This announcement contains inside information for the purposes of Regulation 11 of the Market Abuse (amendment) (EU Exit) Regulations 2019/310.

31 January 2025

Newmark Security plc

("Newmark", the "Company" or the "Group")

Interim Results

for the six months ended 31 October 2024

Group on track to deliver full year revenue growth

Newmark Security plc (AIM: NWT), a leading provider of electronic, software, and physical security systems and installations, is pleased to announce its unaudited results for the six months ended 31 October 2024 ("H1 FY25").

 Maurice Dwek, Chairman of Newmark, commented:

"The Group delivered a positive first half in accordance with its strategy to drive further growth in recurring revenue streams and service offering. Increased investment in line with our new five-year strategic plan is reflected in our lower reported EBITDA, however; higher HCM product margins and growth in annualised recurring revenues helped to strengthen our cash flow and balance sheet. 

"In terms of execution, the Group has been building its divisional sales pipelines, developing new partnerships and extending existing relationships. At the same time, it has also invested in people and systems to both enhance customer services and efficiencies.

"We continue to win and extend contracts with blue-chip customers, which is testament to our people and our service offering. Like last year, our sales pipeline across both divisions is weighted to the second half and we expect to surpass the previous full year revenue performance.

"We are excited about the outlook and look forward to updating the market on our progress at the full year."

Financial highlights:

·     Revenue of £10.2 million (H1 FY24: £10.4 million)

·     Gross profit of £3.9 million (H1 FY24: £3.9 million)

·     Gross profit margin increased by 0.9% pts to 38.1%

·     EBITDA of £0.5 million (H1 FY24: £0.8 million)

·     Loss after tax of £0.4 million (H1 FY24 loss: £0.1 million)

·     Loss per share of 4.60 pence (H1 FY24: loss per share of 0.54 pence)

·     Investment in research and development of £0.2 million (H1 FY24: £0.2 million)

·     Cash at bank as at 31 October 2024 of £0.3 million (H1 FY24: £0.01 million)

·     Net debt excluding leases down 40% to £2.2 million (H1 FY24: £3.7 million)

Business highlights:

Grosvenor Technology

·     Human Capital Management ("HCM") annualised recurring revenues* ("ARR") increased by 30% year-on-year ("YOY") to £3.0 million in October 2024, positively contributing to profit margin growth

·     YOY revenue growth for HCM was 8%, with North America up 16%

·     GT Connect, the division's global platform, is now processing over 12.1 million monthly clock-ins with over 35,000 monthly device subscriptions for GT Connect and other GT Services

·     Progressed Oracle - GT Time partnership with software integration completed and testing underway

Safetell

·     Grew service and maintenance revenue by 38% in accordance with long term strategy

·     Strengthened service team and made senior hire to drive business efficiencies

·     Extended existing service contracts with two large banking customers and a major petrol retailer

·     Completed the installation of physical security at a new major football stadium 

·     Won a series of new automatic door service contracts with blue-chip organisations across retail, pharma and transport

Outlook

·     Strong HCM sales pipeline in both North America and Rest of the World ("ROW") markets set to deliver full year growth

·     Safetell winning new contracts, growing services revenue and on course for greater performance in H2 FY25

·     Profitability has been improving with each quarter and this trend is expected to continue into Q4 FY25

*ARR is calculated by annualising revenue recognised in a given month from all clients on deployed HCM subscription contracts

  For further information:

Operational highlights:

Group performance

Group revenue decreased by 1% YOY to £10.2 million (H1 FY24: £10.4 million), primarily due to phasing of project deliveries from the Physical Security Solutions division. This impact was partly offset by strong HCM growth in the People and Data Management division.

Gross profit percentage increased by 0.9% pts to 38.1% (H1 FY24: 37.2%) due to improvements in the People and Data Management division from enhanced product margins and an increase in higher margin recurring revenues.

Administrative expenses increased by 10% to £4.2 million (H1 FY24: £3.8 million) driven by both inflationary cost rises and investment in strategic initiatives following the approval of a new five-year strategic growth plan in June 2024.  This investment included increases in headcount, marketing and professional fees.

Loss from operations was £0.3 million (H1 FY24: profit of £0.1 million). Finance costs during the period were £0.15 million (H1 FY24: £0.18 million). The reduction in financing costs is from reduced use of overdraft and invoice financing facilities.

For H1 FY25, the Group made a loss per share of 4.60 pence (H1 FY24: loss per share of 0.54 pence).

People and Data Management division - Grosvenor Technology ("Grosvenor")

Revenue information

 Human Capital Management

We have continued to execute the strategy of building a "hardware-enabled software and services" business and selling customers a wrapped subscription to build stronger recurring revenues. The division delivered revenue of £6.5 million (H1 FY24 £6.0 million), up 8% on the prior year, with subscription-based annual recurring revenues increasing by 30% YOY to £3.0 million in October 2024. GT Connect, the division's global platform, is now processing over 12.1 million monthly clock-ins and has over 35,000 monthly device subscriptions for GT Connect and other GT Services.

HCM's growth was driven by the strong performance in North America, where sales were up 16%, with one of our largest North American partners experiencing a robust start to the year in terms of demand for the GT10 device.  We are also in advanced discussions with partners to introduce the next generation GT10-2 to replace the existing GT10-1, this fiscal year.  Demand for the GT4 and lower-cost GT4-Lite devices have also been particularly strong, with orders for the latter helping to displace its main low-cost clock competitor in the North American market. 

Sales for the Rest of the World were slightly lower than H1 FY24, after our largest ROW partner recently completed a series of acquisitions, which resulted in a temporary slow-down in orders. However, since the period end, sales have been much stronger with orders from two major retailers and we expect the full year performance to be up on last year. Our partner's acquisitions have led to its expansion into new European territories and, as such, we stand to benefit directly from this expansion as the sole provider of Timeclock software and hardware solutions to them.

Earlier in the year we announced the pending launch of GT Time in partnership with Oracle to target the Direct to Enterprise market and the expansion of data security and compliance. A senior US consultant with specific experience in working with global HCM marketplaces has been hired to accelerate the roll-out of GT Time and so gain further momentum for this key strategic initiative. We are pleased to report that the Clock and Cloud based Oracle software integration for the beta test phase has been completed including certification by Oracle. We are also pleased to report that there has already been progress with early business development creating sales opportunities and pipeline.

Access Control

Access Control experienced a slower start to the period than was initially anticipated, with sales impacted by delays to upgrade projects and our software partner for the new Janus C4 Ultras taking longer to have the product ready for launch. However, these delays have been resolved and the sales pipeline for the second half is stronger, positioning the business for a much better end to the year.

Whilst Access Control continues to make a meaningful contribution, management will, in due course, be reviewing the division's longer-term strategy to assess how it can deliver better value to the Group. In the immediate term, management has taken a strategic decision to focus Grosvenor's investment resources on HCM to take advantage of the growing market demand for data security and compliance and accelerate the development of its sales pipeline.

Physical Security Solutions division - Safetell

Revenue information

As previously disclosed in the Group's AGM statement, the timings of four significant contracts being delayed until H2 FY25 will see Safetell generate the majority of its revenue through the latter part of the year. Consequently, H1 FY25 revenue decreased by 13% to £2.4 million compared to the corresponding prior period. However, the significance of the H2 FY25 revenue weighting means the division is on track to deliver full year growth.

In terms of operations and building of its sales pipeline, Safetell has performed well in accordance with the strategic long-term plan, which includes growing its share of service and maintenance work in the UK automatic door servicing market. It has also invested in talent to strengthen its support services and installations teams and made a senior hire to optimise its operations, all of which is already helping to make the division more efficient and deliver on contracts more profitably.

Reflecting on some project and contract highlights in the period, Safetell successfully extended existing service contracts with two large banking customers, a major petrol retailer and completed the installation of physical security at a new Premier League football stadium.

In terms of growing its revenue pipeline for H2 FY25 and beyond, the division won a series of new automatic door service contracts with blue-chip organisation, including a national retailer, a regional train operator and a major pharmaceutical business, as well as contracts with a major housing trust, a UK charity and a large university in the North of England.

Balance sheet and financing

Cash as at 31 October 2024 was £0.3 million compared to £0.01 million at the prior year. Group had an unused £0.2 million UK overdraft facility at the balance sheet date (H1 FY24: £0.4 million).

Net debt excluding leases fell to £2.2 million at 31 October 2024 compared to £3.7 million at 31 October 2023.  The decrease is due to a combination of higher cash balances, CBILS loan repayments and lower invoice financing draw downs. The UK invoice financing facility remains at £2.3 million.  In February 2025 the $2 million US invoice financing facility with Seacoast National Bank will be replaced by a $2 million revolving credit facility with our relationship bank, HSBC. This will provide more flexible financing and at lower interest rates than the current US invoice financing facility.

CONSOLIDATED INCOME STATEMENT

For the six months ended 31 October 2024