Newmark Security plc Annual Report 2006

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FY2006 Annual Report · Newmark Security plc

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Annual Report

For the year ended 30 April 2006

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

Page

Newmark Security PLC
1

Company number;

Registered Of¢ce:

Directors:

Secretary:

Bankers:

Solicitors:

Auditors:

Nominated Adviser:

Broker:

Registrars:

DIRECTORS, SECRETARY AND ADVISERS

3339998

57 Grosvenor Street
London W1K 3JA

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

B Beecraft FCA

HSBC PLC
Corporate Banking Centre
59 Old Christchurch Road,
Bournemouth
Dorset BH1 1EH

Field Fisher Waterhouse
35 Vine Street
London EC3N 2AA

BDO Stoy Hayward LLP
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

Capita Registrars
The Registry
34 Beckenham Road
Beckenham
Kent BR3 4TU

Newmark Security PLC
2

CHAIRMAN’S STATEMENT

Overview
The year has been a period of restructuring and consolidation. We sold NSP Europe Limited and closed down
Concept Hardware & Security Solutions Limited, our two loss making businesses. The remaining businesses have
all continued to be proﬁtable. Results were lower than anticipated at the beginning of the year due to three
major factors:

(i)

(ii)

(iii)

the delay by the customer of one major contract for Grosvenor Technology Limited. However the business
has not been lost and indeed is expected to start within the next few months. Provided that it occurs this
will generate a substantial increase in sales and proﬁts in the current ﬁnancial year,

the cancellation by the Post Ofﬁce of the Horizon project within Safetell Limited to install RollerCash
machines and Flip Top Tills, and

the fall in sales to our US distributor by Custom Micro Products Limited during the ﬁrst six months of the
year following the high level of turnover in the last few months of the preceding year. Sales in the second
half of the year returned to historical levels and this has been maintained in the current year.

As a consequence of the above, turnover for the year from continuing businesses was £11,839k compared to
£12,348k, a fall of 4.1 per cent. Gross margin for the year from continuing operations was £4,764k (40.2 per
cent of sales) compared to £5,281k (42.8 per cent). Within the Electronic sector, the costs of the development
and support teams are included within cost of sales. This represents a ﬁxed cost to those companies and
therefore their margins vary with the level of sales. This has had an impact in the year in CMP for the reason
explained above. Gross margin within Safetell was also lower in the year for the reasons set out in the asset
protection division review below.

Administrative expenses were tightly controlled in the year increasing slightly from £3,762k to £3,799k for
continuing businesses before amortisation of goodwill. After a small increase in the amortisation of goodwill,
operating proﬁts from continuing operations fell from £1,148k to £572k.

Loss per share is shown in the proﬁt and loss account as 0.11p (2005: Nil). However, the earnings per share
before goodwill amortisation, interest discount adjustment, losses of discontinued operations and exceptional
items are 0.22p (2005: 0.3p) as calculated in note 7 to the accounts.

As a consequence of the fall in turnover, turnover per employee fell slightly from £100,390 to £99,487.

Both CMP and Safetell are the leaders in their particular markets whilst Grosvenor is a major force at the upper
price end of the access control market. There were no environmental issues having a major impact on the Group
in the year, although the directives on the use of leaded components did create some additional work within
CMP.

The Group continues to invest in research and development which will beneﬁt the results in the medium to long
term. Costs relating to research and development are expensed as incurred.

The Disability Discrimination Act will, we believe, have an increasing impact on the needs of some of our
customers when the requirements are realized more fully, and this would beneﬁt Safetell in particular.

The Group net assets have reduced in the year from £3.3 million to £3.0 million but will be strengthened in the
current year with the expiry of the loan notes which will result in 50 per cent of the loan notes being converted
into shares. All the loan notes are currently shown in creditors: amounts falling due within one year.

Working capital does vary month by month due to the timing and amounts of some of the types of contracts
that we are involved in, particularly within Safetell.

During the year the deferred element of the purchase consideration for the acquisition of CMP was paid.

In the current ﬁnancial year, the earn out period related to the deferred consideration for Grosvenor Technology
expires and the vendors of the business receive loan notes as explained in note 14 to the accounts. We believe
that the maximum amount under the earnout will be payable. As a consequence of this the discount charge on
deferred consideration will reduce substantially in the current year.

A detailed review of their activities, results and future developments is set out in the divisional results below.

Newmark Security PLC
3

Share issues
Shares were issued to Arbury Inc., in the year as compensation for the change of Mr M Dwek from executive to
non-executive chairman at a signiﬁcantly lower cost to the company from 1 November 2005, (as detailed in
note 24 to the accounts), and for the management fee in respect of his services for September and October
2005.

Financial results
The operating proﬁt for the year was £362,000 (2005: £414,000).

The operating proﬁt for the year for continuing operations before goodwill amortisation was £965,000 (2005:
£1,519,000), both ﬁgures exclude the operating losses of £210,000 and £734,000 from the discontinued
businesses.

Turnover for the year for continuing operations was £11.8 million (2005: £12.3 million). The main commercial
factors affecting the results of the divisions are set out below.

Electronic Division
Turnover £6,407,000 (2005: £6,682,000)
Operating proﬁt £988,000 (2005: £1,350,000)

Turnover in Grosvenor for the year was similar to last year. We had anticipated a substantial increase in the
year but one major contract was delayed by the customer and should now fall into the current ﬁnancial year.

We also anticipate other major contracts for both existing and new customers for shipment some time in 2007.
Our products have been approved by the customer but in view of the complexity and size of the contracts, the
timing is difﬁcult to predict.

JANUS and Siteguard versions 4.0 have been released and offer greater compatibility with third party systems
such as Simplex, MX, American Dynamics and Bosch. This version also includes additional features related to the
Disability Discrimination Act.

The Siteguard product, which is developed exclusively for Tyco, is now able to integrate directly with the Tyco
Intellex CCTV product as well as the Tyco MX Fire Panel system and this should increase sales to the ADT branch
network and open new possibilities for Siteguard where existing Intellex or MX systems require a new access
control system.

Newmark Technology Limited sales fell in the year with a decrease in the sales of the third party access control
system C-Cure due to increased competition from other distributors of the product.

However the N-TEC access control system, for which Newmark has an exclusive agreement with Simplex Fire, is
starting to take off in the Middle East. Some sizable contracts are being gained and the ﬁrst major sale was
invoiced in April 2006. Sales are set to grow as this is the only access control product that Simplex is
distributing in the Middle East, Africa and Russia.

A software interface between N-TEC and the Simplex 4100U ﬁre panel was launched at the Intersec Security
Exhibition in Dubai in February 2006 and the Simplex conference in Cairo in May 2006.

United States UL approvals are being sought for N-TEC and phase 1 should be completed by the ﬁrst quarter
2007. This will allow the system to be sold into those Middle East countries that require UL and eventually
directly into the United States.

Newmark has recently announced that it has formed an agreement with HID Global where, from 1 July 2006,
the company has become a distributor and technical resource for their Indala brand in the UK. Indala was the
ﬁrst company to attain commercial success applying RFID technology to access control systems and are
employed in a myriad of private and public sector organizations in corporate, education, healthcare and
government. The current Indala annual turnover in the UK is approaching £1 million. Newmark has acted as
sub-agent for the product for many years and consequently already has a detailed knowledge of the company
and its products. Newmark will be one of seven distributors.

The Par-Sec RFID asset protection system is being re-developed to accommodate European frequency
regulations. A new reader will be available by early 2007 and will connect to a suitable system such as JANUS,
Siteguard or N-TEC via Ethernet. The new reader will not require an access control unit to interface as it will
communicate directly with the main system via a TCP/IP network thus saving money for the customer and
making it easier to install.

Newmark Security PLC
4

As stated above, the sales of CMP were lower in the year due to an exceptionally high volume of sales to our
US distributor towards the end of the previous ﬁnancial year. The uplift in orders from that source in the
second half of the year under review has been maintained in the current year to date.

The increased presence of products from the Far East has also created pressure on margins. The Waste Electrical
and Electronic Equipment Directive has placed restraints on the use of leaded components which has made
some components obsolete and caused the need for redesign work on existing products.

Existing products have been re-evaluated and are being re-developed to minimize manual assembly and reduce
costs wherever possible. The RS range (Revised Series) will be launched at the end of this year and offer
manufacture cost savings of 20/25 per cent on some products. We will also build into the redesign as
standard, where possible, the ability to connect via Ethernet thus improving the product whilst at the same
time reducing costs.

Asset Protection Division
Turnover £5,432,000 (2005: £5,666,000)
Operating proﬁt £490,000 (2005: £787,000)

Safetell’s ﬁnancial year was characterised by a large number of smaller projects with no single, major
programme of work. Although total sales were £234k lower than the previous year, compound sales growth
has been 8 per cent per annum since April 2003.

Various Eclipse rising screen programmes were maintained with long-term customers in retail ﬁnance, petrol
retailing and some police forces. The value of reconﬁguration/refurbishment works for Eclipse again exceeded
the value of new installations with some signiﬁcant work to provide new counters to Abbey in line with the
re-branding by Santander.

The number of CounterShield installations increased by 17 per cent to 48 in the year but average values
decreased so that revenues increased by only 7 per cent compared to last year. Eye2Eye sales were
disappointing in both numbers and values but each installation was for a new customer with all having the
potential for signiﬁcant repeat business in 2006-07. Police Authorities, Local Authorities and Rail Operating
Companies remain the market focus for these products.

Sales to Post Ofﬁce of RollerCash and BiDi Safe were much lower than planned due to the cancellation of the
Horizon project and, towards the end of the year, by restrictions on Government funding for Post Ofﬁce
restructuring. Nevertheless, sales of cash handling equipment increased by 48 per cent compared to the
previous year. The Post Ofﬁce rural network is due to receive substantial funding in 2006-07 so that sales
volumes are expected to remain reasonably constant. Other retail ﬁnance customers are now carrying out
trials of open plan branches with cashier till positions incorporating Safetell equipment. If these trials are
successful, there could be signiﬁcant growth in the next 2-3 years.

Service and maintenance revenue increased by 11 per cent with more contract work being secured from existing
customers. This part of the business is set to grow further and acts as a catalyst for new product development
to meet client requirements.

Various factors, including adverse product mix, new clients, a few high cost contracts, investment in training
and resources to meet the future demands of the business as well as continual competitive pressures,
depressed margins from their previous high level. Action was taken in late 2005 to redress the imbalance and
the effects should be seen in the current ﬁnancial year.

Order intake in the early part of 2006 was slow and will result in sales for the ﬁrst months of the current year
being below the long-term average with no revenue and proﬁt growth in the ﬁrst half year.

The prospects for the second half are more difﬁcult to predict but the level of customer enquiries with plans for
major roll-out programmes offer good grounds for growth.

Balance sheet and cash £ow
The balance sheet reﬂects the disposal and closure of businesses in the year, but the components of working
capital, and hence the operating cash ﬂow, are affected by the timing of both the project work that is
undertaken by Safetell, and one off major contracts of both Grosvenor and Safetell.

The cash ﬂow in the year includes the payment of the deferred consideration for the acquisition of Custom
Micro Products Limited, which also impacted on the comparison of creditors in the balance sheet.

Newmark Security PLC
5

Employees
The Board would again like to express their gratitude to all employees for their contribution to the success of
the businesses in which they work.

Summary
We would anticipate that the roll forward of the major contract within Grosvenor should have a signiﬁcant
impact upon the results of the Group in the current year, whilst we would expect an upturn in the
performance of CMP after a disappointing year and this is supported by initial results and orders.

The £1.5 million loan notes expire in July and one half of the total will be repaid using agreed banking facilities,
and the other 50 per cent converted into ordinary shares in accordance with the option in the loan note
agreement.

M DWEK
Chairman

24 July 2006

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 2006.

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 proﬁt on ordinary activities after exceptional items and goodwill amortisation and before interest, tax and
minority interest in the year was £170,000 (2005: £401,000). Exceptional items were £192,000 and related to the
loss on disposal of NSP Europe Limited and the closure of Concept Hardware & Security Solutions Limited.
Amortisation of goodwill was £393,000 (2005: £371,000).

The operating proﬁt for the year was £362,000 (2005: £414,000).

The operating proﬁt for the year before exceptional items and goodwill amortisation for continuing operations
was £965,000 (2005: £1,519,000). Turnover for the year for continuing operations was £11.8 million (2005:
£12.3 million). The directors do not recommend the payment of a dividend. A review of the business and
future prospects is given in the Chairman’s Statement on pages 3 to 6.

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

M Dwek
B Beecraft
M Rapoport
A Reid

Details of the Directors’ service contracts are shown in the Remuneration Committee Report on pages 11
and 12.

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

Share capital
Full details of changes to the share capital in the year, please refer to note 16 to the ﬁnancial statements on
page 28.

Financial instruments
For full details of changes to the Group’s management of its ﬁnancial instruments, please refer to note 22 to
the ﬁnancial statements on page 30.

Valuation of land
In the opinion of the directors there is no material difference between the market value of the company’s
interest in land and the amount at which it is shown in the ﬁnancial statements.

Directors
Directors’ interests
The beneﬁcial and other interests of the Directors in the shares of the Company as at 1 May 2005 (or the date
of their appointment to the Board, if later) and 30 April 2006 were as follows:

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

Percentage
holding at
30 April 2006
10.2%
2.8%
15.7%

30 April 2006
38,069,467
10,555,000
58,833,237

1 May 2005
(or date of
appointment
if later)
23,366,667
10,555,000
55,335,237

Newmark Security PLC
7

(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 80.3 per cent by A Reid of which 74.8 per cent is a beneﬁcial holding and 5.5 per cent is a non beneﬁcial holding,
and the R.K. Harrison Retirement Beneﬁt Scheme in which A Reid has a beneﬁcial interest.

The interests of Directors in Share Option Schemes operated by the Company at 30 April 2005 and 2006 were as
follows:

Number of
Ordinary Shares
under the
Approved
Scheme
30 April 2006
—
500,000

Number of
Ordinary Shares
under the
Unapproved
Scheme
30 April 2006
5,000,000
4,000,000

Number of
Ordinary Shares
under the
Approved
Scheme
1 May 2005
—
500,000

Number of
Ordinary Shares
under the
Unapproved
Scheme
1 May 2005
5,000,000
1,000,000

M Dwek
B Beecraft

The Directors had no other interests in the shares or share options of the Company or its subsidiaries.

Research and development
The Group is committed to on-going research and development. The strategy is based upon market demand to
meet 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 on page 21.

Substantial shareholdings
Apart from the Directors’ shareholdings detailed above, the Directors have been notiﬁed of the following
additional shareholdings of 3 per cent or more of the issued ordinary share capital of the Company as at the
date of this document:

Mrs G A B Reid
L R Nominees Limited
M V. Beheer BV
Mr and Mrs S Lothian
T D Waterhouse Nominees (Europe) Limited SMKT Nominees Account

Percentage
holding
4.2%
5.5%
3.6%
3.5%
3.0%

Number of
shares
15,750,000
20,594,300
13,447,725
13,000,000
11,399,161

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 set
out in note 16 to the accounts on page 28.

Newmark Security PLC
8

Environmental Policy
The Group’s environmental policy endeavours to minimise the impact of its activities on the environment
through, where possible, the proper conservation of natural resources. The Group recognises its responsibility
to review continually and improve its environmental performance and,
in doing so, seeks the input of
architects, engineers and other professional advisers.

Payment of suppliers
The Group requires its operational management to settle terms of payment with suppliers when agreeing the
terms of the transaction to ensure that suppliers are aware of these terms and to abide by them. Trade creditors
at the year end were 41 days (2005: 24 days) of average supplies for the period.

Corporate governance
The Company has complied voluntarily throughout the year as far as practicable with the provisions of the
Combined Code which only applies mandatorily to fully listed companies.

At 30 April 2006, the Board comprised a Chairman, one Executive Director 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
approve major capital expenditure and to review budgets. The Board will also consider reports from senior
members of the management team. The Chairman takes responsibility for the conduct of the Group and
overall strategy.

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
re-election at each Annual General Meeting. Additionally, each director has undertaken to submit
for
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 but not absolute 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 Director,

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.

Newmark Security PLC
9

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 two
independent Non-Executive Directors. Each committee has written terms of reference.

is responsible for the appointment of external
The Audit Committee, comprising M Rapoport and A Reid,
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
incentives and
terms and conditions of employment of Executive Directors including the provision of
performance related beneﬁts. The report of the Remuneration Committee is set out on pages 11 and 12.

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.

Directors’ responsibilities
The Directors are responsible for preparing the annual report and the ﬁnancial statements in accordance with
applicable law and United Kingdom Generally Accepted Accounting Practice.

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.

All of the current Directors have taken all the steps that they ought to have taken to make themselves aware of
any information needed by the Company’s auditors for the purposes of their audit and to establish that the
auditors are aware of that information. The Directors are not aware of any relevant audit information of
which the auditors are unaware.

Auditors
A resolution to reappoint BDO Stoy Hayward LLP as auditors will be proposed at the next annual general
meeting.

By order of the Board

B BEECRAFT
Company Secretary

24 July 2006

Newmark Security PLC
10

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 2006 comprised two existing Non-Executive Directors, Alexander Reid and Michel
Rapoport.

Alexander Reid is executive chairman of R.K. Harrison & Company Limited (a shareholder of the Company) and a
director of 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).

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 President and Chief
Executive Ofﬁcer of LII Holdings, Inc., a holding company based in Atlanta, Georgia USA.

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.

As at 31 October 2005, Mr Dwek changed from being executive to non-executive Chairman, and 10 million
shares in the Company were issued at 1.5p as compensation for the change in the Consultancy Agreement
(representing the differential in fee payable for the one year notice period).

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.

Newmark Security PLC
11

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

Consultancy/
management
agreement
»000

Compensation
for change
of terms
»000

Salary
»000

Benefits
in kind
»000

—

124
—
—

124

198

—

150
—
—

150

—

—
—
—

—

—
—
—

—

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

2005

Pension
contri-
butions
»000

—

—
—
—

—

Total
»000

274
15
15

403

333

Fees
»000

—

—
15
15

The directors’ share interests are detailed in the Report of the Directors on page 7.

(a)

The Company paid a consultancy fee of £124,127 (2005 £198,433) to Arbury Inc., a company 51 per cent
owned by M Dwek which covers salary, pension and car beneﬁts.
In addition the Company issued
10 million shares in the year as compensation for the change of terms from executive to non-executive
chairman.

(b)

Directors’ fees in respect of A Reid of £15,000 (2005: £15,000) were paid by the Company to R. K. Harrison
& Co. Limited.

Newmark Security PLC
12

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

We have audited the group and parent company ﬁnancial statements (the ‘‘ﬁnancial statements’’) of Newmark
Security PLC for the year ended 30 April 2006 which comprise the group proﬁt and loss account, the group and
company balance sheets, the group cash ﬂow statement, the statement of total recognised gains and losses and
the related notes. These ﬁnancial statements have been prepared under the accounting policies set out therein.

Respective responsibilities of directors and auditors
The directors’ responsibilities for preparing the ﬁnancial statements in accordance with applicable law and
United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice) are set out
in the statement of directors’ responsibilities.
Our responsibility is to audit the ﬁnancial statements in accordance with relevant legal and regulatory
requirements and International Standards on Auditing (UK and Ireland).
We report to you our opinion as to whether the ﬁnancial statements give a true and fair view and have been
properly prepared in accordance with the Companies Act 1985 and whether the information given in the
directors’ report is consistent with those ﬁnancial statements. We also report to you if, in our opinion, the
company has not kept proper accounting records,
the information and
explanations we require for our audit, or if information speciﬁed by law regarding directors’ remuneration and
other transactions is not disclosed.
We read other information contained in the Annual Report and consider whether it is consistent with the
audited ﬁnancial statements. The other
the
Chairman’s Statement and the Report of the Remuneration Committee. 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 no 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.

information comprises only the Report of

if we have not

the Directors,

received all

Basis of audit opinion
We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) 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
judgments made by the directors in the preparation of the ﬁnancial statements, and of whether the
accounting policies are appropriate to the group’s and company’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 group ﬁnancial statements give a true and fair view, in accordance with United Kingdom Generally
Accepted Accounting Practice, of the state of the group’s affairs as at 30 April 2006 and of its loss for the
year then ended;
the parent company ﬁnancial statements give a true and fair view, in accordance with United Kingdom
Generally Accepted Accounting Practice, of the state of the parent company’s affairs as at 30 April 2006;
the ﬁnancial statements have been properly prepared in accordance with the Companies Act 1985; and
the information given in the directors’ report is consistent with the ﬁnancial statements.

.
.

BDO STOY HAYWARD LLP
Chartered Accountants and Registered Auditors
London
24 July 2006

Newmark Security PLC
13

CONSOLIDATED PROFIT AND LOSS ACCOUNT
For the year ended 30 April 2006

2006
Before
goodwill
and
exceptional
items
»000

2006
Goodwill
and
exceptional
items
»000

Notes

11,839
320
12,159
(7,317)

4,842

(4,087)
—
(4,087)

965
(210)
755

—

755
20

(251)
(101)

423

(58)

365
—

365

—
—
—
—

—

—
(393)
(393)

(393)
—
(393)

(192)

(585)
—

—
(199)

(784)

—

(784)
—

(784)

3(c)

4
4

2006
Total
»000

11,839
320
12,159
(7,317)

4,842

(4,087)
(393)
(4,480)

572
(210)
362

(192)

170
20

(251)
(300)

(361)

(58)

(419)
—

(419)

pence

2005
Total
»000

12,348
1,286
13,634
(8,150)

5,484

(4,699)
(371)
(5,070)

1,148
(734)
414

(13)

401
52

(275)
(139)

(106)

(67)
—

(67)

pence

(0.11)p

—p

Turnover
Continuing operations
Discontinued operations

Cost of sales

Gross pro¢t

Administrative expenses pre

amortisation of goodwill and
exceptional items
Amortisation of goodwill
Administrative expenses — total

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

Loss on disposal/closure of
subsidiary/business

Pro¢t/(loss) on ordinary

activities before interest

Interest receivable
Interest — discount charge on
deferred consideration

Interest payable

Pro¢t/(loss) on ordinary

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

activities

Pro¢t/(loss) on ordinary

activities after taxation

Minority interest

Pro¢t/(loss) for the ¢nancial

year

Loss per share
— basic and diluted

Newmark Security PLC
14

BALANCE SHEETS
As at 30 April 2006

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 asset/(liabilities)

Total assets less current

liabilities

Creditors: amounts falling due
after more than one year

Provisions
Accruals and deferred income

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

Shareholders’ funds
Minority interests

Notes

8
9
10

14
15

16
17
17
17

Group
2006

»000

6,439
941
—

7,380

1,256

2,471

—
2,471

1,373

5,100

(4,664)

436

Group
2005
(Restated)
»000

6,820
803
—

7,623

1,664

2,968

—
2,968

3,205

7,837

Company
2006

»000

—
—
16,587

16,587

—

717

—
717

791

Company
2005
(Restated)
»000

—
5
16,573

16,578

—

625
656

1,200

1,856

(4,887)

2,950

(11,598)

(10,807)

(11,743)

(9,887)

7,816

10,573

(3,670)
(208)
(891)

3,047

3,740
493
801
(2,051)

2,983
64

3,047

(5,488)
(185)
(1,580)

3,320

3,617
432
801
(1,593)

3,257
63

3,320

5,780

(3,369)
—
(201)

2,210

3,740
493
801
(2,824)

2,210
—

2,210

6,691

(4,431)
—
(193)

2,067

3,617
432
801
(2,783)

2,067
—

2,067

The ﬁnancial statements were approved by the Board of Directors and authorised for issue on 24 July 2006 and
were signed on its behalf by:

M DWEK
Chairman

B BEECRAFT
Finance Director

Newmark Security PLC
15

CONSOLIDATED CASH FLOW STATEMENT
For the year ended 30 April 2006

Net cash in£ow from operating activities

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

Net cash 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
Costs relating to acquisition made in previous year
Net cash acquired on purchase of subsidiary undertakings

Net cash out£ow from acquisitions

Disposals
Costs related to sale of subsidiary undertaking, and business and

trading assets

Cash disposed of with business

Net cash out£ow from disposals

Net cash out£ow before use of liquid resources and ¢nancing

Financing
New ﬁnance loans
Repayment of loans

Share issues less expenses paid

Net cash in£ow from ¢nancing

(Decrease)/increase in cash

Notes
19

2006
»000
850

20
(101)

(81)

(423)

(469)
24

(445)

(1,925)
(12)
—

(1,937)

(11)
(14)

(25)

(2,061)

365
(106)

259
—

259

(1,802)

2005
»000
786

52
(139)

(87)

(404)

(277)
247

(30)

(918)
—
563

(355)

—
—

—

(90)

329
(209)

120
1,643

1,763

1,673

Newmark Security PLC
16

CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
For the year ended 30 April 2006

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 2006

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

undertakings

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

Closing shareholders’ funds

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

Increase in/(reduction to) shareholders’ funds
Opening shareholders’ funds

Closing shareholders’ funds

2006
»000
(419)

(39)

(458)

2006
»000

(419)
184

(39)

(274)
3,257

2,983

(41)
184

143
2,067

2,210

2005
»000
(67)

(20)

(87)

2005
»000

(67)
1,918

(20)

1,831
1,426

3,257

(2,612)
1,918

(694)
2,761

2,067

Newmark Security PLC
17

NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 April 2006

NOTES TO THE FINANCIAL STATEMENTS
ACCOUNTING POLICIES

Accounting policies

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 made a loss for the year ended
30 April 2006 of £419,000, and had net current assets of £436,000 and net assets of £3,047,000 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)

current trading; and

trading and cash ﬂow forecasts.

During the year the Group adopted Financial Reporting Standard 21 Events after the Balance Sheet Date,
Financial Reporting Standard 22 Earnings per share, Financial Reporting Standard 28 Corresponding Amounts
and the presentational requirements of Financial Reporting Standard 25 Financial Instruments: Disclosure and
Presentation ‘‘FRS 25’’. None of these standards had any impact on the net assets of the Group or the Company,
nor on the loss of the Group. The presentation requirements of FRS 25 did not have any effect as the equity
component of the convertible loans are not material.

Accruals and deferred income have been reclassiﬁed in the year from current liabilities to a separate heading on
the balance sheet, and the comparatives have been restated accordingly.

In accordance with FRS 25, the 1,500,000 6 per cent redeemable loan notes of £1 each are presented as a
current liability in the 2006 balance sheet. Each loan note grants the holders 50 1p warrants for ordinary
shares. At the balance sheet date the share price was below the exercise price of the warrants.

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 fair value of the consideration payable and the fair value of the
separable 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.

Impairment tests on the carrying value of goodwill are undertaken;

—

at the end of the ﬁrst full ﬁnancial year following acquisition,

in other periods if events or changes in circumstances indicate that the carrying value may not be
recoverable.

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.

Newmark Security PLC
18

Contingent deferred consideration
Contingent deferred consideration is accounted for in accordance with Financial Reporting Standard 7 Fair
Values in Acquisition Accounting. 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.

Development costs
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
Motor vehicles
Computer equipment

Nil
5% per annum
20% per annum
10% per annum
25% per annum
25% per annum

Leased assets and obligations
Assets acquired under hire purchase contracts and 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.

Financial instruments
Financial instruments are measured initially and subsequently at cost. Short term debtors and creditors are not
treated as Financial Instruments for disclosure purposes.

Stocks 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.

Provisions
Provisions are recognised for liabilities of uncertain timing or amount that have arisen as a result of past
transactions.

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

Newmark Security PLC
19

differences which arise from translation of the opening net assets and results of foreign subsidiary undertakings
are taken to reserves.

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.

Employees of the Group contribute to state schemes. Contributions are charged to the proﬁt and loss account
when paid.

Share based payments
Where share options are awarded to employees, the intrinsic value of the options at the date of grant is
charged to the proﬁt and loss account over the performance period.

Segmental analysis

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

Turnover

UK
Europe
USA
Rest of the World

Total

Pro¢t/(loss) before tax

UK
Europe

Net assets

UK
Europe

2006
By origin
»000
12,159
—
—
—

12,159

2005
By origin
»000
13,634
—
—
—

13,634

2006
By destination
»000
10,663
943
431
122

2005
By destination
»000
11,952
767
703
212

12,159

13,634

2006
Before goodwill
and exceptional
items
»000
464
(41)

2006
Goodwill
and exceptional
items
»000
(583)
(201)

423

(784)

2006
Total
»000
(119)
(242)

(361)

2005
Total
»000
138
(99)

2006
Net assets
»000
4,392
(1,345)

2005
Net assets
»000
4,477
(1,157)

3,047

3,320

Exceptional
exceptional interest payable of £199,000 (2005: £Nil).

items include the loss on disposal or closure of a subsidiary of £192,000 (2005: £13,000) and

Newmark Security PLC
20

Operating pro¢t/(loss)

3.
(a) Continuing and discontinued operations

Sales
Cost of sales

Gross pro¢t

Administrative expenses

pre-amortisation of goodwill

Amortisation of goodwill

Administrative expenses in total

Operating pro¢t/(loss)

2006
Continuing
operations
»000
11,839
(7,075)

2006
Discontinued
operations
»000
320
(242)

4,764

(3,799)
(393)

(4,192)

572

(288)
—

(288)

(210)

2006
Total
»000
12,159
(7,317)

4,842

(4,087)
(393)

(4,480)

362

2005
Continuing
operations
»000
12,348
(7,067)

2005
Discontinued
operations
»000
1,286
(1,083)

5,281

203

(3,762)
(371)

(4,133)

1,148

(937)
—

(937)

(734)

2005
Total
»000
13,634
(8,150)

5,484

(4,699)
(371)

(5,070)

414

Discontinued operations include NSP Europe Limited, which was sold in the year, and Concept Hardware &
Security Solutions Limited, which was closed down during the year.

(b) Operating pro¢t/(loss) is arrived at after charging the following:

Group
Depreciation of tangible ﬁxed assets
Amortisation of goodwill
Consultancy fee costs ﬁnanced by share issues
Research and development
Auditors’ remuneration:
Parent company auditors
Audit fees (Group)
Audit fees (parent company)
Non audit fees (Group)
Non audit fees (parent company)

Operating lease rentals:

Property
Motor vehicles and computer equipment

(c)

Loss on disposal/closure of subsidiary/business

Net assets of subsidiary disposed of
Cost of disposal

Net loss on disposal
Costs of closure of operation in year

Loss on disposal/closure of subsidiary/business

Interest payable and similar charges

Discount charge on deferred consideration
Loan notes, bank loans, overdrafts and other short term ﬁnance
Interest on late payment of tax

Interest payable includes £209k related to discontinued operations (2005: £40k).

Newmark Security PLC
21

2006
»000
302
393
109
459

51
14
10
3

242
68

2006
»000
(150)
(42)

(192)
—

(192)

2006
»000
251
101
199

551

2005
»000
258
371
—
406

54
13
11
3

247
82

2005
»000
—
—

—
(13)

(13)

2005
»000
275
139
—

414

Employees and directors

5.
The average numbers employed (including Executive Director) within the following categories were:

Group
Management, sales and administration
Production

Company
Management

The costs incurred in respect of these employees were:

Group
Wages and salaries
Social security costs
Other pension costs

Company
Wages and salaries
Social security costs

Directors emoluments

Aggregate emoluments
Emoluments of highest paid director

Taxation

6.
Taxation is based on the results for the year and comprises:

UK Corporation taxation
Overseas taxation
Deferred taxation (note 15)

Taxation charge on loss for the year
(Over)/underprovision for tax in prior years

2006
Number
75
44

119

2005
Number
56
67

123

»000
4,067
452
148

4,667

117
13

130

2006
»000
327
198

2006
»000
152
(25)
—

127
(69)

»000
4,151
451
126

4,728

114
13

127

2005
»000
327
198

2005
»000
147
28
(70)

105
1

106

The tax charged for the year is greater than (2005: greater than) the standard rate of corporation tax in the UK
(30 per cent).

Newmark Security PLC
22

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% (2005: 30%)
Timing differences including capital allowances in excess of depreciation dealt
with under deferred tax
Goodwill amortisation
Interest discount charge on deferred consideration
Effects on proﬁts/(losses) of other items not deductible for tax purposes
Grossing up of foreign income
Double tax relief
Adjustment to tax charge in respect of previous periods
Relief for losses brought forward
Losses not utilised
Other timing differences

Current tax charge for year

2006
»000
(361)

(108)

5
118
78
47
2
(8)
(69)
(39)
32
—

2005
»000
39

2
111
82
10
2
(7)
1
(55)
14
4

176

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
Trading losses
Capital losses

If the losses were to be recognised this would give rise to deferred tax assets as follows:

Management expenses
Trading losses
Capital losses

2006
»000
523
2,323
792

2006
»000
157
697
238

2005
»000
147
2,569
792

2005
»000
44
771
238

(Loss)/earnings per share

7.
The calculation of the basic (loss)/earnings per ordinary share is based on a loss of £419,000 (2005: loss £67,000)
and the weighted average number of shares in issue during the year of 367,856,416 (2005: 329,241,000). For
every £1 of loan note issued, the loan note holder receives a warrant entitling the loan note holder to 50
ordinary shares of 1p each on exercise of the warrant.

The options in issue have no dilutive effect.

The basic (loss)/earnings per share before goodwill amortisation,
losses of discontinued
operations 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)/earnings per share as follows:

interest discount,

Basic loss per share (pence)
Goodwill amortisation
Discount charge on deferred consideration
Losses of discontinued operations (after tax)
Exceptional items

2006
pence
(0.11)
0.11
0.07
0.05
0.10

2005
pence
—
0.1
0.1
0.1
—

Earnings per share before goodwill amortisation, interest discount, losses of
discontinued operations and exceptional items

0.22

0.3

Newmark Security PLC
23

Reconciliation of earnings
Loss used for calculation of basic loss per share
Goodwill amortisation
Discount charge on deferred consideration
Losses of discontinued operations (after tax)
Exceptional items

»000

(419)
393
251
179
391

(67)
371
275
548
13

Earnings before goodwill amortisation, interest discount, losses of discontinued
operations and exceptional items

795

1,140

Exceptional
exceptional interest payable of £199,000 (2005: £Nil). There are no potentially dilutive shares in issue.

items include the loss on disposal or closure of a subsidiary of £192,000 (2005: £13,000) and

Intangible ¢xed assets

Group
Cost
At 1 May 2005
Costs and adjustments to consideration

At 30 April 2006

Amortisation
At 1 May 2005
Charge for the year

At 30 April 2006

Net book value
At 30 April 2006

At 30 April 2005

Tangible ¢xed assets

9.
Group

Cost
At 1 May 2005
Additions
Disposals
Reclassiﬁcations
Disposal of subsidiary
Exchange adjustment

At 30 April 2006

Depreciation
At 1 May 2005
Charge for the year
Disposals
Reclassiﬁcations
Disposal of subsidiary
Exchange adjustment

At 30 April 2006

Net book value
At 30 April 2006

At 30 April 2005

Goodwill
»000

7,864
12

7,876

1,044
393

1,437

6,439

6,820

Total
»000

1,894
469
(197)
—
(27)
6

2,145

1,091
302
(172)
—
(19)
2

1,204

941

803

Freehold
land and
buildings
»000

Short
leasehold
improvements
»000

Plant,
machinery
& motor
vehicles
»000

Computers,
fixtures &
fittings
»000

316
—
—
—
—
6

322

96
15
—
—
—
2

113

209

220

157
103
—
—
—
—

260

119
22
—
—
—
—

141

119

1,125
321
(182)
(37)
—
—

1,227

663
215
(160)
(6)
—
—

712

515

462

296
45
(15)
37
(27)
—

336

213
50
(12)
6
(19)
—

238

Newmark Security PLC
24

Company

Cost
At 1 May 2005 and 30 April 2006

Depreciation
At 1 May 2005
Charge for the year

At 30 April 2006

Net book value
At 30 April 2006

At 30 April 2005

Computers,
fixtures &
fittings
»000

18
5

—

Total
»000

18
5

—

The net book value of tangible ﬁxed assets for the Group includes an amount of £249,901 (2005: £206,837) in
respect of assets held under ﬁnance leases and hire purchase contracts. The related depreciation charge on
these assets for the year was £107,204 (2005: £39,979).

Fixed asset investments

10.
Company
Investment in subsidiary companies

Cost
At 1 May 2005
Costs relating to acquisition made in previous year
Disposal of subsidiary company in year

At 30 April 2006

Provision for impairment
At 1 May 2005
Provision in the year
Disposal of subsidiary company in year

At 30 April 2006

Net book value
At 30 April 2006

At 30 April 2005

»000

17,617
14
(1,000)

16,631

1,044
—
(1,000)

16,587

16,573

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(1)
Newmark Technology (C-Cure Division) Limited
Vema B.V.
Vema N.V.(3) (98% owned)
Newmark Technology S.A.
Safetell International Limited

Activity
Trading
Dormant
Holding
Property
Dormant
Holding

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

Safetell Limited(2)
Safetell Security Screens Limited(2)

Trading
Trading

England & Wales
England & Wales

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

Newmark Security PLC
25

Name
Newmark Technology Inc.
Vema U.K. Limited(4)
Concept Hardware & Security Solutions Limited
Grosvenor Technology Limited
Newmark Group Limited
De Facto 992 Limited

Activity
Dormant
Finance
Trading
Trading
Dormant
Dormant

Country of
incorporation
USA
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales

Description
of shares held
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)

Owned by Grosvenor Technology Limited
Owned by Safetell International Limited
Owned by Vema B.V. 51 per cent, Newmark Security PLC 47 per cent
Owned by Vema N.V.

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

Debtors: amounts falling due after more than one year
Amounts owed by subsidiary company

Debtors: total

13. Creditors: amounts falling due within one year

Bank loans, loan notes 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

2006
Group
»000
728
154
374

1,256

2006
Group
»000
2,009
—
74
70
318

2,471

—

2,471

2006
Group

»000
1,510
949
—
1,324
340

113
428

4,664

2005
Group
»000
1,284
150
230

1,664

2005
Group
»000
2,543
—
43
70
312

2,968

—

2,968

2005
Group
(Restated)
»000
41
1,285
—
826
491

72
2,172

4,887

2006
Company
»000
—
—
—

2005
Company
»000
—
—
—

—

2006
Company
»000
—
625
14
—
78

717

—

717

2006
Company

»000
1,500
—
10,090
—
6

—
2

11,598

2005
Company
»000
—
—
24
—
7

625

656

2005
Company
(Restated)
»000
13
—
9,791
—
53

—
1,886

11,743

Other creditors within the Group includes an amount of £Nil (2005: £132,767) in respect of a discount company
which was secured on trade debtors of subsidiary companies.

Newmark Security PLC
26

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

Loan notes and bank loans
Corporation tax
Obligations under ﬁnance leases and hire purchase
contracts
Other creditors

2006
Group
»000
187
—

114
3,369

3,670

2005
Group
»000
1,475
750

107
3,156

5,488

2006
Company
»000
—
—

—
3,369

3,369

2005
Company
»000
1,275
—

—
3,156

4,431

Other creditors are the fair value of the contingent consideration payable in cash related to the acquisition of
Grosvenor Technology Limited, which is taken to be the estimated amount of cash value discounted to its
present value. Payment by way of loan notes is due after the agreement of the accounts for the four years
ended 31 October 2006 in accordance with the earn out agreement with cash payment at the holders
discretion but at earliest one year later.

Group
Loans are repayable as follows:
In one year or less
Bank loans(a)
Loan notes(b)
Bank overdrafts
Finance leases and hire purchase contracts

Total within one year

In more than one year but not more than two
years
Bank loans(a)
Finance leases and hire purchase contracts
Loan notes(b)

In more than two year but not more than ¢ve years
Bank loans(a)
Finance leases and hire purchase contracts

In more than ¢ve years
Bank loans(a)

Total after more than one year

2006
Unsecured
»000

2006
Secured
»000

2005
Unsecured
»000

2005
Secured
»000

—
—
—
—

—

—
—
—

—

—
—

—

10
1,500
—
113

1,623

10
89
—

29
25

148

301

—
—
30
—

—
—
—

—

—
—

—

11
—
—
72

9
72
1,275

1,356

28
35

163

1,582

(a)

(b)

The bank loan is repayable in quarterly instalments over 21 years. Interest is charged at 6.4 per cent until 20 November 2010 and the loan is
secured on the freehold property of Vema N.V.
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. The loan notes are secured by a ﬁxed and ﬂoating charge on the assets of the UK subsidiary companies, and are
repayable on 24 July 2006.

Newmark Security PLC
27

15. Provisions

Group
At 1 May 2005
Released in year
Created in year

At 30 April 2006

Rental
provision
»000
120
(16)
—

104

Deferred
taxation
»000
—
—
—

—

Dilapidation
provision
»000
—
—
84

Other
»000
65
(45)
—

Total
»000
185
(61)
84

208

The rental provision relates to the excess of Safetell’s contractual legal obligation at date of acquisition over the
market rental, and will be reversed over the remaining seven years of the lease.
Assuming future proﬁts are taxable at a rate of 30 per cent, the Group has available tax losses for offset against
future taxable proﬁts, part of which are considered capable of being offset in the foreseeable future, giving rise
to a deferred tax asset. In accordance with Financial Reporting Standard 19 ‘‘Deferred taxation’’, this asset (as
shown in note 12) has been provided to the extent that trade losses will be recoverable against future proﬁts in
the foreseeable future and is included within current assets.
The dilapidation provision relates to the estimated cost of returning a leasehold property to its original state at
the end of the lease in accordance with the lease terms. The cost is recognised as depreciation of leasehold
improvements over the remaining term of the lease.
Other provisions relate to a warranty provision.

16. Share capital

Authorised:
1,015,164,192 (2005: 1,015,164,192) Ordinary shares of 1p each

Allotted, called up and fully paid:
373,957,816 (2005: 361,755,016) Ordinary shares of 1p each

During the year, the following shares were issued;

Shares in issue at 1 May 2005
Share issues 1.5p per share

Shares in issue at 30 April 2006

2006

2005

£10,151,642

£3,739,578

£3,617,550

Number of
shares

361,755,016
12,202,800

Share
capital
»
3,617,550
122,028

373,957,816

3,739,578

The share issues in the year included 10 million to Arbury Inc., as compensation for the alteration in the
Consultancy Agreement whereby M Dwek changed from being executive to non-executive chairman.
The balance of the share issues were in settlement of the management fee payable to Arbury Inc., for
September and October 2005.
In accordance with FRS 25, the 1,500,000 6 per cent redeemable loan notes of £1 each are presented as a
current liability in the balance sheet. Each loan note grants the holder 50 1p warrants for ordinary shares. At
the balance sheet date the share price was below the exercise price of the warrants.
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
October 2005

Total

Subscription
price payable
14.5p
8.25p
5p
2p
1.5p

2006
Approved
28,000
250,000
125,000
125,000
7,000,000

2006
Unapproved
28,000
250,000
125,000
6,075,000
7,000,000

2005
Approved
28,000
250,000
125,000
125,000
—

2005
Unapproved
28,000
250,000
125,000
6,075,000
—

7,528,000

13,478,000

528,000

6,478,000

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

Newmark Security PLC
28

17. Share premium and reserves

Group
Accumulated reserves at 1 May 2005
Retained loss for the year
Premium on share issues
Exchange differences on foreign currency investments

Share
premium
account
»000
432
—
61
—

Merger
reserve
»000
801
—
—
—

Profit and
loss
account
»000
(1,593)
(419)
—
(39)

Accumulated reserves at 30 April 2006

493

801

(2,051)

The cumulative amount of goodwill eliminated against reserves is £4,079,000 (2005: £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 2005
Premium on share issues
Retained loss for the year

Accumulated reserves at 30 April 2006

Share
premium
account
»000
432
61
—

Merger
reserve
»000
801
—
—

Profit and
loss
account
»000
(2,783)
—
(41)

493

801

(2,824)

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 £41,000 (2005: loss £2,612,000).

18. Minority interests

At 1 May 2005
Minority interest purchased back in year
Exchange differences

At 30 April 2006

19. Reconciliation of operating pro¢t to net cash in£ow from operating activities

Operating proﬁt
Costs ﬁnanced by share issues
Depreciation and amortisation of goodwill
Decrease/(increase) in stocks
Decrease/(increase) in debtors
(Decrease)/increase in creditors and provisions

Net cash inﬂow from operating activities

2006
»000
63
—
1

2006
»000
362
109
695
316
385
(1,017)

850

2005
»000
300
(237)
—

2005
»000
414
—
629
(441)
(583)
767

786

Newmark Security PLC
29

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

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

(Decrease)/increase in net funds/(debt) resulting from cash ﬂows
Exchange adjustments

Movement in net funds/(debt)

Net funds/(debt) at start of year

Net (debt)/funds at end of year

2006
»000
(602)
(253)
(1,200)

(2,055)
(6)

(2,061)

1,510

(551)

2005
»000
473
(120)
1,200

1,553
—

1,553

(43)

1,510

Cash in hand at 30 April 2005 included £1,200,000 held as security for the deferred consideration payable in
respect of Custom Micro Products Limited, and was therefore not available on demand.

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
Finance leases

Liquid resources

Net (debt)/funds

April
2005
»000
2,005
(30)

1,975

(1,475)
(11)
(179)

(1,665)

1,200

1,510

Cash flow
»000
(632)
30

Exchange
adjustments
»000
—
—

(602)

1,288
(1,493)
(48)

(253)

(1,200)

(2,055)

—

—
(6)
—

(6)

—

(6)

April
2006
»000
1,373
—

1,373

(187)
(1,510)
(227)

(1,924)

—

(551)

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, bank borrowings and loan notes. 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 (2005: 98 per cent) of the Group’s borrowings were at ﬁxed rates
with 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.

At the year end, 8 per cent (2005: 10 per cent) of the Group’s borrowings were due to mature in more than ﬁve
years.

Newmark Security PLC
30

Foreign currency risk
The sales of the UK companies are predominantly priced and invoiced in sterling.

Interest rate risk of ﬁnancial assets and ﬁnancial liabilities
The interest rate proﬁle of the Group’s ﬁnancial assets at 30 April 2006 was:

Currency
Sterling

Floating
rate
financial
assets
»000
1,373

Fixed rate
financial
assets
»000
—

Financial assets
on which no
interest is
received
»000
—

Total
»000
1,373

The interest rate proﬁle of the Group’s ﬁnancial assets at 30 April 2005 was:

Currency
Sterling

Floating
rate
financial
assets
»000
3,205

Fixed rate
financial
assets
»000
—

Financial assets
on which no
interest is
received
»000
—

Total
»000
3,205

The interest rate proﬁle of the Group’s ﬁnancial liabilities at 30 April 2006 was:

Currency
Sterling
Euros

Floating
rate
financial
liabilities
»000
—
—

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

Fixed rate
financial
liabilities
»000
1,727
197

—

1,924

—

Total
»000
1,727
197

1,924

The interest rate proﬁle of the Group’s ﬁnancial liabilities at 30 April 2005 was:

Currency
Sterling
Euros

Total

Floating
rate
financial
liabilities
»000
30
—

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

Fixed rate
financial
liabilities
»000
1,454
211

1,665

—

Total
»000
1,484
211

1,695

Fixed rate financial liabilities Fixed rate financial liabilities
Weighted
average
period for
which rate
is fixed
2005
Years
1.5
22.0

Weighted
average
period for
which rate
is fixed
2006
Years
0.4
21.0

Weighted
average
interest
rate
2005
%
6.0
6.1

Weighted
average
interest
rate
2006
%
6.1
6.1

6.1

1.6

6.0

4.0

Newmark Security PLC
31

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.

As at 30 April 2006, these exposures were as follows:

Euros
7

(126)

Functional currency of Group operation
Sterling

Total

As at 30 April 2005:

Sterling

Total

Maturity of ﬁnancial liabilities
The maturity 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 two years but not more than ﬁve years
In more than ﬁve years

Borrowing facilities
The Group has no undrawn committed borrowing facilities.

Net foreign currency monetary
assets/(liabilities) in »000
Total
US dollars
110
103

103

168

2006
»000
1,623
99
54
148

1,924

110

2005
»000
113
1,356
63
163

1,695

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
2006
»000

1,623
301

Fair
values
2006
»000

1,596
201

Book
values
2005
»000

113
1,582

Fair
values
2005
»000

61
1,504

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.

Newmark Security PLC
32

23. Other ¢nancial commitments
At 30 April 2006, the annual commitments under non-cancellable operating leases were as follows:

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

Company
Property leases in one year or less

2006
»000

2005
»000

—
5
6
—

34
—
45
150

41
9
—
—

35
24
45
144

24. 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 £15,000 from the Company during the year (2005:
£15,000) in respect of Mr. Reid.

(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 £124,127 (2005: £198,433) in the year. In addition the
Company issued 10 million shares in the year as compensation for the change of terms from executive
to non-executive chairman. One half of the value of the shares issued has been charged to the proﬁt and
loss account for the year ended 30 April 2006, the other half will be charged in the accounts for the year
ended 30 April 2007.

Newmark Security PLC
33

NOTICE OF ANNUAL GENERAL MEETING

Notice is hereby given that an Annual General Meeting of Newmark Security PLC will be held at 57 Grosvenor
Street, London W1K 3JA on 7 September 2006 at 12.00 noon for the following purposes:

ORDINARY BUSINESS
1.

To receive and adopt the ﬁnancial statements and reports of the Directors and auditors for the ﬁnancial
period ended 30 April 2006.

To re-appoint Brian Beecraft as a director of the Company, who retires in accordance with the Company’s
Articles of Association and offers himself for re-appointment.

To re-appoint BDO Stoy Hayward LLP as the auditors of the Company until the next Annual General
Meeting and to authorise the Directors to ﬁx their remuneration.

SPECIAL BUSINESS
4.

To consider and, if thought ﬁt, to pass the following Resolution as an Ordinary Resolution:
That the Directors be and they are hereby generally and unconditionally authorised in accordance with
section 80 of the Companies Act 1985 (the ‘‘Act’’) to allot relevant securities (as deﬁned in that section)
up to a maximum aggregate nominal amount of relevant securities of £1,246,519; and this authority will
(unless renewed) expire at the conclusion of the next Annual General Meeting of the Company but the
Company may, before this authority expires, make an offer or agreement which would or might require
relevant securities to be allotted after the authority expires and the Directors may allot relevant securities
pursuant to such offer or agreement as if the authority conferred hereby had not expired.

To consider and, if thought ﬁt, to pass the following Resolution as a Special Resolution:
That, subject to the passing of the previous resolution, the Directors be and they are hereby empowered
pursuant to section 95 of the Act to allot equity securities (within the meaning of section 94 of the Act)
for cash pursuant to the authority conferred by Resolution 4 above as if section 89(1) of the Act did not
apply to any such allotment provided that this power shall be limited to:

(a)

the allotment of equity securities in connection with an issue in favour of the holders of ordinary
shares of the Company in proportion (as nearly as may be) to their respective holdings of ordinary
shares, subject only to exclusions or other arrangements which the Directors may deem necessary or
expedient to deal with fractional entitlements, legal or practical problems arising in any overseas
territory or the requirements of any regulatory body or stock exchange in any territory; and

(b)

the allotment otherwise than pursuant to sub-paragraph (a) above of equity securities up to an
aggregate nominal amount of £747,912,

and the power hereby granted shall expire at the conclusion of the next Annual General Meeting of the
Company save that the Company may before such expiry make an offer or agreement which would or
might require equity securities to be allotted after such expiry but otherwise in accordance with the
foregoing provisions of this power in which case the Directors may allot equity securities in pursuance
of such offer or agreement as if the power conferred hereby had not expired.

By order of the Board
B G Beecraft
Company Secretary

24 July 2006
Registered Ofﬁce
57 Grosvenor Street
London W1K 3JA

Notes:
1.

A member entitled to attend and vote at the meeting is entitled to appoint a proxy to attend and, on a poll, vote instead of him. A proxy
need not be a member of the Company.
To be effective, completed forms of proxy and the power of attorney or other authority (if any) under which they are signed or a copy of that
power or authority certiﬁed notarially or in accordance with the Powers of Attorney Act 1971 must be lodged in accordance with the
instructions printed thereon, not later than 48 hours before the time appointed for the meeting or any adjourned meeting.
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 7 September 2006 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)

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

(b)

Newmark Security PLC
34

Completion and return of a form of proxy will not preclude a member from attending and voting at the meeting in person should he wish to
do so.
The Company, pursuant to Regulation 41 of the Uncertiﬁcated Securities Regulations 2001, speciﬁes that only those members registered in
the register of members of the Company 48 hours before the time of the meeting shall be entitled to attend and vote at this meeting in
respect of the number of shares registered in their name at that time. Changes to entries in the register of members after that time shall be
disregarded in determining the rights of any person to attend or vote at this 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 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 2006. 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 a number of shares equal
to twenty 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.
Pre-existing section 89 authority
The Directors are authorised pursuant to an authority passed on 24 July 2003 to allot up to 75,000,000 shares on a non pre-emptive basis on
the exercise of warrants granted on that date pursuant to a loan note agreement.

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Newmark Security PLC
36

NEWMARK SECURITY PLC

Proxy for Annual General Meeting

I/We the undersigned, being (a) Member(s) of

the Company, HEREBY APPOINT the Chairman of

the

Meeting or ... ....... ........ ....... ........ ....... ....... ........ ....... ........ ....... ....... ........ ....... ........ ....... ........ ....... ....... .
(Note 1) as my/our Proxy to vote for me/us and on my/our behalf at the Annual General Meeting of the
Company to be held at 57 Grosvenor Street, London W1K 3JA on 7 September 2006 at 12.00 noon and at
any adjournment thereof.

For

Against

(Note 2)

ORDINARY RESOLUTIONS

To receive and adopt the ﬁnancial statements and reports of the
Directors and auditors for the ﬁnancial period ended 30 April 2006.

To re-appoint B Beecraft as a director of the Company.

To re-appoint BDO Stoy Hayward LLP as the auditors of the Company
and authorise the Directors to ﬁx their remuneration.

To approve the granting of authority pursuant to Section 80 of the
Companies Act 1985 to allot relevant securities.

SPECIAL RESOLUTION

To approve the granting of authority under Section 95 of the
Companies Act 1985 to allot equity securities on a non pre-emptive
basis.

Dated this .... ....... ........ ....... ........ ....... ....... ........ .....day of. ....... ....... ........ ....... ........ ....... ........ ....... ..2006

Signature(s) .. ....... ........ ....... ........ ....... ....... ........ ....... ........ ....... ....... ........ ....... ........ ....... ........ ....... ....... .

Full name(s) in which shares are registered.... ........ ....... ........ ....... ....... ........ ....... ........ ....... ........ ....... ....... .

.... ........ ....... ....... ........ ....... ........ ....... ....... ........ ....... ........ ....... ....... ........ ....... ........ ....... ........ ....... ....... .
PLEASE USE BLOCK LETTERS

Notes:
1.

If any other proxy is desired strike out ‘‘the Chairman of the Meeting or’’ and insert the name or names preferred. Any alterations to this
form must be initialled. A proxy need not be a member of the Company.
Please indicate with an ‘‘X’’ in the relevant box marked ‘‘For’’ or ‘‘Against’’ how you wish the proxy to vote on the resolutions. When no ‘‘X’’ is
inserted the proxy will at his or her discretion vote as he or she thinks ﬁt or abstain from voting.
The instrument appointing a proxy shall be in writing under the hand of the appointor or his attorney duly authorised in writing or, if the
appointor is a corporation, either under the common seal or under the hand of an ofﬁcer or attorney so authorised.
In the case of joint holders of a share the vote of the ﬁrst-named holder on the Register of Members (whether voting in person or by proxy)
will be accepted to the exclusion of the votes of the other joint holders in respect of the joint holding.
This form of proxy and the power of attorney or other authority (if any) under which it is signed, or a notarially certiﬁed copy of such power
or authority, should be returned so as to reach the Company Registrar, Capita Registrars, The Registry, 34 Beckenham Road, Beckenham, Kent
BR3 4TU not less than 48 hours before the time appointed for holding the meeting or adjourned meeting at which the person named in the
instrument proposes to vote and, in default, the instrument of proxy shall not be treated as valid.
Completion and return of this form of proxy will not preclude members from attending and voting in person at the meeting should they
subsequently decide to do so. Pursuant to regulation 41 of The Uncertiﬁcated Securities Regulations 2001, members will be entitled to attend
and vote at the meeting if they are registered on the Company’s register of members 48 hours before the time appointed for the meeting or
any adjournment thereof.
The summaries of the resolutions are for guidance only. You are advised to read the accompanying circular and notice of meeting carefully.

Newmark Security PLC
37

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