13th Dec 2007 09:41
Newmark Security PLC13 December 2007 NEWMARK SECURITY PLC ("NEWMARK SECURITY" OR THE "COMPANY") INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 OCTOBER 2007 HIGHLIGHTS: • Revenue from continuing operations up by 18% from £6.4m to £7.6m, with 5% increase in electronic division and 37% growth in asset protection division •Profit from operations for continuing businesses 32% higher, £1,194K compared to £907K •Earnings per share for continuing businesses increased by 13% to 0.17p (basic and diluted) (2006: 0.15p) despite the larger average number of shares in issue in the period compared to last year • Earnings per share before interest discount, losses of discontinued operations, provision for exchange losses and warrant revaluation increased by 19% to 0.19p (2006: 0.16p) •Total net assets increased by 26%, from £4.697m to £5.937m and will increase substantially in the second half of the year with the recent announcement about the favourable settlement of a tax liability. This will result in the release of approximately £1.1m to the profit and loss account in the second half. •Cash flow from operating activities increased by 24% from £599K to £744K •Trading result for the year expected to be at least in line with market expectations Enquiries: Seymour Pierce LimitedMark Percy 020 7107 8000 INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 OCTOBER 2007 CHAIRMAN'S STATEMENT The Board is pleased to announce their interim results for the six months ended31 October 2007. The interim figures have been produced in accordance withInternational Financial Reporting Standards (IFRS), and the comparativeinformation shown for the six months ended 31 October 2006 has been restated onan IFRS basis as disclosed in the preliminary announcement with the results forthe year ended 30 April 2007. Revenue in the period for continuing businesses of £7,582,000 was 18 per cent.ahead of the corresponding period last year of £6,398,000.The Group operating profit for the period was £1,253,000 (2006: £907,000) beforeprovision for exchange loss; an improvement of 47 per cent.Earnings per share were 0.17 pence per share (2006: 0.15 pence). However, asshown in note 4 to the accounts, the earnings per share before interestdiscount, provision for exchange loss, warrant revaluation and losses ofdiscontinued operations were 0.19 pence (2006: 0.16 pence). A detailed review of the activities, results and future developments of eachdivision is set out below. ELECTRONIC DIVISION Revenue 6 months 31 October 2007: £3,935,000 (2006: £3,731,000) Operating profit6 months 31 October 2007: £1,035,000 (2006: £950,000). Revenue in the period for the division was 5 per cent. higher than thecorresponding period last year. Revenue in Grosvenor Technology was 7 per cent.lower than the same period last year which had included revenue of £0.5 millionfor a major contract with BAe Systems. Notwithstanding this, there has been animprovement in gross margin from 50 per cent. to 54 per cent. due to acombination of improved manufacturing costs associated with off-shoremanufacturing (Hungary), the mix of business and salary savings where staffleavers have not been replaced as a result of the merger of Custom MicroProducts and Grosvenor Technology. The emerging JANUS, Siteguard and N-TEC Enterprise systems and the Admin Managerweb application, announced in the last annual report, continue to attractsignificant interest. The development period was extended to permit enhancedinternet security within the initial release. Version 1.0 is due to be completedand released during the first quarter 2008, and we already have an order book inexcess of £150,000. Two systems have been installed as working trials and areworking very well. Revenue in Newmark Technology was 65 per cent. higher arising mainly from thesales to Russia through Simplex Fire (part of the Tyco Group) which we hadpredicted in last year's annual report. Sales to Russia to date have been inEnglish language only but we have now developed a Russian translation of thecore N-TEC software and further significant sales to this area are expected inthe future. Revenue in Custom Micro Products rose by 17 per cent. overall from £1,356,000 to£1,582,000 but there was again a major variation in the volumes of sales to ourthree main geographic destinations. Sales to the US fell slightly with turnoverof £390,000 in the first half year compared to £429,000 in the correspondingperiod last year. Sales to Europe and the UK increased respectively by 49 percent. from £322,000 to £480,000, and by 14 per cent. from £579,000 to £662,000.Both of these increases are due to a higher level of sales by our agents anddistributors. Gross margin percentage has increased with the benefit of thehigher volumes compared to the fixed element of salaries included within cost ofsales. The RS21 product is now complete and we are manufacturing for stock ready for anofficial launch in January 2008. The product has been widely acclaimed by UK andEuropean customers who will be universally opting for it as their standardoffering once formally launched. The US market is opting for the IT3100 terminalwhich is technically more advanced, and trials are currently underway betweenour US distributors and their customers. Other modules and expansion boards forthe RS21 and the IT3100 will continue to be developed to further enhance theproducts and their features and functions. As announced previously, Grosvenor and Custom Micro Products have now mergedunder the name of Grosvenor Technology. The combined business will continue tooperate from the two existing facilities but the merger provides cost benefitsfrom the unification of the various departments within the two organisations.These longer term cost benefits will adversely affect the second half figures asthe company is incurring restructuring costs in merging the two businesses. ASSET PROTECTION DIVISION Revenue 6 months 31 October 2007: £3,647,000 (2006: £2,667,000) Operating profit6 months 31 October 2007: £546,000 (2006: £183,000) The increase in revenue has occurred in all the product areas and the servicebusiness with improved volume related efficiencies resulting in an improvementin gross margin. Quotations and orders in the period were 21 per cent. and 37 per cent. more thanthe same period last year most of which have been fast turn round projects.Although the order backlog is 54 per cent. above last year, a number of finiteprogrammes are coming to their end. Last year's trend of Eclipse rising screen programmes re-starting for long-termcustomers has continued and some new customers have been introduced. Branchreconfiguration work for Eclipse sites has seen higher demand than expected.CounterShield sales were double the figure for the first six months last yearand Safetell has nearly £600,000 of outstanding quotes in this area, 45 percent. more than October 2006, the second year of this level of growth.The Eye-2-Eye Disability Access counter module business has seen a notablegrowth in quotations, orders and sales. Sales were double last year at £131,000and the backlog of quotes at £271,000 and orders at £176,000 indicate that totalannual sales will exceed £500,000 (2006: £166,000). Network Rail and seven ofthe Train Operating Companies are now established customers with repeat orderpotential for the coming years. RollerCash sales to the Sub-Post Offices have been slow relative to last yeardue to continued uncertainty about government funding for the rural network.However, the Post Office franchise agreement with WH Smith has proved successfuland boosted sales of TRIO machines so that overall cash handling sales were 20per cent. more than the first six months last year. The supply contract withPost Office was extended to the end of July 2009. New opportunities for cashhandling solutions are being pursued with one of the major retail banks andsmaller building societies. The new formats of FlexiGlaze screens developed last year for petrol stationsand other applications are being more widely accepted with sales totalling£163,000 compared to £38,000 in the first half of last year. The petrolretailers are becoming more inclined to invest in physical staff protection tocombat a rising level of attacks and further growth is expected in this productarea. The ongoing comprehensive service contracts with Abbey, HBOS, Nationwide andothers continue to form the backbone of the service business. Each of thesemajor contracts have been gradually expanded to include tills, cameras, CCTV andlocks to provide added value to Safetell, and cost reductions by single sourcingfor the customer.A single programme of service upgrade work worth in excess of £380,000 will becompleted by March 2008 for a major client involving access control and lockinstallation at several hundred sites to improve branch operationalefficiencies, £218,000 of this work having been completed in the first halfyear.The company achieved Approved Installer status for Mitsubishi Digital SecuritySystems as a requirement of the Abbey service contract. This status and therelated skills and experience have enabled the acquisition of new CCTV work forselected clients in Safetell's market environment. BALANCE SHEET AND CASH FLOW Stock holding at the period end includes the impact of the out-sourcing ofproduction within Custom Micro Products and the consequent need to hold finishedgoods in stock. Stock and trade debtors also reflect the higher level of tradingactivity in the period. As part of the settlement of the loan notes related to the acquisition ofGrosvenor Technology (as detailed below), the Group has started invoicediscounting in certain subsidiary companies to finance the settlement. This wasdrawn down on 31 October in readiness for the payment of these loan notes andhence affect the cash and other creditors figures. POST BALANCE SHEET EVENTSThe euro denominated loan notes issued by way of deferred consideration for theacquisition of Grosvenor Technology in 2002 were repaid on 1 November 2007. Theloan notes were redeemed from the Group's own cash resources and bankingfacilities which included £1.2 million by way of a loan repayable over 3 yearsand invoice discounting. An exchange loss of £59,000 relating to these loannotes was accrued in the accounts for the six months to 31 October 2007.A favourable settlement has been reached with regard to a disputed overseascorporation tax liability which should result in a release to the profit andloss account of approximately £1.1 million which will be included in theaccounts for the second half of the year ended 30 April 2008. The exceptionalprofit will form part of the results of discontinued operations. In addition,the Group's Dutch subsidiary, Vema NV, has sold its remaining property torealise a gain on disposal of approximately £50,000, which will similarly beincluded in the results for the second half year. CONCLUSIONTrading within Custom Micro Products is continuing at the same levels to date inthe second half. The Christmas period is traditionally a quiet time for ourcompanies but the expectation is that the last quarter will return to the samelevel of trading as the first half and therefore the result for the year isexpected to be at least in line with market expectations. CONSOLIDATED INCOME STATEMENTFor the six months ended 31 October 2007 Notes Unaudited Audited Unaudited Six months ended Year ended Six months ended 31 October 2007 30 April 2007 31 October 2006 £'000 £'000 £'000 Revenue 7,582 13,422 6,398Cost of sales (4,399) (7,605) (3,620)Gross profit 3,183 5,817 2,778Provision forexchange loss (59) (111) -Administrativeexpenses (1,930) (4,074) (1,871)Profit fromoperations 1,194 1,632 907Finance income 46 30 16Finance costs (140) (113) (36)Other financelosses (50) (44) (17)Profit beforetax 1,050 1,505 870Tax expense 2 (306) (368) (241)Profit for theyear fromcontinuingoperations 744 1,137 629Post-tax lossrelated todiscontinuedoperations - (48) (30)Profit for theyear 744 1,089 599Attributable to:- Equityholders of theparent 744 1,089 599Earnings per shareContinuing operations- Basic anddiluted(pence) 4 0.17p 0.25p 0.15pDiscontinuedoperations- Basic anddiluted(pence) - (0.01p) (0.01p) CONSOLIDATED BALANCE SHEETAt 31 October 2007 Notes Unaudited Audited Unaudited 31 30 April 31 October 2007 October 2007 £'000 2006 £'000 £'000ASSETSNon-current assetsProperty,plant andequipment 1,000 880 981Intangibleassets 7,308 7,136 7,059Deferred taxassets 43 37 65Totalnon-currentassets 8,351 8,053 8,105Current assetsInventories 1,709 1,381 1,482Trade andotherreceivables 3,439 3,196 2,889Cash and cashequivalents 2,977 1,948 1,148Total currentassets 8,125 6,525 5,519Total assets 16,476 14,578 13,624LIABILITIESCurrent liabilitiesTrade andother payables 3,969 3,173 2,643Other shorttermborrowings 4,065 3,930 375Corporationtax liability 1,758 1,443 1,420Provisions 113 113 113Total currentliabilities 9,905 8,659 4,551Non-current liabilitiesLong termborrowings 486 553 718Provisions 148 156 158Othercreditors - - 3,500Totalnon-currentliabilities 634 709 4,376Totalliabilities 10,539 9,368 8,927TOTAL NETASSETS 5,937 5,210 4,697Capital and reserves attributable toequity holders of the companyShare capital 4,490 4,490 4,490Share premiumreserve 3 493 493 493Merger reserve 3 801 801 801Foreignexchangedifferencereserve 3 (74) (38) (42)Retainedearnings 3 163 (600) (1,109) 5,873 5,146 4,633Minorityinterest 64 64 64TOTAL EQUITY 5,937 5,210 4,697 CONSOLIDATED CASH FLOW STATEMENTSFor the six months ended 31 October 2007 Unaudited Audited Unaudited Six months Year ended Six months ended ended 30 April 2007 31 October 2006 31 October 2007 £'000 £'000 £'000Cash flow from operatingactivitiesNet profitafter tax fromordinaryactivities 744 1,089 599Adjustments for:Depreciation 181 348 178Investmentincome (46) (30) (16)Interestexpense 140 113 36Other financelosses 109 158 131Income taxexpense 306 347 226Share optioncharge 19 38 19Warrantrevaluation - (114) (114)Operatingprofit beforechanges inworkingcapital andprovisions 1,453 1,949 1,059(Increase) intrade andotherreceivables (223) (798) (560)(Increase) ininventories (329) (125) (225)Increase/(decrease) in tradeand otherpayables 765 654 (71)Cash generatedfromoperations 1,666 1,680 203Income taxespaid (29) (210) (21)Cash flowsfrom operatingactivities 1,637 1,470 182Cash flow from investingactivitiesPayment forproperty,plant andequipment (153) (242) (143)Sale of property,plant andequipment - 47 -Research anddevelopmentexpenditure (172) (269) (115)Interestreceived 46 30 16 (279) (434) (242)Cash flow from financingactivitiesProceeds fromloans - 750 750Repayment loannotes - (750) (750)Repayment ofbank loans (130) (194) (62)Repayment offinance leasecreditors (59) (154) (74)Interest paid (140) (113) (36) (329) (461) (172) Increase/(decrease) in cashand cashequivalents 1,029 575 (232) NOTES TO THE ACCOUNTS 1. BASIS OF ACCOUNTS The unaudited interim figures for the six months ended 31 October 2007 have beenprepared in accordance with International Financial Reporting Standards (IFRSs)and its interpretations issued by the International Accounting Standards Board(IASB) and with those parts of the Companies Act 1985 applicable to companiespreparing their reports under IFRS. The comparative figures for the six monthsended 31 October 2006 have been restated on the same bases. These figures do not constitute statutory accounts within the meaning of Section240 of the Companies Act 1985. The results for the year ended 30 April 2007 arean abridged version of the full accounts, which received an unqualified auditreport and have been filed with the Registrar of Companies, as restated forIFRS. 2. TAXATION The tax charge is affected by the effect on profits of items not deductible fortax purposes, and the use of losses brought forward. 3. SHARE PREMIUM AND RESERVES Share premium Merger reserve Retained earnings Foreign £'000 £'000 £'000 exchange reserve £'000 At 1 May 2007 493 801 (600) (38)Retainedprofit for theperiod - - 744 -Share basedpaymentsprovision - - 19 -Exchangedifferences onforeigncurrencyinvestments - - - (36)As at 31 October 2007 493 801 163 (74) 4. EARNINGS PER SHARE The earnings per share has been calculated based on the weighted average numberof shares in issue during the period, which was 448,957,816 shares (2006:414,311,077). The basic earnings per share before discount charge, losses of discontinuedoperations and provision for exchange losses has also been presented since, inthe opinion of the directors, this provides shareholders with a more appropriatemeasure of earnings derived from the Group's businesses. It can be reconciled tobasic earnings per share as follows: Pence £'000 per share Profit after taxation and minority interest 0.17 744Discount charge on deferred consideration 0.01 59Provision for exchange loss 0.01 59Earnings per share before interest discount andprovision for exchange loss 0.19 862 Unaudited Audited Unaudited Six months ended Year ended Six month ended 31 October 2007 30 April 2007 31 October 2006 Total Total Total Pence Pence PenceEarnings pershare beforelosses ofdiscontinuedoperations,discount charge,warrant revaluationand provisionfor exchangeloss 0.19 0.30 0.16 5. DIVIDENDS No interim dividend is proposed (2006: Nil). This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Newmark Security