TIDMNWT
RNS Number : 5968N
Newmark Security PLC
26 September 2023
This announcement contains inside information for the purposes
of Regulation 11 of the Market Abuse (amendment) (EU Exit)
Regulations 2019/310.
26 September 2023
Newmark Security plc
("Newmark", the "Company" or the "Group")
Final Results
for the year ended 30 April 2023
Newmark Security plc (AIM: NWT), a leading provider of
electronic, software, and physical security systems and
installations is pleased to announce its audited results for the
year ended 30 April 2023 ("FY23"). The Board of Newmark is pleased
to reiterate a positive momentum and the Group returning to
profitability.
Financial highlights:
-- R evenue up 6.1% to GBP20.3m (2022: GBP19.1m)
-- Gross profit margin increased by 4.1% pts to 37.6% (2022: 33.5%)
-- Human Capital Management ("HCM") annualised recurring
revenues* ("ARR") increased by 133% year-on-year to GBP2.1 million
for April 2023, positively contributing to profit margins
-- EBITDA of GBP1.5m (2022: GBP0.03m loss)
-- Operating profit of GBP0.3m (2022: GBP1.1m loss)
-- Profit after tax of GBP0.4m (2022: GBP0.8m loss)
-- Earnings per share of 3.77p (2022: 0.32p loss per share)
-- Investments in research and development GBP0.5m (2022: GBP0.8m)
-- Cash at bank of GBP0.6m at year end (2022: GBP0.2m)
-- Net assets of GBP7.9m at year end (2022: GBP7.6m)
Business highlights:
-- FY23 year-on-year revenue growth, driven by a strong
performance in the Group's People, Data Management, and Physical
Security divisions
-- Product innovation and efficient software systems have
enhanced solutions offering, resulting in new client contracts.
-- 8th consecutive year of HCM revenue growth due to increases
in both North American and European markets.
-- Launched our next generation secure cloud control platform GT
Connect, which will drive future recurring revenue growth.
-- Relocated Grosvenor's US headquarters to a much larger
facility in Florida and brought third-party logistics in-house.
-- Physical Security division returned to revenue growth in FY23
due to an increase in service revenues and strong demand for our
security-rated screens and counters in both the retail and public
sectors.
-- Group returned to profitability and cash flow generation in FY23.
*ARR is calculated by annualising revenue recognised in a given
month from all clients on deployed HCM subscription contracts
Maurice Dwek, Chairman of Newmark, commented:
"It has been a milestone year in several ways, culminating in
the Group returning to full-year profitability. What might look
like modest overall top line growth hides the key story underneath,
which is the launch of our strategic cloud platform, GT Connect.
This is vastly more scaleable as a service offering and is
accelerating GT's shift from being a 'hardware only' to a
'hardware-enabled software and services' business. This, combined
with the return to growth in Safetell, shows the success of our
2025 Growth Strategy.
"Looking ahead, the business has made a good start to FY24 with
its new revenue pipeline."
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 / 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/
Safe. Seamless. Secure
CHAIRMAN'S STATEMENT
Overview
As we see a slow but steady recovery in the macro environment, I
am absolutely delighted to report another year of strong
performance, made possible by the resolute commitment and focus of
our talented Newmark teams, as they continue to execute our 2025
Growth Strategy. As a result, during the year we made substantial
progress in our mission to grow recurring revenues and services,
enabled by key technology investments, achieving an overall
increase in revenues and returning the business to full-year
profitability. This careful balancing act is not to be
under-estimated and is a testament to the leadership team's skill
and efforts across the business.
Most notably, our focus on software has been a key evolutionary
step in our strategy, enabling the business to target a large and
growing market in people and data security, and is the result of
several years of product and service innovation that now gives us a
valuable strategic advantage in our journey ahead.
Once again, our proactive approach has demonstrated our ability
to manage the business for the long-term, building credibility with
new clients and strengthening existing relationships through
services that set us apart in how we are able to comprehensively
meet their needs. Our ability to provide technical solutions that
include both hardware, software and services without requiring us
to physically attend a site is a huge advantage and will continue
to be an important factor as we scale.
With high confidence in our solutions and a client-focused
strategy, we are driving our business forward with disciplined
execution. We will remain agile and continue to prioritise our
investments to create sustainable growth, converting the many
opportunities we have already identified, expanding our network of
partners, and embedding our range of solutions as subscriptions
that we can jointly promote.
This has been a very impressive year, demonstrating the
market-fit of our solutions and the relevance of our recurring
business model. Strengthened by the increasing traction we are
achieving in software-based services, we have once again positioned
ourselves ideally for another tremendous opportunity to convert
this effort into incremental revenue growth across North America,
the UK, Europe and the Rest of World markets.
Board and governance
The Board and its Committees continue to maintain a robust
governance framework, led by our Chief Financial Officer, Paul
Campbell-White, supported by an experienced leadership team to
provide independent challenge and ensure that good governance is
promoted across the Group.
We follow the Quoted Companies Alliance Corporate Governance
Code (QCA Code), and details on how the Company applies the
principles of the QCA Code are set out in our Corporate Governance
section in the Annual Report.
Going concern
The Board continues to have a reasonable expectation that the
Company and the Group have adequate resources to continue in
operational existence for the foreseeable future. We remain in a
stable position as the slow but steady global post-pandemic
recovery continues, although cash remains a key focus. Once again,
we have taken steps to mitigate the supply chain challenges we face
by retaining some additional inventory and further innovating to
help mitigate the global shortage of components we need to build
our products.
During the year the Group increased its UK invoice financing
facility by GBP0.5 million to GBP2.3 million. This, together with
an overdraft facility of GBP0.2 million has helped finance the
Group's working capital needs in the year to 30 April 2023 (FY23).
In July 2023 the overdraft facility was increased to GBP0.4 million
to provide additional working capital headroom as the Group
delivers its strategic growth plan.
The Group's next covenant to be tested for the GBP2 million HSBC
CBILs facility will be for the year ended 30 April 2024 (FY24) and
requires the Group to deliver a pre-debt service cashflow of 1.2
times the level of debt service. The latest forecast of the Group
results in exceeding the debt service covenant test by 48% and will
be tested again when a revised forecast is completed in
October.
The Group is currently trading ahead of this forecast and
continues to generate operating cashflows in FY24.
We are optimistic that our growth will continue in the next 12
months, supported by the investments we have made in FY23. A full
analysis of the Group's going concern assessment is included in the
Directors' Report in the Annual Report. Accordingly, the directors
consider it appropriate to prepare the accounts on a going concern
basis.
Dividend
The Board is not recommending the payment of a dividend for the
year ended 30 April 2023 (2022: GBPNil).
Outlook
The Group has again demonstrated great resilience in the face of
continued uncertainty affecting the macro-economic environment in
the UK and internationally. I am absolutely delighted with the
progress we have made this year. Despite continued inflationary
pressures, we look forward with great optimism, particularly for
the accelerating growth of our human capital management (HCM)
business through new and growing partnerships in North America,
Europe and the Rest of the World. We are already benefitting from
the execution of our 2025 Growth Strategy and will continue to
build a greater proportion of recurring revenues in the year
ahead.
Our Physical Security Solutions division, Safetell, is also now
well-positioned to make a greater contribution to this strategy, by
growing its services to achieve national scale efficiencies as well
as optimising its product portfolio and improving its competitive
position with broader manufacturing and supply chain options.
Already underway, these initiatives will see it continue to advance
its share of the Entrance Control and Automatic Door servicing
market by pressing its advantage, offering complete security
solutions with services that bring rapid response to customers'
needs, as well as targeting new market opportunities with an
enhanced sales and marketing team.
I remain entirely convinced of the strategy and outlook for
growth. We have worked hard to put ourselves in a strong position
in each of our respective markets and this is beginning to show
rewards that will be in further evidence in the year ahead.
On behalf of the Board, I would like to extend my thanks for all
the hard work and dedication shown by our teams in what has been a
highly productive year, overcoming key challenges with enormous
resolve and driving forward with great confidence in addressing an
exciting market opportunity that is expanding quickly. I look
forward to a successful year ahead.
Maurice Dwek
Chairman
25 September 2023
CHIEF EXECUTIVE OFFICER'S REVIEW
Overview
This was another year of solid execution and progress against
our strategic plan, with key improvements across the business
driven by the significant efforts of the whole team, and strong
business unit performances within both our People and Data
Management and Physical Security divisions.
Last year's innovation efforts, in particular the development
and adaptation of products and services aimed at generating
increasing and new recurring revenues, has produced extremely
positive results.
Specifically, the launch of GT Connect has enabled us to begin
to realise our vision to create larger trusted ecosystems in the
workplace that more broadly connect security device hardware with
our secure cloud services, including Bring Your Own Device (BYOD)
tablets and third-party products that greatly extend the reach of
our solutions.
This key software enhancement enables us to push forward with
our strategy, executing with a collective focus to attach services
to all our products and this is yielding a dramatic increase in the
recurring proportion of our revenues, creating a critical
foundation and with much further growth to come.
Broadening our product portfolio once again this year, our
expert teams have deployed innovative configuration and design
techniques to adapt existing products and increase the range of our
offering, creating a new low-cost clock solution that will
challenge a hitherto under-served segment of the market with
greatly enhanced cloud services.
Our sales and commercial teams have also been hard at work,
progressing a very exciting pipeline of new HCM partners. With
several in advanced discussions, we have been busy lining up a
strong and diverse spread of revenue streams to replace the
anticipated loss of UKG in the second half of FY23 who, following
the 2020 merger with clock competitor, Kronos, were always clear on
their intention to pursue an independent market strategy. The fact
that they have used our services and products this far is testament
to the quality of services provided by our team.
As a mark of the progress we have made with our strategy and
strongly anticipated growth, we relocated Grosvenor's US
headquarters to a much larger facility in Florida, and brought
third-party logistics in-house. With triple the floor space and a
greatly improved location, this gives us excellent headroom for
growth in both staff and inventory capacity, as momentum continues
to build.
Although the macro environment continues to be challenging, with
weaker exchange rates causing some downside in foreign exchange and
rising costs due to inflation, these have been partially offset by
necessary and inevitable price increases.
Our supply chain continues to show resilience to global impacts,
such as the war in Ukraine, but this has placed greater pressure on
retaining our stock of components across a wider range of devices
as our product range continues to grow and develop. By
significantly enhancing our focus on inventory and supply chain
management over the last three years, we have been able to create a
strong competitive position, and this is one from which we can
fully support our customers and meet all the commitments we have
undertaken.
I was especially delighted that Safetell returned to growth once
more. As the first step in its transformation, it achieved a modest
increase in FY23 with further growth to come as projects and
contracts delayed by Covid began to recover. However, these
projects have been operating significantly behind schedule, causing
some delays in sales of security products that tend to be fitted at
the tail end of infrastructure and building projects. These delays
were offset by the rise in demand for security screens and the
significant increase in income from services. During the year,
Safetell developed a redesigned, cost-effective retail
attack-resistant screen for convenience stores, and this has been
subject to strong demand, having rolled out over GBP1 million of
installations for major UK retailers and built a pipeline of over
GBP2 million for installations for FY24. Our strategic aim, to
gather more service contracts, is also progressing very strongly
with commercial discussions with several major high street brands
at an advanced stage. We have learnt to navigate a number of new
post-pandemic approval procedures instituted by major brands,
whilst this has slightly extended sales cycles, at the same time
this has added further competitive advantage, giving us much
increased confidence for the year ahead.
Performance
Group revenue has grown once again, increasing by 6%
year-on-year to GBP20.3 million with gross margin increasing
substantially, up 19% to GBP7.6 million.
This performance was primarily driven by continued success in
HCM sales, up by 10% to GBP12.6 million, with a greatly improved
gross margin contribution, up 32% to GBP6.0 million. At the centre
of this success is the rapidly growing high margin recurring
services contribution with Software-as-a-Service (SaaS) and
Clock-as-a-Service (ClaaS) annual recurring revenues (ARR)
increasing by 133% to GBP2.1 million by April 2023. As our clear
strategic priority, we expect growth in HCM to accelerate in FY24
with further significant gains in annual recurring revenues.
Our Access Control business declined slightly by 3% year-on-year
to GBP3.0 million as it underwent an important re-balancing,
transitioning away from the end-of-life legacy Janus product, with
revenues declining by GBP1 million, and towards the new Janus C4
Access Control product, with those sales increasing to GBP1.7
million, representing an outstanding growth rate of 108%. Together
with a small 5% increase in sales of Sateon Advance to GBP1.1
million and the new Janus C4 Ultra product in the pipeline, the
future growth outlook in Access Control is extremely positive.
Safetell revenues grew modestly by 3% to GBP4.7 million
benefitting from its new leadership and numerous re-organisation
measures which started to take effect. These are expected to have a
greater impact as we move forward. With a number of exciting
national opportunities in the pipeline and expected to come through
in FY24, this puts the business in a very strong position to plan
for more aggressive growth in the year ahead.
Financial
The Group's cash at 30 April 2023 was GBP0.6 million (2022:
GBP0.2 million).
This increase was due to a significant improvement in operation
cashflows driven by higher revenues, increased gross margin
percentage and lower overheads. During FY22, we implemented a
programme of strict cost control and increased prices to mitigate
the effect of higher componentry and freight costs. With a full
year of these price rises and cost savings taking effect, this
resulted in improved performance in FY23 as we began to use our
recent investments in products and infrastructure to accelerate
growth.
Supply chain challenges have also been successfully managed by
building inventory to satisfy ongoing customer demand. The
inventory levels are expected to ease in FY24, allowing for further
cash flow generation.
With the oversight of our CFO, Paul Campbell-White, we continue
to exercise strong governance and appropriate commercial controls,
ensuring that sound financial discipline underpins our operations,
and all investment decisions continue to align with our strategic
goals as we accelerate towards our 2025 strategy.
Outlook
People and Data Management division - Grosvenor Technology
Looking ahead to FY24, we anticipate further substantial growth
as we continue to build on the positive momentum we have achieved
in all our geographic markets. With our existing approach
demonstrating clear success, the challenge ahead will be to
accelerate the pace with the appropriate discipline required to
scale effectively across every region, and in particular through
our expanded presence in North America.
Our clear intention is to gain an increasing share of the
enormous opportunity we have created as a market leader in secure
cloud solutions for Human Capital Management and innovative
products for Access Control. Our priority will be to continue
leveraging GT Connect, our enhanced services, and a broader range
of products as we look to further secure long-term HCM partnerships
and onboard new customers. These efforts will further increase
recurring revenues, driving towards an even more ambitious ARR
target.
Similarly, we will drive growth in Access Control across public
and private markets with our recently expanded sales team and with
further investment in next-generation control, completing the
development of Janus C4 Ultra, a new product which is already
creating significant new interest and opportunity.
I am extremely grateful for the leadership of Colin
Leatherbarrow, and his talented senior team, for their ongoing
commitment to the highest professional standards, demonstrating
great skill in execution and driving an excellent full-year
performance. This has been an exemplary first year for Colin as MD,
stepping up from his former role as CTO in November 2022, bringing
his expert focus to Grosvenor's technical and commercial operations
and making a wholeheartedly positive impact right across the
business. As the business expands, I am confident we have the right
team to guide this division to the success it deserves.
Physical Security Solutions division - Safetell
With new leadership and renewed strategic focus on growing
services, the team has been busy rebuilding its operations to
enable it to scale nationally. Looking ahead, the priority
continues to be securing national servicing contracts, enabling
efficient, profitable operations across a growing team of high
quality, professionally certified engineers and service
personnel.
With new projects beginning to regain their pre-pandemic
momentum and new partnerships being secured, the business will also
continue to optimise its product portfolio and improve its
competitive position, with broader manufacturing and supply chain
options already in place for FY24.
Already underway, these initiatives will see it target larger
contracts in entrance control, build new national scale
relationships for our Autodoor Service Department and convert the
significant pipeline we have created for retail attack-resistant
screens as we seek to further extend our long-established banking
experience to meet the growing demand for security screens across
retailers of all sizes.
By offering complete security solutions with services that bring
rapid response to customers' needs, as well as targeting new market
opportunities with an enhanced sales and marketing team, I am
equally grateful to Nick Shannon and his leadership team for
achieving revenue growth after a number of years of decline, and in
challenging conditions. Safetell now stands ideally placed for
further solid growth in the year ahead.
Strategy
With data security and compliance driving strong market demand,
this is an opportunity which we will actively pursue to capitalise
on the trust in our operations and reputation for engineering
excellence that we have established over three decades.
Compliance with data remains a strong underpinning core value,
and the business will seek to leverage this in winning new HCM SaaS
recurring revenue business in both the North American, European and
Rest of World markets.
Our strategic aim remains to increase recurring revenues and
make the powerful evolution from hardware to hardware-enabled
software and services, based on providing 'secure cloud control'.
This strategy is already being realised, and it will continue to be
the core focus underpinning all our growth initiatives as we seek
to use our expertise in data security to generate sustainable, high
quality revenue streams that will scale and extend, over and beyond
the product lifecycle, into the longer-term.
Our valuable objective remains. By offering secure cloud control
of people's access, time keeping and identity data at work, we are
shifting the strategic value paradigm, raising the customer focus
from its former dependency on hardware 'clocks' and 'access
terminals', to one that empowers the intelligent enterprise.
Through our solutions, customers will gain the capability to enable
and connect a broad range of internet-enabled devices securely in
the cloud with unified software control - creating a trusted
ecosystem in the workplace.
As our business model evolution to hardware-enabled
software-as-a-service gathers pace, our focus remains on winning
trusted, long-term partnerships fulfilled by our unique combination
of best-in-class products with market leading software and expert,
specialist support services that put customers in control.
In an increasingly risk-aware enterprise environment, our
strategic focus and approach are opening a substantial market
opportunity in which we now occupy a commanding position with key
partners. Our aim in FY24 is to accelerate how we scale this model
across an expanded partnership channel, securing greater market
share and converting our hard-earned competitive advantage as we
continue to execute our 2025 growth strategy reassured by the
essential feedback of our many happy customers.
Marie-Claire Dwek
Chief Executive Officer
25 September 2023
OUR DIVISIONS - People and Data Management
Revenue information
Increase/
GBP'000 2023 2022 (decrease) % change
HCM North America 8,830 8,726 104 1%
------- ------- ------------ ---------
HCM Rest of World 3,721 2,716 1,005 37%
------- ------- ------------ ---------
Total HCM 12,551 11,442 1,109 10%
------- ------- ------------ ---------
Janus C4 1,729 833 896 108%
------- ------- ------------ ---------
Sateon Advance 1,063 1,010 53 5%
------- ------- ------------ ---------
Legacy Janus 231 1,274 (1,043) (82%)
------- ------- ------------ ---------
Total Access Control 3,023 3,117 (94) (3%)
------- ------- ------------ ---------
Division Total 15,574 14,559 1,015 7%
------- ------- ------------ ---------
Performance overview
Grosvenor Technology (Grosvenor) continues to be a market leader
in time, data capture and access solutions for Human Capital
Management and Access Control, helping organisations to protect and
manage their most valuable assets - people in the workplace.
Once again, it has been another solid year with top line revenue
growth of 7% to GBP15.6 million, primarily driven by strong growth
of the HCM business and our expanding relationships with software
partners, which have been particularly strengthened in the European
market.
The year has been a clear illustration of the value of executing
on our 2025 Growth Strategy, evolving our business model to
hardware-enabled software and services. By connecting devices to
deliver secure cloud-based control via our newly upgraded and
re-launched software, GT Connect, we have been able to offer
customers and partners enhanced services attached to every
connection, and this now includes third party devices for the first
time.
These developments mark a major strategic milestone for
Grosvenor, unlocking enormous market potential across a broader
range of connected devices, as well driving another substantial
increase in recurring revenues, as we continue to build steady,
predictable income streams across a fast-growing base of customers
and partners.
As a consequence, HCM annualised recurring revenues (ARR) grew
by 133% to reach an ARR of GBP2.1 million in April 2023. These
revenues represented 12% of Grosvenor's 2023 revenues (2022: 4%).
As a central focus of our strategic plan, we are confident this
continued strong growth trajectory will result in an even greater
share of revenue in FY24 and beyond.
During the year, significant overall HCM growth was achieved in
both the North American and Rest of World (ROW) markets, however
another strong US-based performance was masked by the termination
of our partnership with UKG. Whilst this had always been foreseen
following the 2020 merger between Ultimate Software, our original
HCM partner, and Kronos, a competitor in time clock products, in
prior years revenue had significantly increased due to the ease
with which our clocks integrate with the Ultimate software
platform. Although UKG's corporate policy decision was entirely
unrelated to the performance of solutions and services from
Grosvenor, the notification in Q3 FY23 left a shortfall in sales
against our original plan that we were able to offset with
substantial gains across our other HCM partnerships, but which
combined to result in an overall flat 1% growth in the region.
Progress with European HCM partners gathered pace, as ROW markets
delivered underlying growth of GBP1.0 million, resulting in a 37%
year-on-year improvement, and contributing most of the 10% growth
in HCM revenues overall.
Meanwhile, Access Control solutions underwent an important
re-balancing as we transitioned between new and end-of-life legacy
product revenue lifecycles during FY23. Whilst at a headline level,
overall revenues decreased by 3% to GBP3.0 million, sales of our
new Janus C4 product doubled to GBP1.7 million (2022: GBP0.8
million) and this was supported by a modest 5% growth of Sateon
Advance to GBP1.1 million (2022: GBP1.0 million). Although this
combination was not sufficient to offset the decline in revenues
from our legacy Janus product, which reduced to GBP0.2 million
(April 2022: GBP1.3 million), passing through the tail-end of this
legacy removal cycle clears the way for positive growth across all
product lines in FY24. With additional sales resource joining this
team in FY23, this provides an ideal platform to add new growth
from our Janus C4 Ultra product, planned for launch 2024 and which
is already generating significant customer interest.
By taking further actions to optimise our operations, including
putting through necessary price increases to mitigate the
inflationary environment, and growing recurring revenues, we were
able to significantly increase gross margins to 38.6% (2022:
31.4%).
Below these headline financial results, we made positive
operational progress that produced encouraging growth across all
strategic priority areas. With the successful delivery of an
ambitious upgrade to our product strategy, re-platforming our core
cloud control software, GT Connect, and evolving the service model,
the business enters FY24 in a commanding position to address a far
broader market opportunity with substantially enhanced solutions
and competitive advantage.
Evolving partnerships driving HCM growth
Grosvenor's strategic growth continues to be driven through key
partnerships with a variety of HCM providers. The substantial
progress made in developing existing partnerships produced another
year of exceptional growth, with some notable partnership
successes.
Our major European partnership grew by 23% with recurring
revenue nearly doubling, driven by increased sales, planned price
increases and the compounding annual effect of growing recurring
revenue. As we had anticipated, this partner also began taking our
GT8 product, ordering a significant number of units during the
year.
Direct to end-user business grew in both revenue and margin,
onboarding end-users that included notable high-profile customers
such as Shangri-la hotels (The Shard), Imperial London Hotels,
Dorchester Hotels and Refresco Drinks, and all attracted
incremental service revenues.
We achieved major US partner success, migrating a new and large
tier 1 HCM provider to GT Connect, leveraging the full range of
features and benefits. By achieving the required levels of control
by their channel partners via the advanced tenancy architecture,
this has started to drive downstream demand via their channel
partner network following a launch at their annual partner
event.
Another major US HCM partner produced an outstanding growth of
27% and this was achieved through diversification of products and
closely supporting larger projects.
The Grosvenor team also delivered a significant foundation of
the forward outlook by migrating existing clients from legacy to
GT4, including a number of well-known household name brands. This
is essential groundwork for retaining existing customers in the
future.
We continue to actively support another key partner in the US to
enhance and scale their services with customers, and in particular
their introduction to one of the world's largest retailers who we
now support directly. Winning a major national contract to provide
transactional cloud services across all their Mexican stores has
delivered a substantial boost to our strategy and further added to
growth in our recurring revenues.
OUR DIVISIONS - Physical Security
Revenue information
Increase/
GBP'000 2023 2022 (decrease) % change
Products 2,840 3,131 (291) (9%)
------ ------ ------------ -----------------
Service 1,900 1,455 445 31%
------ ------ ------------ -----------------
Division Total 4,740 4,586 154 3%
------ ------ ------------ -----------------
Performance overview
Safetell continues to develop its presence in the UK as a
leading provider and installer of integrated door solutions and
physical security.
FY23 was a pivotal year for the business, with a rapid
turn-around conducted by MD, Nick Shannon, reversing recent years'
declining revenues and achieving a small increase of 3%
year-on-year to GBP4.7 million. This clearly demonstrated the
positive effect of organisational changes implemented in FY22 and
the value of our strategy to focus on growing service revenues, up
31% year-on-year, increasing the proportion of income from services
which rose to 40% (2022: 32%). This transformation was achieved
despite the continuing contraction of physical branches in the
banking market, reducing demand for legacy rising screen
services.
Our strategy to focus on services and move away from one-off
supply of products had a notable impact, with a 9% contraction in
product sales largely caused by temporary order delays, now planned
in Q1 FY24, and which was more than offset by expected gains in
service in the areas we had prioritised.
Although trading throughout the year was in line with
expectations, with top line revenue rising, gross margin decreased
to 34% (2022: 40%). This was due to the under-utilisation of
field-based engineers as we grow capacity in order to build-up
services revenue. As we secure additional service contracts in
FY24, we expect this to normalise and return a net
contribution.
With challenging economic conditions continuing in the form of
inflationary pressures and increased supply chain volatility, our
experienced team made further adaptations to enhance resilience and
secure the way ahead. This included negotiating price increases in
those open tenders and supply agreements where contract conditions
allowed, although in many instances this was not possible due to
either pre-negotiated pricing or market competition. To provide
further mitigation, we sourced two alternative product
manufacturers in China who can deliver at higher quality,
substantially lower cost and with materially reduced lead times
compared to previous 'make-to-order' supply arrangements. These
advantages will not take effect until FY24 however, following from
last year's enhancements to our product offering that brought
automatic doors and entrance control into our product portfolio, we
have now secured high specification 'standardised' alternatives
across all of the key items in our portfolio. This will make us far
more competitive, improving our speed of delivery and response for
the year ahead.
Whilst overall demand for security products and services has
recovered to above pre-pandemic levels, in FY23, we saw residual
effects of continued uncertainty in the business environment
causing a long-tail drag on projects, with some clients taking
longer to work through their own transformation plans as a
consequence. This caused a slight delay in project revenues
bookings at the end of FY23, in most cases this has only been by a
matter of months. With those revenues now set to come through in
early FY24, this assures a particularly strong start to the new
year. Together with a very positive demand outlook, evidenced by
the strength of an even more rigorously qualified pipeline, we
remain confident that the business is well-positioned to achieve
its ambitious growth strategy.
Focused execution on areas of high demand drives growth and
builds positive forward momentum
Executing on our 2025 Growth Strategy, all of our focus areas
experienced strong demand in FY23, enabling us to build on the
foundations laid in 2022, as we continued to drive growth and
generate the momentum essential to scaling the business
incrementally, in carefully planned stages.
Our security-rated screens and counters performed exceptionally
well throughout the year both in the retail environment as well as
within the public sector. Key to this success was developing a
redesigned, retail attack-resistant screen for convenience stores
which is lightweight, flexible and cost-effective.
This has received strong demand, having rolled out over GBP1
million of installations for major UK retailers and built a
pipeline of over GBP2 million for installations in FY24. With the
current robbery issues in the convenience store market, we believe
we can further grow this order level through 2024.
Our relationship with blue light customers continued to grow
with an additional GBP0.3 million of projects from one of the UK's
largest Police Forces, following on from our work in 2022. Our
development efforts in this segment were rewarded with orders from
five other Police Forces, creating a strong base from which to
expand. Public Sector orders in general were strong throughout the
year, with projects completed in multiple healthcare settings,
where our unique Countershield 'moving screen' remains popular for
A&E departments, as well as prisons, transport hubs and
military installations.
Our FY22 entry into the Entrance Control market also gathered
pace in FY23, building on the early wins achieved in 2022 with new
installations direct to end-users as well as through the enlarged
construction sector, including newbuild and refurbishment. The new
manufacturing arrangements we have secured are helping us to fill
the gaps in our product range to enable access to markets where
cost effective solutions are required. As we continue to win market
share, we expect our Entrance Control business to grow
significantly in 2024, with a number of projects tendered during
2023 moving into the construction phase in 2024. As before, we
remain focused on targeting the larger contracts available in this
area, which bring the dual benefit of the maintenance services that
follow-on from initial installation, helping to grow our Autodoor
Service Department.
Continuing to grow recurring service revenues, with a focus on
automatic doors
In line with our strategy, service revenue increases were driven
by additional wins in autodoor servicing and repairs, with new
national service contracts contributing to a nearly five-fold
increase in recurring revenues to GBP0.3 million. We expect this
trend of additional autodoor works to continue into 2024, starting
strongly with GBP0.6 million in our pipeline of service and repair
contracts already quoted. With further growth expected, this
remains the clear strategic priority for the future of the
business.
Our record in repairing and upgrading customer doors rather than
replacing them has continued to be an advantage. All of our service
engineers have been security cleared to BS7858, the UK standard for
vetting of people employed in the security sector, and this coupled
with our 'Repair-not-replace' mentality, continues to strike a
positive chord with our customers, particularly those with larger
national estates. In the last year, we added a further 200 doors
and now provide call-out support across over 2,000 doors,
representing a substantial national footprint.
This market continues to be a strategic priority for Safetell,
with autodoor servicing in the UK estimated at twice the size of
Safetell's traditional markets. Our challenge in FY24 will be to
gain a critical mass of contract volumes to support a more
efficient scaling and deployment of our service team at competitive
margins. This transition will be the key factor to overcome as we
transition from high margin one-off projects and a unique legacy
rising screens service to high volume service and repair contracts
at reduced margins but which provide sustainable revenues and
long-term stability. Our clear emphasis is on generating strong
recurring revenues, and we expect the autodoor segment to account
for an increasing share of turnover in the coming years.
Learning how we win, generating insights to accelerate future
success
As important as our wins are, understanding why we have lost
competitive tenders in the past has been just as important to us in
learning how to unlock, accelerate and scale the business.
Following a detailed review of current and past commercial
submissions in FY23, we now have a much better understanding of why
and how to win in key competitive scenarios, specifically in the
Security Door, Entrance Control & Automatic Door Installation
and Service sectors. The findings from this review are now being
channelled into improved methods, marketing and enhanced products
to help us gain additional market share in 2024 and beyond.
Overall, our pipeline grew steadily throughout the year and, at
the outset of 2024, stood at GBP9.5 million, with a further GBP4.6
million of quoted 'suspects', compared to a pipeline total of
GBP5.4 million at the outset of 2023.
The planned investment in Sales and Marketing during FY23
enabled the sales team to achieve against a significantly increased
new business sales order target from 2022, gaining new orders of
GBP3.9 million within the year, against GBP3.0 million in 2022. An
increased delay in timing between orders being received and
projects commencing served to under-represent the significant
achievements made by our improved team, however we are confident
this will contribute to a stronger FY24 where this will become
fully visible.
Creating safe spaces for employees and colleagues
The substantial progress made by a dedicated and committed team
has delivered precisely what we'd hoped for in FY23, returning the
business to growth, focusing on key areas of high demand and
organising to compete and win as we begin to address a much wider
market opportunity, particularly in security doors and entrance
control.
The market continues to experience rising demand for high
specification physical security products. Increasing threats from
crime and terrorism have made physical protection and security a
priority for businesses in most sectors, as many businesses prepare
to meet the new 'Protect Duty' legislation.
Responding to the rapid and continuous growth of high security
environments, such as data centres, also provides a significant
scaling opportunity for Safetell, one that we are ready for as we
continue to build trusted, long-term partnerships with Facilities
Management providers.
Building our reputation as a trusted service partner for the
long-term will not only translate into success with our immediate
growth targets, it underpins our confidence to take the next steps
on the journey we have planned. Focused execution will continue to
prioritise recurring revenues from services, and this transition
lies at the heart of our strategy and approach.
FINANCIAL REVIEW
Increase/ Percentage
Revenue 2023 2022 (decrease) change
GBP'000 GBP'000 GBP'000 %
People and Data Management
Division
HCM 12,551 11,442 1,109 10%
Access Control 3,023 3,117 (94) (3%)
15,574 14,559 1,015 7%
Physical Security Solutions
Division
Products 2,840 3,131 (291) (9%)
Service 1,900 1,455 445 31%
4,740 4,586 154 3%
Group Revenue 20,314 19,145 1,169 6%
Group revenue increased by 6% to GBP20.3 million (2022: GBP19.1
million) driven by growth in HCM from both North America and Rest
of World. This revenue increase was due to recurring revenues from
SaaS (GT Connect) and ClaaS products. There has also been revenue
increase from Services in the Physical Security Solutions Division.
This growth is from traditional bank and building society clients
as well as new auto-door servicing and repairs. Further commentary
and discussion can be found in the relevant divisional
sections.
Increase/ Percentage
2023 2022 (decrease) change
GBP'000 GBP'000 GBP'000 %
-------- -------- ------------ -----------
Gross Profit 7,638 6,419 1,219 19%
-------- --------
Gross Profit Margin 37.6% 33.5%
Gross profit margins have increased to 37.6% (2022: 33.5%) due
to the full year effect of customer price rises and cost savings in
the People and Data Management division. Their gross margins
increased to 38.6% (2022: 31.4%). The Physical Security Solutions
division achieved a gross profit of 34.4% (2022: 40.4%) the
decrease is primarily caused by the under-utilisation of
field-based engineers as we grow capacity to serve new service
contracts.
Administrative expenses and average employees
Administrative expenses before exceptional items have decreased
by 2% to GBP7.4 million (2022: GBP7.5 million). This has mainly
been the result of a decrease in consultancy costs to support the
strategic growth plan. Overall average employees have decreased to
99 (2022: 103) driven by reductions in Grosvenor UK. Staff costs
(which are included in both cost of sales and administrative
expenses) increased by GBP0.2 million or 2% to GBP7.4 million
(2022: GBP7.1 million).
Exceptional costs
There were no exceptional costs during the year. In 2022, GBP0.1
million of exceptional costs were incurred relating to continued
streamlining of positions in Grosvenor and Safetell.
Finance costs
Finance costs have increased by GBP0.1 million to GBP0.3 million
(2022: GBP0.2 million) due to additional invoice financing
borrowings to support higher working capital requirements and
higher interest rates.
Profitability
The current year profit from operations before exceptional items
was GBP0.3 million (2022: loss GBP1.1 million). The increase in
profitability was caused by a combination of increase in gross
profits from higher revenues, improved gross margins percentages
and the full year effect of cost savings measures introduced in the
second half of FY22.
Profit after tax for the year was GBP0.4 million (2022: loss
GBP0.8 million). This is after tax credits which are discussed in
more detail below.
Taxation
A tax credit of GBP0.4 million (2022: GBP0.6 million) was
recognised in the year. This resulted from a current tax credit of
GBP0.4 million (2022: GBP0.4 million) due to the continued R&D
claims at Grosvenor and Safetell and a GBP44,000 deferred tax
credit (2022: GBP0.2 million). The prior year deferred tax credit
was primarily from the recognition of tax losses.
Earnings per share
Earnings per share was 3.77p (2022: loss 0.32p) being an
increase of 4.09p. The decrease was due to the increase in
profitability in FY23.
Balance sheet
Net assets have increased by GBP0.3 million to GBP7.9 million
(2022: GBP7.6 million). Property, plant and equipment increased by
GBP0.8 million to GBP2.9 million mainly from right of use buildings
(renewal of Safetell lease and new Grosvenor Florida office), right
of use motor vehicles and ClaaS clocks. Inventory has increased by
GBP0.2 million to GBP4.2 million with additional purchases of
finished goods to allow extra cover for any further supply chain
delays. Trade and other receivables increased by GBP1.0 million
primarily due to a rise in trade receivables in the Physical
Security Solutions Division. Cash and cash equivalents increased by
GBP0.4 million to GBP0.6 million (2022: GBP0.6 million). Trade and
other payables increased by GBP1.5 million as result of higher
activity in Q4 FY23 in the Physical Security Solutions division.
The GBP0.4 million increase in short term borrowings to GBP3.4
million was due to drawing down of the UK invoicing financing
facility and increase in lease payments.
Research & Development (R&D)
The Group has decreased its R&D investment to GBP0.5 million
(2022: GBP0.8 million) in the People and Data Management division.
The reduction is due the completion of the development of GT
Connect, our upgraded SaaS platform which was launched in the
second half of FY23.
Cashflow
During the year cash increased by GBP0.4 million to GBP0.6
million (2022: GBP0.2 million). Cash generated from operating
activities increased by GBP2.8 million to GBP2.1 million (2022:
outflow GBP0.7 million) mainly driven by an increase in operating
profits and a GBP1.7 million improvement working capital due to
lower inventories and creditor outflows. There was also a net tax
receipt of GBP0.4 million (2023: GBP0.4 million) from R&D tax
credits. Cashflow from investing activities decreased by GBP0.5
million to GBP0.8 million (2022: GBP1.3 million) primarily due to
the reduction in investment in research and development as
mentioned above. The financing movements related to the drawdown of
GBP0.3 million of invoice financing from the UK facility (2022:
GBP2.3 million from UK and US facilities), lease principal
repayments of GBP0.4 million (2022: GBP0.4 million) and GBP0.4
million of repayments from the Coronavirus Business Interruption
Loan Scheme ("CBILS") which started to be paid back from September
2021 over a 5-year term. There was also GBP0.3 million of interest
paid on the debt facilities (2022: GBP0.1 million).
Cashflow forward currency contracts
During the year we executed our foreign exchange strategy by
entering into forward contracts. The strategy effectively hedges
75% of excess USD and reduces the level of volatility compared to
using spot rates. The contracts manage our currency mismatch
between an increasing US Dollars (USD) position from revenues and
the existing cost base in both GBP and Euros. The adopted process
involved currency forecasting three quarters ahead and taking out
tranches of forward contracts for 25% of each of the forecasted
quarters relating to our excess USD position.
CONSOLIDATED INCOME STATEMENT FOR THE YEAR 30 APRIL 2023
2023 2022
Note GBP'000 GBP'000
Revenue 20,314 19,145
Cost of sales (12,676) (12,726)
Gross profit 7,638 6,419
Administrative expenses (7,354) (7,633)
Profit/(loss) from operations before exceptional
items 284 (1,090)
Exceptional redundancy costs - (124)
-------------------------------------------------- ----- --------- ---------
Profit/(loss) from operations 284 (1,214)
Finance costs (348) (220)
Loss before tax (64) (1,434)
Tax credit 3 417 630
Profit/(loss) for the year 353 (804)
--------- ---------
Attributable to:
- Equity holders of the parent 353 (804)
--------- ---------
Earnings/(loss) per share
- Basic (pence) 3.77 (0.32)
- Diluted (pence) 3.69 (0.32)
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
2023 2022
GBP'000 GBP'000
Profit/(loss) for the year 353 151
Foreign exchange on the retranslation of overseas
operation (22) (196)
Total comprehensive profit/(loss) for the
year 331 (661)
-------- --------
Attributable to:
- Equity holders of the parent 331 (661)
-------- --------
The notes in the annual report and accounts form part of these
financial statements.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION AT 30 APRIL
2023
2023 2022
ASSETS Note GBP'000 GBP'000
Non-current assets
Property, plant and equipment 2,914 2,088
Intangible assets 5,450 5,564
Deferred tax 3 454 410
Total non-current assets 8,818 8,062
---------- ----------
Current assets
Inventory 4,150 3,983
Trade and other receivables 4,978 3,979
Cash and cash equivalents 581 157
Total current assets 9,709 8,119
---------- ----------
Total assets 18,527 16,181
---------- ----------
LIABILITIES
Current liabilities
Trade and other payables 4,559 3,105
Other short-term borrowings 3,402 2,958
Total current liabilities 7,961 6,063
---------- ----------
Non-current liabilities
Long term borrowings 2,537 2,447
Provisions 100 100
Total non-current liabilities 2,637 2,547
---------- ----------
Total liabilities 10,598 8,610
---------- ----------
TOTAL NET ASSETS 7,929 7,571
---------- ----------
Capital and reserves attributable
to equity holders
of the company
Share capital 4,687 4,687
Share premium reserve 553 553
Merger reserve 801 801
Foreign exchange difference
reserve (181) (159)
Retained earnings 2,029 1,649
Total attributed to equity
holders 7,889 7,531
Non-controlling interest 40 40
TOTAL EQUITY 7,929 7,571
---------- ----------
The financial statements were approved by the Board of Directors
and authorised for issue on 25 September 2023.
Paul Campbell-White
Director
The notes in the annual report and accounts form part of these
financial statements.
CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEARED 30 APRIL
2023
2023 2022
GBP'000 GBP'000
Cash flow from operating activities before
exceptional items
Profit/(loss) after tax 353 (804)
Adjustments for: Depreciation, amortisation
and impairment 1,201 1,248
Exceptional items - 124
Finance cost 348 220
Gain on sale of property, plant and equipment (37) (30)
Share based payment 27 7
Corporation tax credit (417) (630)
Operating profit before changes in working
capital and provisions 1,475 135
Increase in trade and other receivables (999) (29)
Increase in inventories (167) (856)
Increase/(decrease) in trade and other
payables 1,384 (658)
Cash generated from operations before
exceptional items 1,693 (1,408)
Exceptional items - (124)
Cash generated from operations after exceptional
items 1,693 (1,532)
Corporation tax recovered 400 871
Cash flow from operating activities 2,093 (661)
Cash flow from investing activities
Acquisition of property, plant and equipment (405) (561)
Sale of property, plant and equipment 37 30
Acquisition of intangible assets (462) (766)
(830) (1,297)
-------- --------
Cash flow from financing activities
Bank loans paid (400) (267)
Principal paid on lease liabilities (394) (424)
Proceeds on invoice discounting 290 2,263
Interest paid (299) (84)
(803) 1,488
-------- --------
Increase/(decrease) in cash and cash equivalents 460 (470)
Cash and cash equivalents at beginning
of year 157 484
Exchange differences on cash and cash equivalents (36) 143
Cash and cash equivalents at end of year 581 157
-------- --------
The notes in the annual report and accounts form part of these
financial statements.
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
year - - - - 353 353 - 353
Other
comprehensive
income - - - (22) - (22) - (22)
Total
comprehensive
income/(loss)
for the year - - - (22) 353 331 - 331
------- ------- ------- -------- -------- ------------ --------------- -----------------
Transactions
with
owners
Share based
payment - - - - 27 27 - 27
As at 30 April
2023 4,687 553 801 (181) 2,029 7,889 40 7,929
------- ------- ------- -------- -------- ------------ --------------- -----------------
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 2021 4,687 553 801 (302) 2,446 8,185 40 8,225
Loss for the
year - - - - (804) (804) - (804)
Other
comprehensive
income - - - 143 - 143 - 143
Total
comprehensive
income/(loss)
for the year - - - 143 (804) (661) - (661)
------- ------- ------- -------- -------- ------------ --------------- -----------------
Transactions
with
owners
Share based
payment - - - - 7 7 - 7
As at 30 April
2022 4,687 553 801 (159) 1,649 7,531 40 7,571
------- ------- ------- -------- -------- ------------ --------------- -----------------
The notes in the annual report and accounts form part of these
financial statements.
1. Accounting policies
Newmark Security (the "Company") is a public limited company,
limited by shares, registered number 03339998 in England &
Wales. The consolidated financial statements of the Company
comprise the Company and its subsidiaries (together referred to as
the "Group").
The financial statements are for the year ending 30 April 2023
(2022: year ended 30 April 2022).
Basis of preparation
The primary economic environment in which the Group operates is
the UK and therefore the consolidated financial statements are
presented in pounds sterling ('GBP').
The consolidated financial statements have been prepared on a
historical cost basis.
The principal accounting policies adopted in the preparation of
the financial statements are set out below. The policies have been
consistently applied to all the years presented, unless otherwise
stated. These consolidated financial statements have been prepared
in accordance with UK adopted international accounting standards
("IFRS") in conformity with the requirements of the Companies Act
2006.
The preparation of financial statements in conformity with IFRSs
requires management to make judgements, estimates and assumptions
that affect the application of policies and reported amounts of
income and expenses, and assets and liabilities. These judgements
and assumptions are based on historical experience and various
other factors that are believed to be reasonable under the
circumstances, the result of which form the basis of making the
judgements about carrying values of assets and liabilities. Actual
results may differ from these estimates.
These estimates and underlying assumptions are reviewed on an
ongoing basis. Any revisions to the accounting estimates are
recognised in the period in which the revision is made.
None of the new standards or amendments to standards have had
any impact on the accounting policies of the group in the year.
No new standards that are not yet effective have been early
adopted or are expected to have a material impact on the Group's
profit or loss.
Going concern
Based on the Group's latest trading, future expectations and
associated cash flow forecasts, the Directors have considered the
Group cash requirements and forecast covenant compliance and are
confident that the Company and the Group will be able to continue
trading for a period of at least twelve months following approval
of these financial statements, being the going concern period.
In August 2020, the Group secured a GBP2 million financing
facility from its bankers, HSBC, via the Coronavirus Business
Interruption Loan Scheme ("CBILS"). This loan is for a term of 6
years, with the first year being interest, repayment and covenant
free under the Business Interruption Payment scheme. The original
covenant required the Group to deliver a pre-debt service cashflow
of 1.2 times the level of debt service commencing for the year end
30 April 2022, based on audited accounts. As a result of the
Strategic Business Plan certain investments were identified and
factored into a forward looking model. Management identified that
the investments and cash outlay may result in a potential default
of the covenant and therefore the Directors agreed a waiver of the
debt service ratio to be replaced by a Tangible Net Worth ("TNW")
test applicable for the year ended 30 April 2022 based on audited
accounts. This test used the calculation of Net Assets less
Intangible Assets and required the result to exceed GBP3.1 million.
In the year ended 30 April 2022 profitability and cashflows were
significantly impacted by the COVID-19 pandemic, increase in
freight costs and the global componentry shortage as the Group had
to increase stock levels to meet anticipated demand and pay higher
prices for many components. As a result of this, in January 2022,
HSBC agreed to a waiver of the year ended 30 April 2022 covenant
calculation.
For the year ended 30 April 2023 the covenant returned to the
original pre-debt service cashflow of 1.2 times the level of debt
service commencing, based on audited accounts. The 2023 calculation
was 1.45 so 121% of the target. No other financing facilities of
the Group have any covenant requirements.
In January 2023, the Group increased its UK HSBC invoice
financing facility to GBP2.3 million to provide additional working
capital headroom. At 30 April 2023, GBP2.0 million was being
utilised.
In February 2022, the Group secured a 3 year $2 million invoice
financing facility with Seacoast National Bank against invoices
raised from our US operation. At 30 April 2023, $0.6 million of the
facility was being utilised. The level of invoice financing
available varies with the open book of trade debtors at any point
in time and therefore the level of financing fluctuates.
At 30 April 2023 the Group had a GBP0.2 million overdraft
facility with its bankers, HSBC, although none was utilised as the
Group had a positive bank balance of GBP0.6 million at year end.
This overdraft facility increased to GBP0.4 million on 27 July
2023.
The Group's going concern assessment is based on the Group
continuing to generate operating cashflows the year to 30 April
2024 and stock levels starting to unwind from their historic high
levels.
The latest forecast of the Group results in exceeding the debt
service covenant test by 48%. Further scenario testing and
sensitivity analysis was completed to model certain criteria that
would indicate a potential covenant breach against the latest
formally approved budget. Given the 48% headroom in the latest
covenant calculation it would take a large reduction in gross
material margin to cause in a covenant breach at April 2024.
However, management are confident that the shortfalls will not
occur but are undertaking regular reviews and forecasts to ensure
this.
The Group is currently trading ahead of budget and continues to
generate operating cashflows in FY24.
Management are confident that the Group would be able to meet
loan repayments and working capital needs. The Group is expected to
be able to operate within existing finance facilities, based on
Management's detailed monthly cashflow forecasts to September 2024.
Should profits or cashflow movements fall behind expectations in
this period the Group expects to be able to utilise more of its
current UK and US invoice financing facilities and also extend the
overdraft facility. Accordingly, the Directors consider it
appropriate to prepare the financial statements on a going concern
basis.
2. Segment information
Description of the types of products and services from which
each reportable segment derives its revenues
The Group has two main reportable segments:
-- People and Data Management division - This division is
involved in the design, manufacture and distribution of
access-control systems (hardware and software) and the design,
manufacture and distribution of HCM hardware only, for
time-and-attendance, shop-floor data collection, and access control
systems. This division contributed 77% (2022: 76%) of the Group's
revenue.
-- Physical Security Solutions division (previously called the
Asset Protection division) - This division is involved in the
design, manufacture, installation and maintenance of fixed and
reactive security screens, reception counters, cash management
systems and associated security equipment. This division
contributed 23% (2022: 24%) of the Group's revenue.
Factors that management used to identify the Group's reportable
segments
The Group's reportable segments are strategic business units
that offer different products and services. The two divisions are
managed separately as each involves different technology, and sales
and marketing strategies. Operating segments are reported in a
manner consistent with the internal reporting provided to the chief
operating decision maker.
Segment assets and liabilities exclude group company
balances.
People Physical
and Data Security
Management Solutions
division division Total
2023 2023 2023
GBP'000 GBP'000 GBP'000
Revenue from external customers 15,574 4,740 20,314
------------ ----------- --------
Finance cost 154 58 212
Depreciation 341 230 571
Amortisation 572 - 572
Segment profit/(loss) before income
tax 2,196 (685) 1,510
------------ ----------- --------
Additions to non-current assets 1,299 463 1,933
Disposal of non-current assets 457 484 976
Reportable segment assets 13,556 3,739 17,295
Reportable segments liabilities 4,980 3,518 8,498
People Physical
and Data Security
Management Solutions
division division Total
2022 2022 2022
GBP'000 GBP'000 GBP'000
Revenue from external customers 14,558 4,587 19,145
------------ ----------- --------
Finance cost 99 20 119
Depreciation 304 228 532
Amortisation 703 - 703
Segment profit/(loss) before income
tax 312 (103) 209
------------ ----------- --------
Additions to non-current assets* 1,292 158 1,450
Disposal/modification of non-current
assets 488 198 686
Reportable segment assets 13,094 2,299 15,392
Reportable segments liabilities 4,722 1,530 6,252
Reconciliation of reportable segment revenues, profit or loss,
assets and liabilities to the Group's corresponding amounts:
2023 2022
GBP'000 GBP'000
Revenue
Total revenue for reportable segments 20,314 19,145
Profit or loss before income tax expense
Total profit or loss for reportable segments 1,510 209
Parent company salaries and related costs (604) (809)
Other parent company costs (970) (834)
Loss before income tax expense (64) (1,434)
Corporation taxes 417 630
(Loss)/profit after income tax expense 353 (804)
--------------- --------
Assets
Total assets for reportable segments 17,295 15,392
Parent company assets * 1,261 789
Group's assets 18,556 16,181
--------------- --------
Liabilities
Total liabilities for reportable segments 8,498 6,252
Parent company liabilities ** 2,128 2,358
Group's liabilities 10,626 8,610
--------------- --------
*PLC bank overdraft is set off against other group cash balances
and has therefore been included within the asset line owing to an
offsetting arrangement that is in place with HSBC.
**Parent company liabilities include dormant companies'
intercompany balances which eliminate fully on consolidation
therefore do not feature in the consolidated financial
statements.
Geographical information:
Non-current assets by
location of assets
2023 2022
GBP'000 GBP'000
UK 7,280 7,092
USA 1,084 560
8,364 7,652
Reportable Reportable
segment Group segment Group
totals PLC Totals totals PLC Totals
2023 2023 2023 2022 2022 2022
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Other material items
Additions to non-current
assets 1,761 171 1,933 1,443 7 1,450
Disposals and modifications
of non-current assets 942 34 976 623 - 623
Depreciation and amortisation 1,146 55 1,201 1,235 13 1,248
3. Tax and Deferred tax
2023 2022
GBP'000 GBP'000
Current tax
UK corporation tax on profit for the
year - (338)
Overseas corporation tax (25) -
Adjustment to provision in prior periods (348) (88)
(373) (426)
-------- --------
Deferred tax
Origination and reversal of temporary
differences (16) (159)
Effect of change in corporation tax rate - (61)
Adjustment to provision in prior periods (28) 16
(44) (204)
-------- --------
Total tax credit (417) (630)
-------- --------
The reasons for the differences between the actual tax credit
for the year and the standard rate of corporation tax in the UK
applied to profits for the year are as follows:
2023 2022
GBP'000 GBP'000
Loss before tax (64) (1,434)
-------- --------
Expected tax credit based on the standard
rate of corporation tax in the UK of
19.49% (2022: 19.0%) (12) (272)
Research and development allowances (347) (142)
Effects on profits on items not taxable
or deductible for tax purposes 17 24
Effects of corporation tax change - (61)
Movement in deferred tax not recognised 190 -
Remeasurement of deferred tax for changes
in tax rate 3 4
Fixed asset differences (14) 6
Foreign tax credits (25) 25
Adjustments in respect of prior period (247) (71)
Adjustments in respect of prior period
(deferred tax) (28) (143)
Other movements 46 -
Total tax credit (417) (630)
-------- --------
The Group has the following tax losses, subject to agreement by
HMRC Inspector of Taxes, available for offset against future
trading profits as appropriate:
2023 2022
GBP'000 GBP'000
Management expenses and loan relationship
deficits 240 170
Trading losses 5,622 5,203
5,862 5,373
-------- --------
2023 2022
A deferred tax asset has not been recognised
for the following: GBP'000 GBP'000
Management expenses 240 170
Trading losses 1,425 732
1,665 902
-------- --------
Deferred tax
Deferred tax is calculated in full on temporary differences
under the liability method using a tax rate of 25% (2022: 19%). The
March 2021 Budget announced a further increase to the main rate of
corporation tax to 25% from 1 April 2023 and was substantively
enacted in May 2021. The GBP61,000 increase in net deferred tax
assets as a result of this change in tax rate is recorded in the
year ended 30 April 2022.
Deferred tax assets have been recognised in respect of all
temporary timing differences giving rise to deferred tax assets if
it is probable that these assets will be recovered. The movements
in deferred tax assets and liabilities (prior to the offsetting of
balances within the same jurisdiction as permitted by IAS12) during
the period are shown below. Deferred tax assets and liabilities are
only offset where there is a legally enforceable right of offset
and there is an intention to settle the balances net.
Details of the deferred tax liability, and amounts
(charged)/credited to the consolidated income statement are as
follows:
Other
temporary
Fixed and deductible Available
Total Assets differences losses
Asset/(liability)
At 1 May 2022 410 (639) - 1,049
Income statement (charge)/credit 44 (25) 69 -
At 30 April 2023 454 (664) 69 1,049
------------- -------- ---------------- -----------
Asset/(liability)
At 1 May 2021 206 146 (526) 586
Income statement (charge)/credit 204 (785) 526 463
At 30 April 2022 410 (639) - 1,049
------------- -------- ---------------- -----------
Deferred tax assets have been recognised in respect of available
losses which are expected to be matched against future trading
profits. Management reviews the estimate mid-year and assesses
whether latest projections impact the level of recognised deferred
tax. Management allow for a fluctuation in projections and apply a
level of cautiousness to recognition so that it allows for profit
fluctuations.
There are unrecognised deferred tax assets as listed above,
which have not been recognised due to the uncertainty of the timing
of future profits.
4. Dividends
The Directors are not proposing a dividend for 2023 (2022: nil
pence).
5. Subsequent events
The Directors are not aware of any material events which
occurred after the reporting data of these financial statements
which will significantly affect the financial position of the Group
or the results of its operations.
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END
FR SEIESIEDSEDU
(END) Dow Jones Newswires
September 26, 2023 02:00 ET (06:00 GMT)
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