25th Jan 2006 14:26
Newmark Security PLC25 January 2006 NEWMARK SECURITY PLC ("NEWMARK" OR "THE COMPANY") INTERIM REPORT for the six months ended 31 October 2005 CHAIRMAN'S STATEMENT The six months have been a period of restructuring and consolidation. Asannounced in the last annual report and accounts, we have sold NSP EuropeLimited and closed down Concept Hardware & Security Solutions Limited which werethe two loss making activities. Our remaining businesses have all beenprofitable in the period and a detailed review of their activities and resultsis set out in the divisional reviews below. The overall Group operating profit for the period was £45,000 (2004: £280,000).The operating profit for the six months for continuing operations beforegoodwill amortisation was £452,000 (2004: £699,000). Both figures exclude theoperating losses of discontinued operations of £210,000 and £234,000respectively. Turnover for the period for continuing operations was £5.8 million(2004: £5.9 million). The major factor affecting the cash flow and balance sheet during the period hasbeen the payment of the deferred consideration for Custom Micro ProductsLimited. However the balance sheet also shows other significant changes from thelast year end when the stock, debtors and creditors figures were all affected bythe timing of major contracts both before and after the year end. ELECTRONIC DIVISION Turnover 6 months 31 October 2005: £3,161,000 (2004: £2,998,000)Operating profit 6 months 31 October 2005 £483,000 (2004: £585,000)Derek Blethyn, Managing Director of Grosvenor Technology ("Grosvenor") has beenappointed as Managing Director of the Electronic Systems Division which includesGrosvenor, Custom Micro Products ("CMP") and Newmark Technology ("NT"). Eric Dewwho has been the Engineering Director of Grosvenor for the past eleven years hasbeen appointed as the Technical Director for the Electronic Systems Division tomanage and control the product development teams. With clear vision and jointmanagement the synergistic opportunities between the different companies are nowset to be maximised. Trading levels of Grosvenor have been similar to that achieved in the sameperiod last year. Turnover in NT however is down due to the further decline ofthe C.Cure product range. Turnover of CMP in the 6 months was greater than inthe four month period since acquisition last year. However it was belowexpectations due to an exceptionally high volume of sales to our US distributorat the end of the last financial year resulting in lower levels of sales to thatsame important customer base in the period under review. There has been a recentuplift in orders from that source in the second half of the year but thedecreased average monthly sales has resulted in a fall in operating profit forCMP for the period in question. We have received a prestigious order for a government body for the nextfinancial year. The eSeries controllers recently launched by Grosvenor are proving to besignificant in the company's success in a new market where very large systemscan easily be installed utilising existing pc network wiring andinfrastructures. There are many high value tenders outstanding that look likelyto convert into orders over the next financial year. There will be another release of Grosvenor's core software JANUS in the secondquarter of 2006 which will include system interfacing to the Bosch VIDOS CCTVsystem and will also provide interconnectivity with very large databases such asOracle and Microsoft SQL Server. NT's Par-Sec asset management system is being updated with a completely newgeneration of RFID tags and readers currently in development. This will negatethe need for readers to be connected via an additional controller as they willconnect directly to a PC network in the same way so successfully employed by theeSeries controllers at Grosvenor. CMP is developing a brand new range of Time & Attendance terminals, the first ofwhich will be launched in the second or third quarter of 2006. The new rangewill run in parallel with existing products and will address market requirementsin reducing costs by utilising the latest technology and will be set tochallenge emerging markets such as hosted web/asp systems as opposed to the moretraditional on-site installations. The core systems of Grosvenor, NT and CMP, namely JANUS/N-TEC access control,ParSec asset protection and ViewPoint Time & Attendance have been integrated andare ready to offer as a combined solution to the market place. The recentagreement with Simplex Fire Systems in the Middle East, Africa and Russiawhereby N-TEC access control was launched in May 2005 into their distributorchain has already been expanded to take these additional products starting firstquarter 2006. These products will be announced at the Intersec exhibition, thelargest security exhibition in the Middle East to be hosted in Dubai, January2006. ASSET PROTECTION Turnover 6 months 31 October 2005: £2,664,000 (2004: £2,883,000)Operating profit 6 months 31 October 2005 £248,000 (2004: £429,000)The sales for the comparative period last year included an exceptional orderfrom Abbey for counterwork which amounted to £662K of sales in that period,whereas the sales value of such counterwork in the half year under reviewamounted to only £84K. This shortfall in sales was partly offset by increasedsales of cash handling equipment to the Post Office including a contract for thesupply of BiDi Safes and Flip Top Tills of £200K. Unfortunately the Post Officecancelled the Horizon project to install RollerCash machines and Flip Top Tillsordered in January 2005 and, although the products are being diverted to thesub-post office network, the majority will be shipped in the second half year.The Eclipse rising screen programmes were maintained with long-term customers inretail finance and petrol retailing, whilst CounterShield continues to find awider acceptance with a number of clients, including police forces. The contract to maintain all locks for security doors for HBOS remainssuccessful and the client has consented to a price revision to reflect thehigher than expected demand. The new contracts to maintain rising screenequipment originally supplied by other OEMs have also proved to be successful.Safetell has now achieved its strategic aim of dominating the rising screenservice market sector. We have renewed one major maintenance contract in January2006 which will provide £1.2 million service revenue over two years including£140,000 per annum of additional business. Gross margin slipped by 1.3 per cent. in the period reflecting competitivepricing of the Post Office contracts, changes in product mix, and additionaltraining and support costs with the growth of the service business.Administration costs increased with some one-off property refurbishment costs,additional property lease costs required by the change in product mix, and therequirement for additional engineering support. The second half is expected to be similar to the first half with someimprovements in the sale of CounterShield and Eye2Eye. The company expects toexceed £2 million service revenue for the first time in the current financialyear. CONCLUSION Safetell's level of trading performance in the first six months is expected tocontinue in the second half year, whilst CMP results should be higher in thesecond half with the higher level of orders from our US distributor. Whilst Grosvenor has enjoyed considerable success in winning new business, thetiming of orders continues to be difficult to predict. One such sizeablecontract, which Grosvenor had believed would be in progress in the currentfinancial year, has unfortunately been delayed by the customer and will now fallinto the next financial year. Although it is pleasing that the business is notbeing lost to competitors, nonetheless such a delay will impact our results forthe year ended 30 April 2006. The operating profit from continuing operationsfor the full year before amortisation of goodwill will be approximately £1.0million. CONSOLIDATED PROFIT AND LOSS ACCOUNT for the six months ended 31 October 2005 Notes Unaudited Unaudited Unaudited Audited Unaudited Six months Six months Six months Year Six months ended 31 ended 31 ended 31 ended 30 ended 31 October October October April October 2005 2005 2005 2005 2004 Before Goodwill Total Total Total goodwill and £'000 £'000 £'000 and exceptional exceptional items items £'000 £'000TURNOVERContinuingoperations 5,825 -- 5,825 12,348 5,881Discontinuedoperations 323 -- 323 1,286 748 6,148 -- 6,148 13,634 6,629Cost of (3,759) -- (3,759) (8,150) (4,044)sales Gross profit 2,389 -- 2,389 5,484 2,585 Administrativeexpenses (2,147) -- (2,147) (4,699) (2,120) Amortisationof goodwill -- (197 ) (197) (371) (185) Administrativeexpenses-total (2,147 ) (197 ) (2,344 ) (5,070 ) (2,305 ) OPERATINGPROFIT/(LOSS) Continuingoperations 452 (197 ) 255 1,148 514Discontinuedoperations (210 ) -- (210 ) (734 ) (234 ) 242 (197 ) 45 414 280Loss onclosure/disposal ofsubsidiaries -- (149 ) (149 ) (13 ) -- PROFIT/(LOSS)ON ORDINARYACTIVITIES BEFOREINTEREST ANDTAXATION 242 (346 ) (104 ) 401 280 Interestreceivable 22 -- 22 52 14 Interest-discount charge ondeferredconsideration (139 ) -- (139 ) (275 ) (130 ) Interestpayable (47 ) -- (47 ) (139 ) (36 ) PROFIT/(LOSS)ON ORDINARYACTIVITIESBEFORETAXATION 78 (346 ) (268 ) 39 128 Tax onordinaryactivities 2 (40 ) -- (40 ) (106 ) (100 ) PROFIT/(LOSS)FOR THE YEARAFTER TAX 38 (346 ) (308 ) (67 ) 28Minority -- -- -- -- --interest 38 (346 ) (308 ) (67 ) 28 Pence Pence Pence Pence PenceEarnings/(loss) per share--- basic anddiluted 4 0.01 (0.10 ) (0.09 ) (0.02 ) 0.01--- Continuingbusiness 4 0.07 (0.06 ) 0.01 0.14 0.06---Discontinuedbusiness 4 (0.06 ) (0.04 ) (0.10 ) (0.16 ) (0.05 ) CONSOLIDATED BALANCE SHEET as at 31 October 2005 Notes Unaudited Audited Unaudited 31 October 2005 30 April 2005 31 October 2004 £'000 £'000 £'000FIXED ASSETSIntangibleassets 6,665 6,820 6,969Tangibleassets 872 803 1,039 7,537 7,623 8,008 CURRENT ASSETSStocks 1,330 1,664 1,323Debtors 1,928 2,968 2,722Cash at bankand in hand 1,300 3,205 2,659 4,558 7,837 6,704 CREDITORS:amountsfalling duewithin oneyear (3,783 ) (6,467 ) (5,026 ) NET CURRENTASSETS 775 1,370 1,678 TOTAL ASSETSLESS CURRENTLIABILITIES 8,312 8,993 9,686 CREDITORS:amountsfalling dueafter morethan one year (5,123 ) (5,488 ) (6,031 )Provisions forliabilitiesand charges (177 ) (185 ) (201 ) NET ASSETS 3,012 3,320 3,454 CAPITAL AND RESERVESCalled upshare capital 3,617 3,617 3,834Share premium 432 432 --Merger reserve 801 801 801Profit andloss reserve 3 (1,901 ) (1,593 ) (1,478 ) EQUITYSHAREHOLDERS'FUNDS 2,949 3,257 3,157Minorityinterest 63 63 297 3,012 3,320 3,454 CONSOLIDATED CASH FLOW STATEMENT for the six months ended 31 October 2005 Unaudited Audited Unaudited Six months Year ended Six months ended 30 April ended 31 October 2005 31 October 2005 £'000 2004 £'000 £'000 NET CASHINFLOW/(OUTFLOW) FROMOPERATINGACTIVITIES 151 786 (149) RETURNS ON INVESTMENT AND SERVICING OFFINANCEInterest received 22 52 14Interest paid (47) (139) (36) NET CASH OUTFLOW FROMRETURNS ON INVESTMENTSAND SERVICINGOF FINANCE (25 ) (87 ) (22 ) TAXATION (201 ) (404 ) (89 ) CAPITAL EXPENDITURE AND FINANCIALINVESTMENTPurchase oftangible fixedassets (212 ) (277 ) (63 )Receipts from sale oftangible fixedassets -- 247 -- NET CASHOUTFLOW FROMCAPITALEXPENDITUREAND FINANCIALINVESTMENT (212 ) (30 ) (63 ) ACQUISITIONSPurchase ofsubsidiaryundertakings (1,825 ) (918 ) (946 )Net cashacquired onpurchase ofsubsidiaryundertakings -- 563 563 NET CASHOUTFLOW ONACQUISITIONS (1,825 ) (355 ) (383 ) DISPOSALSCosts related to closure/sale of -- -- --subsidiariesCash disposedof with business (11 ) -- -- NET CASHOUTFLOW FROMDISPOSALS (11 ) -- -- NET CASHOUTFLOW BEFOREFINANCING (2,123 ) (90 ) (706 ) FINANCINGNew finance loans 247 329 150Repayment of loans (29 ) (209 ) (7 ) 218 120 143Issue of shares -- 1,643 1,700 NET CASH INFLOW FROM FINANCING 218 1,763 1,843 (DECREASE)/INCREASE IN CASH (1,905 ) 1,673 1,137 NOTES TO THE ACCOUNTS 1. BASIS OF ACCOUNTSThe unaudited interim figures for the six months ended 31 October 2005 have beenprepared on a basis consistent with the accounting policies disclosed in theGroup's 2005 Report and Accounts, and do not constitute statutory accountswithin the meaning of Section 240 of the Companies Act 1985. The results for theyear ended 30 April 2005 are an abridged version of the full accounts, whichreceived an unqualified audit report and have been filed with the Registrar ofCompanies. 2. TAXATIONThe tax charge is disproportionate to the profit for the year due to the effecton profits of items not deductible for tax purposes, and the use of lossesbrought forward. 3. RESERVES Profit and loss reserve Merger reserve Total other reserve £'000 £'000 £'000 At 1 May 2005 (1,593 ) 801 (792 )Retained lossfor the period (308 ) -- (308 ) As at 31October 2005 (1,901 ) 801 (1,100 ) 4. EARNINGS PER SHARE Pence per share £'000Loss after taxation and minority interest (0.09 ) (308 )Goodwill amortisation 0.06 197Discount charge on deferred consideration 0.04 139Loss on closure/disposal of subsidiaries 0.04 149Losses of discontinued operations 0.05 179 Earnings before goodwill amortisation, interestdiscount,loss on closure/disposal of subsidiariesand losses of discontinued operations 0.10 356 The profit per share has been calculated based on the weighted average number ofshares in issue during the period, which was 361,755,016 shares (2004:303,750,433). Unaudited Six months Audited Year ended Unaudited Six months nded 31 October 2005 30 April 2005 ended 31 October 2004 Total Total Total Pence Pence PenceEarnings/(loss)per share before amortisationof goodwill, losses ofdiscontinued operations,loss on closure/disposal of subsidiaries and discount charge on 0.10 0.35 0.07deferred consideration 5. The loan notes of £1.5 million are repayable on 24 July 2006. The Companyissued warrants to the loan note holders to subscribe for ordinary shares at aprice of 1p per ordinary share. The loan note holders have informed the Companythat, at this point in time, they will exercise the option to take up the sharesat this price, and accordingly loan notes have been included as £750,000 increditors amounts falling due within one year, and £750,000 in creditors fallingdue after more then one year. 6. DIVIDENDSNo interim dividend is proposed (2004: Nil). 7. The company issued shares to the value of £150,000 on 1 November 2005 toArbury Inc., in consideration for the termination of Mr Dwek's contract as anexecutive director. 8. A copy of the interim report has been sent to shareholders and copies areavailable for inspection at the Company's registered office, 57 Grosvenor Street, London W1K 3JA, during normal office hours, Saturdays, Sundays and bankholidays excepted, for one month. Enquiries: Brian BeecraftFinance Director, Newmark Security plc: 07977 467 295 Mark PercySeymour 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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