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 £17,658,000 (2020: £18,767,000), a decrease of 5.9%

·      Gross profit margin decreased to 37.5% (2020: 39.7%)

·      Operating Profit before exceptional items was £79,000 (2020: £604,000)

·      Operating loss after exceptional items was £38,000 (2020: Operating profit £305,000)

·      Tax credit of £297,000 (2020: credit of £896,000)

·      Profit after tax for the year of £171,000 (2020: £1,127,000)

·      Earnings per share of 0.04 pence (2020: 0.24 pence)

·      Cash generated from operations before exceptional items was £245,000 (2020: £1,267,000)

·      Continued investment in development with amount decreasing to £744,000 (2020: £886,000)

·      Net Assets of £8,290,000 (2020: £8,302,000)

 Operational highlights:

·      People and Data Management division (Grosvenor Technology)

o  Revenues from Human Capital Management (HCM) increased by 6% to £9,659,000 (2020: £9,142,000)

§ 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 £2,988,000 (2020: £4,215,000)

§ 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 £351,000 of revenue in a COVID impacted year (2020: £383,000).

·      Physical Security Solutions division (Safetell)

o  Revenue decreased by 7% to £5,011,000 (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:

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 £17,658,000 (2020: £18,767,000), 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 £38,000 (2020: profit of £305,000) was incurred. Revenue in the People and Data Management division (Grosvenor) fell by 5.3% from £13,357,000 to £12,647,000, while revenue in the Physical Security Solutions division (Safetell) was down 7.4% from £5,410,000 to £5,011,000. 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 £2 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 £200,000 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: £Nil).

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 £12,647,000 (2020: £13,357,000). This included revenue from HCM, which increased by 5.7% to £9,659,000 (2020: £9,142,000), and revenue from Access Control, which fell by 29.1% to £2,988,000 (2020: £4,215,000). 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 £2.9 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 £5,011,000 (2020: £5,410,000), 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