Newmark Security plc Annual Report 2002

← All annual reports

FY2002 Annual Report · Newmark Security plc

Loading PDF…

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

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:

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

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 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

145
30
20

21
8

224

319
146
107

21
8

601

324

O
11
O

O
O

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)

(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

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(f)

(814)
557

(257)

(257)
(55)

(312)

(122)

(434)
(131)

(565)
O

(565)

O
O

(98)

6,479
5,548

12,027

(7,785)

4,242

597

6,645
5,404

12,049

(7,522)

4,527

(391)
(128)

(519)

(617)
O

(617)

(391)
(128)

O
(116)

(5,713)

(4,941)

(1,431)
557

(874)

(1,133)
719

(414)

182

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

(414)
(206)

(620)

(284)

(904)
O

(904)

(394)

(959)

(904)

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

(5,022)

(5,466)

(2,662)

(1,366)

4,154

7,512

(658)

2,983

(61)

7,157

due after more than one year

(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

16
17
17

(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

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

3(f)

2002
»000

(458)

(55)

(145)

(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)

(517)

(402)

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)

(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

(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

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

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

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

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

177

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

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

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

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

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

O
O

138

9
O
O
O
O
15
O

9
O
O
15
O

26
O
46
O

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

243

13
117
11
O
1,333
15
O

1,489

13
3
O
15
O

39
O
46
O

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

65
O

65
O
O

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)

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

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

72
430

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

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

Total

Financial
liabilities on
which no
interest
has been
paid
»000
O

Fixed rate
¢nancial
liabilities
»000
677

Floating
rate
¢nancial
liabilities
»000
O

677

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)

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