Newmark Security plc
Annual Report 2002

Plain-text annual report

Annual Report For the year ended 30 April 2002 INDEX DIRECTORS, SECRETARY AND ADVISERS CHAIRMAN’S STATEMENT REPORT OF THE DIRECTORS REPORT OF THE REMUNERATION COMMITTEE REPORT OF THE INDEPENDENT AUDITORS FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS ACCOUNTING POLICIES Page 2 3 7 12 14 15 19 19 Newmark Technology Group PLC 1 DIRECTORS, SECRETARY AND ADVISERS Company registration number: 3339998 Registered O⁄ce: Suite 3 23 Bruton Street London W1X 7DA Directors: Secretary: Bankers: Solicitors: Auditors: Nominated Adviser: Joint Stockbroker: Joint Stockbroker: P R Consultants: M Dwek (Chairman) S Rajwan (Chief Executive) B Beecraft FCA (Finance Director) A Reid FCA (Non-Executive Director) M Rapoport (Non-Executive Director) B Beecraft FCA Bank of Scotland PLC Travers Smith Braithwaite 10 Snow Hill London EC1A 2AL Hacker Young St. Alphage House 2 Fore Street London EC2Y 5DH Williams de Broe« Plc 4 Park Place Leeds LS1 2RU Williams de Broe« Plc 4 Park Place Leeds LS1 2RU Seymour Pierce Ellis Limited Talisman House Jubilee Walk Three Bridges Crawley West Sussex RH10 1LQ Hansard Group plc One Citadel Place Tinworth Street London SE11 5EP Newmark Technology Group PLC 2 CHAIRMAN’S STATEMENT Overview The year has seen the disposal of the business and trading assets of Vema N.V. (‘‘Vema’’). Accompanying these accounts are a number of documents relating to the proposed purchase of the minority interest in Vema and acquisition of Grosvenor Technology Limited (‘‘Grosvenor’’). The sale of the Vema business is discussed in detail below. This, together with the acquisition of Grosvenor, re£ects your Board’s concern to improve shareholder value. These transactions represent a ‘‘reverse takeover’’ under the rules of the Alternative Investment Market (‘‘AIM’’). These documents require your detailed consideration and I trust that you will support the Board and vote in favour of these resolutions at the Extraordinary General Meeting. Disposal of Vema business We announced in May 2001 the £otation of our Dutch subsidiary, Vema, on AIM, which resulted in our interest in Vema being reduced to 51 per cent. We believed that this would help Vema to develop its geographical and product range whilst demonstrating that the market capitalisation of the Newmark Group did not re£ect the underlying value of its businesses. In our interim report, the Board was pleased to report a substantial increase in pro¢ts for the six month period with a 10 per cent increase in turnover. However, greater competitive pressures since the introduction of the Euro a¡ected trading results in the second half. In the second half of the year, there was an approach from Assa Abloy AB Group (‘‘Assa Abloy’’) to acquire the Vema business. Vema is a major distributor for Assa Abloy’s subsidiary, Fritz Fuss Gmbh & Co (‘‘E¡ E¡’’) a leading lock manufacturer based in Germany, over 60 per cent of Vema’s products are sourced from E¡ E¡. On 29 April 2002, your Board announced the disposal of the trading business and assets of Vema to Assa Abloy for »6 million payable in two tranches, »5.5 million on completion and the balance of »0.5 million agreed since the year end on the basis of the net assets and pro¢ts in the audited accounts for the year. In view of the increases in competitive pressures, the Board believed that it was prudent to dispose of the business for a good price. We wish the company every success in the future. As a consequence there is now little point in Vema continuing as a separate listed company with its associated costs, and accompanying these accounts there are details of an o¡er by Newmark Technology Group PLC to buy back the 49 per cent minority interest in Vema. The ¢nancial adviser to Vema has advised the Board of Vema that this o¡er is fair and reasonable and that Vema shareholders should accept the o¡er, in the absence of any higher o¡er. As Newmark Technology Group PLC is unable to issue shares at below nominal value, there is also attached the details of a capital reorganisation which will be presented for approval at the Extraordinary General Meeting. Acquisition of Grosvenor Technology Limited I commented in the interim and previous reports on the di⁄culties that Newmark Technology Limited had experienced in gaining critical sales mass and that from 1 March 2002 the day to day management of Newmark Technology Limited would be performed by Grosvenor, a well established and pro¢table private company in the access control business. Following a successful period of working together, we have made an o¡er to acquire Grosvenor for an initial consideration of »3.287 million with a potential maximum deferred consideration of »3.5 million, based on the trading performance of Grosvenor over the next four years. The full details of the o¡er are set out in the attached documents. Grosvenor’s main product is a Windows based access control system called JANUS. All Grosvenor’s products are designed by its in-house research and development team. Newmark Technology Limited will continue to distribute the C-Cure range of products. Newmark’s Omni range of products will be streamlined and will in due course be replaced with JANUS. The Board believes that Grosvenor meets the criteria laid down for successful acquisitions into the Group and that this will form the basis for a quantum leap forward for the Group. Newmark Technology Group PLC 3 Change of name Your Board believes that the existing name of your Company does not re£ect the activities performed by the Group. It is proposed to change the name of the Company to Newmark Security PLC at the Extraordinary General Meeting as the Directors believe that the proposed new name better re£ects the security focus and established nature of the Group’s activities. Financial results The pro¢t on ordinary activities before interest, tax and minority interests in the year was »2,315,000 (2001: loss »414,000). The accounts include four exceptional items in the year: Pro¢t on part disposal of investment in Vema arising from the £otation of Vema in the year Pro¢t on disposal of business and trading assets of Vema NV Costs of reorganisation and restructuring Amortisation of goodwill »000 182 3,007 (489) (128) The pro¢ts on disposal of the Vema business in the year are stated net of »3,460,000 goodwill on the original acquisition of the Vema business and written o¡ to reserves at that time. In accordance with standard accounting convention, this goodwill is required to be charged in the pro¢t and loss account on disposal of the business and credited to reserves (note 17). The operating loss for the year before exceptional items was »257,000 (2001: loss »298,000). Turnover for the year was »12.0 million (2001: »12.0 million). The reasons for the more signi¢cant factors a¡ecting the results of the divisions are set out below. Electronic Division This division specialises in integrated security management systems designed to control access of personnel and track asset movements. We launched the new Omni 5 series at the beginning of the year and continued to supply the C^Cure product line sourced from Sensormatic. However the underlying sales to sustain the overhead of the business were still disappointing and, as a result, we decided to transfer the day to day management of the business to Grosvenor. This was completed successfully and following a successful trial period, we now propose the acquisition of Grosvenor. Accompanying these accounts are the details of and rationale for the acquisition. The closure costs of the o⁄ces in Redhill and the assembly plant in Rainton Bridge have been provided for in the accounts and the estimated cost savings in excess of »500,000 will bene¢t the Group going forward. We will continue to sell the C^Cure product range alongside the Janus product line of Grosvenor Technology. In the last annual statement I referred to the ongoing problems we had experienced with the purchasing commitment by Lik On Security Limited in Hong Kong, and I reported in the interim ¢gures on the rescheduling of the contract. I am pleased to report that we have now been able to conclude the contract with Lik On, and the ¢nal settlement has been received and accounted for in the period. This terminates the contract that should have been completed in December 2000. We are now supplying the Hong Kong market on a non exclusive basis via Hall Smart Limited, a sister company of Lik On and a wholly owned subsidiary of Sun Hung Kai Properties. We have continued our sales and marketing e¡ort in the USA for the Parsec product range which culminated in the signing up of Casi Rusco, a subsidiary of Interlogix (now part of GE Capital) as an OEM. Casi Rusco is one of the main suppliers to ADT for their access control product and the objective is to supply and support the ADT branches with Parsec. This necessitated a proven beta site for ADT which is now under construction and the launch of Parsec into ADT in the USA awaits their approval of the beta site. Subject to the trials proving successful, ADT will train and launch the product to their internal sales force. However, progress is taking longer than anticipated and sales are still slow, therefore we have trimmed overheads to minimise any adverse a¡ects until sales gather momentum. We are also in discussions with other potential customers such as ADI and Ademco International. Newmark Technology Group PLC 4 Asset Protection Division The Drion managing director left during the year to pursue other business interests, which are complementary to the company and is, therefore, expected to be a major customer of Drion. A new managing director was appointed to, inter alia, perform a full review of operating procedures and establish an action plan to improve the operational e⁄ciency of the business. The restructuring that followed this review included the appointment of a new senior management team to control the three major business operations, sales and marketing, manufacturing and ¢nance. The management team has been given business objectives and speci¢c tasks and the bene¢ts of these changes will be e¡ective during the second half of the current year. The changes that have already taken place include the implementation of computer aided design, increased training for sta¡ and a more e⁄cient manufacturing process being devised. On the trading front, the consolidation and rationalisation within the Belgian banking sector has continued, but Drion has maintained its market share within the existing customer base as well as establishing new banking customers. The commercial section that was established last year has prompted great interest and the company has gained new customers such as post o⁄ces, hospitals, embassies and government o⁄ces. In particular we were delighted to win a major contract for security work at Namur railway station with a value of Euros 360,000, (»225,000). We were disappointed that the third phase of the Algerian export contract was delayed by twelve months and, consequently, there were no export orders in the year. However, a tender was issued by CNEP in Algeria in March for this project with a value of Euros 20 million over three years. Positive news in the near future on at least a part of this tender could greatly enhance the division’s performance in the current year. The increased activity in Safetell in the last few months of the previous year continued throughout the year under review. Both order intake and sales enjoyed a 30 per cent improvement over the previous year. These higher volumes enhanced direct labour e⁄ciency which, together with cost control in other areas, improved margins. The historical core business of Eclipse rising screens increased by nearly 30 per cent, and the associated after sales service and maintenance improved by 14 per cent. Countershield sales proved successful in new market areas and achieved growth of 400 per cent. Sales of RollerCash increased by 73 per cent with new customers being gained. Another cash handling product has been sourced from Germany to complement RollerCash at the bottom end of the range. Sales have already been made to The Post O⁄ce and interest has also been expressed by retail banking customers to address their obligations under the disability access rules. The new Eye2Eye product was developed in response to the Disability Discrimination Act and the ¢rst unit has been operational for over six months. New orders have been secured for installation during the summer using variants of the basic product. The Strategic Rail Authority guidelines for station design speci¢cally require a ticketing counter similar to the Eye2Eye product. A new wide-span moving glass screen product, MaxiView, has been commissioned by a major petrol retailer for installation in London during the summer, with good prospects for a major rollout programme in the following ¢nancial year. Secure Locking Division This division included Vema prior to the disposal, but still includes Newmark Security Products Limited which supplies third party sophisticated electronic and electro mechanical locking systems for a wide variety of high security applications in the UK. Balance sheet and cash £ow The Group balance sheet and cash £ow re£ect the receipt of the proceeds from the sale of the business and trading assets of Vema on 29 April 2002. The balance sheet is also a¡ected by the disposal of the Vema business and trading assets particularly with regard to stocks and trade debtors. Other debtors include the retention of »532,000 on the Vema sale proceeds whilst most of the corporation tax liability relates to the tax payable on the disposal. Borrowings have also been substantially reduced in the period with the repayment of the bank loan for the original acquisition of Safetell. Newmark Technology Group PLC 5 Employees I would like to thank all employees for their unstinting e¡orts on behalf of the Group, and to send our best wishes for the future to the sta¡ at Vema. The future The changes that have taken place during the last twelve months, together with those that will occur following the Annual General Meeting, will have a fundamental impact on the structure and composition of the Group. Your Board will continue to consider further acquisitions that the Board believe will increase shareholder value. MAURICE DWEK Chairman Newmark Technology Group PLC 6 REPORT OF THE DIRECTORS The Directors submit their annual report and audited ¢nancial statements of the Group for the year ended 30 April 2002. Principal activities The Group is principally engaged in the design, manufacture and supply of products and services for the security of assets and personnel. The principal activity of the Company is that of an investment holding company. Financial results and dividends The pro¢t on ordinary activities before interest, tax and minority interest in the year was »2,315,000 (2001: loss »414,000). The accounts include four exceptional items in the year: Pro¢t on part disposal of investment in Vema arising from the £otation of Vema in the year Pro¢t on disposal of business and net trading assets of Vema NV Costs of reorganisation and restructuring Amortisation of goodwill »000 182 3,007 (489) (128) The pro¢ts on disposal of the Vema business in the year are stated net of »3,460,000 goodwill on the original acquisition of the Vema business and written o¡ to reserves at that time. In accordance with standard accounting convention, this goodwill is required to be charged in the pro¢t and loss account on disposal of the business and credited to reserves (note 17). The operating loss for the year before exceptional items was »257,000 (2001: »298,000). Turnover for the year was »12.0 million (2001: »12.0 million). The directors do not recommend the payment of a dividend. A review of the business and future prospects is given in the Chairman’s Statement on page 3. Acquisitions and disposals In May 2001, the Group’s subsidiary company Vema N.V. was admitted to trading on the Alternative Investment Market and a placing and o¡er for Global Depository Receipts in the company reduced the Newmark shareholding to 51 per cent. Vema N.V. continues to be consolidated within the results of the Group. On 29 April 2002 the Group disposed of the trading business and assets of Vema to Assa Abloy Group for »6 million payable in two tranches, »5.5 million payable on completion and the balance of »0.5 million agreed since the year end on the basis of the net assets and pro¢ts in the audited accounts for the year. The Board continues to seek to improve the pro¢tability and cash £ow of the Group from existing activities and to acquire suitable businesses within the security sector which satisfy the requirements set by the Board. There is attached to this document an admission document for the acquisition of Grosvenor Technology Limited a private company in the access control business. Directors The Directors who served during the year were as follows: M Dwek S Rajwan B Beecraft A Reid M Rapoport Details of the Directors’ service contracts are shown in the Remuneration Committee Report on pages 12 and 13. Newmark Technology Group PLC 7 B Beecraft retires in accordance with the articles of association. Mr Beecraft being eligible, o¡ers himself for re-election at the next annual general meeting. Directors’ interests The bene¢cial and other interests of the Directors in the shares of the Company as at 30 April 2001 (or the date of their appointment to the Board, if later) and 30 April 2002 were as follows: M Dwek(a) A Reid(b) M Rapoport Percentage holding at 30 April 2002 30 April 2002 12.4% 15,075,000 20.8% 25,208,238 0.8% 1,605,000 30 April 2001 (or date of appointment if later) 15,000,000 23,608,238 1,000,000 (a) These shares are held in the name of Arbury Inc., 51 per cent of the equity share capital of which is, at the date of this report, bene¢cially owned by M Dwek. (b) These shares are in part held in the name of R.K. Harrison & Co. Limited, a company the issued equity share capital of which is, at the date of this report, owned as to 70.7 per cent by A Reid of which 64.5 per cent is a bene¢cial holding and 6.2 per cent is a non bene¢cial holding, and the R.K. Harrison Retirement Bene¢t Scheme in which A Reid has a bene¢cial interest. There were no changes in these holdings to the date of this document. The interests of Directors (and related parties) in Share Option Schemes operated by the Company at 30 April 2001 and 2002 were as follows: Number of Ordinary Shares under the Approved Scheme 30 April 2002 420,000 375,000 Number of Ordinary Shares under the Unapproved Scheme 30 April 2002 1,680,000 375,000 Number of Ordinary Shares under the Approved Scheme 30 April 2001 420,000 250,000 Number of Ordinary Shares under the Unapproved Scheme 30 April 2001 1,680,000 250,000 S Rajwan B Beecraft The Directors had no other interests in the shares or share options of the Company or its subsidiaries. Research and development The Group is committed to on-going research and development. The strategy is based upon market demand to meet identi¢ed security needs in conjunction with a commercial assessment of the short to medium term pro¢tability of each project. The amount of the costs incurred in the year are shown in note 3(b) to the accounts. Substantial shareholdings Apart from the Directors’ shareholdings detailed above, the Directors have been noti¢ed of the following additional shareholding of 3 per cent or more of the issued ordinary share capital of the Company as at the date of this document: Albany Life Assurance Company Limited M V. Beheer BV HSBC Global Custody Nominee (UK) Limited Pershing Keen Nominees Limited PSL982 Account PH Nominees Limited Peclt Account Percentage of class 4.9% 11.1% 5.5% 3.5% 6.3% Number of shares 5,900,000 13,447,725 6,666,666 4,181,000 7,587,000 Employee involvement The Group keeps employees informed of matters a¡ecting them and employees have regular opportunities to meet and have discussions with their managers. Newmark Technology Group PLC 8 Disabled persons The Group gives sympathetic consideration to the employment of disabled people. Whilst no special facilities are provided for training the disabled, all employees are given equal opportunities for training and promotion, having regard to their particular aptitudes and abilities. In the event of employees becoming disabled, every e¡ort is made to retain them in order that their employment with the Group may continue. Share option schemes The Company has two employee share option schemes which enable employees and Executive Directors to be granted options to subscribe for Ordinary Shares. The Approved Scheme has been approved by the Inland Revenue in accordance with Section 185 of, and Schedule 9 to, the Income and Corporation Taxes Act 1988 (‘‘Taxes Act’’), the Unapproved Scheme not requiring such approval. The Schemes require that exercise of options be subject to the satisfaction of certain performance criteria. The Remuneration Committee administers and operates each Scheme. The maximum number of Ordinary Shares in respect of which options may be granted under each Scheme is equivalent to 5 per cent in aggregate of the Company’s issued Ordinary share capital. Further details of the share option schemes are in note 16 to the accounts. Environmental Policy The Group’s environmental policy endeavours to minimise the impact of its activities on the environment through, where possible, the proper conservation of natural resources. The Group recognises its responsibility to continually review and improve its environmental performance and, in doing so, seeks the input of architects, engineers and other professional advisers. Payment of suppliers The Group requires its operational management to settle terms of payment with suppliers when agreeing the terms of the transaction to ensure that suppliers are aware of these terms and to abide by them. Trade creditors at the year end were 79 days (2001: 41 days) of average supplies for the period. Corporate governance The Company has complied throughout the year with the provisions set out in Section 1 of the Principles of Good Governance and Code of Best Practice (‘‘the Combined Code’’) which embraces the work of the Cadbury, Greenbury and Hempel Committees, in so far as this is practical and appropriate for a small public limited company, with the exception of certain matters set out below. At 30 April 2002, the Board comprised an Executive Chairman, two Executive Directors and two independent Non-Executive Directors. The Board meets regularly to exercise full and e¡ective control over the Group. The Board has a number of matters reserved for its consideration, with the principal responsibilities being to monitor performance and to ensure that there are proper internal controls in place to agree overall strategy and acquisition policy, to approve major capital expenditure and to review budgets. The Board will also consider reports from senior members of the management team. There is a clear division of responsibilities between the Chairman and Chief Executive. The Chairman takes responsibility for the conduct of the Group and overall strategy whilst the Chief Executive is required to develop and lead day to day business strategies and actions. Under the Company’s Articles of Association, the appointment of all directors must be approved by the shareholders in General Meeting, and additionally one-third of the directors are required to submit themselves for re-election at each Annual General Meeting. Additionally, each director has undertaken to submit themselves for re-election at least every three years. The Board has considered the recommendation to introduce a Nominations Committee. However, it was decided given the small size of the Board, that nominations are to remain a matter reserved for the Board. Any Director may, in furtherance of his duties, take independent professional advice where necessary, at the expense of the Company. All directors have access to the Company Secretary whose appointment and removal is a matter for the Board as a whole, and who is responsible to Newmark Technology Group PLC 9 the Board as a whole and who is responsible to the Board for ensuring that agreed procedures and applicable rules are observed. The Company maintains an ongoing dialogue with its institutional shareholders. The Combined Code requires proxy votes to be counted and announced after any vote on a show of hands and this has been implemented by the Company. The Combined Code requires Directors to review, and report to shareholders on, the Group’s system of internal control. In September 1999 guidance to this requirement was provided to Directors by the publication of Internal Control: Guidance for Directors on the Combined Code (‘‘The Turnbull Report’’). The Board continues to report on internal ¢nancial control in accordance with the guidance on internal control and ¢nancial reporting that was issued by the Institute of Chartered Accountants in England and Wales in 1994. The Directors have considered the Turnbull Report but have decided that the cost of implementing the procedures contained therein is disproportionate to expected bene¢ts at this stage of the Group’s development. The Directors acknowledge their responsibility for the Group’s systems of internal ¢nancial control which are designed to provide reasonable assurance that the assets of the Group are safeguarded and that transactions are properly authorised and recorded. The Directors have reviewed the e¡ectiveness of the Group’s systems of internal ¢nancial control and found no matters which indicated that the system of internal ¢nancial control could not provide reasonable assurance that the objectives above were satis¢ed. During the year, key controls were: . . . . . Each Group company is responsible for the preparation of a budget for the following year, which is presented to and required to be agreed by the Board before the beginning of that year. The subsidiary is required to report actual performance against that plan each month. day to day supervision of the business by the Executive Directors, maintaining a clear organisational structure with de¢ned lines of responsibility, production of management information, with comparisons against budget, maintaining the quality and integrity of personnel, Board approval of all signi¢cant capital expenditure, and all acquisitions. The Board has established two standing committees, the audit and remuneration committees, comprising the two independent Non-Executive Directors. Each committee has written terms of reference which are regularly reviewed by the Board. The Audit Committee, comprising M Rapoport and A Reid, is responsible for the appointment of external auditors, reviewing the interim and annual ¢nancial results, considering matters raised by the auditors and reviewing the internal control systems operated by the Group. The Remuneration Committee, comprising M Rapoport and A Reid meets at least once a year to review the terms and conditions of employment of Executive Directors including the provision of incentives and performance related bene¢ts. The report of the remuneration committee is set out on pages 12 and 13. After making enquiries, the Directors believe that the Group has su⁄cient ¢nancial resources to continue in operational existence for the foreseeable future. The accounts have therefore been produced on the going concern basis. Directors’ responsibilities Company law requires the Directors to prepare ¢nancial statements for each ¢nancial year which give a true and fair view of the state of a¡airs of the Company and the Group for that period. In preparing those ¢nancial statements, the directors are required to: . . . select suitable accounting policies and apply them consistently and make judgements and estimates that are reasonable and prudent, state whether applicable accounting standards have been followed, prepare the ¢nancial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business. The Directors are responsible for maintaining proper accounting records which disclose with reasonable accuracy at any time the ¢nancial position of the Company and to enable them to Newmark Technology Group PLC 10 ensure that the ¢nancial statements comply with the Companies Act 1985. They are also responsible for safeguarding the assets of the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The Directors con¢rm that the ¢nancial statements comply with the above requirements. Auditors A resolution for the re-appointment of Hacker Young, Chartered Accountants, as auditors of the Company is to be proposed at the Annual General Meeting. By order of the Board B BEECRAFT Secretary 15 August 2002 Newmark Technology Group PLC 11 REPORT OF THE REMUNERATION COMMITTEE Authority The Remuneration Committee is responsible for approving the remuneration of Executive Directors. The remuneration of Non-Executive Directors is approved by the full Board of the Company. Membership The majority membership of the Remuneration Committee is required to comprise independent Non-Executive Directors and at 30 April 2002 comprised only the two existing Non-Executive Directors, Michel Rapoport and Alexander Reid. Michel Rapoport was previously President and Chief Executive O⁄cer of Mosler Inc., a manufacturer and integrator of security systems for banking, industrial and commercial organisations. Prior to that he was Vice President of Pitney Bowes International and Chairman of Pitney Bowes France. He is Chairman of Chloralp S.A., a chloralkali manufacturer in Grenoble, France, and President of La Roche Industries Inc., an ammonia distributor based in Atlanta, U.S.A. Alexander Reid is executive chairman of R.K. Harrison & Company Limited (a shareholder of the Company), a director of Yeoman Investment Trust Plc and a number of unquoted companies. He was formerly a director of the merchant bank Samuel Montagu & Co. Limited and for 15 years was a director of various investee and group companies within Invesco MIM (now Amvescap). Remuneration policy The Group’s policy is to o¡er remuneration packages which are appropriate to the experience, quali¢cations and level of responsibility of each Executive Director and are in line with Directors of comparable public companies. Service and consultancy agreements The Company entered into a Consultancy Agreement with Arbury Inc., on 1 September 1997 for the services provided to the Company by Mr Dwek. The Agreement may be terminated by either party subject to 24 months’ notice being served. Arbury Inc is paid a fee in line with the level of responsibilities of Mr Dwek who is also entitled to the provision of a car for which the Company will meet all running expenses. On 4 April 2001, Arbury Inc. entered into a consultancy agreement with Vema N.V. (a subsidiary company) pursuant to which Mr Dwek acts as Chairman of that Company. This agreement can be terminated by 12 months’ written notice given by either party. On 30 April 1997, the Company entered into a Service Agreement with Mr Rajwan which may now be terminated by either party serving 12 months’ notice. The Company entered into a Service Agreement on 5 June 1998 with Mr Beecraft which may now be terminated by either party serving six months’ notice. On 4 April 2001 R.K. Harrison & Company Limited entered into a consultancy agreement with Vema N.V. pursuant to which Mr Reid acts as Finance Director of Vema N.V.. This agreement can be terminated by 12 months’ written notice given by either party. Bonus scheme The Executive Directors are entitled to receive bonuses pursuant to a bonus scheme based upon the Group’s performance. Under the Scheme, up to 10 per cent of the consolidated net pre-tax pro¢ts of the Group in excess of such pro¢ts as are required to generate a minimum amount of Earnings per Share for the Group may be allocated. Newmark Technology Group PLC 12 Directors’ emoluments Emoluments of the directors (including pension contributions and bene¢ts in kind) of the Company were as follows: Executive Directors M Dwek(a) S Rajwan(b) B Beecraft(c) Non-Executive Directors A Reid(d) M Rapoport 2001 Consultancy/ management agreement Salary »000 »000 Benefits in kind »000 Fees »000 Total »000 Pension contri- butions »000 174 O O O O 174 121 O 100 79 O O 179 173 O 16 8 O O 24 20 145 30 20 21 8 224 10 319 146 107 21 8 601 324 O 11 O O O 11 10 The directors’ share interests are detailed in the Report of the Directors on page 8. (a) The Company paid a consultancy fee of »121,000 (2001: »121,000) to Arbury Inc., a company 51 per cent owned by M Dwek which covers salary, pension and car bene¢ts. A consultancy fee of »52,903 (2001: Nil) was paid to Arbury Inc., by Vema NV for services as Chairman of that company. In addition, Arbury Inc., received a fee of »50,000 from Vema NV in connection with consultancy services provided by M Dwek in relation to the fund raising and admission to AIM of Vema NV. A further »95,000 was accrued in the accounts of Vema NV for Arbury Inc., in connection with consultancy services provided by M Dwek in relation to the disposal of the business and trading assets of Vema NV. (b) A fee of »30,000 payable to S. Rajwan has been accrued in the accounts of Vema NV in relation to the disposal of the business and trading assets of Vema NV. The pension contributions in respect of S Rajwan were for a money purchase pension scheme. (c) »9,900 has been paid to Beecraft Consultants Limited, a company of which B Beecraft is a director, by Vema NV in connection with consultancy services provided by B Beecraft in relation to the fund raising and admission to AIM of Vema NV. A further »10,000 has been accrued in the accounts of Vema NV for Beecraft Consultants Limited in connection with consultancy services provided by B. Beecraft in relation to the disposal of the business and trading assets of Vema NV. (d) Directors’ fees in respect of A Reid of »7,500 (2001: »7,500) were paid by the Company to R. K. Harrison & Co. Limited. In addition, Vema NV paid fees to R. K. Harrison & Co. Limited of »14,135 (2001: Nil) for services as director of that company. Newmark Technology Group PLC 13 REPORT OF THE INDEPENDENT AUDITORS TO THE SHAREHOLDERS OF NEWMARK TECHNOLOGY GROUP PLC We have audited the ¢nancial statements of Newmark Technology Group PLC on pages 15 to 34 for the year ended 30 April 2002. These ¢nancial statements have been prepared under the historical cost convention and the accounting policies set out therein. Respective responsibilities of Directors and Auditors As described in the directors’ report on page 10 the Company’s directors are responsible for the preparation of the ¢nancial statements in accordance with applicable law and United Kingdom Accounting Standards. Our responsibility is to audit the ¢nancial statements in accordance with relevant legal and regulatory requirements and United Kingdom Auditing Standards. We report to you our opinion as to whether the ¢nancial statements give a true and fair view and are properly prepared in accordance with the Companies Act 1985. We also report to you if, in our opinion, the directors’ report is not consistent with the ¢nancial statements, if the company has not kept proper accounting records, if we have not received all the information and explanations we require for our audit, or if information speci¢ed by law regarding directors’ remuneration and transactions with the Company is not disclosed. We read other information contained in the Annual Report and consider whether it is consistent with the audited ¢nancial statements. This other information comprises only the Chairman’s Statement and the Directors’ Report. We consider the implications for our report if we become aware of any apparent misstatements or material inconsistencies with the ¢nancial statements. Our responsibilities do not extend to any other information. Basis of opinion We conducted our audit in accordance with United Kingdom Auditing Standards issued by the Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the ¢nancial statements. It also includes an assessment of the signi¢cant estimates and judgements made by the directors in the preparation of the ¢nancial statements, and of whether the accounting policies are appropriate to the Company’s and the Group’s circumstances, consistently applied and adequately disclosed. We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with su⁄cient evidence to give reasonable assurance that the ¢nancial statements are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the ¢nancial statements. Opinion In our opinion the ¢nancial statements give a true and fair view of the state of the a¡airs of the Company and of the Group at 30 April 2002, and of the loss of the Group for the year then ended and have been properly prepared in accordance with the Companies Act 1985. HACKER YOUNG Chartered Accountants Registered Auditors 15 August 2002 London Newmark Technology Group PLC 14 (5,194) O (5,194) (4,825) CONSOLIDATED PROFIT AND LOSS ACCOUNT For the year ended 30 April 2002 2002 Before goodwill and exceptional items »000 2002 Goodwill and exceptional items »000 Notes 2 2002 Total »000 2001 Total (As restated) »000 Turnover Continuing operations Discontinued operations Cost of sales Gross pro¢t 6,479 5,548 12,027 3(c) (7,687) Other operating income 3(d) Administrative expenses pre amortisation of goodwill and exceptional items Reorganisation and restructuring costs Amortisation of goodwill 3(c) 3(e) 4,340 597 O O Administrative expenses O total (5,194) Operating loss Continuing operations Discontinued operations Pro¢t on part disposal of investment in subsidiary company Pro¢t on disposal of business and net trading assets Pro¢t/(loss) on ordinary activities before interest Interest payable Pro¢t/(loss) on ordinary activities before taxation Tax on pro¢t/(loss) on ordinary activities Pro¢t/(loss) on ordinary activities after taxation Minority interest Loss for the ¢nancial year Dividends Amount withdrawn from reserves Loss per share O basic and diluted O before exceptional items 3 3(f) 23 4 6 18 17 7 (814) 557 (257) O O (257) (55) (312) (122) (434) (131) (565) O (565) O O O (98) (98) O 6,479 5,548 12,027 (7,785) 4,242 597 6,645 5,404 12,049 (7,522) 4,527 O (391) (128) (519) (617) O (617) (391) (128) O (116) (5,713) (4,941) (1,431) 557 (874) (1,133) 719 (414) 182 182 3,007 3,007 2,572 O 2,315 (55) 2,572 2,260 (1,395) (1,517) 1,177 (1,571) (394) O 743 (1,702) (959) O O O (414) (206) (620) (284) (904) O (904) (394) (959) (904) pence pence (0.8p) (0.5p) (0.8p) (0.7p) Newmark Technology Group PLC 15 BALANCE SHEETS as at 30 April 2002 Fixed Assets Intangible assets Tangible assets Investments Current Assets Stocks Debtors Cash at bank and in hand Notes 8 9 10 11 12 Group 2002 »000 Group 2001 (as restated) »000 Company 2002 »000 Company 2001 »000 2,014 1,344 O 3,358 773 1,994 6,409 9,176 2,158 1,483 O 3,641 1,656 2,500 652 4,808 O O 7,218 7,218 O 2,601 O 2,601 O O 7,218 7,218 O 2,665 O 2,665 Creditors: amounts falling due within one year Net current assets/ (liabilities) Total assets less current liabilities Creditors: amounts falling 13 (5,022) (5,466) (2,662) (1,366) 4,154 7,512 (658) 2,983 (61) 7,157 due after more than one year 14 (525) (665) Provisions for liabilities and charges Capital and reserves Called up share capital Share premium Pro¢t and loss reserve Equity shareholders’ funds Minority interests 15 16 17 17 18 (453) 6,534 6,060 5,194 (6,750) 4,504 2,030 6,534 (249) 2,069 6,060 5,194 (9,185) 2,069 O 2,069 1,299 8,517 O O O O 7,157 8,517 6,060 5,194 (4,097) 7,157 O 7,157 6,060 5,194 (2,737) 8,517 O 8,517 The ¢nancial statements on pages 15 to 34 were approved by the Board of Directors on 15 August 2002 and were signed on its behalf by: M DWEK Chairman B BEECRAFT Finance Director Newmark Technology Group PLC 16 CONSOLIDATED CASH FLOW STATEMENT For the year ended 30 April 2002 Net cash (out£ow)/in£ow from operating activities Returns on investments and servicing of ¢nance Interest paid Net cash out£ow from returns on investments and servicing of ¢nance Taxation Capital expenditure and ¢nancial investment Purchase of tangible ¢xed assets Net cash out£ow from capital expenditure and ¢nancial investment Disposals Proceeds on sale of subsidiary undertaking, and business and trading assets Net overdraft disposed of with business Net cash in£ow from disposals Net cash in£ow/(out£ow) before ¢nancing Financing Proceeds from £otation of Vema Costs related to £otation of subsidiary Loan to ¢nance acquisition of property Repayment of loans Issue of shares Expenses paid in connection with share issues Net cash in£ow from ¢nancing Increase/(decrease) in cash Notes 19 23 3(f) 21 2002 »000 (458) (55) (55) (145) (200) (200) 5,525 61 5,586 4,728 2,880 (705) O (1,029) 1,146 O O 1,146 5,874 2001 »000 236 (206) (206) (517) (402) (402) O O O (889) O O 251 (246) 5 715 (22) 698 (191) Newmark Technology Group PLC 17 STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES For the year ended 30 April 2002 Loss for the ¢nancial year Exchange di¡erence on translation of net assets and results of subsidiary undertakings Total recognised gains and losses relating to the year 2001 (As restated) »000 (904) 78 (826) 2002 »000 (959) (66) (1,025) RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS’ FUNDS For the year ended 30 April 2002 Loss for the ¢nancial year New share capital subscribed (net of issue costs) Goodwill on disposal of business and trading assets Exchange di¡erence on translation of net assets and results of subsidiary undertakings Net increase/(reduction) to shareholders’ funds Opening shareholders’ funds Closing shareholders’ funds 2001 (As restated) »000 (904) 693 O 78 (133) 2,202 2,069 2002 »000 (959) O 3,460 (66) 2,435 2,069 4,504 Newmark Technology Group PLC 18 Notes to the ¢nancial statements For the year ended 30 April 2002 1. Accounting policies The ¢nancial statements have been prepared in accordance with applicable accounting standards in the United Kingdom and under the historical cost convention. The consolidated ¢nancial statements include the results of subsidiaries since the date of acquisition. The principal accounting policies which the directors have adopted are set out below. Turnover Turnover represents the invoiced value of goods sold and services rendered as principal excluding value added tax and trade discounts. Goodwill Goodwill represents the di¡erence between the costs of acquisition and the fair value of the net tangible assets acquired. In accordance with Financial Reporting Standard 10 (‘‘FRS 10’’), goodwill arising on the acquisition of subsidiaries is capitalised as an intangible asset and amortised over its useful economic life of 20 years. The Board considers that the activities of the subsidiaries acquired will be ongoing and they will contribute to the Group’s earnings for over 20 years. Goodwill arising on the acquisition of subsidiaries prior to FRS 10 was written o¡ immediately against reserves. The Group has adopted the transitional arrangement allowed by FRS10 in that this goodwill remains eliminated against reserves and will be charged to the pro¢t and loss account on the subsequent disposal of the businesses to which it relates. Intellectual property rights and development costs Intellectual property rights and development costs are written o¡ to the pro¢t and loss account as incurred. Tangible ¢xed assets The Group’s tangible ¢xed assets are stated at cost less depreciation. Provision for depreciation is made in equal annual instalments to write o¡ the cost less estimated residual value of each asset over its estimated useful life as follows: Freehold land Freehold buildings Plant and machinery Fixtures and ¢ttings Motor vehicles Computer equipment Nil 5% per annum 20% per annum 10% per annum 25% per annum 25% per annum Leased assets and obligations Assets acquired under hire purchase contracts and ¢nance leases are capitalised as tangible assets and depreciated over the shorter of the lease term and their useful lives. Obligations under such agreements are included in creditors net of the ¢nance charge allocated to future periods. The ¢nance element of the rental payment is charged to the pro¢t and loss account so as to produce a constant periodic rate of charge on the net obligation outstanding in each period. Rentals payable under operating leases are charged against income on a straight line basis over the lease term. Fixed asset investments Fixed asset investments are recorded at cost less any provision for impairments. Stock and work in progress Stocks and work in progress are stated at the lower of cost and net realisable value. Cost is determined on an average cost basis. The cost of work in progress and ¢nished goods comprises materials, direct labour and attributable production overheads. Net realisable value is based on estimated selling price less further costs expected to be incurred to completion and disposal. Newmark Technology Group PLC 19 Deferred taxation The accounting policy in respect of deferred tax has been changed to re£ect the requirements of Financial Reporting Standard 19 (‘‘FRS19’’) ^ Deferred Tax. Deferred tax is provided in full in respect of taxation deferred by timing di¡erences between the treatment of certain items for taxation and accounting purposes. Deferred tax assets are only recognised when that asset is regarded as recoverable. The previous policy was to provide deferred tax only to the extent that it was probable that liabilities would crystallise in the foreseeable future. The deferred tax balance has not been discounted. In prior years deferred tax was provided for a gain recognised on revaluing ¢xed assets for fair value purposes on the acquisition of a subsidiary. In accordance with FRS19, no provision should be made for deferred tax on gains recognised on revaluing ¢xed assets as the company does not intend to sell the revalued assets. This amounts to a change in accounting policy. The adoption of the standard requires a prior period adjustment to be made to eliminate the provision which existed at the start of the ¢nancial year. The e¡ect has been to decrease intangible ¢xed assets and the deferred tax provision by »200,000. The deferred tax asset of »46,000 has been restated in other debtors. Foreign currencies The assets and liabilities of overseas subsidiary undertakings are translated into sterling at the rates of exchange ruling at the balance sheet date. The results of the foreign subsidiary undertakings are translated into sterling at the average rates of exchange for the ¢nancial year. Surpluses and de¢cits arising from changes in exchange rates during the year, in so far as they relate to the net investment in overseas subsidiaries together with surpluses or de¢cits arising from the translation of overseas subsidiaries’ results at rates ruling at the year end compared to the average rates of exchange for the ¢nancial year, are taken direct to reserves. Assets and liabilities denominated in foreign currencies are translated into sterling at the rate of exchange ruling at the balance sheet date, trading results are translated at the average exchange rate for the ¢nancial period. Gains or losses arising from trading operations are dealt with in the pro¢t and loss account. Pensions Vema operated an optional non-contributory ¢nal salary pension scheme for sta¡ aged 25 years or over with more than one year’s service. The assets of the scheme were held separately from those of the company. Contributions to the scheme were charged to the pro¢t and loss account so as to spread the cost of pensions over employees’ working lives with the company. The contributions were determined by a quali¢ed actuary on the basis of an annual valuation. The most recent valuation was performed in October 2000. Safetell operates a fully insured money purchase scheme open to all employees and more than half are members. The scheme is funded and its assets are held by an insurance company in a separate trustee administered fund. Both the company and employees make contributions to the fund. In addition to the contributions paid in respect of S Rajwan for a money purchase scheme, other employees of the Group contribute to state schemes. Contributions are charged to the pro¢t and loss account when paid. 2. Analysis by geographical area The analysis by geographical area of the Group’s turnover, pro¢t before taxation and net assets is set out below: Turnover UK Europe Rest of the World Total 2002 By origin »000 4,918 7,109 O 2001 By origin »000 4,860 7,189 O 2002 By destination »000 4,518 7,270 239 2001 By destination »000 4,306 6,727 1,016 12,027 12,049 12,027 12,049 Newmark Technology Group PLC 20 2. Analysis by geographical area (continued) Pro¢t/(loss) before tax UK Europe Rest of the World Net Assets UK Europe Rest of the World 2002 Before goodwill and exceptional items »000 (214) 264 (362) 2002 Goodwill and exceptional items »000 (572) 3,144 O (312) 2,572 2002 Total »000 (786) 3,408 (362) 2,260 2002 Net assets »000 550 6,708 (724) 6,534 2001 Total »000 (990) 738 (368) (620) 2001 Net assets »000 1,264 1,181 (376) 2,069 3. Operating loss (a) Continuing and discontinued operations 2002 Continuing operations »000 6,479 (4,565) 2002 Dis- continued operations »000 5,548 (3,220) 1,914 597 2,328 O 2002 Total »000 12,027 (7,785) 4,242 597 2001 Continuing operations »000 6,645 (4,391) 2001 Dis- continued operations »000 5,404 (3,131) 2001 Total »000 12,049 (7,522) 2,254 2,273 4,527 (3,423) (1,771) (5,194) (3,271) (1,554) (4,825) (391) (128) (1,431) O O 557 (391) (128) (874) O (116) (1,133) O O 719 O (116) (414) Sales Cost of sales Gross pro¢t Other operating income Administrative expenses pre-amortisation of goodwill and exceptional items Reorganisation and restructuring costs Amortisation of goodwill Operating (loss)/pro¢t Newmark Technology Group PLC 21 (b) Operating loss is arrived at after charging the following: Group Depreciation of tangible ¢xed assets Amortisation of goodwill Research and development Auditors’ remuneration: Parent company auditors Audit fees Non audit fees Other auditors Audit fees Non audit services Operating lease rentals: Motor vehicles and computer equipment Property 2002 »000 241 128 70 35 2 67 9 173 141 2001 »000 236 116 82 36 2 64 1 194 141 (c) Administrative expenses and cost of sales The allocation of direct labour to cost of sales has been amended in the year by a subsidiary company, and the prior year ¢gures have been restated by the transfer of »485,000 from administrative expenses to cost of sales. (d) Other operating income Other operating income represents the monies received from Lik On Security Limited in settlement of their purchasing commitment. (e) Reorganisation and restructuring costs comprise: Accrual for sta¡ termination costs Provision for unexpired portion of property and other operating leases related to Newmark Technology Limited Exceptional depreciation of ¢xed assets owned by Newmark Technology Limited Termination costs for restructuring in another subsidiary company (f) Pro¢t on part disposal of investment in subsidiary Proceeds from partial disposal of investment in subsidiary Goodwill on partial disposal of investment Costs of £otation and share issue Share of net assets relating to minority interests at date of £otation 2002 »000 2,880 (1,695) (705) (298) 182 »000 105 220 21 45 391 2001 »000 O O O O O This pro¢t relates to the £otation of Vema N.V. on the Alternative Investment Market, and the subscription for 49 per cent of the A issued share capital by external shareholders. Interest 4. Interest payable and similar charges Bank loans, overdrafts and other short term ¢nance 55 206 Newmark Technology Group PLC 22 5. Employees and directors The average numbers employed by the Group (including Executive Directors) within the following categories were: Management, sales and administration Production The costs incurred in respect of these employees were: Wages and salaries Social security costs Other pension costs Number Number 72 58 72 66 138 130 »000 3,322 520 134 3,976 »000 3,141 446 111 3,698 Details of directors’ emoluments are disclosed in the Report of the Remuneration Committee on page 13 which forms part of this note. Taxation 6. Taxation is based on the results for the year and comprises: UK Corporation taxation Overseas taxation Deferred taxation Taxation charge on loss for the year before exceptional items Taxation on gain on disposal of business and trading assets 2002 »000 O 122 O 122 1,395 1,517 2001 »000 O 273 11 284 O 284 The tax charged for the year is higher than the standard rate of corporation tax in the UK (30 per cent). The di¡erences are explained below: Pro¢t/(loss) on ordinary activities before taxation Pro¢t on ordinary activities at the standard rate of UK corporation tax of 30% (2001: 30%) E¡ects on pro¢ts of items not deductible for the tax purposes Tax losses carried forward Timing di¡erences including capital allowances in excess of depreciation dealt with under deferred tax Grossing up of foreign income Marginal relief Double tax relief Adjustment to tax charge in respect of previous periods Higher tax rates on overseas earnings Current tax charge for year 2002 »000 2,260 678 267 338 (3) 2 O (6) 2 239 1,517 2001 »000 (620) (186) 315 155 (2) 63 (2) (106) O 47 284 Newmark Technology Group PLC 23 Loss per share 7. The calculation of the basic loss per ordinary share is based on a loss of »959,000 (2001: loss »904,000) and the weighted average number of shares in issue during the year of 121,208,952 (2001: 116,625,619). The options in issue have no dilutive e¡ect. The basic loss per share before goodwill amortisation and exceptional items has also been presented since, in the opinion of the directors, this provides shareholders with a more appropriate measure of earnings derived from the Group’s businesses. It can be reconciled to basic loss per share as follows: Basic loss per share (pence) Goodwill amortisation and exceptional items per share Loss per share before goodwill amortisation and exceptional items 8. Intangible ¢xed assets Group Cost At 1 May 2001 as previously reported Prior year adjustment (note 15) At 1 May 2001 as restated Disposal of subsidiary in year At 30 April 2002 Amortisation At 1 May 2001 Charge for the year At 30 April 2002 Net book value At 30 April 2002 At 30 April 2001 as restated 2002 (0.8) 0.3 (0.5) 2001 (0.8) 0.1 (0.7) Goodwill »000 2,544 (200) 2,344 (16) 2,328 (186) (128) (314) 2,014 2,158 Newmark Technology Group PLC 24 Freehold land and buildings »000 Plant, machinery & motor vehicles »000 Computers, fixtures & fittings »000 1,333 O O O O (2) 1,331 150 37 O O O 1 188 1,143 1,183 1,093 117 (99) (2) (46) (3) 1,060 970 61 (99) (2) (10) (2) 918 142 123 614 78 (70) (244) 46 3 427 437 143 (70) (154) 10 2 368 59 177 9. Tangible ¢xed assets Group Cost At 1 May 2001 Additions Disposals Disposal of subsidiary/business Reclassi¢cations Exchange adjustment At 30 April 2002 Depreciation At 1 May 2001 Charge for the year Disposals Disposal of subsidiary Reclassi¢cations Exchange adjustment At 30 April 2002 Net book value At 30 April 2002 At 30 April 2001 10. Fixed asset investments Company Investment in subsidiary companies Cost At 1 May 2001 and 30 April 2002 Provision for impairment At 1 May 2001 and 30 April 2002 Net book value At 30 April 2002 At 30 April 2001 Total »000 3,040 195 (169) (246) O (2) 2,818 1,557 241 (169) (156) O 1 1,474 1,344 1,483 »000 9,347 2,129 7,218 7,218 The provision for impairment in 2001 was calculated to state the net book value of an investment in a subsidiary company at the commercial valuation of that company. Newmark Technology Group PLC 25 The details of the Company’s subsidiary undertakings (wholly owned unless otherwise stated) which are involved in the supply of access control and other security products, are as follows: Name Newmark Technology Limited Newmark Security Products Limited Newmark Technology (C-Cure Division) Limited Vema B.V. Vema N.V.(3) (51% owned) Newmark Technology S.A. Ateliers Drion S.A.(2) Safetell International Limited Safetell Limited(1) Safetell Security Screens Limited(1) Newmark Onroerend Goed B.V.(2) Newmark Technology Inc. Vema U.K. Limited(4) Activity Trading Trading Dormant Holding Trading Trading Trading Holding Trading Trading Property Trading Dormant Country of incorporation England & Wales England & Wales England & Wales Description of shares held Ordinary Ordinary Ordinary The Netherlands The Netherlands Belgium Belgium England & Wales England & Wales England & Wales Belgium USA England & Wales Ordinary Ordinary Ordinary Ordinary Ordinary and Redeemable Preference Ordinary Ordinary Ordinary Ordinary Ordinary The investments in subsidiary companies are held directly by the Company apart from the following: (1) Owned by Safetell International Limited (2) Owned by Newmark Technology S.A. (3) Owned by Vema B.V. The company’s business and trading assets were sold during the year. (4) Owned by Vema N.V. 11. Stocks Raw materials Work in progress Finished goods 12. Debtors Amounts falling due within one year: Amounts owed by subsidiary undertakings Trade debtors Prepayments and accrued income Other debtors Deferred tax asset (note 15) 2002 Group »000 470 139 164 773 2002 Group »000 O 1,005 150 793 46 1,994 2001 Group »000 722 182 752 1,656 2002 Company »000 O O O 2001 Company »000 O O O O O 2001 Group (as restated) »000 O 2,062 178 214 46 2,500 2002 Company »000 2001 Company »000 2,577 O 24 O O 2,601 2,658 O 7 O O 2,665 Deferred tax Other timing di¡erences 46 46 O O Newmark Technology Group PLC 26 13. Creditors: amounts falling due within one year 2002 Group »000 152 O 995 533 104 1,763 1,475 Bank loans and overdrafts (note 14) Amounts due to group companies Trade creditors Accruals Other taxation and social security Other creditors Corporation tax 5,022 2001 Group »000 1,660 O 935 1,009 128 1,734 O 5,466 2002 Company »000 O 2,619 O 23 O 20 O 2001 Company »000 1,333 O O 20 O 13 O 2,662 1,366 Other creditors within the Group includes an amount of »29,775 (2001: »171,487) in respect of a factoring company which was secured on trade debtors of a subsidiary company. Bank overdrafts of »Nil (2001: »109,000) were secured by a £oating charge on the assets (excluding freehold property) of a subsidiary. Newmark Technology Group PLC 27 14. Creditors: amounts falling due after more than year Bank loans and overdrafts Other creditors Group 2002 »000 525 O 525 Group Company Company 2001 »000 O O 2002 »000 O O 2001 »000 662 3 665 O O Company The terms of repayment, interest and security for the loan to the Company are set out as loan (c) in the analysis of Group Loans. Group Loans are repayable as follows: Within one year Bank loans(a) Bank overdrafts Finance leases Bank loan(b) Bank loan(c) Bank loan(d) Bank loan(e) Total within one year After one and within two years Bank loans(a) Finance leases Bank loan(b) Bank loan(d) Bank loan(e) Between two and ¢ve years Bank loans(a) Bank loan(b) Bank loan(d) Bank loan(e) After ¢ve years Bank loans(a) Bank loan(d) Total after more than one year 2002 Unsecured »000 2002 Secured »000 2001 Unsecured »000 2001 Secured »000 O O O 121 O O 7 128 O O 121 O 8 129 O O O 9 9 O O O 138 9 O O O O 15 O 24 9 O O 15 O 24 26 O 46 O 72 168 123 291 387 O O O 162 O O 9 171 O O 108 O 9 117 O 108 O 18 126 O O O 243 13 117 11 O 1,333 15 O 1,489 13 3 O 15 O 31 39 O 46 O 85 167 139 306 422 (a) The bank loan is repayable in quarterly instalments over 25 years. Interest is charged at 6.125 per cent over the ¢rst 5 years and the loan is secured on the freehold property of Vema B.V.. (b) The bank loan is repayable in quarterly instalments over 2 years. Interest is charged at 5.25 per cent per annum. (c) The bank loan was repayable in quarterly instalments over 7 years and was secured by a composite debenture and cross guarantee by the Company and Newmark Technology Limited, incorporating a ¢xed and £oating charge over all the assets and undertaking of these companies. There was also a ¢rst ¢xed charge over the Company’s shares in Safetell International Limited and all monies guarantees from Safetell supported by debentures over their assets and undertakings. Interest was payable at 2% over LIBOR. The loan was repaid in full during the year. (d) The bank loan is repayable in quarterly instalments over 15 years and is secured on the freehold property of Newmark Onroerend Goed B.V. Interest is charged at 7.05 per cent per annum. (e) The bank loan is repayable in quarterly instalments over 3 years and interest is charged at 4.6 per cent per annum. Newmark Technology Group PLC 28 15. Provisions for liabilities and charges Reorganisation and restructuring provision »000 Group At 1 May 2001 as previously reported Prior year adjustment At 1 May 2001 as restated Charge for year Released in year At 30 April 2002 Rental provision »000 Deferred taxation »000 Other »000 Total »000 O O O 220 O 220 184 O 184 O (16) 168 154 (154) O O O O 65 O 65 O O 65 403 (154) 249 220 (16) 453 The reorganisation and restructuring provision relates to the unexpired portion of property and other operating leases relating to Newmark Technology Limited. The rental provision relates to the excess of Safetell’s contractual legal obligation over the current market rental, and will be reversed over the remaining eleven years of the lease. The accounting policy in respect of deferred tax has been changed to re£ect the requirements of FRS19 ^ Deferred Tax. Deferred tax is provided in full in respect of taxation deferred by timing di¡erences between the treatment of certain items for taxation and accounting purposes. The previous policy was to provide deferred tax only to the extent that it was probable that liabilities would crystallise in the foreseeable future. The deferred tax balance has not been discounted. In prior years deferred tax was provided for a gain recognised on revaluing ¢xed assets for fair value purposes on the acquisition of a subsidiary. In accordance with FRS19, no provision should be made for deferred tax on gains recognised on revaluing ¢xed asset investments as the company does not intend to sell the revalued assets. This amounts to a change in accounting policy. The adoption of the standard requires a prior period adjustment to be made to eliminate the provision which existed at the start of the ¢nancial year. The e¡ect has been to decrease intangible ¢xed assets and the deferred tax provision by »200,000. The deferred tax asset of »46,000 has been restated in other debtors (note 12). 16. Share capital Authorised: 300,000,000 (2001: 250,000,000) Ordinary shares of 5p each Allotted, called up and fully paid: 121,208,952 (2001: 121,208,952) Ordinary shares of 5p each 2002 2001 »15,000,000 »12,500,000 »6,060,450 »6,060,450 The total number of share options outstanding at 30 April 2002 under the Approved and Unapproved Share Option Schemes were 928,000 (2001: 1,314,000) and 2,588,000 (2001: 2,574,000) respectively. The subscription price payable upon the exercise of the 504,000 (2001: 952,000) and 1,764,000 (2001: 2,212,000) Approved and Unapproved Share Options respectively granted in October 1997 is 14.5 pence per share. The exercise price for the 278,000 (2001: 362,000) options granted under both the Approved and Unapproved Schemes, granted in January 1999, is 8.25 pence per share. A further 146,000 and 546,000 options were granted under the Approved and Unapproved Schemes respectively in December 2001 at an exercise price of 5 pence per share. The options may be exercised within 10 years from the date of issue. Newmark Technology Group PLC 29 17. Share premium and reserves Group Accumulated reserves at 1 May 2001 Retained loss for the year Exchange di¡erences on foreign currency investments Goodwill on disposal of business and trading assets of Vema charged to the pro¢t and loss account Accumulated reserves at 30 April 2002 Share premium account »000 5,194 O O Profit and loss account »000 (9,185) (959) (66) O 5,194 3,460 (6,750) The cumulative amount of goodwill eliminated against reserves is »4,079,000 (2001: »7,539,000). This goodwill will be charged in the pro¢t and loss account on any eventual disposal of the businesses to which it related. Company Accumulated reserves at 1 May 2001 Retained loss for the year Accumulated reserves at 30 April 2002 Share premium account »000 5,194 O Profit and loss account »000 (2,737) (1,360) 5,194 (4,097) Loss attributable to the members of the parent company As permitted by section 230 of the Companies Act 1985, the parent company has not presented its own pro¢t and loss account. The loss on ordinary activities after tax dealt with in the ¢nancial statements of the parent company for the year was »1,360,000 (2001: loss »3,246,000). 18. Minority interests Share of net assets relating to minority interest at date of £otation of Vema Share of pro¢ts in period Exchange di¡erences 19. Reconciliation of operating loss to operating cash£ow Operating loss Depreciation and amortisation of goodwill Charges for reorganisation and restructuring (Increase) in stocks Decrease in debtors (Decrease)/increase in creditors Operating cash (out£ow)/in£ow 20. Reconciliation of net cash £ows to movement in net (debt)/funds Increase/(decrease) in cash from cash £ows of the group Net overdraft disposed of on sale of Vema business and trading assets Decrease/(increase) in debt in the year from cash £ows Increase/(decrease) in net funds resulting from cash £ows Debt disposed of on sale of Vema business and trading assets Increase/(decrease) in net funds Newmark Technology Group PLC 30 2002 »000 312 1,702 16 2,030 2002 »000 (874) 369 423 (57) 59 (378) (458) 2002 »000 5,813 61 1,029 6,903 502 7,405 2001 »000 O O O O 2001 »000 (414) 352 O (338) 293 343 236 2001 »000 (166) O (51) (217) O (217) 21. Analysis of changes in net (debt)/funds Disposed of with subsidiaries (excluding cash April 2001 »000 652 (117) Cash flow »000 5,757 117 balances) »000 O O April 2002 »000 6,409 O 535 (665) (1,543) (2,208) (1,673) 5,874 68 961 1,029 6,903 O 72 430 502 502 6,409 (525) (152) (677) 5,732 Cash at bank and in hand Overdrafts Debt due after one year Debt due within one year Net (debt)/funds 22. Financial instruments The Group’s ¢nancial instruments comprise borrowings, cash resources, and various items, such as trade debtors, trade creditors, etc, that arise directly from its operations. The main purpose of these ¢nancials instruments is to raise ¢nance for the Group’s operations. It is, and has been throughout the year, the Group’s policy that no trading in ¢nancial instruments shall be undertaken. The main risks arising from the Group’s ¢nancial instruments are interest rate risk, liquidity risk and foreign currency risk. The Board reviews and agrees policies for managing each of these risks. These policies have remained unchanged during the year and are summarised below. Interest rate risk The Group ¢nances its operations through a mixture of retained pro¢ts and bank borrowings. The Group borrows at ¢xed rates of interest on long term loans to secure the Group’s exposure to interest rate £uctuations. At the year end, 100% (2001: 26%) of the Group’s borrowings were at ¢xed rates with Nil% (2001: Nil%) of these borrowings comprising liabilities on which no interest is paid. Liquidity risks Short-term £exibility in borrowings is achieved by overdraft facilities in the UK. A long term loan existed in the Netherlands at the date of acquisition of Vema, secured on the freehold property. An unsecured loan of BEF 35 million partly ¢nanced the acquisition of Drion in Belgium. A secured loan of »1.5 million which ¢nanced the acquisition of Safetell International Limited was repaid during the year. At the year end, 39% (2001: 19%) of the Group’s borrowings were due to mature in more than ¢ve years. Foreign currency risk At the years end, the Group has a signi¢cant overseas subsidiary operating in Belgium and the Belgian acquisition was partly ¢nanced by a loan in Belgian francs. The sales of the UK companies are predominantly priced and invoiced in sterling, whilst the Belgian company invoices its customers exclusively in Euros. Newmark Technology Group PLC 31 Interest rate risk of ¢nancial assets and ¢nancial liabilities The interest rate pro¢le of the Group’s ¢nancial assets at 30 April 2002 was: Sterling Euros Dollars Floating rate ¢nancial assets »000 954 5,430 25 Fixed rate ¢nancial assets »000 O O O Financial assets on which no interest is received »000 O O O 6,409 O O Total »000 954 5,430 25 6,409 The interest rate pro¢le of the Group’s ¢nancial liabilities at 30 April 2002 was: Currency Euros Currency Euros Total Financial liabilities on which no interest has been paid »000 O Fixed rate ¢nancial liabilities »000 677 Floating rate ¢nancial liabilities »000 O O 677 O Total »000 677 677 Fixed rate ¢nancial liabilities Weighted average period for which rate is ¢xed Years 12.44 Weighted average interest rate % 6.03 6.03 12.44 Currency exposures Gains and losses from the Group’s net investment overseas are recognised in the statement of total recognised gains and losses. The table below shows the Group’s currency exposures that give rise to the net currency gains and losses recognised in the pro¢t and loss account. Such exposures comprise the monetary assets and monetary liabilities of the Group that are not denominated in the operating currency of the operating unit involved. As at 30 April 2002, these exposures were as follows: Functional currency of Group operation Sterling Total Net foreign currency monetary assets/(liabilities) in »000 US dollars (113) Total (113) (113) (113) Newmark Technology Group PLC 32 Maturity of ¢nancial liabilities The maturity of pro¢le of the Group’s ¢nancial liabilities at 30 April 2002 was as follows: In one year or less or on demand In more than one year but not more than two years In more than one year but not more than ¢ve years In more than ¢ve years »000 152 153 81 291 677 Borrowing facilities The Group has various undrawn committed borrowing facilities. The facilities available at 30 April 2002 in respect of which all conditions precedent had been met were as follows: Expiring in one year or less »000 Nil Fair values of ¢nancial liabilities Set out below is a comparison by category of book values and fair values of the Group’s ¢nancial liabilities as at 30 April 2002. Short-term ¢nancial liabilities and current portion of long-term liabilities Long term borrowings Book values »000 152 525 Fair values »000 150 347 The fair values shown above have been calculated by discounting cash £ows at prevailing interest rates. The fair values of all other monetary assets and liabilities is equal to their book values. 23. Disposal of business and trading assets On 29 April 2002 the Group disposed of the business and trading assets of a subsidiary company Vema NV, including the investment in its subsidiary company Vema Belgie BV. Proceeds of sale received Retention receivable Total proceeds receivable Net assets disposed of: Fixed assets Goodwill in subsidiary Stocks Debtors Creditors Cash Bank Overdrafts Loans Goodwill on disposal of investment in subsidiary Costs of disposal »000 90 16 842 1,106 (444) 29 (90) (502) »000 5,525 532 6,057 (1,047) (1,760) (243) 3,007 Newmark Technology Group PLC 33 24. Other ¢nancial commitments At 30 April 2002, the Company had annual commitments under non-cancellable operating leases as follows: Plant and equipment Expiring within 1 year Expiring between 2 and 5 years inclusive Expiring in over 5 years Property leases Expiring between 2 and 5 years Expiring over 5 years 2002 »000 2001 »000 128 30 O 67 78 59 103 8 67 78 25. Related party transactions (a) A Reid is a director of the Company and has a controlling interest in R.K. Harrison & Co. Limited. R.K. Harrison & Co. Limited received director’s fees of »7,500 from the Company during the year (2001: »7,500) in respect of Mr. Reid. In addition Vema NV paid fees of »14,135 (2001: »Nil) to R. K. Harrison & Co. Limited for services as director of that company. (b) M Dwek is a director of the Company and owns 51% of the share capital of Arbury Inc., which received consultancy fees from the Company of »121,000 (2001: »121,000) in the year. A consultancy fee of »52,903 (2001: »Nil) was paid to Arbury Inc. by Vema NV for services as Chairman of that Company. In addition Arbury Inc., received a fee of »50,000 from Vema NV in connection with consultancy services provided by M Dwek in relation to the fund raising and admission to AIM of Vema NV. A further »95,000 was accrued in the accounts of Vema NV for Arbury Inc., in connection with consultancy services provided by M Dwek in relation to the disposal of the business and trading assets of Vema NV. (c) Amounts totalling »4,521 (2001: »5,880) were paid on an arm’s length basis during the year to a company of which B Beecraft is a director, in respect of consultancy and other accountancy services. A further »9,900 has been paid to Beecraft Consultants Limited by Vema NV in connection with consultancy services provided by B Beecraft in relation to the fund raising and admission to AIM of Vema NV, and »10,000 has been accrued in the accounts of Vema N.V. in relation to the disposal of the business and trading assets of Vema N.V. 26. Post balance sheet events The Company has recently announced the proposed acquisition of a new trading subsidiary and the purchase of the minority interest in Vema N.V., both of which the directors believe will improve shareholder value. Details of these transactions can be found in the documents accompanying these accounts. Newmark Technology Group PLC 34 Printed by greenaways, a member of the ormolu group London, Edinburgh, Leeds, Manchester, New York, Paris, Hong Kong, Singapore, Tokyo. S138792 

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