Newmark Security plc Annual Report 2003

FY2003 Annual Report · Newmark Security plc
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BY APPOINTMENT TO
HER MAJESTY THE QUEEN
PRINTERS
GREENAWAYS, LONDON

BY APPOINTMENT TO
HM QUEEN ELIZABETH
THE QUEEN MOTHER
PRINTERS
GREENAWAYS, LONDON

145024

30.10.2003

Job No: ................................................

Date: ....................................................

Proof: ...................................................

Ormolu House
Crimscott Street
London SE1 5TE
Tel: 020 7417 8000
Fax: 020 7417 8001
www.greenaways.com

SECURITY
COVER

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If you have any queries with regards to the proof or would like any additional information please telephone
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Greenaways on 020 7417 8000 and ask for Customer Services department.
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Annual Report

For the year ended 30 April 2003

INDEX

DIRECTORS, SECRETARY AND ADVISERS

CHAIRMAN’S STATEMENT

REPORT OF THE DIRECTORS

REPORT OF THE REMUNERATION COMMITTEE

REPORT OF THE INDEPENDENT AUDITORS

FINANCIAL STATEMENTS

ACCOUNTING POLICIES

NOTES TO THE FINANCIAL STATEMENTS

NOTICE OF ANNUAL GENERAL MEETING

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36

Newmark Security PLC
1

Company number;

Registered Of¢ce:

Directors:

Secretary:

Bankers:

Solicitors:

Auditors:

Nominated Adviser:

Broker:

DIRECTORS, SECRETARY AND ADVISERS

3339998

Suite 3
23 Bruton Street
London W1J 6QF

M Dwek (Chairman)
B Beecraft FCA (Finance Director)
M Rapoport (Non-Executive Director)
A Reid FCA (Non-Executive Director)

B Beecraft FCA

Lloyds TSB PLC
1st Floor
Navigation House
Walnut Tree Park
Walnut Tree Close
Guildford
Surrey GU1 4TR

Travers Smith Braithwaite
10 Snow Hill
London EC1A 2AL

BDO Stoy Hayward
Northside House
69 Tweedy Road
Bromley
Kent BR1 3WA

Seymour Pierce Limited
Bucklersbury House
3 Queen Victoria Street
London EC4N 8EL

Seymour Pierce Ellis Limited
Talisman House
Jubilee Walk
Three Bridges
Crawley
West Sussex RH10 1LQ

Newmark Security PLC
2

CHAIRMAN’S STATEMENT

Overview
During the year we completed the acquisition of Grosvenor Technology that was detailed in last year’s annual
report, and progressed with the buy back of the minority interest in Vema N.V.

The Grosvenor acquisition is in line with the Board’s strategy of creating an integrated high value security
solutions group in both mechanical and electronic products.

Grosvenor
is an established access control and security management systems company with a strong
experienced management team. It sells a sophisticated range of proprietary products through a network of
dealers and installers who supply a predominantly blue chip customer base.

Grosvenor has a high research and development team which is responsive to market demands and has a proven
track record of product innovation and introduction. It also has a technical support team. The businesses of
Grosvenor and Newmark Technology have been amalgamated and run by Grosvenor’s management, creating
economies of scale and reducing the combined total overhead.

Financial Results
The operating loss for the year for continuing operations before exceptional items and goodwill amortisation
was £1,034,000 (2002 — £550,000), £624,000 of this loss was incurred by Drion Security where failure to
obtain a major export order referred to before led to substantial losses and since the year end this company
has been disposed of. Losses were also incurred, as expected, at Newmark Security Products which recorded a
loss of £365,000, whilst the business was moving from a start up position as it incurred expenditure in building
up the business.

Safetell and Grosvenor both contributed proﬁts although in the latter case only from its acquisition in
September 2002.

There are a number of exceptional items in the year relating to the under-provision of costs for the disposal of
the Vema business and the closure of our operation at Redhill and the closure of our sales and marketing
operation in the USA.

Turnover for the year for continuing operations was £6.6 million (2002: £6.5 million). The reasons for the more
signiﬁcant factors affecting the results of the divisions are set out below.

Electronic Division
With the acquisition of Grosvenor Technology now complete, that company has taken control of the Electronic
Division. Since its acquisition in September 2002, Grosvenor has evaluated the entire product portfolio and the
individual company structures within the Division, both UK and US based.

Rationalisation has been the result which has included the closure of the previous Newmark Technology head-
ofﬁce in Redhill, the assembly plant at Rainton Bridge and the US operations. The Omni, Midi CE and TransAsset
have been pulled from production and reduced to being sold for spares and supporting existing sites only.

Since September 2002 the rationalisation has made cost savings in excess of £500,000 per annum and Newmark
Technology is now cash positive.

The core products for the Electronic Division are:

.

.

.

JANUS Access Control — Grosvenor Technology

C-Cure Access Control — Newmark Technology

ParSec Asset Management and Personnel Tracking — Newmark Technology

JANUS and ParSec are ’own-brand’ systems and developed ’in-house’ directly under the control of Grosvenor.
C-Cure is a very well respected product and is properly supported via Tyco and Sensormatic so we now have a
very stable and easily manageable product portfolio.

Of the two in-house products, ParSec has previously suffered from not having a software management package.
The product has always been sold as component parts to be controlled and managed by other company’s
software which has never been forthcoming. JANUS is constantly being developed to remain at the forefront
of technology and continues to be a leader in its class. The latest release includes a complete integration with
ParSec which will beneﬁt both products.

Newmark Security PLC
3

With the new control and management functionality afforded by JANUS, it is the company’s intention to re-
launch the ParSec range. Although not redesigned in itself, it has been completely re-structured with a newly
It also boasts new, stylish, and more
designed reader PCB and ﬁrmware, offering additional functionality.
modern labelling and brand new literature including manuals and datasheets.

With this news there has been positive and renewed interest from Tyco in the UK and Honeywell/Ademco in the
US, both of which are keen to revisit a revitalised product complete with the JANUS software integration.
Grosvenor will also include the complete integration of ParSec with Siteguard, the Tyco access control product
developed speciﬁcally by Grosvenor for Tyco in the UK. This will also further enhance the ongoing relationship
between the two companies.

Grosvenor and Newmark Technology have made substantial investments in time and money during the year on
new ofﬁce systems and infrastructure that will consolidate the rationalisation and bring about further
efﬁciencies and tangible beneﬁts to our customers. With the introduction of Exchequer Enterprise, sales order
processing, purchase order processing, stock control with integrated accounting and connectivity functionality
with the internet, the company has been able to introduce its ﬁrst eCommerce web site speciﬁcally timed for
the re-launch of the ParSec product range.

The new web site www.par-sec.biz is a fully integrated eCommerce site where customers with a Newmark
trading account can log on and:

.

.

.

.

.

.

.

.

Browse the ParSec catalogue

View and download technical information and speciﬁcations

View our stock/inventory status in real-time

Create, print, save and email their own quotations

Convert quotations into purchase orders

Print, save and email purchase order acknowledgements

Check the status of purchase orders with real-time tracking and POD from our couriers

Save transactions for future reference

Many other features will be added over time.

It is our intention to offer this method of trading to all of our account customers across the entire product
range. It will produce even more efﬁciencies within the company whilst at the same time provide immediate
attention and information to our customers 24/365.

The evaluation and subsequent realignment and re-branding of the ParSec product has been the reason to close
the ofﬁce in USA. With so few sales into the US it was not economical to keep a physical presence. The
eCommerce site is now our shop window on the world and has meant that we can still trade with the US in
’real-time’. An added bonus is that eCommerce is fast becoming the preferred method of business to business
trading in the US so we are ahead of the game as well.

The advent of our more efﬁcient systems and immediate accessibility of our staff to the customers has rebuilt
our reputation as a credible added-value re-seller providing ﬁrst class product training, technical support and
product knowledge for the C-Cure range. It is our intention to recover the lost ground as we are now set on a
solid footing for the future to build upon and expand the Electronic Division with the people, the systems, and
the products all in place, ready for a new era of positive and purposeful trading.

Asset Protection Division
Drion Security
Turnover in the home market was on course in the banking sector but did not meet our expectations of a major
breakthrough in the commercial sector.

The shortfall against budget was mainly due to the lack of export contracts in particular the cancellation of the
tender for the Algerian national bank. Despite many assurances that the placing of that order was imminent, it
has recently been announced that the entire project has been postponed for an indeﬁnite period. This affected
our performance further as CNEP (the Algerian national bank) had demanded a lot of co-operation with the
company especially in the second part of the year and we had incurred costs in preparing the tender.

Newmark Security PLC
4

Margins were also affected as the company was moving out of the non core activities it had been engaged with
over the last two years and a demand from one of Drion’s main customers to provide services as general
contractor as part of the security service and products.

Safetell
The ﬁrst part of Safetell’s ﬁnancial year continued the healthy trading situation in the early months of 2002.
From September onwards there was a further marked improvement in both traditional and new business
resulting in full year sales being 23% better than the previous year. The volume of work improved operating
efﬁciencies and gross margins so that operating proﬁt rose by 50% compared to last year.

The Eclipse rising screen programmes were maintained with long-term customers in retail ﬁnance and petrol
retailing. A number of police authorities and local governments are re-entering the market for rising screens
as the best defence against violence in the front ofﬁce/reception areas.

The newer screen products of InterScreen, CounterShield, Eye2Eye and MaxiView are all becoming established in
their respective niche markets with a number of multiple site and/or repeat orders. The imminent application of
the Disability Discrimination Act in October 2004 is obliging public bodies to make adjustments to their service
areas which is increasing the available market for these products. The sales force has been expanded by 50% to
take advantage of these opportunities.

The demand for RollerCash and BiDi Safe cash handling equipment is very dependent on the roll-out
programmes of established customers. New customers are being introduced to the product and new
applications are being implemented, although this is a long term process. The Post Ofﬁce contract has been
extended to July 2004 and volumes are expected to rise in line with its suburban network reorganisation.

The service and maintenance business increases pro rata to the installed base of primary equipments. Other
service related work for third party suppliers is also being secured to improve operational efﬁciency of the
service technicians.

The early months of the current year are trading ahead of plan but the customer/product mix remains
predominantly reliant on historical situations. The intended expansion of new products to new customers is
still proving to be slow and difﬁcult.

Secure Locking Division
As reported last year Newmark Security Products (NSP) has been building up the infrastructure of the company
for anticipated growth in sales. The company has moved from the Group’s former head ofﬁce to its own
premises at Milton Keynes where we have been establishing our sales and support team. Turnover in the year
increased substantially from £100,000 to nearly £350,000 but this was insufﬁcient to meet the higher level of
overheads. A further substantial increase in turnover is anticipated in the current year.

NSP is now one of the most complete and comprehensive electronic locking suppliers in the UK with an
extensive range of products, from Strikes to Video Entry Systems, from Access Control to Cabinet Locks.

The NSP name and brand are being recognised by a wider audience. Having recently developed and launched
our own XK range of electric strikes which is proving very successful in the UK, we have now started to launch
our full portfolio including the XK range and this has been met with enthusiasm which is now being translated
into orders.

NSP has also recently been assessed and accredited with ISO 9001, which with our full and extensive product
range, dedicated team of professionals and an eye for the future will continue to increase market share and
keep NSP amongst the leaders in its ﬁeld.

Balance Sheet and Cash Flow
The balance sheet shows signiﬁcant variations from last year in many areas due to the acquisition of Grosvenor
Technology. In particular, there is the increase in intangible assets due to the goodwill arising on the acquisition.
We have assumed that there would be the full deferred consideration of £3.5 million based on the projected
level of proﬁts arising over the next few years, and this is included within creditors due after more than one
year after discounting for the net present value in accordance with Financial Reporting Standards. The
unwinding of the discount factor is required to be charged to the proﬁt and loss account as notional interest.
For the year under review this amounted to £106,000. The acquisition of the Vema shares by share exchange
has caused the increase in share capital, creation of merger reserve and reduction of minority interest.

Newmark Security PLC
5

The cash ﬂow in the year reﬂects the initial cash consideration paid for Grosvenor together with associated
costs. However, the cash ﬂow also reﬂects the payment in the year of the last element of the deferred
consideration for an acquisition made in previous years, plus the payments of the costs associated with the
sale of the Vema business at the end of the previous year.

Board
Sassie Rajwan left the Group in August this year after over six years as Chief Executive of the Group, and I
would like to take this opportunity to thank him on your behalf for all his efforts. He has left to pursue other
business interests, and we have subsequently reached agreement for the sale of Drion Security to him. We wish
him every success for the future.

Post Balance Sheet Events
Since the year end the Group has agreed terms for the issue of secured loan notes to raise up to £1.5 million.
The Loan Note Holders have committed to subscribe in cash for £1 million, and on agreement between the
parties, the Loan Note Holders can subscribe in cash for up to a further £0.5 million of Loan Notes. The Loan
Notes bear interest at a rate of 6% per annum payable quarterly in arrears and are repayable three years after
the date of the instrument constituting the Loan Notes with an option for early repayment. As part of the
fundraising, the Company issued warrants to the Loan Note Holders to subscribe for ordinary shares of 1p
each in the Company at any time between 24 July 2003 and 24 July 2008 at a price of 1p per ordinary share.

With the losses incurred by the company for the last two years and the loss of the prospect for the Algerian
export markets, we decided to sell Drion Security to our former Chief Executive who left the Group in August to
pursue other business interests. This has necessitated the write off of the unamortised goodwill capitalized on
the original acquisition of the company.

Employees
The Board wishes to thank all employees for their efforts during the year. In particular we send our best wishes
for the future to the employees of Drion, and to welcome the employees of Grosvenor to the Group.

The Future
With the closure of our operations at Redhill and Rainton Bridge last autumn, we had looked forward to the
rest of the year under review with some conﬁdence. The turnover and proﬁt performance of Drion in the year
was therefore very disappointing. Both Grosvenor and Safetell have for the current year to date performed
ahead of plan and in the case of Grosvenor there are some very interesting potential orders in sight. Overall I
look forward to reporting an improved result for the ﬁrst six months, after excluding the ﬁnancial effects of
Drion. The outlook for the full year at the current time is positive.

M DWEK
Chairman

Newmark Security PLC
6

REPORT OF THE DIRECTORS

The Directors submit their annual report and audited ﬁnancial statements of the Group for the year ended
30 April 2003.

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 loss on ordinary activities after exceptional items and goodwill amortisation and before interest, tax and
minority interest in the year was £2,725,000 (2002: proﬁt £2,315,000).

The operating loss for the year before exceptional items and goodwill amortisation for continuing operations
was £1,034,000 (2002: £550,000). Turnover for the year was £8.4 million (2002: £6.5 million for continuing
operations). 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.

Change of name
The name of the Company was changed from Newmark Technology Group PLC to Newmark Security PLC during
the year.

Share Capital
By a special resolution passed at last year’s annual general meeting:

(i)

(ii)

each of the unissued ordinary shares of 5p each in the capital of the Company were sub-divided into ﬁve
ordinary shares of 1p each; and

each of the issued ordinary shares of 5p each in the capital of the Company were sub-divided and
converted into one ordinary share of 1p each and one deferred share of 4p each.

During the year, the Company issued 90,314,814 ordinary shares of 1p each to acquire 60,209,877 Global
Depository Receipts of Vema N.V.

Acquisitions and disposals
During the year the company acquired 100 per cent of the share capital of Grosvenor Technology Limited for an
initial consideration of £3,287,000. A further maximum deferred consideration of £3.5million may be payable
when the accounts for the 48 month period ended 31 October 2006 have been agreed. If the average annual
proﬁt before tax is less than or equal to £450,000, the deferred consideration will be nil. If the average proﬁts
before tax is greater than £450,000, the deferred consideration will be the average annual proﬁt before tax less
£450,000 multiplied by seven subject to a maximum deferred consideration of £3.5million.

The company also made an offer to the Global Depository Receipts (‘‘GDR’’) holders of Vema N.V. for the 49 per
cent of the issued share capital of that company not already owned by Newmark. The offer represented
1.5 Newmark shares for each GDR. As at 30 April 2003, acceptances had been received for GDR’s so that the
Group owned 92 per cent of Vema N.V. at 30 April 2003.

Since the year end, the Group has sold its investment in Drion Security for a maximum deferred consideration
of k500,000 subject to the level of proﬁts achieved in the future. The deferred consideration will be payable in
three annual instalments commencing in 2006.

Directors
The Directors who served during the year were as follows:

M Dwek
S Rajwan
B Beecraft
M Rapoport
A Reid

S Rajwan resigned as a director on 27 August 2003.

Newmark Security PLC
7

Details of the Directors’ service contracts are shown in the Remuneration Committee Report on pages 12 and 13.

M Dwek retires in accordance with the articles of association. M Dwek being eligible, offers himself for
re-election at the next annual general meeting.

Directors’ interests
The beneﬁcial and other interests of the Directors in the shares of the Company as at 30 April 2002 (or the date
of their appointment to the Board, if later) and 30 April 2003 were as follows:

M Dwek(a)
M Rapoport
A Reid(b)

Percentage
holding at
30 April 2003

30 April
2003
7.8% 16,575,000
5.0% 10,555,000
15.5% 32,858,238

30 April 2002
(or date of
appointment
if later)
15,075,000
1,605,000
25,208,238

(a)

(b)

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, beneﬁcially
owned by M Dwek.
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 beneﬁcial holding and 6.2 per cent is a non beneﬁcial holding,
and the R.K. Harrison Retirement Beneﬁt Scheme in which A Reid has a beneﬁcial interest.

There were no changes in these holdings to the date of this document. Since the year end the Group has agreed
terms for the issue of secured loan notes to raise up to £1.5 million. The Loan Note Holders have committed to
subscribe in cash for £1 million, and on agreement between the parties, the Loan Note Holders can subscribe in
cash for up to a further £0.5 million of Loan Notes. The Loan Notes bear interest at a rate of 6 per cent per
annum payable quarterly in arrears and are repayable three years after the date of the instrument constituting
the Loan Notes with an option for early repayment. As part of the fundraising, the Company issued warrants to
the Loan Note Holders to subscribe for ordinary shares of 1p each in the Company at any time between 24 July
2003 and 24 July 2008 at a price of 1p per ordinary share. Since the year end parties related to M Dwek and
A Reid have subscribed for £360,000 and £90,000 of loan stock respectively.

The interests of Directors (and related parties) in Share Option Schemes operated by the Company at 30 April
2002 and 2003 were as follows:

Number of
Ordinary Shares
under the
Approved
Scheme
30 April 2003
—
420,000
500,000

Number of
Ordinary Shares
under the
Unapproved
Scheme
30 April 2003
5,000,000
3,180,000
1,000,000

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

M Dwek
S Rajwan
B Beecraft

The Directors had no other interests in the shares or share options of the Company or its subsidiaries. S. Rajwan
has left the Company since the year end, and hence his options have lapsed.

Research and development
The Group is committed to on-going research and development. The strategy is based upon market demand to
meet identiﬁed security needs in conjunction with a commercial assessment of the short to medium term
proﬁtability of each project. The amount of the costs incurred in the year are shown in note 3(b) to the
accounts.

Newmark Security PLC
8

Substantial shareholdings
Apart from the Directors’ shareholdings detailed above, the Directors have been notiﬁed 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:

Credit Suisse First Boston Nominees
M V. Beheer BV
HSBC Global Custody Nominee (UK) Limited
Pershing Keen Nominees Limited
PH Nominees Limited

Percentage
of class
3.8%
6.4%
3.2%
3.1%
4.5%

Number of
shares
8,100,000
13,447,725
6,666,666
6,565,000
9,437,000

Employee involvement
The Group keeps employees informed of matters affecting them and employees have regular opportunities to
meet and have discussions with their managers.

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
effort 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 approximately 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
in doing so, seeks the input of
to continually review and improve its environmental performance and,
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 58 days (2002: 79 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. This statement indicates several ways in which the Company does not comply with the Combined
Code.

At 30 April 2003, the Board comprised an Executive Chairman, two Executive Directors and two Non-Executive
Directors.

The Board meets regularly to exercise full and effective 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

Newmark Security PLC
9

approve major capital expenditure and to review budgets. The Board will also consider reports from senior
members of the management team. There was a clear division of responsibilities between the Chairman and
Chief Executive during the year. The Chairman takes responsibility for the conduct of the Group and overall
strategy. The Chief Executive has left the Group since the year end.

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 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 ﬁnancial control in accordance with the guidance on internal control
and ﬁnancial 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 beneﬁts at this stage of the Group’s development.

The Directors acknowledge their responsibility for the Group’s systems of internal ﬁnancial control which are
designed to provide reasonable assurance that the assets of the Group are safeguarded and that transactions
are properly authorised and recorded.

During the year, key controls were:

.

.

.

.

.

day to day supervision of the business by the Executive Directors,

maintaining a clear organisational structure with deﬁned lines of responsibility,

production of management information, with comparisons against budget,

maintaining the quality and integrity of personnel,

Board approval of all signiﬁcant capital expenditure, and all acquisitions.

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.

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.

The Audit Committee, comprising M Rapoport and A Reid,
is responsible for the appointment of external
auditors, reviewing the interim and annual ﬁnancial 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 beneﬁts. The report of the remuneration committee is set out on pages 12 and 13.

After making enquiries, the Directors believe that the Group has sufﬁcient ﬁnancial resources to continue in
operational existence for the foreseeable future. The accounts have therefore been produced on the going
concern basis.

Newmark Security PLC
10

Directors’ responsibilities
Company law requires the Directors to prepare ﬁnancial statements for each ﬁnancial year which give a true
and fair view of the state of affairs of the Company and the Group for that period. In preparing those ﬁnancial
statements, the directors are required to:

.

.

.

.

select suitable accounting policies and apply them consistently;

make judgements and estimates that are reasonable and prudent;

state whether applicable accounting standards have been followed, subject to any material departures
disclosed and explained in the ﬁnancial statements; and

prepare the ﬁnancial statements on the going concern basis unless it is inappropriate to presume that the
Group will continue in business.

The Directors are responsible for maintaining proper accounting records which disclose with reasonable
accuracy at any time the ﬁnancial position of the Company and to enable them to ensure that the ﬁnancial
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 conﬁrm that the ﬁnancial statements comply with the above requirements.

Auditors
A resolution for the re-appointment of BDO Stoy Hayward, Chartered Accountants, as auditors of the Company
is to be proposed at the Annual General Meeting.

By order of the Board

B BEECRAFT
Secretary

31 October 2003

Newmark Security 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 2003 comprised only the two existing Non-Executive Directors, Michel Rapoport and
Alexander Reid.

Michel Rapoport was previously President and Chief Executive Ofﬁcer 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 offer remuneration packages which are appropriate to the experience, qualiﬁcations 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
12 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 except
for lease costs.

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 was terminated during the
year.

On 30 April 1997, the Company entered into a Service Agreement with Mr Rajwan which has been terminated
since the year end.

The Company entered into a Service Agreement on 5 June 1998 with Mr Beecraft which may 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 was terminated during the
year.

Newmark Security PLC
12

Directors’ emoluments
Emoluments of the directors (including pension contributions and beneﬁts in kind) of the Company were as
follows:

Consultancy/
management
agreement
»000

Termination
payments
»000

Salary
»000

Benefits
in kind
»000

Fees
»000

Total
»000

Executive Directors
M Dwek(a)
S Rajwan(b)
B Beecraft
Non-Executive Directors
A Reid(c)
M Rapoport

2002

212
—
—

8
—

220

174

62
—
—

16
—

78

—

—
140
89

—
—

229

179

—
21
6

—
—

27

24

—
—
—

7
7

14

224

274
161
95

31
7

568

601

Pension
contri-
butions

—
13
—

—
—

13

11

The directors’ share interests are detailed in the Report of the Directors on page 8.

(a)

(b)

(c)

The Company paid a consultancy fee of £179,821 (2002: £121,000) to Arbury Inc., a company 51 per cent
owned by M Dwek which covers salary, pension and car beneﬁts. A consultancy fee of £31,895 (2002:
£52,903 ) was paid to Arbury Inc., by Vema NV for services as Chairman of that company. In addition,
Vema paid a fee to Arbury Inc., of £61,904 for the termination of his consultancy contract with that
company.

The salary of S Rajwan includes a special fee of £40,000 for working in Belgium at Drion. The pension
contributions in respect of S Rajwan were for a money purchase pension scheme.

Directors’ fees in respect of A Reid of £7,500 (2002: £7,500) were paid by the Company to R. K. Harrison &
Co. Limited. Vema NV paid fees to R. K. Harrison & Co. Limited of £8,045 (2002: £14,135) for services as
director of that company. In addition, Vema paid a fee to R. K. Harrison & Co. Limited, of £16,193 for the
termination of his management contract with that company

Newmark Security PLC
13

REPORT OF THE INDEPENDENT AUDITORS
Independent Auditors’ Report to the Shareholders of Newmark Security PLC

We have audited the ﬁnancial statements of Newmark Security PLC for the year ended 30 April 2003 on
pages 15 to 35 which have been prepared under the accounting policies set out on pages 19 and 20.

Respective responsibilities of directors and auditors
The directors’ responsibilities for preparing the annual report and the ﬁnancial statements in accordance with
applicable law and United Kingdom Accounting Standards are set out in the Statement of Directors’
Responsibilities.

Our responsibility is to audit the ﬁnancial statement in accordance with relevant legal and regulatory
requirements and United Kingdom Auditing Standards.

We report to you our opinion as to whether the ﬁnancial 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 ﬁnancial 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 speciﬁed
by law regarding directors’ remuneration and transactions with the group is not disclosed.

We read other information contained in the annual report and consider whether it is consistent with the
audited ﬁnancial statements. This other information comprises only the Remuneration Report, the Directors’
Report and the Chairman’s Statement. We consider the implications for our report if we become aware of any
apparent misstatements or material inconsistencies with the ﬁnancial statements. Our responsibilities do not
extend to any other information.

Our report has been prepared pursuant to the requirements of the Companies Act 1985 and for no other
purpose. No person is entitled to rely on this report unless such a person is a person entitled to rely upon this
report by virtue of and for the purpose of the Companies Act 1985 or has been expressly authorised to do so by
our prior written consent. Save as above, we do not accept responsibility for this report to any other person or
for any other purpose and we hereby expressly disclaim any and all such liability.

Basis of audit 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 ﬁnancial statements.
It also includes an assessment of the signiﬁcant estimates and
judgements made by the directors in the preparation of the ﬁnancial statements, and of whether the
accounting policies are appropriate to 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 sufﬁcient evidence to give reasonable assurance that the ﬁnancial
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
ﬁnancial statements.

Opinion
In our opinion the ﬁnancial statements give a true and fair view of the state of the affairs of the Company and
the Group at 30 April 2003, and of the loss of the Group for the year then ended and have been properly
prepared in accordance with the Companies Act 1985.

BDO Stoy Hayward
Chartered Accountants
Registered Auditors

31 October 2003

London

Newmark Security PLC
14

CONSOLIDATED PROFIT AND LOSS ACCOUNT
For the year ended 30 April 2003

Turnover
Continuing operations
Acquisitions
Discontinued operations

Cost of sales

Gross pro¢t

Administrative expenses pre

amortisation of goodwill and
exceptional items
Reorganisation and

restructuring costs
Amortisation of goodwill

Administrative expenses — total

Other operating income

Operating (loss)/pro¢t
Continuing operations
Acquisitions
Discontinued operations

Proﬁt on part disposal of

investment in subsidiary
company

(Loss)/proﬁt on closure/disposal of
business and net trading assets

(Loss)/pro¢t on ordinary

activities before interest

Interest receivable
Interest — discount charge on
deferred consideration

Interest payable

(Loss)/pro¢t on ordinary

activities before taxation
Tax on (loss)/proﬁt on ordinary

activities

(Loss)/pro¢t on ordinary

activities after taxation

Minority interest

Loss for the ¢nancial year
Dividends

Amount withdrawn from reserves

Loss per share
— basic and diluted
— before exceptional items and

goodwill amortisation

Notes

2

3(c)

3(d)

3

3(e)

3(f)

4
4

6

18

17

7

2003
Before
goodwill
and
exceptional
items
»000

2003
Goodwill
and
exceptional
items
»000

6,622
1,748
23

8,393
(5,720)

2,673

(3,932)

—
—

(3,932)

—

(1,146)
112
(225)

(1,259)

—

—

(1,259)
67

(106)
(34)

—
—
—

—
—

—

—

—
(1,093)

(1,093)

—

(1,093)
—
—

(1,093)

—

(373)

(1,466)
—

—
—

2003
Total
»000

6,622
1,748
23

8,393
(5,720)

2,673

(3,932)

—
(1,093)

(5,025)

—

(2,239)
112
(225)

(2,352)

—

(373)

(2,725)
67

(106)
(34)

(1,332)

(1,466)

(2,798)

—

—

—

(1,332)
78

(1,254)
—

(1,254)

(1,466)
—

(1,466)
—

(1,466)

(2,798)
78

(2,720)
—

(2,720)

pence

(1.6p)

(0.8p)

Newmark Security PLC
15

2002
Total
»000

6,479
—
5,548

12,027
(7,785)

4,242

(5,194)

(391)
(128)

(5,713)

597

(1,431)
—
557

(874)

182

3,007

2,315
—

—
(55)

2,260

(1,517)

743
(1,702)

(959)
—

(959)

pence

(0.8p)

(0.5p)

BALANCE SHEETS
As at 30 April 2003

Fixed assets
Intangible assets
Tangible assets
Investments

Current assets
Stocks
Debtors: amounts falling due

within one year

Debtors: amounts falling due
after more than one year

Cash at bank and in hand

Creditors: amounts falling due

within one year

Net current (liabilities)/assets

Total assets less current

liabilities

Creditors: amounts falling due
after more than one year
Provisions for liabilities and

charges

Capital and reserves
Called up share capital
Share premium
Merger reserve
Proﬁt and loss reserve

Equity shareholders’ funds
Minority interests

Notes

8
9
10

11

12

12

13

14

15

16
17
17
17

18

Group
2003
»000

5,585
1,844
—

7,429

1,239

2,389

—
806

4,434

(4,706)

(272)

7,157

(3,263)

(217)

3,677

6,963
5,151
801
(9,585)

3,330
347

3,677

Group
2002
»000

2,014
1,344
—

3,358

773

1,994

—
6,409

9,176

(5,022)

4,154

7,512

(525)

(453)

6,534

6,060
5,194
—
(6,750)

4,504
2,030

6,534

Company
2003
»000

Company
2002
»000

—
19
15,214

15,233

—

71

751
—

822

(9,728)

(8,906)

6,327

(2,798)

—

3,529

6,963
5,151
801
(9,386)

3,529
—

3,529

—
—
7,218

7,218

—

2,601

—
—

2,601

(2,662)

(61)

7,157

—

—

7,157

6,060
5,194
—
(4,097)

7,157
—

7,157

The ﬁnancial statements were approved by the Board of Directors on 31 October 2003 and were signed on its
behalf by:

M DWEK
Chairman

B BEECRAFT
Finance Director

Newmark Security PLC
16

Notes
19

3(e)

2003
»000
(3,172)

67
(34)

33

—

(349)
31

2002
»000
(458)

—
(55)

(55)

(145)

(200)
—

(318)

(200)

(3,870)
1,104

(2,766)

—
—

—

(6,223)

—
—
58
(151)

(93)
(43)

(136)

—
—

—

5,525
61

5,586

4,728

2,880
(705)
—
(1,029)

1,146
—

1,146

5,874

21

(6,359)

CONSOLIDATED CASH FLOW STATEMENT
For the year ended 30 April 2003

Net cash out£ow from operating activities

Returns on investments and servicing of ¢nance
Interest received
Interest paid

Net cash in£ow/(out£ow) from returns on investments and

servicing of ¢nance

Taxation

Capital expenditure and ¢nancial investment
Purchase of tangible ﬁxed assets
Receipts from sale of tangible ﬁxed assets

Net cash out£ow from capital expenditure and ¢nancial

investment

Acquisitions
Purchase of subsidiary undertakings
Net cash acquired on purchase of subsidiary undertakings

Net cash out£ow from acquisitions

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 (out£ow)/in£ow before ¢nancing

Financing
Proceeds from ﬂotation of Vema
Costs related to ﬂotation of subsidiary
New ﬁnance loans
Repayment of loans

Expenses paid in connection with share issues

Net cash in£ow from ¢nancing

(Decrease)/increase in cash

Newmark Security PLC
17

STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
For the year ended 30 April 2003

Loss for the ﬁnancial year
Exchange difference on translation of net assets and results of subsidiary

undertakings

Total recognised gains and losses relating to the year

RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS’ FUNDS
For the year ended 30 April 2003
GROUP

Loss for the ﬁnancial year
New share capital subscribed (net of issue costs)
Goodwill on disposal of business and trading assets
Exchange difference on translation of net assets and results of subsidiary

undertakings

Net (reduction)/increase to shareholders’ funds
Opening shareholders’ funds

Closing shareholders’ funds

COMPANY
Loss for the ﬁnancial year
New share capital subscribed (net of issue costs)

Reduction to shareholders’ funds
Opening shareholders’ funds

Closing shareholders’ funds

2003
»000
(2,720)

(115)

(2,835)

2003
»000
(2,720)
1,661
—

(115)

(1,174)
4,504

3,330

(5,289)
1,661

(3,628)
7,157

3,529

2002
»000
(959)

(66)

(1,025)

2002
»000
(959)
—
3,460

(66)

2,435
2,069

4,504

(1,360)
—

(1,360)
8,517

7,157

Newmark Security PLC
18

Accounting policies

NOTES TO THE FINANCIAL STATEMENTS
ACCOUNTING POLICIES

Notes to the ¢nancial statements
For the year ended 30 April 2003
1.
The ﬁnancial statements have been prepared in accordance with applicable accounting standards in the United
Kingdom and under the historical cost convention. The consolidated ﬁnancial statements include the results of
subsidiaries since the date of acquisition. The principal accounting policies which the directors have adopted are
set out below.

Basis of preparation
The ﬁnancial statements have been prepared on a going concern basis which assumes that the Group will
continue in operational existence for the foreseeable future. The Group has incurred a loss for the year ended
30 April 2003 of £2,798,000, and had net current liabilities of £272,000 and net assets of £3,677,000 at that
date.

In arriving at their conclusion that it was appropriate to adopt the going concern basis the directors have had
regard to:

(a)

(b)

(c)

current trading;

trading and cash ﬂow forecasts and

the issue of secured loan notes after the year end, referred to more fully in note 26 below.

Turnover
Turnover is stated net of value added tax. Sales of equipment are recognised when the equipment is shipped to
the customer or installed. Other sales are either recognised on completion of work, or spread evenly over the
term of the contract.

Goodwill
Goodwill represents the difference 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. The Board
considers that there should be a presumption that the useful economic life of goodwill does not exceed a
speciﬁed maximum period, chosen here to be 20 years since after that date continued measurement is less
reliable.

Goodwill arising on the acquisition of subsidiaries prior to FRS 10 was written off immediately against reserves.
The Group has adopted the transitional arrangement allowed by FRS 10 in that this goodwill remains eliminated
against reserves and will be charged to the proﬁt and loss account on the subsequent disposal of the businesses
to which it relates.

Impairment of ﬁxed assets and goodwill
The need for any ﬁxed asset impairment right down is assessed by comparing the carrying value of the asset
against the higher of realisable value and value in use.

Contingent deferred consideration
Contingent deferred consideration is accounted for in accordance with FRS 7. The fair value of the contingent
consideration payable in cash is taken to be the estimated amount of cash value discounted to its present value.

Intellectual property rights and development costs
Intellectual property rights and development costs are written off to the proﬁt and loss account as incurred.

Tangible ﬁxed assets
The Group’s tangible ﬁxed assets are stated at cost less depreciation. Provision for depreciation is made in equal
annual instalments to write off 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 ﬁttings

Nil
5% per annum
20% per annum
10% per annum

Newmark Security PLC
19

Motor vehicles
Computer equipment

25% per annum
25% per annum

Leased assets and obligations
Assets acquired under hire purchase contracts and ﬁnance 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 ﬁnance charge allocated to future periods. The ﬁnance element of the rental
payment is charged to the proﬁt 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 ﬁnished 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.

Deferred taxation
Deferred tax is provided in full in respect of taxation deferred by timing differences 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 deferred tax balance has not been discounted.

Foreign currencies
Foreign currency transactions of individual companies are translated at the rates ruling when they occurred.
Foreign currency monetary assets and liabilities are translated at the rate of exchange ruling at the balance
sheet date. Any differences are taken to the proﬁt and loss account.

The results of overseas operations are translated at the average rates of exchange during the year and the
balance sheet translated into sterling at the rate of exchange ruling on the balance sheet date. Exchange
differences which arise from translation of
foreign subsidiary
undertakings are taken to reserves.

the opening net assets and results of

All other differences are taken to the proﬁt and loss account.

Pensions
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. Grosvenor operates a
deﬁned contribution pension scheme. The assets of the scheme are held separately from those of the
company in an independently administered fund. Contributions to these schemes are charged to the proﬁt
and loss account in the year in which they become payable.

The Company also made contributions in respect of S. Rajwan. Other employees of the Group contribute to
state schemes. Contributions are charged to the proﬁt and loss account when paid.

Analysis by geographical area

2.
The analysis by geographical area of the Group’s turnover, proﬁt before taxation and net assets is set out below:

Turnover
UK
Europe
Rest of the World

Total

2003
By
origin
»000
7,059
1,334
—

8,393

2002
By
origin
»000
4,918
7,109
—

12,027

2003
By destination
»000
6,912
1,344
137

2002
By destination
»000
4,518
7,270
239

8,393

12,027

Newmark Security PLC
20

Analysis by geographical area (continued)

2.
(Loss)/pro¢t before tax

UK
Europe
Rest of the World

Net Assets

UK
Europe
Rest of the World

2003
Before goodwill
and exceptional
items
»000
(495)
(766)
(71)

2003
Goodwill
and exceptional
items
»000
(355)
(1,072)
(39)

(1,332)

(1,466)

2003
Total
»000
(850)
(1,838)
(110)

(2,798)

2002
Total
»000
(786)
3,408
(362)

2,260

2003
Net assets
»000
2,306
2,141
(770)

2002
Net assets
»000
550
6,708
(724)

3,677

6,534

Operating loss

3.
(a) Continuing and discontinued operations

2003
Continuing
operations
»000
6,622
(4,581)

2003
Acquisitions
»000
1,748
(1,139)

2003
Discontinued
2003
operations
Total
»000
»000
23
8,393
— (5,720)

2002
Continuing
operations
»000
6,457
(4,565)

2002
Discontinued
2002
operations
Total
»000
»000
5,570 12,027
(7,785)
(3,220)

2,041

609

23

2,673

1,892

2,350

4,242

(3,187)

(497)

(248)

(3,932)

(3,039)

(2,155)

(5,194)

Sales
Cost of sales

Gross pro¢t

Administrative expenses
pre-amortisation of
goodwill and
exceptional items
Reorganisation and

restructuring costs

Amortisation of
goodwill

Impairment of goodwill

Administrative expenses

in total

Other operating income

—

(287)
(806)

(4,280)

—

Operating (loss)/pro¢t

(2,239)

—

—
—

(497)

—

112

—

—
—

—

(287)
(806)

(391)

(128)
—

—

—
—

(391)

(128)
—

(248)

(5,025)

(3,558)

(2,155)

(5,713)

—

—

597

—

597

(225)

(2,352)

(1,069)

195

(874)

Newmark Security PLC
21

(b) Operating loss is arrived at after charging the following:

Group
Depreciation of tangible ﬁxed assets
Amortisation of goodwill
Impairment 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:

Property
Motor vehicles and computer equipment

(c)

Reorganisation and restructuring costs comprised:

Accrual for staff termination costs
Provision for unexpired portion of property and other operating leases related to
Newmark Technology Limited
Exceptional depreciation of ﬁxed assets owned by Newmark Technology Limited
Termination costs for restructuring in another subsidiary company

2003
»000
219
287
806
166

32
8

6
4

152
92

2003
»000
—

—
—
—

—

2002
»000
241
128
—
70

35
2

67
9

141
173

2002
»000
105

220
21
45

391

(d) Other operating income
Other operating income in 2002 represented monies received from Lik On Security Limited in settlement of their
purchasing commitment.

(e) 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 ﬂotation and share issue
Share of net assets relating to minority interests at date of ﬂotation

2003
»000
—
—
—
—

—

2002
»000
2,880
(1,695)
(705)
(298)

182

This proﬁt related to the ﬂotation 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.

(f)

(Loss)/pro¢t on closure/disposal of business and trading assets

Proceeds of sale received
Retention receivable
Net assets disposed of
Goodwill on disposal of investment in subsidiary
Cost of disposal

Net proﬁt on disposal
Under provision for costs of closure/disposal in prior years
Costs of closure of operation in year

(Loss)/proﬁt on closure/disposal of business and net trading assets

Newmark Security PLC
22

2003
»000
—
—
—
—
—

—
(228)
(145)

(373)

2002
»000
5,525
532
(1,047)
(1,760)
(243)

3,007
—
—

3,007

4.

Interest payable and similar charges

Discount charge on deferred consideration
Bank loans, overdrafts and other short term ﬁnance

2003
»000
106
34

140

2002
»000
—
55

55

Employees and directors

5.
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

Directors emoluments

Aggregate emoluments
Aggregate contributions under money purchase scheme
Aggregate payments for compensation for loss of ofﬁce
Emoluments of highest paid director
Aggregate contributions under money purchase scheme for highest paid director

Number of directors receiving beneﬁt under money purchase scheme

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

Number
73
60

133

Number
72
66

138

»000
3,238
537
138

3,913

2003
»000
490
13
78
274
—

»000
3,322
520
134

3,976

2002
»000
601
11
—
319
—

Number
1

Number
1

2003
»000
—
—
—

—
—

—

2002
»000
—
122
—

122
1,395

1,517

The tax charged for the year is lower than the standard rate of corporation tax in the UK (30 per cent).

Newmark Security PLC
23

The differences are explained below:

(Loss)/proﬁt on ordinary activities before taxation

(Loss)/proﬁt on ordinary activities at the standard rate of UK corporation tax of
30% (2002: 30%)
Effects on proﬁts of items not deductible for the tax purposes
Tax losses carried forward
Timing differences including capital allowances in excess of depreciation dealt
with under deferred tax
Impairment goodwill amortisation
Interest discount charge on deferred consideration
Grossing up of foreign income
Double tax relief
Adjustment to tax charge in respect of previous periods
Higher tax rates on overseas earnings

Current tax charge for year

2003
»000
(2,798)

(839)
12
541

47
242
32
2
(6)
—
(31)

—

2002
»000
2,260

678
267
338

(3)
—
—
2
(6)
2
239

1,517

The Group has the following tax losses, subject to agreement by HM Inspector of Taxes, available for offset
against future trading proﬁts and capital gains as appropriate:

Management expenses
Non-trading deﬁcit
Trading losses
Capital losses

2003
»000
140
4
3,532
792

2002
»000
83
4
2,905
792

Loss per share

7.
The calculation of the basic loss per ordinary share is based on a loss of £2,720,000 (2002: loss £959,000) and
the weighted average number of shares in issue during the year of 174,364,102 (2002: 121,208,952). The
options in issue have no dilutive effect.

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

2003
(1.6)
0.8

(0.8)

2002
(0.8)
0.3

(0.5)

Intangible ¢xed assets

8.
Group

Cost
At 1 May 2002
Acquisitions in the year

At 30 April 2003

Amortisation
At 1 May 2002
Charge for the year
Impairment

At 30 April 2003

Net book value
At 30 April 2003

At 30 April 2002

Newmark Security PLC
24

Goodwill
»000

2,328
4,664

6,992

(314)
(287)
(806)

(1,407)

5,585

2,014

Tangible ¢xed assets

9.
Group

Cost
At 1 May 2002
Additions
Disposals
Acquisition of subsidiary
Exchange adjustment

At 30 April 2003

Depreciation
At 1 May 2002
Charge for the year
Disposals
Acquisition of subsidiary
Exchange adjustment

At 30 April 2003

Net book value
At 30 April 2003

At 30 April 2002

Company

Cost
Additions

At 30 April 2003

Depreciation
Charge for the year

At 30 April 2003

Net book value
At 30 April 2003

Freehold
land and
buildings
»000

Plant,
machinery
& motor
vehicles
»000

Computers,
fixtures &
fittings
»000

1,331
59
(3)
28
160

1,575

188
26
—
20
13

247

1,328

1,143

1,060
213
(209)
501
101

1,666

918
143
(182)
262
108

1,249

417

142

427
77
(128)
32
13

421

368
50
(127)
24
7

322

99

59

Computers,
fixtures &
fittings
»000

23

23

4

4

19

Total
»000

2,818
349
(340)
561
274

3,662

1,474
219
(309)
306
128

1,818

1,844

1,344

Total
»000

23

23

4

4

19

Newmark Security PLC
25

Fixed asset investments

10.
Company
Investment in subsidiary companies
Cost
At 1 May 2002
Additions
Disposals

At 30 April 2003

Provision for impairment
At 1 May 2002
Disposals

At 30 April 2003

Net book value
At 30 April 2003

At 30 April 2002

»000
9,347
9,246
(3,379)

15,214

2,129
(2,129)

—

15,214

7,218

The provision for impairment was calculated to state the net book value of an investment in a subsidiary
company at the commercial valuation of that company.

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) (92% owned)
Newmark Technology S.A.
Drion Security 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)
Concept Hardware & Security Solutions Limited(5)
Grosvenor Technology Limited
Newmark Group Limited
Newmark Security Limited

Activity
Trading
Trading
Dormant
Holding
Property
Holding
Trading
Holding

Trading
Trading
Property
Dormant
Finance
Trading
Trading
Dormant
Dormant

Country of
incorporation
England & Wales
England & Wales
England & Wales
The Netherlands
The Netherlands
Belgium
Belgium
England & Wales

England & Wales
England & Wales
Belgium
USA
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales

Description
of shares held
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary and
Redeemable
Preference
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary

The investments in subsidiary companies are held directly by the Company apart from the following:

(1)

(2)

(3)

(4)

(5)

Owned by Safetell International Limited

Owned by Newmark Technology S.A.

Owned by Vema B.V.

Owned by Vema N.V.

Owned by Newmark Security Products Limited

Newmark Security PLC
26

11. Stocks

Raw materials
Work in progress
Finished goods

12. Debtors

Amounts falling due within one year
Trade debtors
Amounts owed by subsidiary undertakings
Other debtors
Deferred tax asset (Note 15)
Prepayments and accrued income

2003
Group
»000
472
236
531

1,239

2003
Group
»000
1,818
—
312
46
213

2,389

Debtors: amounts falling due after more than one year

—

13. Creditors: amounts falling due within one year

Bank loans and overdrafts (note 14)
Trade creditors
Amounts due to group companies
Corporation tax
Other taxation and social security
Obligations under ﬁnance leases and hire purchase
contracts
Other creditors
Accruals and deferred income

2003
Group
»000
261
881
—
1,709
499

14
494
848

4,706

2002
Group
»000
470
139
164

773

2002
Group
»000
1,005
—
793
46
150

1,994

—

2002
Group
»000
152
995
—
1,475
104

—
1,763
533

5,022

2003
Company
»000
—
—
—

2002
Company
»000
—
—
—

—

—

2003
Company
»000
—
61
—
—
10

71

751

2003
Company
»000
28
—
9,534
—
—

—
—
166

2002
Company
»000
—
2,577
—
—
24

2,601

—

2002
Company
»000
—
—
2,619
—
—

20
23

9,728

2,662

Other creditors within the Group includes an amount of £Nil (2002: £29,775) in respect of a factoring company
which was secured on trade debtors of a subsidiary company.

14. Creditors: amounts falling due after more than one year

Bank loans and overdrafts
Obligations under ﬁnance leases and hire purchase
contracts
Other creditors

Group
2003
»000
421

44
2,798

3,263

Group
2002
»000
525

—
—

525

Company
2003
»000
—

Company
2002
»000
—

—
2,798

2,798

—

—

Newmark Security PLC
27

Group
Loans are repayable as follows:
In one year or less
Bank loans(a)
Bank overdrafts
Finance leases
Shareholders loan(b)
Bank loan(c)
Bank loan(d)
Bank loan(e)

Total within one year

In more than one year but not more than two
years
Bank loans(a)
Finance leases
Bank loan(c)
Bank loan(d)
Bank loan(e)

In more than two year but not more than ¢ve years
Bank loans(a)
Finance leases
Bank loan(d)
Bank loan(e)

In more than ¢ve years
Bank loans(a)
Bank loan(d)

Total after more than one year

2003
Unsecured
»000

2003
Secured
»000

2002
Unsecured
»000

2002
Secured
»000

—
40
—
25
137
—
17

219

—
—
—
—
11

11

—
—
—
—

—

—
—

—

11

20
—
14
—
—
22
—

56

10
14
—
18
—

42

30
30
54
—

114

179
119

298

454

—
—
—
—
121
—
7

128

—
—
121
—
8

129

—
—
—
9

9

—
—

—

138

9
—
—
—
—
15
—

24

9
—
—
15
—

24

26
—
46
—

72

168
123

291

387

(a)

(b)

(c)

(d)

The bank loan is repayable in quarterly instalments over 24 years. Interest is charged at 6.125 per cent over the ﬁrst 5 years and the loan is
secured on the freehold property of Vema N.V.

The shareholders loan will be set off against the loan notes issued after the year end.

The bank loan is repayable in quarterly instalments over 1 year. Interest is charged at 5.25 per cent per annum.

The bank loan is repayable in quarterly instalments over 14 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 2 years and interest is charged at 4.6 per cent per annum.

15. Provisions for liabilities and charges

Group
At 1 May 2002
Provided in the year
Paid in year
Released in year

At 30 April 2003

Reorganisation
and
restructuring
provision
»000
220
15
(235)
—

—

Rental
provision
»000
168

Deferred
taxation
»000
—

—
(16)

152

—
—

—

Newmark Security PLC
28

Other
»000
65

—
—

65

Total
»000
453
15
(235)
(16)

217

The reorganisation and restructuring provision related 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 ten years of the lease.

There is no provision in respect of deferred tax at 30 April 2003 (2002: £Nil). A deferred tax asset of £46,000
(2002: £46,000) is recorded within debtors in respect of timing differences on capital allowances.

Other provisions relate predominantly to maintenance costs arising in respect of safety regulatory requirements,
and are expected to reverse within one to two years of the balance sheet date.

16. Share capital

Authorised:
1,015,164,192 (2002: Nil) Ordinary shares of 1p each
121,208,952 (2002: Nil) Deferred shares of 4p each
Nil (2002: 300,000,000) Ordinary shares of 5p each

Allotted, called up and fully paid:
211,523,766 (2002: Nil) Ordinary shares of 1p each
121,208,952 (2002: Nil) Deferred shares of 4p each
Nil (2002: 121,208,952) Ordinary shares of 5p each

2003
»

2002
»

10,151,642
4,848,358
—

—
—
15,000,000

£15,000,000

£15,000,000

2,115,238
4,848,358
—

—
—
6,060,450

£6,963,596

£6,060,450

By a special resolution passed at last year’s annual general meeting:

(i)

(ii)

each of the unissued ordinary shares of 5p each in the capital of the Company were sub-divided into ﬁve
ordinary shares of 1p each; and

each of the issued ordinary shares of 5p each in the capital of the Company were sub-divided and
converted into one ordinary share of 1p each and one deferred share of 4p each.

During the year, the Company issued 90,314,814 ordinary shares of 1p each to acquire 60,209,877 Global
Depositary Receipts of Vema N.V.

The total number of share options outstanding under the Approved and Unapproved Share Option Schemes
were:

Date of grant
October 1997
January 1999
December 2001
September 2002

Total

Subscription
price payable
14.5p
8.25p
5p
2p

2003
Approved
448,000
250,000
125,000
125,000

2003
Unapproved
1,708,000
250,000
125,000
7,575,000

2002
Approved
504,000
278,000
146,000
—

2002
Unapproved
1,764,000
278,000
546,000
—

948,000

9,658,000

928,000

2,588,000

The options may be exercised within 10 years from the date of issue.

17. Share premium and reserves

Group
Accumulated reserves at 1 May 2002
Retained loss for the year
Excess of market value over nominal value of shares issued
Expenses of share issue
Exchange differences on foreign currency investments

Share
premium
account
»000
5,194
—
—
(43)
—

Merger
reserve
»000
—
—
801
—
—

Profit and
loss
account
»000
(6,750)
(2,720)
—
—
(115)

Accumulated reserves at 30 April 2003

5,151

801

(9,585)

Newmark Security PLC
29

The cumulative amount of goodwill eliminated against reserves is £4,079,000 (2002: £4,079,000). This goodwill
will be charged in the proﬁt and loss account on any eventual disposal of the businesses to which it related.

Company
Accumulated reserves at 1 May 2002
Excess of market value over nominal value of shares issued
Expenses of share issue
Retained loss for the year

Share
premium
account
»000
5,194
—
(43)
—

Merger
reserve
»000
—
801
—
—

Profit and
loss
account
»000
(4,097)
—
—
(5,289)

Accumulated reserves at 30 April 2003

5,151

801

(9,386)

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 proﬁt
and loss account. The loss on ordinary activities after tax dealt with in the ﬁnancial statements of the parent
company for the year was £5,289,000 (2002: loss £1,360,000).

18. Minority interests

At 1 May
Share of net assets relating to minority interest at date of ﬂotation of Vema
Minority interest purchased back in year
Share of (loss)/proﬁts in year
Exchange differences

At 30 April

19. Reconciliation of operating loss to net cash out£ow from operating activities

Operating loss
Depreciation, amortisation and impairment of goodwill
(Increase) in stocks
Decrease in debtors
(Decrease)/increase in creditors and provisions

Net cash outﬂow from operating activities

20. Reconciliation of net cash £ows to movement in net (debt)/funds

(Decrease)/increase in cash
Decrease in debt in the year from cash ﬂows

(Decrease)/increase in net (debt)/funds resulting from cash ﬂows
Debt disposed of on sale of Vema business and trading assets

Movement in net (debt)/funds

2003
»000
2,030
—
(1,710)
(78)
105

347

2003
»000
(2,352)
1,312
(194)
537
(2,475)

(3,172)

2003
»000
(6,359)
93

(6,266)
—

(6,266)

2002
»000
—
312
—
1,702
16

2,030

2002
»000
(874)
369
(57)
59
(45)

(458)

2002
»000
5,874
1,029

6,903
502

7,405

Newmark Security PLC
30

21. Analysis of changes in net (debt)/funds

Cash at bank and in hand
Overdrafts

Debt due after one year
Debt due within one year

April
2002
»000
6,409
—

6,409

(525)
(152)

(677)

Cash flow
»000
(6,288)
(71)

(6,359)

126
(33)

93

Net funds

5,732

(6,266)

Exchange
adjustments
»000
685
—

April 2003
»000
806
(71)

685

(66)
(19)

(85)

600

735

(465)
(204)

(669)

66

Financial instruments

22.
The Group’s ﬁnancial 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 ﬁnancials instruments is to
raise ﬁnance for the Group’s operations.

It is, and has been throughout the year, the Group’s policy that no trading in ﬁnancial instruments shall be
undertaken.

The main risks arising from the Group’s ﬁnancial 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 ﬁnances its operations through a mixture of retained proﬁts and bank borrowings. The Group
borrows at ﬁxed rates of interest on long term loans to secure the Group’s exposure to interest rate
ﬂuctuations. At the year end, 100 per cent (2002: 100 per cent) of the Group’s borrowings were at ﬁxed rates
with Nil per cent (2002: Nil per cent) of these borrowings comprising liabilities on which no interest is paid.

Liquidity risks
Short-term ﬂexibility 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 Euros 867,000 partly ﬁnanced the acquisition of Drion in Belgium.

At the year end, 40 per cent (2002: 39 per cent) of the Group’s borrowings were due to mature in more than
ﬁve years.

Foreign currency risk
At the year end, the Group had a signiﬁcant overseas subsidiary operating in Belgium and the Belgian
acquisition was partly ﬁnanced 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.

Interest rate risk of ﬁnancial assets and ﬁnancial liabilities
The interest rate proﬁle of the Group’s ﬁnancial assets at 30 April 2003 was:

Currency
Sterling
Euros
Dollars

Floating
rate
financial
assets
»000
705
98
3

806

Financial
assets on
which no
interest is
received
»000
—
—
—

Fixed rate
financial
assets
»000
—
—
—

—

—

Total
»000
705
98
3

806

Newmark Security PLC
31

The interest rate proﬁle of the Group’s ﬁnancial assets at 30 April 2002 was:

Currency
Sterling
Euros
Dollars

Floating
rate
financial
assets
»000
954
5,430
25

6,409

Financial
assets on
which no
interest is
received
»000
—
—
—

Fixed rate
financial
assets
»000
—
—
—

—

—

Total
»000
954
5,430
25

6,409

The interest rate proﬁle of the Group’s ﬁnancial liabilities at 30 April 2003 was:

Currency
Euros

Floating
rate
financial
liabilities
»000
—

Fixed rate
financial
liabilities
»000
682

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

—

682

—

Total
»000
682

682

The interest rate proﬁle of the Group’s ﬁnancial liabilities at 30 April 2002 was:

Floating
rate
financial
liabilities
»000
—

Fixed rate
financial
liabilities
»000
677

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

—

677

—

Total
»000
677

677

Fixed rate financial liabilities Fixed rate financial liabilities
Weighted
average
period for
which rate
is fixed
2002
Years
12.44

Weighted
average
period for
which rate
is fixed
2003
Years
12.9

Weighted
average
interest
rate
2002
%
6.03

Weighted
average
interest
rate
2003
%
6.1

6.1

12.9

6.03

12.44

Currency
Euros

Currency
Euros

Total

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 proﬁt 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.

Newmark Security PLC
32

As at 30 April 2003, these exposures were as follows:

Functional currency of Group operation
Sterling

Total

As at 30 April 2002:

Sterling

Total

Maturity of ﬁnancial liabilities
The maturity of proﬁle of the Group’s ﬁnancial liabilities 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 ﬁve years
In more than ﬁve years

Net foreign currency
monetary assets/
(liabilities) in »000
Total
(66)

US dollars
(34)

(34)

(66)

Euros
(32)

(32)

—

—

(113)

(113)

(113)

(113)

2003
»000
275
53
114
298

740

2002
»000
152
153
81
291

677

Borrowing facilities
The Group has various undrawn committed borrowing facilities. The facilities available in respect of which all
conditions precedent had been met were as follows:

Expiring in one year or less

2003
»000
Nil

2002
»000
Nil

Fair values of ﬁnancial liabilities
Set out below is a comparison by category of book values and fair values of the Group’s ﬁnancial liabilities:

Short-term ﬁnancial liabilities and current portion of
long-term liabilities
Long term borrowings

Book
values
2003
»000

275
465

Fair
values
2003
»000

270
404

Book
values
2002
»000

152
525

Fair
values
2002
»000

150
347

The fair values shown above have been calculated by discounting cash ﬂows at prevailing interest rates. The fair
values of all other monetary assets and liabilities is equal to their book values.

23. Acquisitions
On 18 September 2002, the Company acquired the entire share capital of Grosvenor Technology Limited
(‘‘Grosvenor’’) for a consideration of:

(i)

(ii)

initial consideration of £2.5 million cash paid on completion and a further £787,000 paid on conﬁrmation
that the net asset value and cash of Grosvenor exceeded certain parameters, and

deferred consideration of up to £3.5 million payable dependent on the average proﬁt before taxation of
Grosvenor and Newmark Technology for the four years ending 31 October 2006. On the basis of current
projections, this deferred consideration will be payable in full and has been accrued (discounted) in the
ﬁnancial statements.

Newmark Security PLC
33

The assets and liabilities of Grosvenor at the date of acquisition which have been accounted for under
acquisition accounting rules were as follows:

Fixed assets
Tangible

Current assets
Stocks
Debtors
Bank and cash

Total assets

Creditors

Total liabilities

Net assets
Purchased goodwill

Total purchase consideration

Comprises:
Cash
Discounted deferred consideration
Costs

Book value
»000

255

237
797
1,104

2,393

495

495

1,898
4,664

6,562

3,287
2,692
583

6,562

No fair value adjustments were required to the assets and liabilities of Grosvenor at the date of acquisition.

The trading results of Grosvenor for the ten and a half months of that company’s statutory accounts for the
eighteen months to 30 April 2003 that were earned in the period prior to acquisition and therefore not included
in the Group’s results, were as follows:

Turnover

Operating proﬁt
Interest

Proﬁt before tax
Taxation

Proﬁt after tax

»000
2,691

340
26

366
(28)

338

The statement of total recognised gross and losses for the ten and a half months of that company’s statutory
accounts for the eighteen months to 30 April 2003 was as follows:

Proﬁt for the ﬁnancial period

Total recognised gains and loss relating to the period

The proﬁt after tax of Grosvenor for the previous twelve months’ statutory accounts was £548,000.

»000
338

338

Newmark Security PLC
34

24. Other ¢nancial commitments
At 30 April 2003, the Company had annual commitments under non-cancellable operating leases as follows:

Plant and equipment
in one year or less
in more then one year but not more than two years
in more than two year but not more than ﬁve years
in more than ﬁve years

Property leases
in one year or less
in more than one year but not more than two years
in more than two years but not more than three years
in more than ﬁve years

2003
»000

2002
»000

4
20
21
—

40
32
20
79

128
13
17
—

—
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 (2002:
£7,500) in respect of Mr. Reid. Vema NV paid fees of £8,045 (2002: £14,135) to R. K. Harrison & Co.
Limited for services as director of that company. In addition Vema paid a fee to R. K. Harrison & Co.
Limited of £16,193 for the termination of his management contract with that company.

(b) M Dwek is a director of the Company and owns 51 per cent of the share capital of Arbury Inc., which
received consultancy fees from the Company of £179,821 (2002: £121,000) in the year. A consultancy fee
of £31,985 (2002: £52,903) was paid to Arbury Inc. by Vema NV for services as Chairman of that
Company. In addition Vema paid a fee to Arbury Inc., of £61,904 for the termination of his consultancy
contract with that company.

(c)

Amounts totalling £2,700 (2002: £4,521) 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. The amounts
outstanding at 30 April 2003 was £Nil (2002: £Nil).

These amounts are included in directors emoluments.

26. Post balance sheet events
(a)

Since the year end the Group has agreed terms for the issue of secured loan notes to raise up to
£1.5 million. The Loan Note Holders have committed to subscribe in cash for £1 million and, on
agreement between the parties, the Loan Note Holders can subscribe in cash for up to a further
£0.5 million of Loan Notes. The Loan Notes bear interest at a rate of 6% per annum payable quarterly in
arrears and are repayable three years after the date of the instrument constituting the Loan Notes with
an option for early repayment. As part of the fundraising, the Company issued warrants to the Loan Note
Holders to subscribe for ordinary shares of 1p each in the Company at any time between 24 July 2003
and 24 July 2008 at a price of 1p per ordinary share.

(b)

Agreement has been reached to sell Drion Security S.A. to the former Chief Executive of the Group for a
deferred consideration of up to Euro 0.5 million payable over 5 years subject to certain levels of proﬁt
being achieved.

Newmark Security PLC
35

NOTICE OF ANNUAL GENERAL MEETING

Notice is hereby given that the Annual General Meeting of the members of Newmark Security PLC will be held
at the ofﬁces of Newmark Security PLC, Suite 3, 23 Bruton Street, London W1J 6QF on 1 December 2003 at
2.30 p.m. for the purpose of considering and,
if thought ﬁt, passing the following resolutions of which
numbers 1 to 4 will be proposed as Ordinary Resolutions and number 5 as a Special Resolution:

ORDINARY BUSINESS
1.

To receive, consider and adopt the report of the Directors, and the annual accounts for the period ended
30 April 2003 and the auditors’ report thereon.

2.

3.

4.

5.

(a)

(b)

To re-appoint M Dwek as a director of the Company.

To re-appoint BDO Stoy Hayward as auditors and to authorise the directors to determine their
remuneration.

Directors’ authority to allot shares
That the Directors be, and they are hereby, generally and unconditionally authorised pursuant to
section 80 of the Companies Act 1985 (the ‘‘Act’’), in substitution for any existing authorities conferred
upon the Directors pursuant to that section, to exercise all the powers of the Company to allot relevant
securities of the Company (as deﬁned in that section) to such persons at such times and on such terms as
they think proper up to an aggregate nominal amount equal to £2,580,000, such authority to expire upon
the earlier of the conclusion of the next Annual General Meeting of the Company or the date (if any) on
which the said authority is revoked, varied or renewed, save that the Company may, prior to the expiry of
such period, make any offer or agreement which would or might require relevant securities to be allotted
after the expiry of such period and the Directors may allot relevant securities in pursuance of such offer
or agreement notwithstanding such expiry.

Partial exclusion of pre-emption rights
That, subject to the passing of resolution 4 above, the Directors be and they are hereby empowered
pursuant to section 95(1) of the Act to allot equity securities (as deﬁned in Section 94(2) of the Act) of
the Company for cash pursuant to the general authority of the Directors under section 80 of the Act
conferred by resolution 4 above as if the provisions of section 89(1) of the Act did not apply to such
allotment provided that the power conferred by this Resolution shall be limited to the allotment:

of equity securities in connection with an offer of such securities by way of rights to holders of ordinary
shares in proportion (as nearly as may be practical) to their respective holdings of such shares but subject
to such exclusions or other arrangements as the Directors may deem necessary or expedient in relation to
fractional entitlements or any legal or practical problems under the laws of any territory or the
requirements of any regulatory body or stock exchange; and

otherwise than pursuant to paragraph (a) above, of equity securities (to the extent that they are relevant
shares within the meaning of Section 94 of the Act or to the extent that they are other equity securities
giving the right to subscribe for or convert into relevant shares) up to an aggregate nominal amount not
exceeding £1,880,000, such power to expire at the earlier of the conclusion of the next Annual General
Meeting of the Company or 15 months from the date of this resolution whichever is the earlier, save that
the Company may, prior to the expiry of such period, make any offer or agreement which would or might
require equity securities to be allotted after the expiry of such period and the Directors may allot equity
securities in pursuance of such offer or agreement notwithstanding such expiry.

By order of the Board
B G Beecraft

31 October 2003
Registered Ofﬁce
Suite 3
23 Bruton Street
London W1J 6QF

Notes:
1.

2.

A member entitled to attend and vote at the meeting may appoint one or more proxies to attend and, on a poll, to vote instead of him. A
proxy need not be a member of the company.
In relation to uncertiﬁcated shares, only those persons who are registered on the relevant register 48 hours before the time of the meeting
shall be entitled to attend and vote at the meeting.

Newmark Security PLC
36

3.

4.

5.

6.

7.

8.

a register in which are recorded details of all transactions in the shares of the company in respect of all Directors and their families;
a copy of every service contract between the company and any Director of the company.

The following documents are available for inspection at the company’s registered ofﬁce during normal business hours on any weekday
(excluding Saturdays, Sundays and public holidays) until 30 November 2003 and will also be available for inspection at the place of the
annual general meeting for at least 15 minutes prior to and until the conclusion of the meeting:
(a)
(b)
Valid forms of proxy, duly signed, together with the Power of Attorney or authority (if any) under which they are signed (or a certiﬁed copy
of such power or authority) must be lodged with the Company Secretary at the Registered Ofﬁce by no later than 2.30 p.m. on 29 November
2003. Completion of a form of proxy will not affect the right of a member to attend and vote at the meeting.
Pursuant to Regulation 41 of the Uncertiﬁcated Securities Regulation 2001, the time by which a person must be entered on the register of
members in order to have the right to attend and vote at the Extraordinary General Meeting is 2.30 p.m. on 29 November 2003 (being not
more than 48 hours prior to the time ﬁxed for the meeting) or, if the Meeting is adjourned, such time being not more than 48 hours prior to
the time ﬁxed for the adjourned meeting. Changes to entries on the register of members after that time will be disregarded in determining
the right of any person to attend or vote at the Meeting.
In the case of joint holders, the vote of the senior who tenders a vote whether in person or by proxy will be accepted to the exclusion of the
votes of the other joint holders and for this purpose seniority will be determined by the order in which the names stand in the register of
members of the Company in respect of the relevant joint holding.
Directors authority to allot shares:
Under Section 80 of the Companies Act 1985, the Directors may not exercise any powers of the Company to allot relevant securities (as
deﬁned in that section) unless authorised to do so by the Company in general meeting or by its articles. Resolution 4 authorises allotment
sufﬁcient to cover the existing warrants and options granted by the Company and allotment of up to an amount approximately equal to (but
not exceeding) one third of the issued share capital of the Company for the period to the conclusion of the Annual General Meeting in 2004
or until such time as the authority is revoked, varied or renewed whichever is earlier. It replaces all previous authorities and is in line with the
institutional guidelines followed by other publicly listed companies.
Partial exclusion of pre-emption rights:
Section 89 of the Companies Act 1985 requires that a public company allotting shares for cash must ﬁrst offer them to existing shareholders
following a statutory procedure which is both costly and cumbersome. Resolution 5 enables the Directors to allot sufﬁcient shares to cover
the existing warrants and options of the Company and to allot shares up to an aggregate nominal amount of ﬁve per cent of the ordinary
share capital of the Company in issue. It replaces all previous such powers.
The taking of powers of this sort is reasonably standard practice for public companies and the Directors believe that the limited powers
provided by this resolution will maintain a desirable degree of ﬂexibility. Unless previously revoked or varied the disapplication will expire
on the conclusion of the next Annual General Meeting of the Company or 15 months from the date of the passing of this resolution
whichever is earlier.

Newmark Security PLC
37

NEWMARK SECURITY PLC

Form of Proxy

Annual General Meeting

I/We (name(s) in full). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

of . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

being (a) holder/holders of Ordinary Shares of the above-named Company and entitled to vote at general
meetings thereof hereby appoint the Chairman of the meeting or

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

as my/our proxy to vote for me/us on my/our behalf at the Annual General Meeting of the holders of Ordinary
Shares of the Company to be held at 2.30 p.m. on 1 December 2003, and at any adjournments thereof, and
direct the proxy to vote for/against the resolutions to be proposed thereat as detailed below.

Note:
If it is desired to appoint any other person, please insert his/her name and address above and delete the words ‘‘the Chairman of the meeting or’’.

Signed. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Please indicate with an ‘‘X’’ in the appropriate box below how you wish your vote to be cast. If the form is
returned without any indication as to how the proxy shall vote on any particular matter, the proxy will vote
or may abstain as he/she thinks ﬁt.

For

Against

1.

2.

3.

4.

5.

To receive the report of the Directors and the annual
accounts for the period ended 30 April 2003 and the
auditors report thereon

To re-appoint M Dwek as a director of the Company

To re-appoint BDO Stoy Hayward as auditors and to authorise
the directors to determine their remuneration

To generally and unconditionally authorise the Directors
to allot securities pursuant to section 80 of the Companies
Act 1985

To partially disapply the statutory pre-emption rights
pursuant to section 95(1) of the Companies Act 1985

%

Newmark Security PLC
39

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