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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Newmark Security Plc | LSE:NWT | London | Ordinary Share | GB00BNYM9W73 | ORD GBP0.05 |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 83.50 | 80.00 | 87.00 | 83.50 | 82.00 | 82.00 | 5 | 08:00:03 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Security Systems Service | 20.31M | 353k | 0.0377 | 22.15 | 7.83M |
From Apr 2021 to Apr 2024
TIDMNWT
RNS Number : 3342L
Newmark Security PLC
10 September 2021
Dissemination of a Regulatory Announcement that contains inside information according to REGULATION (EU) No 596/2014 (MAR).
Newmark Security plc
("Newmark", the "Company" or the "Group")
Final Results
Newmark Security plc (AIM: NWT), a leading provider of electronic and physical security systems, is pleased to announce its audited results for the year ended 30 April 2021.
Highlights
Financial highlights:
-- Revenue was marginally behind last year as communicated in the year end trading update announced on 9 June 2021 at GBP17,658,000 (2020: GBP18,767,000), a decrease of 5.9%
-- Gross profit margin decreased to 37.5% (2020: 39.7%) -- Operating Profit before exceptional items was GBP79,000 (2020: GBP604,000) -- Operating loss after exceptional items was GBP38,000 (2020: Operating profit GBP305,000) -- Tax credit of GBP297,000 (2020: credit of GBP896,000) -- Profit after tax for the year of GBP171,000 (2020: GBP1,127,000) -- Earnings per share of 0.04 pence (2020: 0.24 pence) -- Cash generated from operations before exceptional items was GBP245,000 (2020: GBP1,267,000) -- Continued investment in development with amount decreasing to GBP744,000 (2020: GBP886,000) -- Net Assets of GBP8,290,000 (2020: GBP8,302,000)
Operational highlights:
-- People and Data Management division (Grosvenor Technology)
o Revenues from Human Capital Management (HCM) increased by 6% to GBP9,659,000 (2020: GBP9,142,000)
-- Successful onboarding of new customers and of significant end users to existing customers has shown growth year on year. After removing the impact of the expected reduction in revenue from the Ultimate and Kronos merger, HCM has grown by 41% year on year.
o Access Control revenues reduced by 29% to GBP2,988,000 (2020: GBP4,215,000)
-- Existing Access Control Legacy Janus product revenue reduced by 4%, whilst Sateon revenue decreased by 50%.
-- The Janus C4, our Integrated Security Management and Access Control product, provides a single-platform, multi discipline solution and attained GBP351,000 of revenue in a COVID impacted year (2020: GBP383,000).
-- Physical Security Solutions division (Safetell)
o Revenue decreased by 7% to GBP5,011,000 (2020: 5,410,000), which, in a year disrupted by reduced access to customer sites and other precautionary measures, shows a turning point for Safetell with product revenue being generated from new lines of business.
-- Post period end, appointment of Paul Campbell-White as Chief Financial Officer
Commenting on the results, Maurice Dwek, Chairman of Newmark Security, said "It has been an encouraging year for Newmark Security, and the Group has continued to trade effectively, considering the circumstances and challenges we all faced. We have navigated the impacts of COVID-19 successfully, while also driving the business forward with a strong focus on growth."
Paul Campbell-White, recently appointed Chief Financial Officer, commented: "The Group performed admirably in a challenging year. I am delighted to be joining Newmark Security at such an exciting time as we launch new products and increase our presence in the US market."
For further information:
Hot Features
Premium
Newmark Security plc
Marie-Claire Dwek, Chief Executive Tel: +44 (0) 20 7355
Officer 0070
www.newmarksecurity.com
Allenby Capital Limited Tel: +44 (0) 20 3328
(Nominated Adviser and Broker) 5656
James Reeve / Liz Kirchner
(Corporate Finance)
Amrit Nahal (Sales & Broking)
CHAIRMAN'S STATEMENT
Overview
Having refocused the strategic direction of the Company in recent years, putting greater emphasis on a recurring revenue model, our transition continues. We rolled out and implemented our strategy across the Group during the year, laying the groundwork for future success.
Driving growth in our People and Data Management division
This focus has helped us drive for growth. We continued to make good progress with our Human Capital Management (HCM) business in North America this year. Our ability to provide technical solutions and hardware without the need for us to physically attend a site has been a huge advantage during the pandemic as well as developing COVID-related solutions such as temperature readings and improved facial recognition for masks. We also onboarded a number of new contracts, including our first Clock as a Service (ClaaS) contract with the Market Intelligence Group. In addition, following investments in both our hardware and software platforms, two of our longstanding US HCM clients subscribed to our Cloud provisioned software, remotely connecting new and existing timeclock devices with our platform.
On the Access Control side, our latest security management platform, Janus C4, performed well in the year given the impact of COVID, albeit from a very modest base. I am delighted that we extended our contract with Gamanet, upon whose technology the platform relies, and this will enable us to put the maximum focus on Janus C4 in the years ahead.
Resilience and flexibility in our Physical Security Solutions division
With COVID-19 hampering our service and technical engineers' ability to work onsite safely during lockdowns, our Safetell team in the UK adapted quickly and with great resilience to protect the business and deliver for their customers in our traditional markets. We continue to make progress, cementing our existing client relationships further, bringing new product lines to the market, and I was extremely pleased to see that we won new projects this year with customers whose businesses remained in operation throughout the initial UK lockdown.
Performance ahead of expectations
Overall performance across the Group during the year was ahead of management's expectations, with revenue for the year from operations slightly down at GBP17,658,000 (2020: GBP18,767,000), largely due to the impact of COVID-19 in the first half of the year, with a much stronger performance in the second half. A loss from operations of GBP38,000 (2020: profit of GBP305,000) was incurred. Revenue in the People and Data Management division (Grosvenor) fell by 5.3% from GBP13,357,000 to GBP12,647,000, while revenue in the Physical Security Solutions division (Safetell) was down 7.4% from GBP5,410,000 to GBP5,011,000. A full Financial Review of our results is included within the Strategic Report.
Moving on from COVID-19 into the 'new normal'
The pandemic has had a major impact on our people and the business, both operationally and financially. Some difficult choices had to be made, and a series of cost reduction initiatives were implemented across the Group including furloughs and temporary pay cuts and some redundancies. However, I am proud of the brilliant response from our people and our management team.
We refinanced the business with a government-backed GBP2 million loan under the Coronavirus Business Interruption Loan Scheme ("CBILS"). The facility has been fully drawn down, helping us to reduce interest charges on other borrowings, and enabling us to continue with core development activities to support future growth.
We have already brought the majority of people back to work, having largely returned to normal operations across the Group. As we move on from COVID-19 towards the 'new normal' for everyone, I am confident that we are emerging as a stronger business, well-positioned for growth.
Board and governance
The Board and its Committees maintain a robust governance framework, using individuals' experience 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.
Our Group Finance Director, Graham Feltham, has left the Group in September 2021. I would like to thank Graham for his important contribution to Newmark Security over the past two years and wish him well for the future. Paul Campbell-White has joined us as our new Chief Financial Officer, also in September, having most recently held the position of Chief Commercial Officer at CognitionX, a technology company in the events space.
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 are in a good position following COVID-19, although cash remains a key focus, especially with the challenges we face managing our inventory levels and dealing with the global shortage of components we need to build our products. We continue to work closely with our bank (HSBC), through which we have our CBILS facility. Post the balance sheet date we have agreed a temporary GBP200,000 extension to our overdraft facility until 1 November 2021 and are currently in discussion with our primary bankers to increase our UK invoice discounting facility and introduce a US invoice discounting facility. We have also renegotiated our covenant on the CBILS facility in light of our investment for growth.
The group is currently operating ahead of revenue expectations albeit with a different phasing of certain lines of business with varying margins which result in a reduced margin. The latest forecast of the Group exceeds the Tangible Net Worth (TNW) covenant test by 13.5% and will be tested more fully when a revised forecast is completed in October.
Overall, the business has performed better than our own internal forecasting had suggested during the COVID-19 period, and we are optimistic that this trend will continue in the next 12 months, supported by sensitised forecasts, 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 2021 (2020: GBPNil).
Outlook
While the Group has inevitably been affected by the global pandemic and restrictions imposed in the UK and internationally, I am pleased with the progress we have made this year. We enter the new financial year with growing optimism, we continue to invest in the US, and we expect to benefit from the rollout of our focused strategy and build a greater proportion of recurring revenues. The outlook for our HCM business in the Rest of the World is also very promising, as we develop our capabilities and onboard new customers.
Our Physical Security Solutions division, Safetell, stands out in the UK market as a 'one stop shop' for customers looking for a solution to their security issues. In particular, we expect to see growth in the year ahead in new product lines in the Entrance Control and Auto-door categories.
I am confident we are set up for growth and, overall, expect the Group to show an increase in revenue in the coming year. On behalf of the Board, I would like to extend my thanks for all the hard work and resilience shown by our teams this year, and I look forward to a successful 2021/22.
Maurice Dwek
Chairman
9 September 2021
CHIEF EXECUTIVE OFFICER'S REVIEW
Overview
We made significant progress in the year to 30 April 2021, despite the impact of COVID-19 and related lockdowns and restrictions. Our proactive response to the global pandemic in the early months of the year supported our business, people and customers, while the Group's trading activity recovered strongly in the second half.
We demonstrated our resilience and ambition during the year, investing in the development of both our hardware and software platforms to support future growth. At the same time, we built on existing relationships, onboarded new customers, and continued to strengthen our presence in high-growth, specialist data and security markets.
Market focus
In a year when everything seemed to stop, the evolution in some of our markets gained pace, spurred on by the challenges presented by the pandemic. There is growing demand for new technologies to handle things like touchless entry and facial recognition, with or without masks; and for systems that can be maintained effectively without a physical on-site presence. There are also new opportunities as customers turn their attention to creating safer workspaces.
The market is moving away from stand-alone Access Control solutions, towards integrated Access Control, Intruder, CCTV, Fire and Building Management, all of which can be provided within a single platform. Since COVID-19, there has been a push for smarter devices that can carry out contactless temperature checks for employees, visitors and customers to identify abnormal body temperatures, and so reduce the risk of infection.
We put a strong focus on developing our market intelligence during the year. It's through a continuous and thorough understanding of our markets that we can target the product developments and offerings that will make a difference for our customers. There are a number of important trends we seek to address, with one of the most important being data protection and quality. This is driven not just by stronger legislation in the US and Europe, but also by the increasing need for companies to present themselves as responsible and trustworthy in a competitive market.
We continue to see growth in the Human Capital Management (HCM) market being facilitated through the technology 'drivers' of high-speed internet availability and the subsequent mass shift to Cloud based computing. We are developing our HCM software platforms with a Cloud and Application Programming Interface ("API") first approach. This approach prioritises the use of a Cloud infrastructure along with APIs to provide seamless connectivity and integration between back-end and front-end systems for customers.
Products and services our customers can rely on
Newmark Security benefits from long-term relationships with many blue-chip customers and I was pleased to see that we had considerable success this year both in onboarding new customers and developing strong prospects for the future.
In our HCM businesses in particular, we continue to generate a greater proportion of our revenues from recurring services. This remains a key part of our strategy. Combined with our existing strengths in data privacy, security and providing end-to-end solutions, I believe this will be an important growth driver for the business in the years ahead.
That's why I am so excited about our newly developed Cloud platform, which we expect to launch in the winter. This will enable us to focus on both Security as a Service (SaaS) and our unique offering, Clock as a Service (ClaaS), which allows customers to choose any clock, bundled with our GT Services, and benefit from one low-cost monthly fee, with a no-quibble lifetime warranty.
Our focus is all about giving our customers confidence in what we can deliver for them - total data management, device management, and identity management, which ensures they have total regulatory compliance and a highly secure environment built in. It's all part of the service.
We have extended our contract for Janus C4, our latest security management platform for Access Control, for a further three years. This recognises the fact that the platform has been well received by both existing and prospective customers, and that uptake is increasing, following our investments in additional training resource to support clients adopting the platform.
Following its reorganisation last year, our Safetell business had identified new markets, products and customers that complemented its existing offering. While COVID-19 has delayed the market launch of some of these new products, I was pleased to see that the business has proactively addressed the new market opportunities this year by replacing traditional business with new business.
Investing in growth
Despite the challenges of operating under COVID-19 restrictions, the Group continued to trade in all divisions this year. I'm immensely proud of the resilience and flexibility our people showed, handling unprecedented pressures and providing uninterrupted services to our customers. During the year, we have had to respond to component shortages and global challenges in our supply chain, however we maintained our productivity levels and continued to onboard valuable new accounts.
While we took the difficult decision to furlough colleagues at the height of the crisis, many of us were able to work seamlessly from home. We've put new policies in place and complied with all regulations, and I'm delighted to say that we are now very much on the other side of the disruption, with all colleagues back to work, and a firm investment strategy in place to build back better.
We are investing in both people and technology. As a growing business, it is vital that we have the right people in the right roles. We also need to upgrade our underlying systems to support growth and new lines of business. That means investing in our customer relationship management (CRM), enterprise resource planning (ERP), people management and marketing systems to ensure we manage our day-to-day business activities and organise our key resources more effectively.
Overview of Divisional Performance
People and Data Management division
Having achieved significant growth in the previous three years, Grosvenor Technology continued to perform well, though revenues decreased by 5.6% overall, to GBP12,647,000 (2020: GBP13,357,000). This included revenue from HCM, which increased by 5.7% to GBP9,659,000 (2020: GBP9,142,000), and revenue from Access Control, which fell by 29.1% to GBP2,988,000 (2020: GBP4,215,000). This reduction in revenues came as COVID-19 impacted some of our clients' end-user projects, and the anticipated reduction in HCM sales to Ultimate Software (following the merger of Ultimate Software Group and Kronos).
Human Capital Management (HCM)
Our HCM sales at GT Clocks in North America were slightly lower, largely due to the Ultimate Software merger, though revenues have held up well overall. We have onboarded new clients, including an HCM software company that provides HR and Payroll solutions to over 30,000 businesses. Also, one of our existing partners entered into an agreement, expected to be worth approximately GBP2.9 million over three years, to supply the GT10, our flagship hardware device, to an international retailer.
We continue to engage with several Tier 1 target HCM software providers in the US, who are interested in our next generation hardware. And three of our longstanding HCM clients in the country have subscribed to our Cloud provisioned software, which means they are remotely connecting new and/or existing timeclock devices with our platform with a new addition in the year for both a ClaaS and SaaS subscription.
In our Rest of World HCM business, we also continued to negotiate with new Tier 1 clients for both products and services. While the effects of COVID-19 impacted our revenues, particularly in Europe, they held up better than expected and improved in the second half of the year.
Access Control
With the vast majority of our Access Control sales coming from the UK, national and regional restrictions imposed to control the spread of COVID-19 resulted in a dramatic fall in demand - as our installation partners were only carrying out essential maintenance, rather than new installs.
A drop in the sales of our legacy Janus product range was also expected, as this platform is no longer installed in our 'new' systems. However, many end-user sites still use legacy Janus products, and this continues to generate revenues for the business, albeit at a diminishing rate.
I was pleased to see sales have held up in our latest access control platform, Janus C4, which can be considered a full Security Management System (SMS). Our ability to onboard new partners has been severely hampered, as we have not been able to conduct face-to-face visits during much of the year, and this limited the number new installations that took place.
Sales of Sateon, our previous flagship access control platform, also decreased in the year - partly due to the business development focus on Janus C4, which was expected, but also as a result of supply chain disruptions arising from border restrictions and other impacts of the pandemic.
Physical Security Solutions division
Revenue in the Physical Security Solutions division decreased by 7.4% to GBP5,011,000 (2020: GBP5,410,000), due the impact on trading activity of COVID-19 and the expected reduction in work with the Post Office Network Transformation having come to an end. However, we built on existing client relationships and won new projects in the year, pivoting the business where necessary to help customers meet the challenges they faced during the extensive lockdowns in the UK.
While COVID-19 meant our service and technical engineers were often unable to work onsite safely, and many projects were delayed during lockdowns, it was a busy year as new opportunities arose in helping customers create safer workspaces. Notably, demand rose for products such as hygiene screens and night-pay hatches that would protect our customers' employees and customers alike.
Pent up demand and a significant order book, thanks to our expanded product range and a wider customer base, drove a stronger performance in the second half of the year. Safetell also took the opportunity to build a full demonstration facility where customers can now view our full product range, including our Autodoor and Entrance Control products.
Changes to our senior team
I would like to take this opportunity to say thank you again to all of our colleagues in what has been a challenging year for everyone. Safetell's Managing Director, Paul Lovell, made the decision to retire on 30 June 2021, having been with the Group since 1991. I'm sure everyone will join me in wishing Paul the best for the future, and I am grateful for the contribution he has made to the business over the past 20 years. The search for Paul's permanent successor is ongoing, but for the moment Safetell is in the extremely capable hands of Bob Darke, who kindly agreed to step in as Interim Managing Director.
We have also recruited Brian Hack as our new Global Operations and Supply Chain Director for Grosvenor Technology in the US. Brian is very experienced in the HCM industry and I am sure he will play a key role in ensuring our business in the US has the solid platform it needs to meet our ambitious growth targets.
Gearing up for future growth
As we emerge from a tough year, I believe Newmark Security is in a strong position - we have enhanced our teams, developed valuable new technology, and expanded the range of products and services we offer our customers. We've even exchanged some older contracts for a number of fantastic new projects, which I believe have the potential to take us to the next level.
Over the next five years, I am confident we can increase our penetration into the vibrant US market, and significantly increase our turnover across the Group. That will mean building our capabilities and skills-base further and earning a market-leading reputation for customer service.
We'll also need to continue onboarding major Software Houses as part of our HCM businesses, and a renewed focus on Janus C4 should see a transition away from legacy products in our Access Control operations. In Safetell, I expect to see an even greater diversification of product lines, as there is a continued shift from traditional markets to innovative new markets.
With such exciting times ahead, 'Living our Values' will be especially important. If and when we encounter setbacks, clarity about our essential values will hold us together, as we work to deliver our business vision and goals. That will underpin our "will-to-win."
I have worked with the Leadership Team to articulate a Vision, a Mission and a set of Core Values for Newmark Security Group. Since launching this programme I am committed to consistently reinforce it throughout our companies. I believe bringing people together in this way is an important step in our evolution as business. It is a key part in our growth story, as well as enhancing Newmark Security's profitability and our enterprise value for shareholders.
Marie-Claire Dwek
Chief Executive Officer
9 September 2021
OUR DIVISIONS - People and Data Management (previously Electronic Division)
Increase/ Percentage
Divisional revenue 2021 2020 (decrease) change
GBP'000 GBP'000 GBP'000 %
People and Data Management
division
Legacy Janus 1,491 1,549 (58) (4%)
Sateon Advance 1,146 2,283 (1,137) (50%)
Janus C4 351 383 (32) (8%)
Total Access control 2,988 4,215 (1,227) (29%)
-------- -------- ------------ -----------
HCM Rest of world 3,150 3,238 (88) (3%)
HCM US 6,509 5,904 605 10%
Total HCM 9,659 9,142 517 6%
-------- -------- ------------ -----------
Division total 12,647 13,357 (710) (5%)
-------- -------- ------------ -----------
At Grosvenor Technology, we provide security and attendance solutions via our Access Control and Human Capital Management (HCM) businesses. Our Janus access control product was the world's first Windows-based access control platform and has been installed at over 10,000 sites globally. In our HCM line of business, we help turn diverse data into real information while increasing security, ensuring compliance, and reducing time and cost for our partners.
Growth opportunities in North America
Following a three-year period of good growth, Grosvenor Technology continued to trade well across all lines of business and regions in a more challenging year. Our HCM revenues in North America, through our trading name of GT Clocks, held up well, although they were affected by the merger between Ultimate Software and Kronos, who make their own device and as a result we saw lower sales to this key customer. We have greatly benefited from our relationship with Ultimate and will continue to work with them.
The reduction of business with Ultimate was largely offset as GT Clocks onboarded new clients, including an HCM software company that provides HR and Payroll solutions to over 30,000 businesses. During the year, one of our existing partners also entered into a new agreement to supply our flagship hardware device, the GT10, to an international retailer.
Our specialist offering continues to gain traction in the sector and in the year, our US based business generated 52% (2020: 44%) of our total revenues for this division. We still believe that the HCM business in the Americas represents our greatest opportunity, and we are increasing our business investment in our people and technology to future proof the business and maximise this opportunity.
We are investing in the development of both hardware and software platforms to support our growth in the HCM market globally. During the year, a big focus for our hardware, electronics and software teams has been the development of our latest Android based timeclock, the GT8, which launched close to the end of the financial year in April.
Launch of the GT8 Timeclock
The GT8 is a thoroughly modern timeclock with an 8" full-colour high-resolution
touch screen providing the user with a concise, impressive interaction,
comparable to smart phones. It is a step forward in technology - a
next generation device using the latest processors with hardware encryption
for biometric data that meets US and European legislation.
The timeclock uses the Android 10 operating system, which means applications
for the device can be easily developed using familiar tools and frameworks.
The GT8 can also be updated Over The Air ("OTA"), keeping the operating
system up-to-date and secure.
We launched the GT8 in April 2021, and we have had a tremendous response
from the market. We are already in negotiations with one of our Tier
1 clients about the potential of supplying the GT8, and we are extremely
confident that the clock will generate good business over the next
year.
Building on our strong reputation
Above all, we are investing in our reputation for providing reliable and high performing hardware. That's how we have been successful in onboarding new Tier 1 clients in the US, and why we remain in negotiation with others. We are talking with several major HCM software providers about supplying them with our next generation hardware and a range of complementary Software as a Service ("SaaS") Solutions.
These services are becoming as important as the hardware for some clients. This is encouraging as we try to balance our hardware sales with our SaaS offering, which provides us with recurring income and bolsters the flow of cash into the business. We also offer Clock as a Service (ClaaS), which brings everything together by allowing customers to choose any clock, bundled with our GT services, for one low-cost monthly fee.
Managing data privacy and security
Another element of building a strong reputation is how we manage data privacy and data security, in particular biometric data, such as fingerprints and face identification. In the US, there are different rules for biometric data capture and what you can do with it, depending on which state you are in, while in Europe and the UK, we have to adhere to General Data Protection Regulation ("GDPR") rules.
It is complex, which is why we have also invested significantly in our workflow management of biometric data. That has meant gathering the consent of people for using their data in the US and Europe, and ensuring that we have annual penetration testing of our systems - both our timeclocks and our Cloud platforms. We are dealing with this ahead of any potential Federal legislation in the US, reassuring our customers that we are secure, and future proofing our systems.
Our services The SaaS services we provide customers are offered through two distinct brands: GT Connect manages the services we provide and our clients' connection to the Cloud. GT Protect protects our clients' assets, and is essentially a lifetime hardware warranty. We also have a dedicated Professional Services team to help us onboard customers quickly. They tailor solutions to our clients' requirements, building an end-to-end solution to meet their needs.
New Cloud platform
With our newly developed Cloud platform due to launch in the winter, we are using a Cloud and Application Programming Interface ("API") first approach. This means we can prioritise the use of a Cloud infrastructure along with APIs to provide seamless connectivity and integration between back-end and front-end systems for customers. We have incorporated new technologies to support Internet of Things (IoT) connectivity to the platform, and we have significantly expanded its middleware capabilities - which will enable smoother integration with our partners' time management platforms, and help us onboard customers, as our systems will talk to each other better.
HCM business outside of the US
While around two thirds of the world's HCM business is in the US, or is dependent on the US, our Rest of World HCM business continues to trade well, with revenues only down 3% in the year. We are building on the strong partnerships we have with our existing HCM clients, and, while hardware sales remain the mainstay of our business, the trend towards enquiries for our subscription 'data management' services has continued during the year.
Steady progress in our Access control business
Our Access Control business is predominantly centred on the UK, and government restrictions imposed to control the spread of COVID-19 resulted in a sharp fall in demand through much of the year as many shops, venues and offices were closed. For those that were open, investing in upgrading their security systems was understandably not a priority.
We now view our Sateon platform, the successor to our original Janus product range, as mature and complete, with development efforts limited to essential bug fixes and maintenance. Sateon Advance, which is the last iteration of this platform, continues to be used by some access control installers and integrators, while many end-user sites still use legacy Janus products. These platforms continue to generate revenues for the business, but albeit at a diminishing rate.
Focus on our Janus C4 Security Management System
Janus C4, our latest access control platform has progressed well during the year, maintaining reasonably consistent revenues despite the impact of COVID. Janus C4 is the first time we have ever gone to an external third party and bought a solution from them, but it represents an advance on previous systems, as it is a fully Integrated Security Management System ("ISMS"), integrating traditionally disparate offerings such as CCTV, Fire Safety, Intrusion Detection and Energy Management to create a seamless, single platform solution that protects buildings and people.
Unfortunately, our ability to onboard new partners with Janus C4 has been severely hampered, as we have not been able to conduct face-to-face visits during much of the year, and this limited the number of new installations that took place. As restrictions ease, the ISMS is starting to gather more interest from our installation partners, so we are optimistic it will gain traction in the remainder of 2021 and 2022.
Rationalising our supply chain
One of the biggest challenges we have faced during the year has been on the supply side. The supply of components like semiconductors has been affected by various socio-economic factors, not least of which have been freight restrictions due to the global pandemic. Even without that, we have seen enormous price hikes in certain components, and we have limited opportunities to pass that on to the market due to contractual obligations where the price is fixed.
This situation appears likely to continue, which means that our margin will become increasingly squeezed. This further highlights the need for our business strategy to balance capital sales with a subscription model, as that makes margin at the point of sale much less relevant.
In our efforts to mitigate this challenge, we are looking to rationalise our global supply chains over the next 12 months. Having been in business in Europe for decades, our primary supply infrastructures are UK-based, with contract manufacturers based in Hungary and Poland, and a lot of our components coming from the Far East. However, most of our growth now comes from the US, which is a much more recent development, and we need to address that.
We have recently employed a new Vice-President of Operations and Supply Chain based in the US. He will work with the third party logistics company we use in the US to improve our local supply chain, but, more importantly, we need to build out our operational capability in the US. We are looking at the potential of a supply chain based wholly within the US, and what that would mean to our business in the region. A rationalisation of our supply chain and procurement could allow us to manufacture in dollars and sell in dollars in the US, while allowing for a failover if there is a problem with our supply chain in either Europe or the US.
The future
In 2021, we have invested in our business, bolstered our strategy and built the momentum we need to push for growth in the year ahead.
Although we expect to see some progress in Access Control, and the business is in a good place, the biggest opportunities are likely to come in our HCM businesses. We have ambitious growth plans in the UK and the EU, where we have onboarded new clients, with more good prospects lined up.
However, the real step change for Grosvenor Technology could come in the US, where we will grow our business with existing partners and look to onboard new Tier 1 clients with a compelling offering that encompasses a combination of market-leading technology, products and services.
OUR DIVISIONS - Physical Security Solutions division (previously Asset Protection division)
Increase/ Percentage
Divisional revenue 2021 2020 (decrease) change
GBP'000 GBP'000 GBP'000 %
Physical Security Solutions
division
Products 3,220 2,695 525 19%
Service 1,791 2,715 (924) (34%)
Division total 5,011 5,410 (399) (7%)
-------- -------- ------------ -----------
At Safetell, our team of industry experts are here to provide a professional service and a personal response to all our customers' needs. We help them create safe and secure places for their people and customers, by designing, installing and maintaining physical security solutions that best meet their evolving requirements.
Our security products and services are used in many environments, including: * NHS * Stadia, Leisure and Hospitality * Finance, Safety Deposit Centres and Jewellers * Retail, ATM and Petrol Forecourts * Education and Local Authorities * Government, Police and Prisons * Corporate Buildings * Data Centres and Utilities ----------------------------------------------------- -----------------------------------------
Re-focusing our business and services
During a year that has brought unique challenges for many businesses, we have worked hard to transform the Safetell business, both through the introduction of new product lines, and with new ways of working. Our traditional market - supplying and installing fast rising screens in the banking sector - is being impacted by falling numbers of bank branches, so we are steadily adapting our offer to use our skills and coverage to install and Entrance Control solutions and Automatic Door installation & maintenance.
We made good progress in the Autodoor market business this year, and plan to increase the pace of growth in this area significantly. We now look after around half of the network for a major petrol retailer, following their approach to us 18 months ago. We are particularly proud of our record in repairing and upgrading their doors rather than replacing them all, saving them thousands of pounds each time. We refitted around 100 of their sites during the last year - attending their premises, changing the glass, changing the locks and bringing them up to standard. We expect to do increased numbers with them over the next two years at least, giving us good repeat revenue.
Entrance Control projects have even greater potential to drive our business, as typically they generate bigger contracts, and they take less time to manage and install. We secured our first order with a major watch retailer this year, and installation on that project is now complete.
Overall, we have grown our quote bank, in this sector alone, from nothing to around GBP1.1 million. However, we recognise we are still in the early days of this initiative, as Entrance Control sales take a while to come to fruition - they are not quick wins. It can be an 18 month long process, as our range has to be specified in the plans by the architects, everything has to go through planning, and the Entrance Control requirement is the last thing to be installed.
To promote our Entrance Control initiative, we've completely refitted our showroom to incorporate all our Entrance Control equipment, allowing customers to see first-hand the value of what we offer.
Seizing new opportunities
Of course, while we were busy building up these key product lines, COVID-19 hit the country, and measures to prevent the spread of the virus have had a significant effect on the Safetell business during the year, both in our new and traditional markets. With banks closed, the need for screen servicing in their branches stopped. However, many of our clients operate from critical locations such as hospitals, retail sites, financial hubs, and key buildings, so it was important for us to adapt and pivot the business in any way we could to support customer needs during the pandemic.
A good example of how we have flexed what we do to meet a need in the market is our work with Britain's leading supermarket chain during the year. They had a problem where their staff were getting threatened or attacked late at night. We designed a screen system for them put on their counters, protecting their staff at around 130 sites. This generated approximately GBP850,000 in turnover for us.
Bringing this product online has been a major driver for Safetell over the last 12 months, and we now see it as a long-term part of our range. Having previously focused on very highly specified, bulletproof screens, these manual attack screens were new to us, but many other retailers have the same problem. We're now taking these products and selling them into other convenience stores and supermarkets, both in the UK and Ireland.
What makes Safetell different?
We offer a broad range of products and services and are able to provide a 'one-stop shop' approach in a fragmented market. None of our competitors do everything that we do. That's why even when customers come to us with a requirement for a single product, we are keen to offer a full solution. We have highly qualified and experienced technical engineers who can create bespoke designed solutions that will ultimately save our customers money and make them safer.
For example, when we originally quoted for around GBP250,000 worth of our traditional products as part of a large Metropolitan Police project at their head office in London, we were also in a position to offer our range of Entrance Control equipment, reception counters, speed gates, blast-proof walling, and bomb-proof windows, along with service contracts to maintain everything significantly increasing the quote and converting it into an order.
Safetell has unique coverage in the physical security market, and we offer service contracts on everything we do. That helps us build long-standing relationships with clients, who can rely on our multi-skilled installers and engineers, while we enjoy ongoing revenue streams through further business and our follow-up services.
A long-term relationship with Safetell offers a complete package
of products and services:
Bespoke design Professional Specialist installation Aftersales support
capability to and experienced teams dedicated and extended
help select the project management to working in lifetime warranties
most appropriate teams with specialist disciplined and to maintain our
solutions to knowledge of challenging environments products to the
meet various demanding site highest standards
business needs conditions and
high-risk locations
Market trends
The move away from our traditional markets continues, in particular due to the large number of bank branch closures across the UK. However, this has given us impetus to retrain our field force to provide a wider package of support to different industries and different product markets.
Threats from crime and terrorism continue to make physical security a priority for businesses in most sectors, while COVID-19 has increased the demand for new and innovative solutions.
The new 'Protect Duty' legislation, should it become law, will mean that the owners and operators of businesses and public spaces such as concert halls, shopping centres and parks will be legally bound to protect their sites and shut them down in the event of a terrorist attack. That means they will need remote locking facilities, screens on all their counters, and even breakout facilities where people can get to and stay safe. We anticipate that many new opportunities will open for us to support businesses that need to comply with such new legislation.
Trust in our products and services will also play an important role in Safetell's efforts to gain market share. Two of our traditional products - a level 4 attack rated door and a level 4 attack rated walling partition system - have now been recertified by The Loss Prevention Certification Board (LPCB), an independent certification body. Our products are listed on the LPCB's certification website, redbooklive.com, which is accessible by any client, architect, or member of the public.
What's ahead?
It's going to be a busy year ahead for Safetell. There's a lot going on with our product range, and our quote bank and order book are both strong. Our biggest challenges over the next year will be to keep driving the Entrance Control initiative, and to continue to build on our service contracts and our Autodoor operations.
We will look at potential new areas, such as fire door maintenance and inspection, as recent legislation means that many of the fire doors out there now need to meet a higher standard. Our installers and engineers could take that on without the need for additional training, as long as they are supported by proper qualified inspectors on the job with them.
To achieve all that, and to push for growth across the business, we'll need to recruit new people to the team, including a new permanent Managing Director. However, with the right resource in place, and the focus we have put into the business this year, Safetell will be in a strong position to succeed.
Our fully accredited product portfolio is designed to meet
the changing needs of our customers:
BUILDING SECURITY ASSET PROTECTION
* Manual attack and ballistic resistant cash counters, * Customised cash and asset storage and protection
windows and moving security screens
* Cash and speech transfer units
* Bullet resistant doors and partitions
* Storage functions to reduce risk of harm or damage to
* Security portals a secure environment
ENTRANCE CONTROL OTHER PRODUCTS
* Certified secure portals and revolving doors * Counter-terror and target hardening solutions
* Integrated speed gates to control the flow of staff * Range of 'touchless' security solutions
and visitors to buildings
* Other standard and bespoke physical products and
* Door automation and remote locking solutions services
FINANCIAL REVIEW
Revenue
Group revenue reduced by (5.9%) to GBP17.66 million (2020: GBP18.77 million). The revenue performance has arrived as expected with a far stronger second half of the year. Given the impact of COVID-19 the revenue levels have been extremely positive with further growth from HCM and a turning point for Products at Safetell. Further commentary and discussion can be found in the relevant divisional sections.
Key Performance Indicators
Increase/ Percentage
Revenue 2021 2020 (decrease) change
GBP'000 GBP'000 GBP'000 %
People and Data Management
division
Access control 2,988 4,215 (1,227) (29.1%)
HCM 9,659 9,142 517 5.7%
12,647 13,357 (710) (5.3%)
Physical Security Solutions
division
Products 3,220 2,695 525 19.5%
Service 1,791 2,715 (924) (34.0%)
5,011 5,410 (399) (7.4%)
Group revenue 17,658 18,767 (1,109) (5.9%)
-------- -------- ------------ -----------
Gross profit margins have reduced to 37.5% (2020: 39.7%). Physical Security Solutions division obtained a gross profit of 40.1% (2020: 44.4%) being impacted by selling lower margin COVID related products during lockdown. People and Data Management division was less impacted at a gross margin of 36.5% (2020: 37.8%) however the reduced sales levels in Access Control had an impact on margins with some fixed elements of cost of sales such as licenses. Both divisions were also impacted by the necessary timing difference of levels of sales activity and furloughs.
Increase/ Percentage
2021 2020 (decrease) change
GBP'000 GBP'000 GBP'000 %
Gross profit 6,629 7,449 (820) (11.0%)
Gross profit percentage 37.5% 39.7%
Administrative expenses & average employees
Administrative expenses before exceptional items have fallen by 4.4% to GBP6.55 million (2020: GBP6.85 million). This has mainly been the result of furloughs, which saved GBP183,000, and group-wide contractual pay reductions along with other savings in travel countered by increased costs for legal contract work in delivering our ClaaS and SaaS contracts across multiple territories and consultancy support for delivery of the Strategic Business Plan. Overall average employees have remained consistent at 112 (2020: 115) with a 3% reduction in staff costs by GBP198,000 to GBP6,781,000 (2020: GBP6,979,000).
Exceptional costs
During the year exceptional costs of GBP117,000 (2020: GBP299,000) were incurred with GBP181,000 (2020: GBP167,000) of restructuring costs incurred as a result of COVID-19 mainly in Grosvenor. An exceptional credit of GBP64,000 (2020: cost GBP82,000) related to the exit of a lease commitment at Safetell whereby the asset had been written down by GBP82,000 in the prior year. An additional GBP50,000 cost for the Group rationalization project was incurred in the prior year.
Profitability
The Group achieved a profit from operations before exceptional items of GBP79,000 (2020: GBP604,000) which is a very positive outcome to a challenging year. After exceptional items the Group made a loss from operations of GBP38,000 (2020: profit GBP305,000) however this operating loss turns into a profit after tax for the year of GBP171,000 (2020: GBP1,127,000) as a result of further tax credits which are discussed in more detail below.
Taxation
A tax credit of GBP297,000 (2020: GBP896,000) was recognised in the year. This resulted from a current tax credit of GBP420,000 (2020: GBP583,000). The current tax credit is made up of the continued revised R&D claim at Grosvenor of GBP262,000 and a new R&D claim for Safetell of GBP260,000, included within this is a GBP185,000 catch up of prior year credit, countered by a tax charge in the Grosvenor Technology LLC of GBP42,000 with a prior year additional charge relating to US tax on deferred revenue of GBP60,000. An additional element of the claim related to RDEC (Research and Development Expenditure Claim) which resulted in a GBP91,000 credit shown within operating profit. A deferred tax charge of GBP123,000 (2020: credit GBP313,000) was driven by timing of R&D at Grosvenor of GBP91,000 and on fixed assets at Safetell of GBP32,000. In the prior year, the deferred tax credit recorded largely related to a deferred tax asset of GBP450,000 recognised on losses arising in both the prior year and preceding years. The asset was recognised based on the expected future profitability of the People and Data Management division.
Earnings per share
Earnings per share of 0.04p (2020: 0.24p) was achieved being a reduction of 0.20p. The decrease resulted from the reduction in profitability related to COVID-19 and the significant impact of both R&D credits and deferred tax asset recognition in the previous year.
Balance sheet
Net assets have reduced by GBP12,000 to GBP8,290,000 (2020: GBP8,302,000) as a result of profit after tax less foreign exchange losses on translation of the US subsidiary. This is presented as an increase to trade and other receivables of GBP774,000 reflecting the increased year end trading activity compared to the prior year along with an additional GBP132,000 for increase corporation tax recoverable related to the R&D tax credit. Inventory has increased by GBP581,000 as a result of anticipated demand for finished goods combined with some impact of the global componentry shortage on prices and additional purchases. Similarly trade and other payables have increased by GBP536,000 again related to levels of year end trading activity. During the year the Group entered into the Coronavirus Business Interruption Loan Scheme ("CBILS") for a GBP2 million facility which was immediately fully drawn and used to repay GBP905,000 invoice discounting borrowing.
Research & Development
The Group has reduced its investment by GBP142,000 to GBP731,000 (2020: GBP873,000) in the People and Data Management division. The investment has been focused on the cloud development of GT Connect, our SaaS platform. Clock development continued with enhancements to our existing GT10 offering and we launched the next generation device GT8 during the year being more compact with enhanced capabilities. The level of investment reduced year on year owing to an intentional slowing down of development activity with the onset of COVID-19 to safeguard our cash position and we were pleased to recommence development once additional financing was in hand.
Cashflow
During the year we have reduced cash by GBP136,000 to GBP484,000 (2020: GBP620,000). Cash generated from operating activities decreased by GBP535,000 to GBP370,000 (2020: GBP905,000) mainly driven by trading and working capital outflow compared to prior year of GBP1,022,000, a reduction in exceptional costs by GBP182,000 and a net tax receipt of GBP369,000 (2020: GBPnil). As mentioned above we have continued investment in research and development and also property plant and equipment of GBP1,016,000 (2020: GBP993,000) with the main other movements related to the GBP2,000,000 (2020: nil) CBILS draw down and the repayment of GBP905,000 (2020: drawdown of GBP212,000) of invoice discounting and lease principle repayments of GBP487,000 (2020: GBP475,000).
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 2021
2021 2020
Notes GBP'000 GBP'000
Revenue 17,658 18,767
Cost of sales (11,029) (11,318)
Gross profit 6,629 7,449
Administrative expenses (6,667) (7,144)
Profit from operations before exceptional
items 79 604
Exceptional redundancy costs (181) (167)
Other exceptional costs 64 (132)
------------------------------------------- ------ --------- ---------
(Loss)/profit from operations (38) 305
Finance costs (88) (74)
(Loss)/profit before tax (126) 231
Tax credit 3 297 896
Profit for the year 171 1,127
--------- ---------
Attributable to:
- Equity holders of the parent 171 1,127
--------- ---------
Earnings per share
- Basic (pence) 0.04 0.24
- Diluted (pence) 0.04 0.24
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
2021 2020
GBP'000 GBP'000
Profit for the year 171 1,127
Foreign exchange on the retranslation of overseas
operation (196) 26
Total comprehensive income for the year (25) 1,153
-------- --------
Attributable to:
- Equity holders of the parent (25) 1,153
-------- --------
The notes in the annual report and accounts form part of these financial statements.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION AT 30 APRIL 2021
2021 2020
Note GBP'000 GBP'000
ASSETS
Non-current assets
Property, plant and equipment 1,088 1,262
Intangible assets 5,505 5,234
Deferred tax 206 329
Total non-current assets 6,799 6,825
-------- --------
Current assets
Inventory 3,125 2,544
Trade and other receivables 4,438 3,664
Cash and cash equivalents 484 620
Total current assets 8,047 6,828
-------- --------
Total assets 14,846 13,653
-------- --------
LIABILITIES
Current liabilities
Trade and other payables 3,782 3,246
Other short-term borrowings 627 1,351
Total current liabilities 4,409 4,597
-------- --------
Non-current liabilities
Long term borrowings 2,047 654
Provisions 100 100
Total non-current liabilities 2,147 754
-------- --------
Total liabilities 6,556 5,351
-------- --------
TOTAL NET ASSETS 8,290 8,302
-------- --------
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 (302) (106)
Retained earnings 2,511 2,327
Total attributed to equity holders 8,250 8,262
Non-controlling interest 40 40
TOTAL EQUITY 8,290 8,302
-------- --------
The financial statements were approved by the Board of Directors and authorised for issue on 9 September 2021.
Marie-Claire Dwek
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 2021
2021 2020
Notes GBP'000 GBP'000
Cash flow from operating activities before
exceptional items
Net profit after tax from ordinary activities 171 1,127
Adjustments for: Depreciation, amortisation
and impairment 1,033 1,022
Exceptional items 117 299
Finance cost 88 74
Gain on sale of property, plant and equipment (5) (58)
Share based payment 13 13
Income tax (credit)/expense 3 (297) (896)
Operating profit before changes in working
capital and provisions 1,120 1,581
(Increase)/decrease in trade and other
receivables (805) 290
(Increase)/decrease in inventories (652) 71
Increase/(decrease) in trade and other
payables 582 (675)
Cash generated from operations before exceptional
items 245 1,267
Exceptional items (244) (362)
Cash generated from operations after exceptional
items 1 905
Income taxes received 369 -
Cash flows from operating activities 370 905
Cash flow from investing activities
Acquisition of property, plant and equipment (272) (150)
Sale of property, plant and equipment - 43
Research and development expenditure (744) (886)
(1,016) (993)
-------- --------
Cash flow from financing activities
Bank loans received 2,000 -
Principal paid on lease liabilities (487) (475)
(Repayment)/proceeds on invoice discounting (905) 212
Interest paid on lease liabilities (37) (44)
Interest paid (51) (30)
520 (337)
-------- --------
Decrease in cash and cash equivalents (126) (425)
Cash and cash equivalents at beginning
of year 620 1,041
Exchange differences on cash and cash equivalents (10) 4
Cash and cash equivalents at end of year 484 620
-------- --------
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 2020 4,687 553 801 (106) 2,327 8,262 40 8,302
Profit for the
period - - - - 171 171 - 171
Other
comprehensive(loss) - - - (196) - (196) - (196)
Total comprehensive
(loss) for the year - - - (196) 171 (25) - (25)
-------- -------- -------- --------- --------- ------------- ---------------- --------
Transactions with
owners
Share based payment - - - - 13 13 - 13
As at 30 April 2021 4,687 553 801 (302) 2,511 8,250 40 8,290
-------- -------- -------- --------- --------- ------------- ---------------- --------
At 30 April 2019 4,687 553 801 (132) 1,165 7,074 40 7,114
Impact of IFRS 16
Lease transition - - - - 22 22 - 22
At 1 May 2019 as
restated 4,687 553 801 (132) 1,187 7,096 40 7,136
Profit for the
period - - - - 1,127 1,127 - 1,127
Other comprehensive
income - - - 26 - 26 - 26
Total comprehensive
income for the year - - - 26 1,127 1,153 - 1,153
-------- -------- -------- --------- --------- ------------- ---------------- --------
Transactions with
owners
Share based payment - - - - 13 13 - 13
As at 30 April 2020 4,687 553 801 (106) 2,327 8,262 40 8,302
-------- -------- -------- --------- --------- ------------- ---------------- --------
The notes in the annual report and accounts form part of these financial statements.
1. Accounting policies
Newmark Security PLC (the "Company") is a public limited company, limited by shares, registered number 3339998 in England & Wales. The consolidated financial statements of the Company for the year ended 30 April 2021 comprise the Company and its subsidiaries (together referred to as the "Group").
Basis of preparation
The financial information has been abridged from the audited financial information for the year ended 30 April 2021.
The financial information set out above does not constitute the Company's consolidated statutory accounts for the years ended 30 April 2021 or 2020, but is derived from those accounts. Statutory accounts for 2020 have been delivered to the Registrar of Companies and those for 2021 will be delivered following the Company's Annual General Meeting. The Auditors have reported on those accounts; their reports were unqualified, did not draw attention to any matters by way of emphasis without qualifying their reports and did not contain statements under s498(2) or (3) Companies Act 2006 or equivalent preceding legislation.
Accounting policies have been consistently applied consistently with those set out in the 2020 financial statements, as amended when relevant to reflect the adoption of new standards, amendments and interpretations which became effective in the year.
While the financial information included in this preliminary announcement has been prepared in accordance with the recognition and measurement criteria of International Financial Reporting Standards ('IFRS'), this announcement does not itself contain sufficient financial information to comply with IFRS. The Group will be publishing full financial statements that comply with IFRS in September 2021.
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 requires 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 uses the calculation of Net Assets less Intangible Assets and requires the result to exceed GBP3.1 million. No other financing facilities of the Group have any covenant requirements.
As a combined result of COVID-19 pandemic global componentry shortage and the requirement to increase stock levels to meet anticipated demand, inventory levels have increased by GBP1.5 million since January 2021 which has reduced the levels of available headroom in our facilities. Management are in advanced discussions with the Group's primary bankers in respect of an extension to the UK invoice financing facility and a new US invoice financing facility. Both facilities are expected to be finalised imminently and Management have the ongoing support of the Group's primary bankers should there be any unforeseen delays. Management have recently secured an additional overdraft facility of GBP200,000 to reach a GBP450,000 facility as a short term, interim measure to 1 November 2021 to cover earlier stock purchases. The expected overall outcome will make the Group more flexible in determining mix of financing and provides a USD currency liability supporting our hedging strategy. Whilst the Group's going concern assessment includes the assumption that these facilities will be received and the Group has the support of the Bank, the directors have also considered forecast scenarios to September 2022 excluding this additional financing.
As at 30 April 2021 no financing facility was being utilised apart from the CBILS loan of GBP2 million although following the year end the invoice discounting facility has been utilised to finance additional stock purchases. The level of invoice discounting available varies with the open book of trade debtors at any point in time and therefore the level of financing fluctuates with indicative numbers being analysed above.
The Group is currently operating ahead of revenue expectations albeit with a different phasing of certain lines of business with varying margins which result in a reduced margin. The latest forecast of the Group results in exceeding the TNW covenant test by 13.5% and will be tested more fully when a revised forecast is completed in October. 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. A shortfall of sales against forecast of 3.4% or a reduction in Gross Material Margin by 2.8% points would result in a covenant breach at April 2022 with an improving position thereafter. Management are confident that the shortfalls will not occur and are undertaking regular reviews and forecasts to ensure this. Management are confident that the Group would be able to meet loan repayments and working capital outflows with the required levels of cash to proceed with investing in the Group in partnership with our banking partners within the going concern review period. The Group is expected to be able to operate within existing finance facilities, based on Management's detailed monthly cashflow forecasts to September 2022. Should profits or cashflow movements fall behind expectations in this period, and there be an unexpected delay to the additional financing arrangement beyond October 2021, the Group expects to be able to extend the overdraft in order to cover any delay in finalising the additional financing. With this financing, the group could see a drop in operating profit of up to 20%, combined with some negative working capital movements and remain cash positive. 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 71.6 per cent. (2020: 71.2 per cent.) 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 28.4 per cent. (2020: 28.8 per cent.) 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
2021 2021 2021
GBP'000 GBP'000 GBP'000
Revenue from external customers 12,647 5,011 17,658
------------ ----------- --------
Finance cost 54 18 72
Depreciation 301 246 547
Amortisation 470 - 470
Segment profit before income tax 1,115 161 1,276
------------ ----------- --------
Additions to non-current assets 1,012 254 1,266
Disposal/modification of non-current
assets 322 440 762
Reportable segment assets 10,657 2,515 13,172
Reportable segments liabilities 2,575 1,435 4,010
People Physical
and Data Security
Management Solutions
division division Total
2020 2020 2020
GBP'000 GBP'000 GBP'000
Revenue from external customers 13,357 5,410 18,767
------------ ----------- --------
Finance cost 50 24 74
Depreciation 324 280 604
Amortisation 405 - 405
Segment profit before income tax 1,623 (12) 1,611
------------ ----------- --------
Additions to non-current assets 999 132 1,131
Disposal of non-current assets - 159 159 Reportable segment assets 10,250 2,961 13,211 Reportable segments liabilities 3,022 1,782 4,804
Reconciliation of reportable segment revenues, profit or loss, assets and liabilities to the Group's corresponding amounts:
2021 2020
GBP'000 GBP'000
Revenue
Total revenue for reportable segments 17,658 18,767
Profit or loss before income tax expense
Total profit or loss for reportable segments 1,276 1,611
Parent company salaries and related costs (868) (755)
Other parent company costs (534) (625)
Profit before income tax expense (126) 231
Corporation taxes 297 896
Profit after income tax expense 171 1,127
-------- --------
Assets
Total assets for reportable segments 13,172 13,211
Parent company assets * 1,674 442
Group's assets 14,846 13,653
-------- --------
Liabilities
Total liabilities for reportable segments 4,010 4,804
Parent company liabilities ** 2,546 547
Group's liabilities 6,556 5,351
-------- --------
*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.
Geographical information:
Non-current assets
by location of assets
2021 2020
GBP'000 GBP'000
UK 6,384 6,456
USA 209 40
6,593 6,496
------------ -----------
Reportable Reportable
segment Group segment Group
totals PLC Totals totals PLC Totals
2021 2021 2021 2020 2020 2020
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Other material items
Additions to non-current
assets 1,266 - 1,266 1,131 43 1,174
Disposals and modifications
of non-current assets 762 - 762 159 66 225
Depreciation and amortisation 1,017 16 1,033 1,009 14 1,023
3. Tax
Current tax expense
UK corporation tax on profit for the year (337) (176)
Overseas corporation tax 42 29
Adjustment to provision in prior periods (125) (436)
(420) (583)
------ ------
Deferred tax expense
Origination and reversal of temporary differences 169 137
Recognition of previously unrecognised deferred
tax assets (46) (450)
123 (313)
------ ------
Total tax (credit) / charge (297) (896)
------ ------
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:
2021 2020
GBP'000 GBP'000
(Loss)/profit before income tax (126) 231
-------- --------
Expected tax (credit)/charge based on
the standard rate of corporation tax
in the UK of 19.0 per cent. (2019: 19.0
per cent) (24) 44
Research and development allowances (199) (176)
Effects on profits on items not taxable
or deductible for tax purposes (77) 23
Recognition of previously unrecognised
deferred tax assets 46 (450)
Utilisation of unrecognised deferred
tax - 61
Temporary differences on deferred tax
liabilities 71 35
Different tax rates applied in overseas
jurisdictions 11 3
Adjustments for tax credit relating to
previous periods (125) (436)
Total tax (credit) (297) (896)
-------- --------
The Group has the following tax losses, subject to agreement by HMRC Inspector of Taxes, available for offset against future trading profits as appropriate:
2021 2020
GBP'000 GBP'000
Management expenses 177 185
Trading losses 4,591 4,678
4,768 4,863
-------- --------
2021 2020
A deferred tax asset has not been recognised
for the following GBP'000 GBP'000
Management expenses 2 -
Trading losses 321 338
323 338
-------- --------
5. Subsequent events
There are no subsequent events.
6. Dividends
The Directors are not proposing a final dividend (2020: nil pence).
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END
FR SSMFWUEFSESU
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September 10, 2021 02:00 ET (06:00 GMT)
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