discounting (34) 1,226 2,263
Interest paid on lease liabilities (26) (39) (48)
Interest paid (127) (16) (84)
(545) 1,352 1,488
----------- ----------- ---------
(Decrease)/increase in cash and
cash equivalents (237) (249) (470)
Cash and cash equivalents at beginning
of period/year 153 484 484
Exchange differences on cash and
cash equivalents 147 (24) 143
Cash and cash equivalents at end
of period/year 63 211 157
----------- ----------- ---------
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Amounts
attributable
Foreign to owners
Share Share Merger exchange Retained of the Non-controlling Total
capital premium reserve reserve earnings parent interest equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 May 2022 4,687 553 801 (159) 1,649 7,531 40 7,571
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 - 619
-------- -------- -------- --------- --------- ------------- ---------------- --------
As at 31
October 2022 4,687 553 801 (12) 2,121 8,150 40 8,190
-------- -------- -------- --------- --------- ------------- ---------------- --------
At 30 April
2021 4,687 553 801 (302) 2,511 8,250 40 8,290
(Loss) for
the period - - - - (775) (775) - (775)
Other
comprehensive
(loss) - - - 43 - 43 - 43
Total
comprehensive
income for
the year - - - 43 (775) (732) - (732)
-------- -------- -------- --------- --------- ------------- ---------------- --------
As at 31
October 2022 4,687 553 801 (259) 1,736 7,518 40 7,558
-------- -------- -------- --------- --------- ------------- ---------------- --------
NOTES TO THE ACCOUNTS
1. BASIS OF ACCOUNTS
The financial information for the six months ended 31 October
2022 and 31 October 2021 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 2023
and are unchanged from those disclosed in the Group's Annual Report
for the year ended 30 April 2022.
The comparative financial information for the year ended 30
April 2022 included within this report does not constitute the full
statutory accounts for that period. The statutory Annual Report and
Financial Statements for 2021 have been filed with the Registrar of
Companies. The Independent Auditors' Report on that Annual Report
and Financial Statement for 2022 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 earnings per share has been calculated based on the weighted
average number of shares in issue during the period, which was
9,374,647 shares (H1 FY22: 468,732,316).
At the Annual General Meeting held on 10 November 2022, the
Company sought shareholder approval for a sub-division and
consolidation of the Company's share capital ("Capital
Reorganisation"). The shareholders passed the resolution, and as of
11 November 2022, the new ordinary shares were admitted to trading
on AIM. As a result of the Capital Reorganisation, each existing
ordinary share was subdivided into one new ordinary share of 0.1
pence and one new deferred share of 0.9 pence. Immediately
following the sub-division, shareholders received one consolidated
ordinary share of 5 pence for every 50 ordinary shares of 0.1
pence.
Prior to the Capital Reorganisation, the Company's ordinary
share capital consisted of 468,732,350 ordinary shares of 1 pence,
and subsequent to the Capital Reorganisation, the Company's
ordinary share capital consists of 9,374,647 ordinary shares of 5
pence with voting rights listed on AIM and 468,732,350 deferred
shares of 0.9 pence with no voting rights. The new ordinary shares
have the same rights and benefits as the ordinary shares which
existed before the consolidation, including voting, dividend and
other rights.
3. DIVIDENDS
No interim dividend is proposed for H1 FY23 (H1 FY22: Nil).
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