14th Sep 2005 13:01
Newmark Security PLC14 September 2005 NEWMARK SECURITY PLC ("NEWMARK" OR THE "COMPANY") FINAL RESULTS FOR THE YEAR ENDED 30 APRIL 2005 CHAIRMAN'S STATEMENT Overview The year under review has seen the acquisition of Custom Micro Products Limited("CMP") as detailed below. During the year the Group disposed of itssubsidiary company, Newmark Onroerend Goed SA, a property holding company inBelgium. Since the year end, NSP Europe Limited ("NSP") has been sold andConcept Hardware and Security Solutions Limited ("Concept") has been closed.We had been hopeful that both of these businesses would grow over the last twoyears to eliminate the trading losses that they had been incurring. However, asthese levels of activity have still not been achieved, the decision was made todispose of these two operations and eliminate the losses that were still beingincurred. The results of these two businesses are included within discontinuedoperations for the year under review. Acquisitions and share issues The Group acquired the entire issued share capital of CMP, for a totalconsideration of £2.725 million (before costs and interest discount adjustment).Further details are included in note 23 to the financial statements. The initial consideration of £800,000 was satisfied by cash on completion, withtwo tranches of deferred consideration of £1.4 million and £525,000respectively, the latter payable on the basis of the profit before tax for theyear ending 30 April 2005. In order to part fund the acquisition of CMP, the Group raised an additional£1,700,000 (before expenses) through a placing of 136,000,000 ordinary shares at1.25p per share. Financial results The operating profit for the year was £414,000 (2004: loss £523,000). The operating profit for the year for continuing operations before exceptionalitems and goodwill amortisation was £1,519,000 (2004: £935,000), both figuresexclude the operating losses of £734,000 and £1,160,000 from the discontinuedbusinesses. Turnover for the year for continuing operations was £12.3 million (2004: £8.7million). The main commercial factors affecting the results of the divisions areset out below. Electronic Division Turnover £6,682,000 (2004: £4,032,000) Operating profit £1,350,000 (2004: £828,000) The combined access control operation comprising Grosvenor and NewmarkTechnology was ahead of plan for the year. CMP's sales for the ten months fromdate of acquisition were £2.5 million for the period under review. Thepreviously anticipated major end-user sales opportunities did not materialiseand, as a result, profits were lower than the projected level. Sales of Siteguard Access (manufactured by Tyco under license from Grosvenor)remain strong and a new training initiative by Grosvenor has directly targetedthe ADT branch network. This will endorse the position of the Siteguard productwithin the Tyco/ADT portfolio and should increase sales where some branches haveyet to be converted to the product. Grosvenor continues to develop its core product, JANUS access control, and hasreleased a new software module to allow generic CCTV control and integration.The product will be further developed to include multiple CCTV systems withinthe same JANUS platform and is due for release early next year. Also beingdeveloped is an Enterprise edition where multiple JANUS access systems can havetheir personnel administration managed from a single database source. We have developed and released a brand new high-end access control product,N-TEC Access ("N-TEC"). A distribution deal with Simplex and ThornInternational has already been agreed, where N-TEC will be interfaced directlyto their fire systems and sold exclusively throughout the Middle East, Africaand Russia ("MEAR"). The product was launched in July 2005 in Abu Dhabi, UAE,and Amman in Jordan. MEAR is a brand new territory for the company with ordersalready being processed. N-TEC, being unique to Newmark Technology will run sideby side with the third party C.Cure business and provides a new opportunity torevitalise sales which will be entirely under the company's own control. The combined sales of Newmark and Grosvenor remain on-plan for the current yearand are expected to remain so for the remainder of the period. The underlying business trends remain strong, particularly for Grosvenor, with acontinuing steady volume of core business. Other contracts, some of which havebeen delayed from last year, are being sought and due to be placed in the comingperiod and include a major bank looking to upgrade its entire securityinfrastructure, defence companies and government facilities. CMP is a leader in the UK market for Time & Attendance ("T&A") terminals andassociated peripheral equipment, including access control and shop floor datacollection equipment. The company has well established sales channel alliancesin the UK, USA and Europe and is a UK sales channel for T&A software. CMP is set to benefit from synergies with Grosvenor Technology, where mutualcooperation is enhancing the Group's access control and T&A offering,particularly into new export markets. Recent promising discussions with newpotential partners in the UK suggest that an additional share of the UK T&Amarket is available and CMP is diligently pursuing these prospects. CMP is alsotaking steps to secure and enhance it's presence in the US market, throughopening an additional sales channel. CMP maintains a UK based product development and production capability and isseeking to reinforce its current position in the T&A marketplace, whilst lookingto exploit its capabilities to broaden its product base and take full advantageof its strong market position. Asset Protection Division Turnover £5,666,000 (2004: £4,694,000) Operating profit £787,000 (2004: £720,000) Safetell's trading throughout the year was broadly in line with plan with themajor benefit of a single programme of work for Abbey through the summer of 2004to achieve revenue growth of 21 per cent over the previous period. However, thatlarge programme was at lower than usual margin. The new maintenance work forHBoS that was started in March 2004 and the revised tender/contract for The PostOffice were also at lower than normal margin. These two factors on the productmix depressed the overall gross margin by 4.2 per cent compared to the previousyear. Overheads were controlled to the essentials required to manage theadditional business level, resulting in a rise in operating profit of 9 per centcompared to last year. The Eclipse rising screen programmes were maintained with long-term customers inretail finance and petrol retailing. For the first time, the value ofreconfiguration/refurbishment works for Eclipse exceeded the value of newinstallations. Both CounterShield and Eye2Eye were successful during the year with increases inrevenue compared to the previous year of 21 per cent and 488 per centrespectively. The new customers for these products have been mainly PoliceAuthorities and this market opportunity is being pursued vigorously with otherforces. The demand for RollerCash and BiDi Safe cash handling equipment is dependent onthe roll-out programmes of established customers. Order intake from The PostOffice for a specific programme was very high in the later months of the yearbut during June 2005 this project was put on hold with only one third of theoriginally expected value completed. New interest in this product range is beingexpressed by both historical and new retail finance customers who are tendingtowards an open plan format requiring secure cash management at the workstation. The development of the new product ("CashCycler") by the OEM supplier has beenseverely delayed by technical problems and the first unit has only just beenmade available in July 2005. Much testing and training will be required beforethis product will generate any significant volume. Changes to the premises of service providers to comply with the DisabilityDiscrimination Act in October 2004 continue to fuel demand from public bodies tomake reasonable adjustments to their service areas. Police authorities, publictrain and bus ticketing organisations, central and local governments are provingto be a good source of work for all forms of screens as the best defence againstviolence in the front office/reception areas. The service and maintenance business continues to increase pro-rata to theinstalled base of primary equipments. During the year new contracts were won tomaintain all screen systems for a number of clients, irrespective of the screenOEM. The early months of the current year are affected by the delayed Post Officecontract works and performance will be below plan in the first half year. The prospects for the second half are more difficult to predict but the level ofoutstanding quotations and orders is promising and a number of excellentprospects for major roll-out programmes offer good grounds for growth. Balance sheet and cash flow The balance sheet varies significantly from last year with the acquisition ofCMP. Goodwill on the acquisition has been calculated as set out in Note 23 tothe accounts, and other creditors include the deferred element of the purchaseconsideration which will be paid in September 2005. Cash balances include £1.2million held as security for the deferred payment. Working capital at April 2005 was affected by some shipping delays on majorcontracts with Safetell which had a significant impact on stock holding at theyear end, although this was offset by advance payments from those customers,which are included in accruals and deferred income. Trade debtors were also highat the year end with large sales volumes in CMP in April. With the shares issued in the year to finance the acquisition of CMP,shareholders funds increased from £1.4 million to £3.3 million. Net cash flow from operating activities increased from £0.3 million to £0.8million. With the disposal of the property in Belgium, net capital expenditurewas minimal. Employees The Board wishes to thank all employees on their contribution during the year. Summary The results for the year have obviously been severely affected by the ongoinglosses in NSP and Concept. These activities have now been terminated and allremaining businesses are profitable, although the results for the current yearwill include the trading losses for the three months to termination and thelosses on termination of the businesses. The Company has made an encouraging start to the new financial year which willbe mainly reflected in the second half, experiencing a high level of interest inits products and services, particularly within Grosvenor Technology, with anumber of new contracts with major companies in advanced stages of discussion. M DWEKChairman14 September 2005 CONSOLIDATED PROFIT AND LOSS ACCOUNTFor the year ended 30 April 2005 2005 2005 2005 2004 Before goodwill and Goodwill and Total Total exceptional exceptional £000 £000 items items £000 £000 Turnover Continuingoperations 9,804 9,804 8,726Acquisitions 2,544 2,544Discontinuedoperations 1,286 1,286 1,858 13,634 13,634 10,584Cost of Sales (8,150) (8,150) ( 6,479) Gross profit 5,484 5,484 4,105 Administrativeexpenses preamortisationof goodwillandexceptionalitems (4,699) (4,699) (4,163) Amortisationof goodwill (371) (371) (298)Terminationcosts (167) Administrativeexpenses- total (4,699) (371) (5,070) (4,628) Operatingprofit/(loss) Continuingoperations 1,107 (298) 809 637Acquisitions 412 (73) 339Discontinuedoperations (734) (734) (1,160) 785 (371) 414 (523)Loss ondisposal/closure ofsubsidiary/business (13) (13) (1,133) Profit/(loss)on ordinaryactivitiesbeforeinterest 785 (384) 401 (1,656) Interestreceivable 52 52 15Interestdiscountcharge ondeferredconsideration (275) (275) (179)Interestpayable (139) (139) (51) Profit/(loss)on ordinaryactivitiesbeforetaxation 423 (384) 39 (1,871) Tax onprofit/(loss)on ordinaryactivities (106) (106) (146) Profit/(loss)on ordinaryactivitiesafter taxation 317 (384) (67) (2,017) Minorityinterest (27) Profit/(loss)for thefinancial year 317 (384) (67) (2,044) Dividends Amounttransferredto/(withdrawn)from reserves 317 (384) (67) (2,044) pence penceEarnings/(loss)per share basic anddiluted -p (1.0p) beforegoodwillamortisation,interestdiscount,losses ofdiscontinuedoperations andexceptionalitems 0.3p 0.3p BALANCE SHEETSAs at 30 April 2005 Group Group Company Company 2005 2004 2005 2004 £000 £000 £000 £000Fixed assetsIntangibleassets 6,820 5,287Tangibleassets 803 903 5 11Investments 16,573 15,187 7,623 6,190 16,578 15,198Current assetsStocks 1,664 893Debtors:amountsfalling duewithin oneyear 2,968 1,974 31 66Debtors:amountsfalling dueafter morethan one year 625 1,242 2,968 1,974 656 1,308Cash at bankand in hand 3,205 1,522 1,200 104 7,837 4,389 1,856 1,412Creditors:amountsfalling duewithin oneyear (6,467) (2,911) (11,936) (9,747)Net currentasset/(liabilities) 1,370 1,478 (10,080) (8,335)Total assetsless currentliabilities 8,993 7,668 6,498 6,863Creditors:amountsfalling dueafter morethan one year (5,488) (5,741) (4,431) (4,102)Provisions forliabilitiesand charges (185) (201) 3,320 1,726 2,067 2,761Capital and reservesCalled upshare capital 3,617 2,131 3,617 2,131Share premium 432 432Merger reserve 801 801 801 801Profit andloss reserve (1,593) (1,506) (2,783) (171)Equityshareholders'funds 3,257 1,426 2,067 2,761Minorityinterests 63 300 3,320 1,726 2,067 2,761 The financial statements were approved by the Board of Directors on 14 September2005 and were signed on its behalf by: M DWEKChairmanB BEECRAFTFinance Director CONSOLIDATED CASH FLOW STATEMENTFor the year ended 30 April 2005 2005 2004 £000 £000 Net cash inflow from operating activities 786 252Returns on investments and servicing of financeInterest received 52 15Interest paid (139) (51)Net cash outflow from returns on investments andservicing of finance (87) (36)Taxation (404)Capital expenditure and financial investmentPurchase of tangible fixed assets (277) (235)Receipts from sale of tangible fixed assets 247 30Net cash outflow from capital expenditure andfinancial investment (30) (205)AcquisitionsPurchase of subsidiary undertakings (918)Net cash acquired on purchase of subsidiaryundertakings 563Net cash outflow from acquisitions (355)DisposalsCosts related to sale of subsidiary undertaking,and business and trading assets (189)Cash disposed of with business (1)Net cash outflow from disposals (190)Net cash outflow before financing (90) (179)FinancingNew finance loans 329 1,100Repayment of loans (209) (176) 120 924 Share issues less expenses paid 1,643Net cash inflow from financing 1,763 924Increase in cash 1,673 745 STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSESFor the year ended 30 April 2005 2005 2004 £000 £000Loss for the financial year (67) (2,044)Exchange difference on translation of net assets andresults of subsidiary undertakings (20) 123Total recognised gains and losses relating to the year (87) (1,921) RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDSFor the year ended 30 April 2005 2005 2004 £000 £000GROUPLoss for the financial year (67) (2,044)New share capital subscribed (net of issue costs) 1,918 17Exchange difference on translation of net assets andresults (20) 123of subsidiary undertakingsNet increase in/(reduction) to shareholders' funds 1,831 (1,904)Opening shareholders' funds 1,426 3,330Closing shareholders' funds 3,257 1,426 COMPANYLoss for the financial year (2,612) (785)New share capital subscribed (net of issue costs) 1,918 17Reduction to shareholders' funds (694) (768)Opening shareholders' funds 2,761 3,529Closing shareholders' funds 2,067 2,761 Earnings/(loss) per share The calculation of the basic earnings/(loss) per ordinary share is based on aloss of £67,000 (2004: loss £2,044,000) and the weighted average number ofshares in issue during the year of 329,241,000 (2004: 212,747,204). For every £1of loan note issued, the loan note holder receives a warrant entitling the loannote holder to 50 ordinary shares of 1p each on exercise of the warrant.The options in issue have no dilutive effect. The basic earnings/(loss) per share before goodwill amortisation, interestdiscount, losses of discontinued operations and exceptional items has also beenpresented since, in the opinion of the directors, this provides shareholderswith a more appropriate measure of earnings derived from the Group's businesses.It can be reconciled to basic earnings/(loss) per share as follows: 2005 2004 pence pence Basic earnings/(loss) per share (pence) (1.0)Goodwill amortisation 0.1 0.2Discount charge on deferred consideration 0.1 0.1Losses of discontinued operations (after tax) 0.1 0.5Exceptional items 0.5Earnings per share before goodwill amortisation,interest discount, losses of discontinued operationsand exceptional items 0.3 0.3 £000 £000Reconciliation of earningsEarnings/(loss) used for calculation of basicearnings/(loss) per share (67) (2,044)Goodwill amortisation 371 298Discount charge on deferred consideration 275 179Losses of discontinued operations (after tax) 548 972Exceptional items 13 1,133Earnings/(loss) before goodwill amortisation, interestdiscount, losses of discontinued operations and exceptionalitems 1,140 538 Basis of preparation The financial information set out above does not constitute the Group's statutory accounts, within the meaning of Section 240 of the Companies Act 1985,for the year ended 30 April 2005 or 2004, but is derived from those accounts.Statutory accounts for the year ended 30 April 2004 have been filed with theRegistrar of Companies. The statutory accounts for 2005 will be delivered tothe Registrar of Companies following the Company's Annual General Meeting.The auditors have reported on those accounts; their report was unqualifiedand did not contain a statement under Section 237(2) or (3) of the Companies Act 1985. When published, the Company's Annual Report and Accounts will be sent toshareholders and will be made available to the public at the Company'sregistered office, 57 Grosvenor Street, London W1K 3JA. The financial information has been prepared on a basis consistent with the accounting policies disclosed in the Group's 2004 Report and Accounts. Dividend No dividend has been proposed in respect of the year. Enquiries: Maurice Dwek, Chairman, Newmark Security PLC 020 7355 0070Brian Beecraft, Finance Director, Newmark Security PLCMark Percy / Jeremy Porter, Seymour Pierce Limited 020 7107 8000 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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