Report and
Financial Statements
Year ended 30 April 2017
Company number: 3339998
INDEX
DIRECTORS, SECRETARY AND ADVISERS
CHAIRMAN’S STATEMENT
STRATEGIC REPORT
REPORT OF THE DIRECTORS
REPORT OF THE REMUNERATION COMMITTEE
INDEPENDENT AUDITOR’S REPORT
FINANCIAL STATEMENTS
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
COMPANY STATEMENT OF FINANCIAL POSITION
COMPANY STATEMENT OF CHANGES IN EQUITY
NOTES FORMING PART OF THE FINANCIAL STATEMENTS OF THE COMPANY
NOTICE OF ANNUAL GENERAL MEETING
Page
2
3
5
11
16
17
19
24
48
49
50
55
1
DIRECTORS, SECRETARY AND ADVISERS
Country of incorporation of
parent company:
Great Britain
Legal form:
Directors:
Public Limited Company
M Dwek
M-C Dwek
B Beecraft
M Rapoport
R Waddington
Secretary and registered office:
B Beecraft, 91 Wimpole Street, London W1G 0EF
Company number:
3339998
Auditors:
BDO LLP, 2 City Place, Beehive Ring Road, Gatwick, West Sussex RH6 0PA
Nominated Adviser and Brokers:
Allenby Capital Limited, 3 St. Helens Place, London EC3A 6AB
Registrars:
Capita Asset Services, The Registry, 34 Beckenham Road,
Beckenham, Kent BR3 4TU
Solicitors:
Bracher Rawlins LLP, 77 Kingsway, London WC2B 6SR
2
CHAIRMAN’S STATEMENT
Overview
Newmark is a leading provider of security systems in the UK. Through our subsidiaries, Grosvenor Technology and
Safetell, we provide our customers with a range of specialist products and services for the security of assets and
personnel.
Group revenue for the year from continuing operations was £16,036k (2016: £21,812k) representing a decrease of
26.5%. As stated in last years report, the strategy of material investment in new products, new customer acquisition
and new geographies has taken longer to yield returns than originally anticipated. Although the opportunity
pipeline has grown, the conversion into sales has been slower than expected. The continuing economic uncertainty
has affected customer spending plans with proposed programmes being severely delayed or cancelled.
Revenue in the electronic division (Grosvenor Technology) decreased by 7.2% from £7,628k to £7,092k. The revenues
from Janus, an access control system, continued to decline following Microsoft’s discontinued support for the
16-bit operating system on which our software runs. Conversely revenues for our Sateon product range increased
by 22% despite delays to our new Sateon Advance variant product release, an innovative modular approach to
access control that is easily scalable for buildings of any size.
Revenue in the asset protection division (Safetell) decreased by 36.9% in the year from £14,184k to £8,944k as a
result of the anticipated reduced contribution from time delay cash handling equipment sales to the Post Office,
reduced orders in the lead up to and after the Brexit vote and subsequent budget cuts in all sectors. The fall in the
value of the pound against the Euro resulted in the increased cost of imported products which reduced margin
further.
Loss from operations for the year from continuing operations before exceptional items was £1,378k (2016: Profit
£1,489k). There were a number of exceptional items including an impairment provision of development costs of
£1,341k and impairment provision of goodwill of £2,229k, primarily due to the age of the goodwill and historical
products and the current focus on the new product ranges, and redundancy costs of £285k. Loss from continuing
operations after exceptional items was £5,233k (2016: Profit £1,489k). In addition the office in Hong Kong was
closed in the year in view of the lack of revenue and the post-tax loss of this operation of £136k (2016: 291k) has
been included in the consolidated income statement as a discontinued operation.
A full financial review of the results for the year is included within the Strategic Report on pages 5 to 10.
Dividend
In view of the results for the year, the Board has not recommended the payment of a dividend for the year ended
30 April 2017 (2016: 0.10 pence per share).
Employees
The Board would like to express its appreciation to all staff for their continuing efforts during this difficult year.
Outlook
Within the access control business, although many end-users have already migrated from Janus to Sateon, there
are a number of large customers that are yet to make this transition. Therefore the opportunity exists for this to
positively impact Sateon revenues in the current financial year.
Our new android terminal, GT-10, will simplify integrations for customers with android and browser based
applications. This new product provides an opportunity to generate revenue in entirely new markets and Grosvenor
has begun research across these markets to investigate the potential return on investment available, particularly
focusing on sectors that offer ‘as a service’ (aaS) opportunities. A focus on near term goals has delayed research in
these areas, however the Board remains confident in the upside value of these opportunities and intends to pursue
these markets as soon as resources allow.
Within the asset protection division, Safetell already has a well-established blue chip customer list, particularly in
the banking and finance sector, but is now expanding into other industries whilst offering a greater range of
products across the board. Safetell has also entered into strategic partnerships with manufacturers of various
additional security products manufactured within the UK and in Europe. Although these products have counter
3
terrorism applications, they are also marketed to existing customers and markets that see a need to improve security
on their premises and increased safety for staff.
We expect continued growth in revenue from our new Sateon Advance access control system and counter terrorism
products but, in view of the ongoing economic uncertainty, we expect that this will be a difficult trading year. In
the longer term we look for continued growth in Sateon, revenue from our exciting new android terminal and
recovery of sales in the asset protection division.
M DWEK
Chairman
14 September 2017
4
STRATEGIC REPORT
Business model
The Group is principally engaged in the design, manufacture and supply of products and services for the security
of assets and personnel. The Group manages its operations through two divisions: Grosvenor Technology, its
electronic division and Safetell, its asset protection division.
The electronic division comprises two main product streams, being the design and distribution of:
•
•
access control (AC) systems (hardware and software); and
workforce management systems (WFM) hardware, for time-and-attendance, shop-floor data collection, and
access control systems.
Both activities have their own design teams creating products to meet the demands of their own markets and
specific needs of customers. That said, the business increasingly sees synergies between the two lines of business
as end user needs are driving convergence of both access control and workforce management. In addition
centralised sales and marketing, purchasing, dispatch and finance functions supplement the requirements of both
activities. Manufacturing is mainly performed by external contractors using our intellectual property.
The majority of our access control customers are security installation companies dealing directly with end users.
For WFM equipment, the majority of our customers are value-added resellers (VARs) dealing with either
installation companies or end users. The division also has the capability to work on special projects directly with
end users, assisting with the design and specification of a system to meet specific customer requirements. These
tend to be larger contracts where the end user needs to ensure that their specifications are fully met.
The asset protection division comprises two main product streams:
•
•
Design and installation of fixed and reactive security screens, reception counters, cash management systems
and associated physical security equipment; and
Service and maintenance of the above equipment, as well as CCTV systems, automatic door operators, locks
and other 3rd party equipment utilizing a national network of security vetted installers.
The certified security products provide protection against the five main forms of security risk namely armed
robberies, manual forced entry or physical attacks against staff, protecting people against attackers utilizing
firearms, protection against explosives and protection and containment of fire.
Each security risk requires unique products which are not always interchangeable and Safetell works with
customers, security consultants and certification bodies to design, develop and test products to ensure their
suitability and provide effective protection.
Safetell’s work is mainly project based and each project has its own customer specific needs and requires close
co-operation with architects and security consultants to develop cost effective security solutions.
Safetell has forged key relationships with suppliers of other security products that complement it’s own range of
products to provide a complete solution to customers and will continue to seek additional products to provide a
single source supply of security products on projects.
Customers of the asset protection division range from leading blue-chip organisations to single sites, including
banks and building societies, post offices, police forces, railway companies, local authorities and government
departments, petrol outlets, hospitals, convenience stores, retailers and supermarket chains. The market varies
across the product range.
Key performance indicators
Revenue from continuing operations
Revenue growth is the prime measure of our economic output and is key to
measuring shareholder return and the success of our growth strategy. Overall
decrease in the year of 26.5% explained in the divisional sections below.
2016/17
£’000
16,036
2015/16
£’000
21,812
Gross profit before exceptional items from continuing operations
5,815
9,134
5
Gross profit from continuing operations
Gross profit provides an indication of the quality of turnover
growth and a measure of value added by the group, reflecting
the quality of our design and sales and marketing functions.
Gross profit percentage before exceptional items percentage
from continuing operations
Gross profit percentage from continuing operations
2016/17
£’000
4,474
2015/16
£’000
9,134
36.3%
27.9%
41.9%
41.9%
Financial review
Revenue in the year decreased from £21.8m to £16.0m, a decrease of 26.5%, analysed as follows:
2016/17
£’000
2015/16
£’000
Increase/
(decrease)
%
Electronic division
Access control
Workforce management
Total electronic division
Asset protection division
Products
Service
Total asset protection division
TOTAL
3,801
3,291
4,350
3,278
(12.8)
–
———— ———— ————
(7.2)
———— ———— ————
7,628
7,092
5,870
3,074
10,721
3,463
(45.2)
(11.2)
———— ———— ————
(36.9)
———— ———— ————
(26.5)
———— ———— ————
———— ———— ————
16,036
14,184
21,812
8,944
A detailed review of the activities, results and future developments is set out in the divisional sections below.
Electronic division (Grosvenor Technology)
Overview
The significant investment that has been made in product development over the previous two years has resulted
in major product releases. Both the Sateon Advance (access control) and GT-10 (Workforce Management solutions)
offerings have received a very warm reception from the market and several potentially high volume new contracts
are at an advanced stage of negotiation. Despite being newly launched, Sateon Advance was also short listed for
an award at the prestigious Security and Fire Excellence Awards.
The expectation that Sateon Advance would quickly surpass revenue from older products has been met with
Advance already enjoying greater commercial success than the older Sateon Pro system. A variant of the Advance
platform has also been selected by an independent distributor of security and CCTV systems to power their own
access control solution.
In the light of these new product launches the directors have impaired development costs by £1,341,000 and
goodwill by £1,268,000 in relation to the electronic division. These impairments are considered to be against
historical products that future revenues are not expected to cover as the directors focus on these new products.
Access Control
This was a difficult trading period as the company experienced reductions in revenues in its legacy access control
platform, Janus, while revenue growth from its current Sateon offering was affected by the delayed release of the
most recent variants.
Due to Microsoft and Intel migrating away from platforms and operating systems that support 16-bit applications
such as Grosvenor’s older Janus product line, the revenues from that product line continued to decline in line with
expectations.
6
Significant investment was made during the year and the Sateon offering was bolstered by the launch of new
hardware and software, released in the second half of the year under review as Sateon Advance. Sateon Advance
V3.0 software is the fastest, most intuitive iteration of Sateon to date, dramatically increasing the speed of
configuring doors and personnel. While revenues for this variant were slower to materialise than original
expectations due to the delayed product release, revenues in the Sateon product range as a whole increased by
22% compared to the previous year to £1,956k. Early revenues and margin from the revised portfolio have been
softer than earlier products due to our penetration pricing strategy.
The revenues from the Hong Kong operation unfortunately fell well short of expectations and as this position
could not be predicted to significantly improve, the decision was taken to withdraw from Hong Kong and redeploy
resource into regions of greater potential. This operation incurred an operating loss of £225K in the year which
has therefore now been eliminated as a cost in future years. The net result has been included in the consolidated
income statement as a discontinued operation.
The company has recently entered into a technology agreement with US based UniKey Technologies whose
patented and proprietary platform provides a “frictionless at door experience” for the end user. It is anticipated
that Grosvenor’s first products incorporating UniKey technology will be seen later in the current calendar year. The
product offering that features this embedded technology will transcend both access control and workforce
management lines of business. This agreement is a perfect example of how Grosvenor can partner with one of the
world’s leading specialist technology providers to deliver innovative solutions and services to the UK market to
enable the business to transition to a recurring revenue model.
Workforce Management WFM
Revenues for WFM were similar to the previous year. The natural slowdown of the rollout across the estate of one
of the world’s largest apparel retailers negated, to some extent, growth in some new and existing channel partners.
Development resource was focussed on the GT-10 employee terminal, launched as a Developer Kit towards the
end of the first half. GT-10 has an Android based operating platform, allowing current and potential software
partners to integrate seamlessly into their web-based offerings where they have existing Android based
applications. Negotiations have commenced with several potential major WFM software providers in the US and
Europe who have chosen to invest in adding their own software to the GT-10. The GT-10 is expected to enter mass
production and be enhanced during the first half of the current financial year, in time for customers to complete
their integration work and transition from their development phase to sales activity.
Negotiations continued during the year with some of the industry’s largest software vendors with a view to
supplying them with variants of the company’s time and attendance terminals. In North America, business
development activities increased to leverage the potential that exists for growing WFM revenues as it is felt the
US market remains the region of greatest growth opportunity for both the existing IT series terminals and the
GT-10.
Asset Protection Division (Safetell)
Revenue within this division decreased by 36.9 per cent, partly as a result of the reduced contribution from time
delay cash handling equipment sales to the Post Office. Although Safetell received orders from various long-term
customers in retail finance, petrol and food retailing sectors, reduced sales were experienced in the lead up to and
after the Brexit vote as many customers put plans on hold. This trend continued with budget cuts in all sectors.
The fall in the value of the pound against the Euro resulted in the increased cost of imported products which
reduced margin further. The down turn in orders resulted in a reorganisation within the business which generated
substantial cost savings.
During the year, new products were developed and certified to UK security standards with the focus on providing
counter terror security equipment for staff and customer protection. A distribution agreement was entered into
with Gunnebo UK to distribute their Security Doors and Partitioning range within the UK. This complements the
existing Safetell product range and the increased product offering enables entry into new market sectors. A fixed
price supply contract with a leading financial institution entered its third and final year and margins on this
contract were reduced due to imported component price increases directly related to the pound/Euro exchange rate.
A programme of product re-certification to the latest security standards was embarked on in the last few months
and will assist in moving the business forward as our focus is moved to the increased crime and threat of terrorism
within the UK.
7
Service Division revenue was 11.2 per cent lower than the corresponding period last year. Sales have been
challenging for the division as a result of the continuing branch closures that have occurred in the banking sector.
Pneumatic upgrades of Rising Screen systems now generate in excess of 10% of total service revenue, providing
customers with an extended product life beyond 20 years. The new TC105 control panel utilised on the rising
screen was introduced to the market and installed at many sites. This has proved very reliable and will replace the
outdated Surefire control panel going forward. The TC105 software was developed by Grosvenor Technology and
utilises Grosvenor’s workforce management IT51 terminal.
Taxation
The tax credit for the year reflects the operating loss for the year and the losses have been carried forward.
Statement of financial position and cash flow
Grosvenor conducted a review of the value of product development costs that had been capitalised as
development costs previously. The review focused on the expected future economic benefits of historical
investments and the ability to use or sell the intangible asset in future years. Grosvenor has historically amortised
intellectual property rich development costs over a seven year period and therefore many of the assets reviewed
were several years old. With the launch of Sateon Advance and a reduction in market demand for older products
and technologies that Sateon Advance has replaced, a write off of £1,341,000 on certain access control
development costs was made. Development costs continued to be capitalised in accordance with the accounting
policy but following the impairment review outlined above, the development costs within intangible assets on the
balance sheet were £1,031,000 lower than the previous year.
In view of the lower level of sales of the historical product range in both divisions, there has also been an
impairment of goodwill in the year of £2,229,000 which has been included within the consolidated income
statement as an exceptional item. The impairment is considered to be against historical products whilst the future
emphasis is on the new product ranges.
Trade receivables and payables were £479,000 and £184,000 respectively lower than the previous year reflecting
both the lower revenue in the period and the timing of that revenue. Deferred income was £372,000 below the
previous year due to the lower level of advance payments from customers.
Overall net assets decreased from £14,457,000 to £8,800,000.
Cash outflows from operating activities for the year was £975,000 (2016: inflow £1,758,000), reflecting the trading
result for the year and the movement in receivables and payables summarized above. Overall there was a decrease
in cash and cash equivalents of £2,938,000 (2016: increase £96,000).
Basic loss per share from continuing operations are shown in the income statement as 1.08 pence (2016: earnings
0.31 pence).
Strategy
Electronic division
The global markets for access control and workforce management are expected to continue to grow. Additionally,
maturing Internet, wireless, embedded and cloud technologies continue to enable new deployment models and
enticing opportunities for Grosvenor to increase its share of these markets within existing and new geographies.
While substantial progress was made towards refreshing the access control portfolio, products continue to be
updated to meet market requirements. To sustain existing revenues and ensure future growth, the electronic
division continues to invest in further new and updated products that will be introduced within the current and
next financial year which are expected to deliver incremental growth and will provide resilient technology
foundations for future years.
Grosvenor has identified that the Workforce Management leads the market for Access Control in valuing the
benefits of the “as a Service” business and technology model. This model can be applied in several areas of
Grosvenor’s portfolios.
•
Leasing rather than outright purchase of hardware; lowering customers’ capital requirements and ensuring
a ‘long tail’ of recurring revenue for Grosvenor.
8
•
•
•
•
Hardware and software maintenance, driven by the need to ensure permanent availability and compliance
with increasingly strict cyber and data protection regulation such as the EU General Protection Regulation
that comes into force from May 2018.
Software as a Service, lowering customers’ capital, deployment and operational costs by eliminating setup
costs and by sharing operational costs across multiple customers.
Centralised remote hardware monitoring and support, helping to eliminate failures and lower the cost of
unnecessary or unsuccessful service visits.
Data as a Service, where customers devolve all responsibility for hardware, software and operational
management to their supplier, instead simply subscribing to a data feed.
By investigating and developing propositions in each of these areas within receptive markets and extending the
offer as markets mature, Grosvenor will transition from a purveyor of hardware to a full-service solution provider.
Access Control
The business intends to build upon the stronger foundation delivered by Sateon Advance to address significant
upside opportunities within access control and adjacent markets. Grosvenor aims to augment its portfolio of first
party products with a wider range of third party accessories. Grosvenor will also build upon the strong cyber
credentials that are integral to the Sateon Advance platform to adopt a leadership position in cyber security and
resilience as purchasing decisions are increasingly made by mainstream IT functions where cyber security and
compliance is paramount.
Grosvenor’s partnership with UniKey is expected to demonstrate how bolt-on services can be wrapped around
traditional hardware sales. This approach is expected to enable Grosvenor to differentiate its offering in the short
term while nurturing new buyer relationships and new buying habits. Once trust is the cloud has been garnered,
the technology initially developed for the WFM market can be adapted and sold through these AC channels, to
deliver a wider range of value added services.
Workforce Management
Labour costs in many sectors exceed 50% of operating expenses. A drive towards greater productivity and
adoption of the latest self-service technologies within the Workforce Management and wider Human Resources
software industries are driving a rapid shift in technologies. By adding the latest open Android technologies to the
portfolio, customers can now leverage Grosvenor products to innovate more quickly share investments across
mobile, Bring your own devise (BYOD) and fixed terminal estates.
Grosvenor will continue to build upon existing core intellectual property and expertise to ensure its terminal
products are well differentiated, performant and best in class to attract new customers. Key areas for
differentiation include product durability and longevity, the scalable/secure management of biometric credentials
such as fingerprints and the remote management of terminal estates.
Asset protection division
The strategy for this division is to broaden the customer base and product range. Safetell already has a well-
established blue chip customer list, particularly in the banking and finance sector, but wants to extend to other
sectors whilst at the same time offering a greater range of products within existing sectors. Specifically, following
the trade and assets acquisition of CSI in November 2013, to address supermarket and retail chains particularly
with ATM Pods, doors and walls, and fire exit doors. With the increase in terrorism in the UK, products have been
developed and certified with the government CPNI blast resistant programme and existing products have been
recertified to the latest BSEN 1522/23 (1999) ballistic standards. A programme of product certification with The
Loss Prevention Certification Board (LPCB) will be completed in August 17, ensuring these products comply to the
latest UK manual attack resistant standards. Due to the high cost of certification and testing, Safetell has entered
into strategic partnerships with manufacturers of various additional security products manufactured within the
UK and in Europe. Although these products are applicable to counter terrorism applications, the products are
marketed to existing customers and markets who wish to target harden their premises and offer increased safety
to staff.
9
Principal risks and uncertainties
Sales of new products
The Group has incurred substantial expenditure on new developments within the electronic division, and there is
the uncertainty of future sales of new developments. The Group mitigates this risk by carrying out customer trials
and ascertaining features required by customers.
Service agreements
The majority of service revenues within the asset protection division is from 2 or 3 year service agreements and
there is the risk that these may not be renewed. The company has service level agreements with these customers
which are closely monitored and holds regular meetings with those customers to check on their satisfaction levels.
If the service agreements are not renewed it is likely that those customers would still require our services but
would be charged on a call out basis.
Market conditions
The asset protection division product range is targeted at both the private (particularly financial, retail and
construction sectors) and the public sector. Customer refurbishment programmes within the financial sector
continues to act as an underlying positive trend for demand for many of the division’s products. Our business is
reliant on the timing of customer programmes and there is a risk that these may be delayed. The division mitigates
this risk by a wide range of product offerings, continuous new product development and maintaining a close
working relationship with its customers so that we are aware of any potential delays. Government cut backs and
budget restraints due to the negative effect of the Brexit vote has impacted the order book and will continue to
influence orders until more certainty is available during the Brexit negotiations regarding the UK’s position within
the European Union. Increased enquires from certain public-sector entities to target harden facilities against
terrorist and criminal attack providers optimism that the budget restraints and cut backs are temporary.
Input prices and availability
Operating performance is impacted by the pricing and availability of its key inputs, which include electronic
components, steel and security glass. The pricing of such inputs can be quite volatile at times due to supply and
demand dynamics and the input costs of the supply base. The Group manages the effect of such demands through
a rigid procurement process, long-term relationships with suppliers, economic purchasing, multiple suppliers and
inventory management. Prices of imported products and components from the EU have been affected after the
Brexit vote as a result of the fall in value of the pound and this uncertainty continues.
Quality control
There is the potential for functional failure of products when put to use, thereby leading to warranty costs and
damage to our reputation. Quality control procedures are therefore an essential part of the process before the
product is delivered to the customer. With the support of external audits the quality control systems are reviewed
and improved on an on-going basis to ensure that the Group is addressing through a certification process which
is undertaken by a recognised and reputable authority before being brought to market.
Approval
This Strategic Report was approved by order of the Board on 14 September 2017.
By order of the Board
B BEECRAFT
Company Secretary
10
REPORT OF THE DIRECTORS
The Directors submit their annual report and audited financial statements of the Group for the year ended 30 April
2017.
Financial results and dividends
The Board is proposing a dividend of Nil per share (2016: 0.10p per share).
Directors
The Directors who served during the year were as follows:
M Dwek
M-C Dwek
B Beecraft
M Rapoport
R Waddington
Details of the Directors’ service contracts are shown in the Report of the Remuneration Committee on page 16.
M-C Dwek and R Waddington retire in accordance with the articles of association. M-C Dwek and R Waddington
being eligible, offer themselves for re-election at the next annual general meeting.
Financial instruments
For full details of changes to the Group’s management of its financial instruments and its general objectives,
policies and processes in respect of financial instruments, please refer to note 19 to the financial statements on
pages 40 to 42.
Credit risk
Credit risk is the risk of financial loss to the Group if a customer fails to meet its obligations, and the Group is
mainly exposed to credit risk from credit sales. It is Group policy to assess the credit risk of new customers before
supplying goods or services with purchase limits established for each customer, which represents the maximum
open amount they can order without requiring approval.
A monthly review of the trade receivables’ ageing analysis is undertaken and customers’ credit is reviewed
continuously. Customers that become “high risk” are placed on a restricted customer list, and future credit sales
are made only with the approval of the local management otherwise pro forma invoices are raised requiring
payment in advance.
Liquidity risk
Liquidity risk arises from the Group’s management of working capital and the finance charges and principal
repayments on its debt instruments. It is the risk that the Group will encounter difficulty in meeting its financial
obligations as they fall due.
The Group finance director receives daily reports of balances on all bank accounts.
Market risk
Market risk arises from the Group’s use of interest bearing, and foreign currency financial instruments. It is the
risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in interest
rates (interest rate risk), foreign exchange rates (currency risk) or other market factors (other price risk).
Foreign exchange risk
Foreign exchange risk arises when individual Group entities enter into transactions denominated in a currency
other than their functional currency. Liabilities are settled with the cash generated from the individual group
entities’ operations in that currency wherever possible, otherwise the liabilities are settled in the functional
currency of the group entities.
11
Likely future developments in the business of the company
Information on likely future developments in the business of the Group has been included in the Strategic Report.
Directors
Directors’ interests
The beneficial and other interests of the Directors in the shares of the Company as at 1 May 2016 (or the date of
their appointment to the Board, if later) and 30 April 2017 were as follows:
Percentage
holding at
M Dwek(a)
M Rapoport
30 April 2017 30 April 2017 30 April 2016
59,099,467
23,055,000
59,099,467
23,055,000
12.6%
4.9%
(a)
These shares are held in the name of Arbury Inc., 51 per cent. of the equity share capital of which is, at the date of this report, beneficially
owned by M Dwek.
The interests of Directors in Share Option Schemes operated by the Company at 1 May 2016 (or the date of their
appointment to the Board, if later) and 30 April 2017 were as follows:
B Beecraft
M-C Dwek
M Dwek
Number of
Ordinary
Shares under
the EMI
Scheme
30 April 2017
5,000,000
15,416,082
Share
Warrants
30 April 2017
–
Number of
Ordinary
Shares under
the EMI
Scheme
30 April 2016
5,000,000
15,416,082
Share
Warrants
30 April 2016
21,750,000
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 development costs capitalised in the year was £1,182,000
(2016: £939,000).
Post balance sheet event
In May 2017, the Group’s wholly owned subsidiary, Grosvenor Technology Limited, acquired a new office property
for £1.2 million, funded 30% from the Company’s existing cash reserves and 70% from a bank loan, which was for
an initial five-year term with repayments and interest payable from month 13 onwards and carried interest at two
per cent. above the base rate.
On 11 August the Group announced that it had exchanged contracts for a sale and leaseback arrangement for the
same property. The property was sold for £1.525 million, after incurring refurbishment costs, part of which will be
used for the repayment of the bank loan. The lease arrangement is for a period of 15 years with stipulated
increases to the annual rental rate at the five and ten year anniversaries of the commencement of the lease
contract. The sale and lease back was completed on 5 September 2017.
12
Going concern
Based on the Group’s latest trading expectations and associated cash flow forecasts, the Directors have considered
the cash requirements and are confident that the Company and the Group will be able to continue to operate for
the next twelve months following approval of these financial statements. If there is a delay to new product
launches and trading falls below expectations there may be a need for funding and the Chairman has provided a
letter of support confirming financial support by way of subscription in cash of loan notes up to the value of
£1,000,000. The provision of the loan notes will be subject to the Company and the Chairman entering into a
separate loan note instrument. The directors are confident this would be sufficient to cover any shortfall and
having assessed all of the above, therefore consider that the Company and Group will be able to meet its liabilities
as they fall due for the foreseeable future and it is on this basis that the Directors consider it appropriate to
prepare the financial statements on a going concern basis.
Share option schemes
The Newmark Security PLC EMI Share Option Plan enables the Board to grant qualifying share options under the
HM Revenue & Custom’s Enterprise Management Incentive (“EMI”) tax code and also unapproved share options to
employees and directors.
The Remuneration Committee has administered and operated the scheme. Further details of the share option
schemes are set out in note 26 to the financial statements on page 46.
Corporate governance
Under the AIM rules the Group is not obliged to implement the provisions of the UK Corporate Governance Code
(“the Code”). However the Group is committed to applying the principles of good governance as appropriate to a
Group of this size.
At 30 April 2017, the Board comprised a Non-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 approve major capital
expenditure and to review budgets. The Board will also consider reports from senior members of the management
team. The Chief Executive Officer 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 for
re-election at each Annual General Meeting. Additionally, each Director has undertaken to submit themselves for
re-election at least every three years.
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 for ensuring that agreed
procedures and applicable rules are observed.
The Company maintains an ongoing dialogue with its institutional shareholders.
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 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.
13
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 the Remuneration Committees, comprising
independent Non-Executive Directors. Each committee has written terms of reference.
The Audit Committee, now comprising R Waddington, M Dwek and M Rapoport, 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, now comprising M Rapoport, M Dwek and R Waddington 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 page 16.
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 a going concern
basis.
Website Publication
The Directors are responsible for ensuring the annual report and financial statements are made available on a
website. Financial statements are published on the Group’s website in accordance with legislation in the United
Kingdom governing the preparation and dissemination of financial statements, which may vary from legislation
in other jurisdictions. The maintenance and integrity of the Group’s website is the responsibility of the Directors.
The Directors’ responsibility also extends to the ongoing integrity of the financial statements contained therein.
Directors’ responsibilities
The Directors are responsible for preparing the annual report, director’s report and the financial statements in
accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each financial year. Under that law the
directors have elected to prepare the Group financial statements in accordance with International Financial
Reporting Standards (IFRSs) as adopted by the European Union and the Company financial statements in
accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards
and applicable law). Under company law the Directors must not approve the financial statements unless they are
satisfied that they give a true and fair view of the state of affairs of the Group and Company and of the profit or
loss of the Group for that period. The Directors are also required to prepare financial statements in accordance with
the rules of the London Stock Exchange for companies trading securities on the Alternative Investment Market.
In preparing these financial statements, the Directors are required to:
•
•
•
•
•
select suitable accounting policies and then apply them consistently;
make judgements and accounting estimates that are reasonable and prudent;
state whether the Group financial statements have been prepared in accordance with IFRSs as adopted by
the European Union, subject to any material departures disclosed and explained in the financial statements;
for the Company financial statements, state whether applicable UK Accounting Standards have been
followed; and
prepare the financial statements on the going concern basis unless it is inappropriate to presume that the
Group and Company will continue in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the
company’s transactions and disclose with reasonable accuracy at any time the financial position of the company
and enable them to ensure that the financial statements comply with the requirements of the Companies Act
2006. They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps
for the prevention and detection of fraud and other irregularities.
14
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 LLP as auditors will be proposed at the next annual general meeting.
Approval
This Directors Report was approved by order of the Board on 14 September 2017.
By order of the Board
B BEECRAFT
Company Secretary
14 September 2017
15
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 2017 comprised three existing Non-Executive Directors, Maurice Dwek, Michel Rapoport
and Robert Waddington.
Maurice Dwek was chairman of and co-founded Dwek Group plc in 1963, a company which was listed on the
London Stock Exchange in 1973 before the company was sold to a management buy-out team. He was
subsequently chairman of Arlen plc and Owen & Robinson plc before concentrating on Newmark in 1997.
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.
Robert Waddington is a chartered accountant who has worked for many years in investment banking and has
experience of the betting and gaming, property investment and engineering industries through his past
non-executive directorships.
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.
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. This notice period was extended in October 2007 to a period of 12 months.
The Company entered into a service agreement on 12 April 2013 with Ms M-C Dwek which may be terminated by
either party serving twelve months’ notice.
Director’s emoluments
Emoluments of the directors (including pension contributions) of the Company during the year ended 30 April
2017 were as follows:
Executive Directors
M-C Dwek
B Beecraft
Non-Executive Directors
M Dwek(a)
M Rapoport
R Waddington
2016
Consultancy/
management
agreement
£’000
–
–
Salary
£’000
193
163
Fees
£’000
–
–
Other
benefits
£’000
14
–
Total
including
pension
contributions
£’000
Pension
contributions
£’000
25
–
232
163
Total
£’000
207
163
–
–
–
–
25
25
80
–
–
103
25
25
———— ———— ———— ———— ———— ———— ————
548
———— ———— ———— ———— ———— ———— ————
548
———— ———— ———— ———— ———— ———— ————
———— ———— ———— ———— ———— ———— ————
———— ———— ———— ———— ———— ———— ————
103
25
25
23
–
–
–
–
–
356
350
523
526
80
80
50
50
22
37
25
46
The directors’ share interests are detailed in the Report of the Directors on page 12.
(a)
The Company paid a consultancy fee of £80,000 (2016: £80,000) to Arbury Inc., a company 51 per cent. owned by M Dwek.
Emoluments of the highest paid director were £207,000 (2016: £215,000).
16
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF NEWMARK SECURITY PLC
We have audited the financial statements of Newmark Security PLC for the year ended 30 April 2017, which
comprise the consolidated statement of financial position and parent company statement of financial position,
the consolidated income statement, the consolidated statement of comprehensive income, the consolidated
statement of cash flows, the consolidated and parent company statement of changes in equity and the related
notes. The financial reporting framework that has been applied in the preparation of the consolidated financial
statements is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European
Union. The financial reporting framework that has been applied in preparation of the parent company financial
statements is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted
Accounting Practice).
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the
Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those
matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s
members as a body, for our audit work, for this report, or for the opinions we have formed.
Respective responsibilities of directors and auditors
As explained more fully in the statement of directors’ responsibilities, the directors are responsible for the
preparation of the financial statements and for being satisfied that they give a true and fair view. Our
responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and
International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Financial
Reporting Council’s (FRC’s) Ethical Standards for Auditors.
Scope of the audit of the financial statements
A description of the scope of an audit of financial statements is provided on the Financial Reporting Council’s
website at www.frc.org.uk/auditscopeukprivate.
Opinion on financial statements
In our opinion:
•
•
•
•
the financial statements give a true and fair view of the state of the group’s and the parent company’s affairs
as at 30 April 2017 and of the group’s loss for the year then ended;
the group financial statements have been properly prepared in accordance with IFRSs as adopted by the
European Union;
the parent company financial statements have been properly prepared in accordance with United Kingdom
Generally Accepted Accounting Practice; and
the financial statements have been prepared in accordance with the requirements of the Companies Act
2006.
Opinion on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
•
•
the information given in the strategic report and directors’ report for the financial year for which the
financial statements are prepared is consistent with the financial statements;
the strategic report and directors’ report have been prepared in accordance with applicable legal
requirements.
17
Matters on which we are required to report by exception
In light of the knowledge and understanding of the Group and the parent company and its environment obtained
in the course of the audit, we have not identified material misstatements in the strategic or directors’ report.
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report
to you if, in our opinion:
•
•
•
•
adequate accounting records have not been kept by the parent company, or returns adequate for our audit
have not been received from branches not visited by us; or
the parent company financial statements are not in agreement with the accounting records and returns; or
certain disclosures of directors’ remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.
Kevin Cook (senior statutory auditor)
For and on behalf of BDO LLP, statutory auditor
Gatwick
United Kingdom
14 September 2017
BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).
18
Note
2
2017
£’000
16,036
2016
£’000
21,812
(11,562)
(12,678)
———— ————
9,134
4,474
(9,707)
(7,645)
———— ————
1,489
–
–
–
(1,378)
(2,229)
(1,341)
(285)
(5,236)
(5,241)
141
(5,100)
(136)
(5,233)
5
(13)
1,489
11
(13)
———— ————
1,487
31
———— ————
1,518
(291)
———— ————
1,227
———— ————
0.26p
———— ————
1,227
———— ————
———— ————
———— ————
———— ————
———— ————
———— ————
———— ————
0.30p
———— ————
0.31p
———— ————
0.25p
———— ————
(5,236)
(1.08p)
(1.08p)
(1.11p)
(1.11p)
CONSOLIDATED INCOME STATEMENT
for the year ended 30 April 2017
Revenue
Cost of sales (2017: including £1,341,000 exceptional development
cost impairment (2016: £Nil))
Gross profit
Administrative expenses (2017: including £285,000 exceptional
redundancy cost and £2,229,000 exceptional impairment goodwill
(2016: £Nil))
(Loss)/profit from operations before exceptional items
Exceptional impairment provision of goodwill
Exceptional impairment provision of development costs
Exceptional redundancy cost
11 & 12
11
3
(Loss)/profit from operations
Interest received
Finance costs
(Loss)/profit before tax
Tax credit
(Loss)/profit for the year from continuing operations
(Loss) of discontinued operation net of tax
(Loss)/profit for the year
Attributable to:
– Equity holders of the parent
(Loss)/earnings per share
– Basic (pence)
– Diluted (pence)
(Loss)/earnings per share from continuing operations
– Basic (pence)
– Diluted (pence)
3
6
7
9
8
8
8
8
The notes on pages 24 to 46 form part of these financial statements.
19
2017
£’000
(5,236)
2016
£’000
1,227
48
(5,188)
9
———— ————
1,236
———— ————
———— ————
———— ————
1,236
———— ————
(5,188)
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 30 April 2017
(Loss)/profit for the year
Items that will or may be reclassified to profit or loss:
Foreign exchange gains on retranslation of overseas operations
Total comprehensive income for the year
Attributable to:
– Equity holders of the parent
20
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
at 30 April 2017
Company number: 3339998
Note
2017
£’000
2016
£’000
ASSETS
Non-current assets
Property, plant and equipment
Intangible assets
Total non-current assets
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Total current assets
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Other short term borrowings
Corporation tax liability
Provisions
Total current liabilities
Non-current liabilities
Long term borrowings
Provisions
Deferred tax
Total non-current liabilities
Total liabilities
TOTAL NET ASSETS
Capital and reserves attributable to equity
holders of the company
Share capital
Share premium reserve
Merger reserve
Foreign exchange difference reserve
Retained earnings
Non-controlling interest
TOTAL EQUITY
10
11
14
15
16
17
21
18
21
22
23
656
5,598
738
8,859
———— ————
9,597
———— ————
6,254
1,646
3,286
1,370
1,406
3,715
4,299
———— ————
9,420
———— ————
19,017
12,556
6,302
3,282
79
–
100
3,971
99
1
–
———— ————
4,071
———— ————
3,461
295
98
100
97
64
100
325
———— ————
489
———— ————
4,560
———— ————
14,457
———— ————
———— ————
3,756
8,800
4,687
553
801
(125)
2,844
4,687
553
801
(173)
8,549
———— ————
14,417
40
———— ————
14,457
———— ————
———— ————
8,760
40
8,800
The financial statements were approved by the Board of Directors and authorised for issue on 14 September 2017.
M Dwek
Director
The notes on pages 24 to 46 form part of these financial statements.
21
CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended 30 April 2017
Cash flow from operating activities
Net (loss)/profit after tax
Adjustments for:
Depreciation, amortisation and impairment
Net interest expense
Income tax credit
Note
10 & 11
7
Operating cash flows before changes in working
capital
Decrease/(increase) in trade and other receivables
(Increase)/decrease in inventories
(Decrease) in trade and other payables
2017
£’000
(5,236)
4,848
8
(230)
————
(610)
458
(232)
(586)
————
Cash generated from operations
Income taxes (paid)/received
Cash flows from operating activities
Cash flow from investing activities
Payments for property, plant & equipment
Sale of property, plant & equipment
Capitalised development expenditure
Cash flow from financing activities
Share issues
Repayment of finance lease creditors
Dividends paid
Net interest paid
Net (decrease)/increase in cash and
cash equivalents
Cash and cash equivalents at beginning of year
Exchange gain on cash and cash equivalents
Cash and cash equivalents at end of year
11
24
(211)
15
(1,182)
————
–
(108)
(469)
(8)
————
2017
£’000
(970)
(5)
————
(975)
(1,378)
(585)
————
(2,938)
4,299
9
————
1,370
————
————
2016
£’000
1,227
1,201
2
(31)
————
2,399
(706)
35
(115)
————
(205)
43
(945)
————
89
(182)
(460)
(2)
————
2017
£’000
2016
£’000
1,613
145
————
1,758
(1,107)
(555)
————
96
4,202
1
————
4,299
————
————
2016
£’000
1,370
4,299
———— ————
———— ————
125
90
———— ————
———— ————
Cash and cash equivalents for purposes of the statement of cash flow comprises:
Cash available on demand
Significant non-cash transactions are as follows:
Financing activities
Assets acquired under finance leases
The notes on pages 24 to 46 form part of these financial statements.
22
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
1 May 2015
Profit for the year
Other comprehensive
income
Total comprehensive
income for the year
Contributions by and
distributions to owners
Dividends (note 24)
Share issues
Total contributions by
and distributions to
owners
30 April 2016
1 May 2016
Loss for the year
Other comprehensive
income
Total comprehensive
loss for the year
Contributions by and
distributions to owners
Dividends (note 24)
Total contributions by
and distributions to
owners
30 April 2017
Share
capital
£’000
4,602
–
Share
premium
£’000
549
–
Merger
reserve
£’000
801
–
Foreign
exchange
reserve
£’000
(182)
–
Non-
Retained controlling
interest
earnings
£’000
£’000
40
7,782
–
1,227
Total
equity
£’000
13,592
1,227
9
———— ———— ———— ———— ———— ———— ————
–
–
9
–
–
–
–
–
–
9
1,227
–
1,236
(460)
89
———— ———— ———— ———— ———— ———— ————
(460)
–
–
85
–
–
–
–
–
4
–
–
4
85
(371)
———— ———— ———— ———— ———— ———— ————
14,457
———— ———— ———— ———— ———— ———— ————
———— ———— ———— ———— ———— ———— ————
8,549
4,687
(173)
(460)
553
801
40
–
–
–
4,687
–
553
–
801
–
(173)
–
8,549
(5,236)
40
–
14,457
(5,236)
48
———— ———— ———— ———— ———— ———— ————
48
–
–
–
–
–
–
–
–
48
(5,236)
–
(5,188)
(469)
———— ———— ———— ———— ———— ———— ————
(469)
–
–
–
–
–
–
–
(469)
———— ———— ———— ———— ———— ———— ————
8,800
———— ———— ———— ———— ———— ———— ————
———— ———— ———— ———— ———— ———— ————
2,844
4,687
(125)
(469)
553
801
40
–
–
–
23
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
for the year ended 30 April 2017
Accounting policies
1.
Newmark Security PLC (the “Company”) is a public limited company registered in England & Wales. The
consolidated financial statements of the Company for the year ended 30 April 2017 comprise the Company and
its subsidiaries (together referred to as the “Group”).
Basis of preparation
The consolidated financial statements have been prepared on a historical cost basis.
The principal accounting policies adopted in the preparation of the financial statements are set out below. The
policies have been consistently applied to all the years presented, unless otherwise stated.
These consolidated financial statements have been prepared in accordance with International Financial Reporting
Standards (IFRSs) and its interpretations (IFRICs) issued by the International Accounting Standards Board (IASB)
and with those parts of the Companies Act 2006 applicable to companies preparing their accounts under IFRS.
The preparation of financial statements in conformity with IFRSs requires management to make judgements,
estimates and assumptions that affect the application of policies and reported amounts of income and expenses,
and assets and liabilities. These judgements and assumptions are based on historical experience and various other
factors that are believed to be reasonable under the circumstances, the result of which form the basis of making
the judgements about carrying values of assets and liabilities. Actual results may differ from these estimates.
These estimates and underlying assumptions are reviewed on an ongoing basis. Any revisions to the accounting
estimates are recognised in the period in which the revision is made.
The following principal accounting policies have been applied consistently in the preparation of these financial
statements:
New standards, interpretations and amendments effective from 1 May 2017
The amendments and interpretations to published standards that have an effective date on or after 1 May 2017
or later periods have not been adopted early by the Group and are not expected to materially affect the Group
when they do come in to effect, with the exception of IFRS 16 and potentially IFRS 9 & IFRS 15. IFRS 16 will result
in the leases disclosed in note 25 becoming finance leases and being recognised in the statement of financial
position. The directors are still assessing the impact, if any, of IFRS 9 & IFRS 15 on the financial statements. None
of the other standards are expected to have a material impact.
Going concern
Based on the Group’s latest trading expectations and associated cash flow forecasts, the Directors have considered
the cash requirements and are confident that the Company and the Group will be able to continue to operate for
the next twelve months following approval of these financial statements. If there is a delay to new product
launches and trading falls below expectations there may be a need for funding and the Chairman has provided a
letter of support confirming financial support by way of subscription in cash of loan notes up to the value of
£1,000,000. The provision of the loan notes will be subject to the Company and the Chairman entering into a
separate loan note instrument. The directors are confident this would be sufficient to cover any shortfall and
having assessed all of the above, therefore consider that the Company and Group will be able to meet its liabilities
as they fall due for the foreseeable future and it is on this basis that the Directors consider it appropriate to
prepare the financial statements on a going concern basis.
Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief
operating decision-maker. The chief operating decision-maker has been identified as the management team
comprising the Chief Executive Officer and Group Finance Director.
Revenue
Revenue is stated net of value added tax. Sales of equipment including hardware and software are recognised
when the customer takes legal ownership. Service, maintenance and licence revenue is spread evenly over the term
of the contract and the proportion of such related to the period after 30 April is included within deferred income
on the consolidated statement of financial position. Other sales include installation and refurbishment work which
24
are recognised on completion of work. Revenue is accounted for as accrued income where service and
maintenance work has been completed for a customer but not yet invoiced.
Basis of consolidation
The group financial statements consolidate the results of the company and all of its subsidiary undertakings drawn
up to 30 April 2017. Subsidiaries are entities controlled by the group. The company controls a subsidiary if all three
of the following elements are present: power over the subsidiary; exposure to variable returns from the subsidiary;
and the ability of the investor to use its power to affect those variable returns. The financial statements of
subsidiaries are included in the consolidated financial statements from the date that control commences until the
date that control ceases.
Business combinations
The consolidated financial statements incorporate the results of business combinations using the purchase
method. In the consolidated statement of financial position, the acquiree’s identifiable assets, liabilities and
contingent liabilities are initially recognised at their fair values at the acquisition date. The results of subsidiaries
acquired or disposed of during the year are included in the consolidated income statement from the effective date
of acquisition or up to the effective date of disposal as appropriate.
Goodwill
Goodwill represents the excess of the cost of a business combination over the interest in the fair value of
identifiable assets, liabilities and contingent liabilities acquired. Cost comprises the fair values of assets given,
liabilities assumed and equity instruments issued.
Goodwill is capitalised as an intangible asset with any impairment in carrying value being charged to the income
statement.
Where the fair value of identifiable assets, liabilities and contingent liabilities exceed the fair value of consideration
paid, the excess is credited in full to the income statement.
Impairment of non-financial assets
Impairment tests on goodwill are undertaken annually on 30 April. Where the carrying value of an asset exceeds
its recoverable amount (ie the higher of value in use and fair value less costs to sell), the asset is written down
accordingly. In assessing value in use, the estimated future cash flows are discounted to their present value using
a pre-tax discount rate that reflects the current market assessment of the time value of money and risk specific
to the asset.
Where it is not possible to estimate the recoverable amount of an individual asset, the impairment test is carried
out on the asset’s cash-generating unit (ie the lowest group of assets in which the asset belongs for which there
are separately identifiable cash flows). Goodwill is allocated on initial recognition to each of the Group’s cash-
generating units that are expected to benefit from the synergies of the combination giving rise to the goodwill.
Impairment charges are included in the cost of sales line item in the income statement for research and
development and in the administration line for goodwill. An impairment loss in respect of goodwill is not reversed.
In respect of other assets, an impairment loss is reversed if there has been a change in the estimates used to
determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying
amount does not exceed the carrying amount that would have been determined, net of depreciation or
amortisation, if no impairment had been recognised.
In testing for impairment, management has to make judgements and estimates about future events which are
uncertain. Adverse results compared to these judgements could alter the decision of whether an impairment is
required.
Foreign currency
The consolidated financial statements are presented in sterling, which is the Group’s functional and presentation
currency.
Transactions entered into by Group entities in a currency other than the functional currency of the primary
economic environment in which it operates are recorded at the rates ruling when the transactions occur. Foreign
currency monetary assets and liabilities are translated at the rates ruling at the statement of financial position
25
date. Exchange differences arising on the retranslation of unsettled monetary assets and liabilities are similarly
recognised immediately in the income statement.
The results and financial position of all Group companies that have a functional currency different from the
presentation currency are translated into the presentation currency as follows:
(i)
(ii)
assets and liabilities are translated at the closing rate at the date of the statement of financial position;
income and expenses are translated at average exchange rates; and
(iii)
all resulting exchange differences are recognised as a separate component of equity.
On disposal of a foreign operation, the cumulative exchange differences recognised in the foreign exchange
reserve relating to that operation up to the date of disposal are transferred to the income statement as part of
the profit or loss on disposal.
Financial assets
All of the Group’s financial assets are categorised as loans and receivables.
The Group’s financial assets comprise trade and other receivables, cash and cash equivalents. Trade and other
receivables are measured initially at fair value and subsequently at amortised cost using the effective interest rate
method, less provision for impairment. Appropriate allowances for estimated irrecoverable amounts are
recognised in profit and loss when there is objective evidence that the asset is impaired, (such as significant
financial difficulties on the part of the counterparty or default or significant delay in payment) that the Group will
be unable to collect all of the amounts due under the terms receivable, the amount of such a provision being the
difference between the net carrying amount and the present value of the future expected cash flows associated
with the impaired receivable. For trade receivables, which are reported net, such provisions are recorded in a
separate allowance account with the loss being recognised within administrative expenses in the consolidated
statement of comprehensive income. On confirmation that the trade receivable will not be collectable, the gross
carrying value of the asset is written off against the associated provision.
Financial liabilities
Financial liabilities are obligations to pay cash and are recognised when the Group becomes a party to the
contractual provisions of the instrument. The Group’s financial liabilities comprise trade payables, other payables
and other short term borrowings. All financial liabilities are measured initially at fair value and subsequently at
amortised cost using the effective interest method.
Share-based payments
Where share options are awarded to employees, the fair value of the options at the date of grant is charged to
the income statement over the vesting period. Equity settled share options are recognised with a corresponding
credit to equity.
Non-market vesting conditions are taken into account by adjusting the number of equity instruments expected to
vest at each statement of financial position date so that, ultimately, the cumulative amount recognised over the
vesting period is based on the number of options that eventually vest. Market vesting conditions are factored into
the fair value of the options granted. As long as all other vesting conditions are satisfied, a charge is made
irrespective of whether the market vesting conditions are satisfied. The cumulative expense is not adjusted for
failure to achieve a market vesting condition.
Leased assets
Where substantially all of the risks and rewards incidental to ownership of a leased asset have been transferred
to the Group (a “finance lease”), the asset is treated as if it had been purchased outright. The amount initially
recognised as an asset is the fair value, or if lower, the present value of the minimum lease payments payable over
the term of the lease. The corresponding lease commitment is shown as a liability. Lease payments are analysed
between capital and interest. The interest element is charged to the income statement over the period of the lease
and is calculated so that it represents a constant proportion of the lease liability. The capital element reduces the
balance owed to the lessor.
Where substantially all of the risks and rewards incidental to ownership are retained by the lessor (an “operating
lease”), the total rentals payable under the lease are charged to the income statement on a straight-line basis over
the lease term.
26
The land and buildings elements of property leases are considered separately for the purposes of lease
classification.
Internally generated intangible assets (research and development costs)
Expenditure on research activities is recognised as an expense in the period in which it is incurred.
Expenditure on internally developed products is capitalised if it can be demonstrated that:
•
•
•
•
•
•
it is technically feasible to develop the product for it to be sold;
adequate resources are available to complete the development;
there is an intention to complete and sell the product;
the group is able to sell the product;
sale of the product will generate future economic benefits; and
expenditure on the project can be measured reliably.
Capitalised development costs are amortised over seven years being the period the Group expects to benefit from
selling the products developed. Amortisation is charged from when the asset is ready for use and the expense is
included within the cost of sales line in the income statement.
Development expenditure not satisfying the above criteria and expenditure on the research phase of internal
projects are recognised in the income statement as incurred.
Licences, patents, trade marks and copyright
Costs associated with licences, patents, trade marks, copyrights etc. are capitalised as incurred and are amortised
over the expected life of the asset.
Taxation
Income tax expense represents the sum of the tax currently payable and deferred tax.
Current tax
The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in
the income statement because it excludes items of income or expense that are taxable or deductible in other years
and it further excludes items that are never taxable or deductible. The Group’s liability for current tax is calculated
using tax rates that have been enacted or substantively enacted by the statement of financial position date.
Deferred taxation
Deferred tax assets and liabilities are recognised where the carrying amount of an asset or liability in the statement
of financial position differs from its tax base, except for differences arising on:
•
•
•
•
the initial recognition of goodwill;
goodwill for which amortisation is not tax deductible;
the initial recognition of an asset or liability in a transaction which is not a business combination and at the
time of the transaction affects neither accounting nor taxable profit; and
investments in subsidiaries and jointly controlled entities where the group is able to control the timing of
the reversal of the difference and it is probable that the difference will not reverse in the foreseeable future.
Recognition of deferred tax assets is restricted to those instances where it is probable that taxable profit will be
available against which the difference can be utilised.
The amount of the asset or liability is determined using tax rates that have been enacted or substantively enacted
by the statement of financial position date and are expected to apply when the deferred tax liabilities/(assets) are
settled/(recovered). Deferred tax balances are not discounted.
Deferred tax assets and liabilities are offset when the Group has a legally enforceable right to offset current tax assets
and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority on either:
•
the same taxable group company; or
27
•
different group entities which intend either to settle current tax assets and liabilities on a net basis, or to
realise the assets and settle the liabilities simultaneously, in each future period in which significant amounts
of deferred tax assets or liabilities are expected to be settled or recovered.
Property, plant and equipment
Items of property, plant and equipment are recognised at cost. As well as the purchase price, cost includes directly
attributable costs and the estimated present value of any future costs of dismantling and removing items. The
corresponding liability is recognised within provisions.
Depreciation is provided on all items of property, plant and equipment to write off the carrying value of items over
their expected useful economic lives. It is applied at the following rates:
Short leasehold improvements
Plant and machinery
Fixtures and fittings
Computer equipment
Motor vehicles
–
–
–
–
–
evenly over the length of the lease
20 per cent. per annum straight line
10-15 per cent. per annum straight line
25-33.3 per cent. per annum straight line
25 per cent. per annum reducing balance
Inventories
Inventories are initially recognised at cost, and subsequently at the lower of cost and net realisable value. Cost
comprises all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their
present location and condition.
Weighted average cost is used to determine the cost of ordinarily interchangeable items.
Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs necessary
to make the sale.
Provisions
Provisions are recognised for liabilities of uncertain timing or amount that have arisen as a result of past
transactions, where it is probable that the Group will be required to settle the obligation, and a reliable estimate
can be made of the amount of the obligation.
The amount recognised as a provision is the best estimate of the consideration required to settle the present
obligation at the statement of financial position date, taking into account the risks and uncertainties surrounding
the obligation.
Dilapidation provisions are provided on leasehold properties where the terms of the lease require the Group to
make good any changes made to the property during the period of the lease. Where a dilapidation provision is
required the Group recognises an asset and provision equal to the discounted cost of restating the property to its
original state. The asset is depreciated over the remaining term of the lease.
Cash and cash equivalents
Cash and cash equivalents in the cash flow statement include cash in hand, deposits held at call with banks, other
short-term highly liquid investments with original maturities of three months or less, and bank overdrafts. Bank
overdrafts are included in borrowings in current liabilities in the statement of financial position.
Borrowing costs
Borrowing costs are recognised as an expense in the period in which they are incurred.
Dividends
Dividends are recognised when they become legally payable. In the case of interim dividends to equity
shareholders, this is when paid. In the case of final dividends, this is when approved by the shareholders at the
AGM.
Pension costs
Contributions to the company’s defined contribution pension scheme are charged to the consolidated income
statement in the year in which they become payable.
28
Holiday pay accrual
A liability is recognised to the extent of any unused holiday pay entitlement which has accrued at the balance
sheet date and carried forward to future periods. The is measured at the undiscounted salary costs of the future
holiday entitlement so accrued at the balance sheet date.
Non-controlling interests
Non-controlling interests are recognised at the Group’s proportionate share in the recognised amounts of the
acquiree’s identifiable net assets. The total comprehensive income of non-wholly owned subsidiaries is attributed
to owners of the parent and to the non-controlling interests in proportion to their relative ownership interests.
Discontinued operations
The results of operations closed or disposed of during the year are included in the consolidated statement of
comprehensive income up to the date of closure or disposal.
A discontinued operation is a component of the Group’s business that represents a separate major line of business
or geographical area of operations that has been closed or disposed of.
Discontinued operations are presented in the consolidated statement of comprehensive income as a single line
which comprises the post-tax profit or loss of the discontinued operation less costs to sell or on disposal of the
assets constituting discontinued operations.
Critical accounting estimates and judgements
The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the next financial year are discussed below.
(a)
(b)
Estimated impairment of goodwill
The Group tests annually whether goodwill has suffered any impairment, in accordance with the accounting
policy stated above. The recoverable amounts of cash-generating units have been determined based on
value-in-use calculations. These calculations require the use of estimates as detailed in note 12.
Development costs on internally developed products are capitalised if it can be demonstrated that the
expenditure meets the criteria set out above. These costs are amortised over the period that the Group
expects to benefit from selling the products developed. The judgements concerning compliance with the
above criteria and the expected useful life of these assets are made using the historical, commercial and
technical experience of senior members of the management team.
2017
£’000
6,740
352
2016
£’000
7,219
409
5,870
3,074
10,721
3,463
———— ————
21,812
———— ————
———— ————
16,036
2.
Revenue
Revenue arises from:
Electronic division
Sale of goods
Provision of services
Asset protection division
Sale of goods
Provision of services
29
(Loss)/profit from continuing operations
3.
This has been arrived at after charging/(crediting):
Staff costs (note 4)
Exceptional redundancy costs
Depreciation of property, plant and equipment
– owned assets
– leased assets
Amortisation of intangible assets
Impairment provision of goodwill
Impairment provision of development costs
Foreign exchange differences
Operating lease expense
– Plant and machinery
– Property
Auditors remuneration:
Audit fees payable to the company’s auditor for the audit of:
– Company annual accounts
– Group annual accounts
Other fees payable to the Company’s auditors:
– Subsidiary companies
– Tax compliance
(Profit) on disposal of tangible non-current assets
2017
£’000
8,902
285
267
138
873
2,229
1,341
(16)
72
295
10
13
2016
£’000
8,781
–
262
156
783
–
–
(42)
64
342
9
13
81
21
(33)
67
46
(48)
———— ————
———— ————
2017
No.
56
102
2016
No.
58
100
———— ————
158
———— ————
———— ————
158
2017
£’000
797
109
98
2016
£’000
854
84
95
———— ————
1,033
———— ————
———— ————
1,004
Exceptional redundancy cost
Certain redundancy costs were incurred as part of a restructuring within the businesses to reduce costs in the light
of the results for the year.
Staff costs
4.
Staff costs (including the Executive Directors) comprise:
Wages and salaries
Defined contribution pension cost
Employer’s national insurance contributions and similar taxes
2017
£’000
7,700
381
821
2016
£’000
7,616
296
869
———— ————
8,781
———— ————
———— ————
8,902
The average numbers employed (including the Executive Directors) within the following categories were:
Management, sales and administration
Production
Key management remuneration (comprising the Executive Directors and Directors of subsidiary companies):
Salaries
Defined contribution pension costs
Employers national insurance contributions and similar taxes
The emoluments of the Directors of the parent company are set out in the Report of the Remuneration Committee
on page 16.
30
5.
Segment information
Description of the types of products and services from which each reportable segment derives its revenues
The Group has 2 main reportable segments:
•
•
Electronic division – This division is involved in the design, manufacture and distribution of access-control
systems (hardware and software) and the design, manufacture and distribution of WFM hardware only, for
time-and-attendance, shop-floor data collection, and access control systems. This division contributed
44 per cent. (2016: 35 per cent.) of the Group’s revenue.
Asset Protection division – This division is involved in the design, manufacture, installation and maintenance
of fixed and reactive security screens, reception counters, cash management systems and associated security
equipment. This division contributed 56 per cent. (2016: 65 per cent.) of the Group’s revenue.
Factors that management used to identify the Group’s reportable segments
The Group’s reportable segments are strategic business units that offer different products and services. The two
divisions are managed separately as each involves different technology, and sales and marketing strategies.
Operating segments are reported in a manner consistent with the internal reporting provided to the chief
operating decision maker.
Measurement of operating segment profit or loss from operations before tax excludes non-recurring losses such
as goodwill impairment, and also excludes the effects of share based payments.
Segment assets and liabilities exclude group company balances.
Electronic
2017
£’000
Asset
Protection
2017
£’000
Total
2017
£’000
8,944
8,944
7,092
7,092
1
125
873
1,341
(2,049)
(225)
16,036
———— ———— ————
16,036
———— ———— ————
5
386
873
1,341
(1,919)
(225)
———— ———— ————
(2,144)
———— ———— ————
1,452
8,823
3,521
4
261
–
–
130
–
156
2,761
2,052
1,296
6,062
1,469
(2,274)
130
Revenue
Total revenue
Revenue from external customers
Finance cost
Depreciation
Amortisation
Impairment provision
Segment (loss)/profit before income tax from continuing activities
Loss before income tax of discontinued operation
Total (loss)/profit before income tax
Additions to non-current assets
Reportable segment assets
Reportable segment liabilities
31
Revenue
Total revenue
Revenue from external customers
Finance cost
Depreciation
Amortisation
Segment (loss)/profit before income tax from continuing activities
Loss before income tax of discontinued operation
Total (loss)/profit before income tax
Additions to non-current assets
Reportable segment assets
Reportable segment liabilities
Electronic
2016
£’000
Asset
Protection
2016
£’000
Total
2016
£’000
7,628
7,628
14,184
14,184
–
122
783
(161)
(291)
2
271
–
2,809
–
21,812
———— ———— ————
21,812
———— ———— ————
2
393
783
2,648
(291)
———— ———— ————
2,357
———— ———— ————
1,236
13,944
4,454
231
7,168
2,822
1,005
6,776
1,632
2,809
(452)
Reconciliation of reportable segment revenues, profit or loss, assets and liabilities to the Group’s corresponding
amounts:
2017
£’000
2016
£’000
16,036
21,812
———— ————
2016
£’000
2017
£’000
(1,919)
141
(522)
(571)
(2,229)
2,648
31
(509)
(652)
–
———— ————
1,518
———— ————
2016
£’000
2017
£’000
(5,100)
8,823
998
2,735
13,944
109
4,964
———— ————
19,017
———— ————
12,556
3,521
235
4,454
106
———— ————
4,560
———— ————
3,756
Revenue
Total revenue for reportable segments
Profit or loss after income tax expense
Total profit or loss for reportable segments
Corporation taxes
Parent company salaries and related costs
Other parent company costs
Impairment provision of goodwill
(Loss)/profit after income tax expense (continuing activities)
Assets
Total assets for reportable segments
PLC
Goodwill on consolidation
Group’s assets
Liabilities
Total liabilities for reportable segments
PLC
Group’s liabilities
32
Other material items
Capital expenditure
Depreciation and amortisation
Impairment of development
costs
Impairment of goodwill
Geographical information:
UK
Netherlands
Sweden
Belgium
Austria
Other Europe
USA
Middle East
Other countries
Reportable
segment
totals
2017
£’000
1,452
1,258
1,341
–
Group
totals
2017
£’000
1,518
1,278
1,341
2,229
Reportable
segment
totals
2016
£’000
1,236
1,176
–
–
PLC
2017
£’000
66
20
–
2,229
PLC
2016
£’000
4
25
–
–
Group
totals
2016
£’000
1,240
1,201
–
–
External revenue by
location of customers
2016
£’000
18,299
265
124
206
145
379
1,473
704
217
Non-current assets
by location of assets
2016
£’000
9,573
–
–
–
–
–
24
–
–
———— ———— ———— ————
9,597
———— ———— ———— ————
2017
£’000
13,008
357
6
362
163
278
1,340
359
163
2017
£’000
6,243
–
–
–
–
–
11
–
–
16,036
21,812
6,254
Revenue from one customer totalled £3,508,000 (2016: £5,502,000). There are no other customers that account
for more than 10% of Group revenue.
6.
Finance costs
Finance costs
Finance leases
7.
Tax expense
Current tax expense
Continuing businesses
UK corporation tax on (loss)/profits for the year
Adjustment for over provision in prior periods
Deferred tax expense
Origination and reversal of temporary differences
Adjustment for over provision in prior periods
Total tax credit
2017
£’000
2016
£’000
13
13
———— ————
13
———— ————
———— ————
13
2017
£’000
2017
£’000
2016
£’000
2016
£’000
8
(10)
————
(247)
19
————
–
(21)
————
3
(13)
————
(21)
(10)
————
(31)
————
————
(2)
(228)
————
(230)
————
————
33
2017
£’000
(141)
(89)
2016
£’000
(31)
–
———— ————
(31)
———— ————
———— ————
(230)
2017
£’000
(5,236)
(230)
2016
£’000
1,227
(31)
———— ————
1,196
———— ————
———— ————
(5,466)
(1,088)
(304)
514
–
659
(20)
9
239
(245)
18
(22)
60
(47)
(34)
———— ————
(31)
———— ————
———— ————
(230)
Income tax credit from continuing operations
Income tax credit from discontinued operations
The reasons for the difference between the actual tax credit for the year and the standard rate of corporation tax
in the UK applied to profits for the year are as follows:
(Loss)/profit for the year
Income tax credit (including income tax on discontinued operation)
(Loss)/profit before income tax
Expected tax (credit)/charge based on the standard rate of corporation tax in the UK of
19.92 per cent. (2016: 20 per cent.)
Research and development allowances
Effects on profits of other items not deductible for tax purposes
Utilisation and recognition of previously unrecognised tax losses
Deferred tax not recognised
Change in tax rate
Adjustment to tax charge in respect of previous periods
Total tax credit
The Group has the following tax losses, subject to agreement by HMRC Inspector of Taxes, available for offset
against future trading profits as appropriate:
Management expenses
Trading losses
A deferred tax asset has not been recognised for the following:
Management expenses
Trading losses
8.
(Loss)/earnings per share
2017
£’000
357
4,179
2016
£’000
750
2,227
———— ————
———— ————
2017
£’000
61
712
2016
£’000
135
401
———— ————
———— ————
Continuing
2017
£’000
2016
£’000
Discontinued
2017
£’000
2016
£’000
Total
2017
£’000
2016
£’000
(5,100)
1,227
———— ———— ———— ———— ———— ————
———— ———— ———— ———— ———— ————
(5,236)
1,518
(136)
(291)
Numerator
(Loss)/earnings used in
basic and diluted EPS
Denominator
Weighted average number of shares used in basic EPS
Weighted average number of dilutive share warrants
Weighted average number of dilutive share options
Weighted average number of shares for diluted EPS
The total number of options in issue is disclosed in note 26.
34
No.
No.
–
2,733,509
468,732,316 464,249,624
14,050,885
10,470,065
———––— ———––—
471,465,825 488,770,574
———––— ———––—
————— —————
The basic earnings per share before 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 earnings per share as follows:
Basic (loss)/earnings per share from continuing operations – basic
Impairment provision of development costs
Impairment provision of development costs
Exceptional redundancy costs
(Loss)/earnings per share from continuing operations before exceptional items
Reconciliation of earnings
(Loss)/profit from continuing operations used for calculation of basic earnings
per share
Impairment provision of development costs
Impairment provision of goodwill
Exceptional redundancy costs
(Loss)/earnings from continuing operations before exceptional items
2017
pence
(1.08)
0.29
0.47
0.06
2016
pence
0.31
–
–
–
———––— ———––—
0.31
———––— ———––—
————— —————
(0.26)
2017
£’000
2016
£’000
(5,100)
1,341
2,229
285
1,518
–
–
–
———––— ———––—
1,518
———––— ———––—
————— —————
(1,245)
Discontinued operations
9.
In October 2016, the Group closed it’s operation in Hong Kong. The post-tax loss of discontinued operations was
determined as follows:
Result of discontinued operations
Revenue
Costs
Tax credit
(Loss) for the year
Basic and diluted loss per share from discontinued operations
Basic and diluted loss per share
Statement of cash flows
2017
£’000
26
(251)
89
2016
£’000
11
(302)
–
———––— ———––—
(291)
———––— ———––—
————— —————
(136)
2017
pence
(0.03)
2016
pence
(0.06)
———––— ———––—
————— —————
The statement of cash flows include the following amounts relating to discontinued operations:
Operating activities
Investing activities
Net cash outflow from discontinued operations
2016
2017
£’000
£’000
(317)
(184)
(11)
3
———––— ———––—
(328)
———––— ———––—
————— —————
(181)
The consolidated income statement has been re-presented to reflect the discontinued operation.
35
10. Property, plant and equipment
Short
leasehold
improvements
£’000
Plant,
machinery
and motor
vehicles
£’000
Computers,
fixtures and
fittings
£’000
Total
£’000
At 30 April 2016
Cost
Accumulated depreciation
Net book value
At 30 April 2017
Cost
Accumulated depreciation
Net book value
Year ended 30 April 2016
Opening net book value
Translation differences
Additions
Disposals
Depreciation
Closing net book value
Year ended 30 April 2017
Opening net book value
Translation differences
Additions
Disposals
Depreciation
Closing net book value
561
(408)
1,000
(766)
3,002
(2,264)
———— ———— ———— ————
738
———— ———— ———— ————
1,441
(1,090)
153
234
351
549
(478)
2,813
(2,157)
———— ———— ———— ————
656
———— ———— ———— ————
1,400
(1,044)
864
(635)
356
229
71
229
–
10
–
(86)
354
–
116
(42)
(194)
905
(1)
295
(43)
(418)
———— ———— ———— ————
738
———— ———— ———— ————
———— ———— ———— ————
322
(1)
169
(1)
(138)
153
234
351
153
–
–
–
(82)
234
–
165
(9)
(161)
738
2
336
(15)
(405)
———— ———— ———— ————
656
———— ———— ———— ————
———— ———— ———— ————
351
2
171
(6)
(162)
356
229
71
The net book value of plant, machinery and motor vehicles for the Group includes an amount of £198,265
(2016: £176,445) in respect of assets held under finance leases and hire purchase contracts. The related
depreciation charge on these assets for the year was £138,532 (2016: £155,823).
36
11.
Intangible assets
At 30 April 2016
Cost
Amortisation
Impairment provision
Net book value
At 30 April 2017
Cost
Amortisation
Impairment provision
Net book value
Year ended 30 April 2016
Opening net book value
Additions
– Internally developed
Amortisation
Closing net book value
Year ended 30 April 2017
Opening net book value
Additions
– Internally developed
Amortisation
Impairment provision
Closing net book value
Electronic division
Asset protection division
Development
costs
(internally
generated)
£’000
Licences,
patents
and
copyrights
£’000
Goodwill
£’000
Total
£’000
6,872
–
(1,908)
9,201
(3,774)
(1,539)
16,118
(3,812)
(3,447)
———— ———— ———— ————
8,859
———— ———— ———— ————
45
(38)
–
4,964
3,888
7
6,872
–
(4,137)
7,143
(1,406)
(2,880)
14,060
(1,445)
(7,017)
———— ———— ———— ————
5,598
———— ———— ———— ————
45
(39)
–
2,735
2,857
6
4,964
3,731
2
8,697
–
–
939
(782)
945
(783)
———— ———— ———— ————
8,859
———— ———— ———— ————
———— ———— ———— ————
3,888
4,964
6
(1)
7
4,964
3,888
7
8,859
1,182
(872)
(1,341)
–
–
(2,229)
1,182
(873)
(3,570)
———— ———— ———— ————
5,598
———— ———— ———— ————
———— ———— ———— ————
–
(1)
–
2,857
2,735
6
Goodwill
carrying amount
2017
£’000
2,735
–
2016
£’000
4,003
961
———— ————
4,964
———— ————
———— ————
2,735
The impairment in the period of £1,341,000 represents internally generated development costs, which no longer
satisfy the criteria for capitalisation as listed on page 27 as a consequence of the redevelopment of the product
design.
The Group has no contractual commitments for development costs (2016: £Nil).
All development costs have a finite useful economic life.
12. Goodwill and impairment
The carrying amount of goodwill is allocated to the cash generating units (CGU’s) as follows:
The recoverable amounts of all the above CGUs have been determined from value in use calculations based on
cash flow projections from formally approved budgets covering a five year period to 30 April 2022. The discount
rate that was applied was 18 per cent. and 16 per cent. for the electronic division and asset protection division
respectively (2016: 16 per cent. and 13 per cent. respectively), representing the pre-tax discount rate that reflects
the current market assessment of the time value of money and risk specific to the asset.
37
The impairment review undertaken in 2017 for the asset protection division resulted in a full impairment of
goodwill of £961,000 (2016: Nil). Revenue from the product range associated with the acquisition of the asset
protection division has been declining and is being replaced by the introduction of new products, and as such it
is no longer considered appropriate to retain the £961,000 goodwill as an intangible asset.
The impairment review undertaken in 2017 for the electronic division resulted in an impairment charge of
£1,268,000 (2016: Nil). Within the electronic division, it is anticipated that the mid-tier access control market will
yield growth for the sale of the Sateon range and the workforce management market will yield growth from the
GT-10 Android based terminal. Similarly to the asset protection division, the impairment charge has therefore
arisen from the development of these products replacing revenues relation to historical products associated with
the original acquisition of the electronic division.
The average annual revenue growth rate for cash flows from operating activities for the electronic division for the
period within the formal budgets is 8 per cent. (2016: 17 per cent.). The projected cash flows beyond the formal
budgeted period are based on an extrapolation of the budgeted cash flows at a growth rate of 14 per cent. (2016:
1 per cent.). The growth rate reflects the introduction of new products.
Following the impairment the carrying value of goodwill is now equal to the recoverable amount and any changes
in the growth rates stated above would result in a change in the impairment provision.
13. Subsidiaries
The subsidiaries of Newmark Security PLC, all of which have been included in these consolidated financial
statements, are as follows:
Name
Custom Micro Products Limited
(2a)
Newmark Technology Limited
Newmark Technology (C-Cure Division) Limited
Safetell International Limited
Safetell Limited
Safetell Security Screens Limited
Vema B.V.
Vema N.V.
Vema UK Limited
Grosvenor Technology Limited
Grosvenor Technology Hong Kong Limited
Newmark Group Limited
Sateon Limited
ATM Protection (UK) Limited
ATM Protection Limited
Grosvenor Technology LLC
(2d)
(2b)
(2a)
(2e)
(2c)
Country of
incorporation
Great Britain
Great Britain
Great Britain
Great Britain
Great Britain
Great Britain
The Netherlands
The Netherlands
Great Britain
Great Britain
Hong Kong
Great Britain
Great Britain
Great Britain
Great Britain
USA
Proportion of
ownership
Activity
interest(1)
Dormant
100%
Trading
100%
Dormant
100%
Dormant
100%
Trading
100%
Trading
100%
Holding
100%
Dormant
98%
Dormant
100%
Trading
100%
Trading
100%
Dormant
100%
100%
Dormant
86.7% Non-trading
86.7% Non-trading
Trading
100%
(1)
(2)
(3)
Owned by Grosvenor Technology Limited
Owned by Vema BV 51 per cent., Newmark Security PLC 47 per cent.
Owned by Vema NV
Owned by Safetell Limited
100 per cent. Owned by ATM Protection (UK) Limited
The shares held in all companies are ordinary shares
The investments in subsidiary companies are held directly by the Company apart from the following:
(a)
(b)
(c)
(d)
(e)
The registered office for all the companies incorporated in Great Britain is 91 Wimpole Street, London W1G 0EF apart from Safetell Limited,
Safetell International Limited and Safetell Security Screens Limited registered office is Unit 46, Fawkes Avenue, Dartford, Kent DA1 1JQ.
Grosvenor Technology LLC registered office is 3009 Green Street Florida USA.
Grosvenor Technology Hong Kong Limited registered office is Unit 1902, Prosperity Place, 6 Shing Yip Street Kuon Tong, Kowloon Hong Kong.
38
2017
£’000
419
138
1,089
2016
£’000
763
105
538
———— ————
1,406
———— ————
———— ————
1,646
2017
£’000
2,767
2016
£’000
3,220
(46)
2,721
101
153
311
(20)
———— ————
3,200
45
19
451
———— ————
3,715
———— ————
———— ————
3,286
2017
£’000
299
44
65
5
2016
£’000
334
63
36
63
———— ————
496
———— ————
———— ————
413
2017
£’000
20
32
(6)
2016
£’000
24
(3)
(1)
———— ————
20
———— ————
———— ————
46
Finished goods include an amount of £Nil (2016: £Nil) carried at fair value less costs to sell. The amount of
inventories consumed in the year was £5,191,000 (2016: £7,847,000). The amount of inventory write downs in the
year was £8,000 (2016: £21,000). There are no inventories recoverable after 12 months (2016: £Nil).
14.
Inventories
Raw materials and consumables
Work-in-progress
Finished goods and goods for resale
15. Trade and other receivables
Trade receivables
Less: provision for impairment
of trade receivables
Trade receivables (net)
Other receivables
Accrued income
Prepayments
At 30 April 2017 trade receivables of £413,000 (2016: £496,000) were past due but not impaired. The ageing
analysis of these receivables is as follows:
30 days past due
60 days past due
90 days past due
Over 90 days past due
Movements on group provisions for impairment of trade receivables are as follows:
Opening balance
Increase/(decrease) in provisions
Receivable written off during the year
Closing balance
The movement on the provision for impaired receivables has been included in the administrative expense line in
the income statement. The Group provides against specific receivables based on regular review of ageing and
communication with customers.
39
16. Trade and other payables – current
Trade payables
Other tax and social security taxes
Other payables
Deferred income
Accruals
Holiday pay provision
17. Other short term borrowings
Finance lease creditor (note 25)
Information about fair values on the financial liabilities is given in note 20.
18. Long term borrowings
Finance lease creditor (note 25)
2017
£’000
1,095
504
164
705
693
121
2016
£’000
1,279
657
81
1,077
771
106
———— ————
3,971
———— ————
———— ————
3,282
2017
£’000
79
2016
£’000
99
———— ————
99
———— ————
———— ————
79
2017
£’000
98
2016
£’000
64
———— ————
64
———— ————
———— ————
98
Information about fair values on the financial liabilities is given in note 20. All finance leases are denominated in
sterling.
19. Financial instruments
The Group’s overall risk management programme seeks to minimise potential adverse effects on the Group’s
financial performance.
The Group’s financial instruments comprise cash, borrowings and liquid resources, and various items such as trade
receivables and payables that arise directly from its operations. The Group is exposed through its operations to
one or more financial risks the details of which are disclosed in the directors report on page 11.
Financial Instruments
Categories of financial assets and financial liabilities are detailed below:
Loans and receivables
2016
£’000
2017
£’000
Current financial assets
Trade and other receivables
Cash and cash equivalents
Total current financial assets
40
2,822
1,370
3,245
4,299
———— ————
7,544
———— ————
———— ————
4,192
Financial liabilities
measured at
amortised cost
2017
£’000
2016
£’000
1,259
79
1,360
99
———— ————
1,459
———— ————
———— ————
1,338
98
98
64
———— ————
64
———— ————
———— ————
———— ————
1,523
———— ————
1,436
Current financial liabilities
Trade and other payables
Loans and borrowings
Total current financial liabilities
Non-current financial liabilities
Loans and borrowings
Total non-current financial liabilities
Total financial liabilities
Financial instrument risk exposure management
The Group is exposed to risks that arise from its use of financial instruments. This note describes the Group’s
objectives, policies and processes for managing those risks and the methods used to measure them. Further
quantitative information in respect of these risks is presented throughout these financial statements.
There have been no substantive changes in the Group’s exposure to financial instrument risks, its objectives,
policies and processes for managing those risks or the methods used to measure them from previous periods
unless otherwise stated in this note.
Principal financial instruments
The principal financial instruments used by the Group, from which financial instrument risk arises are
•
•
•
trade and other receivables
cash at bank
trade and other payables
General objectives, policies and processes
The Board has overall responsibility for the determination of the Group’s risk management objectives and policies.
The overall objective of the Board is to set policies that seek to reduce risk as far as possible without unduly
affecting the Group’s competitiveness and flexibility. Further details regarding these policies are set out below.
The maturity analysis of the undiscounted financial liabilities measured at amortised costs is as follows:
Up to 3 months
3 to 6 months
6 to 12 months
Later than 1 year and not later than 5 years
2017
£’000
1,281
20
37
98
2016
£’000
1,389
26
24
84
———— ————
1,523
———— ————
———— ————
1,436
Foreign currency risk
The Group’s main foreign currency risk is the short-term risk associated with financial assets denominated in US
dollars and Euros relating to the UK operations whose functional currency is sterling. The risk arises on the
difference between exchange rates at the time the invoice is raised to when the invoice is settled by the customer.
The Group is also exposed to currency risk on financial liabilities which are denominated in currencies other than
sterling.
41
Functional currency of individual entity
As of 31 December the Group’s net exposure to foreign exchange risk was as follows:
Pounds sterling
2017
2016
Dollar
Euro
Other
2017
2016
2017
2016
2017
2016
Net foreign currency financial assets/
(liabilities)
Pound sterling
Dollar
Other
Total
–
–
–
–
–
–
–
–
17
——— ——— ——— ——— ——— ——— ——— ———
17
——— ——— ——— ——— ——— ——— ——— ———
——— ——— ——— ——— ——— ——— ——— ———
(34)
–
(5)
(40)
–
–
287
–
–
–
–
18
64
–
–
(39)
(40)
287
18
64
–
–
The effect of a 10 per cent. strengthening of the Euro and Dollar against Sterling at the statement of financial
position date on the Euro/Dollar denominated trade and other receivables and payables carried at that date would,
all other variables held constant, have resulted in a net increase in pre-tax profit for the year and increase of net
assets of £17,000 (2016: £51,000. A 10 per cent. weakening in the exchange rates would, on the same basis, have
decreased pre-tax profit and decreased net assets by £14,000 (2016: £42,000).
Capital
The Group considers its capital to comprise its ordinary share capital, share premium account, foreign exchange
reserve and accumulated retained earnings.
In managing its capital, the Group’s primary objective is to ensure its continued ability to provide a consistent
return for its equity shareholders through capital growth and distributions. The Group seeks to maintain a gearing
ratio that balances risks and returns at an acceptable level and also to maintain a sufficient funding base to enable
the Group to meet its working capital and strategic investment needs. In making decisions to adjust its capital
structure to achieve these aims, the Group considers not only its short-term position but also its long-term
operational and strategic objectives.
The cash-to-adjusted-capital ratios at 30 April 2017 and at 30 April 2016 were as follows:
2017
£’000
177
(1,370)
2016
£’000
163
(4,299)
———— ————
(4,136)
———— ————
14,457
———— ————
———— ————
———— ————
(1,193)
8,800
13.6%
28.6%
Loans and borrowings
Less: cash and cash equivalents
Net cash
Total equity
Cash to adjusted capital ratio
42
20. Financial assets and liabilities
The weighted average interest rate of fixed rate liabilities and the weighted average period for which they are fixed
is as follows:
Sterling
Fair values
The book value and fair value of financial liabilities are as follows:
Finance lease creditor
Rate
2017
%
2.1
Period
2016
Years
0.9
———— ———— ———— ————
———— ———— ———— ————
Period
2017
Years
1.0
Rate
2016
%
2.8
Book
value
2017
£’000
177
Fair
value
2017
£’000
193
Fair
value
2016
£’000
176
———— ———— ———— ————
176
———— ———— ———— ————
———— ———— ———— ————
Book
value
2016
£’000
163
163
193
177
Fair values of financial liabilities have been determined by discounting cash payments at prevailing market rates
of interest having regard to the specific risks attaching to them.
The fair values of all other financial assets and liabilities at 30 April 2017 and 2016 are equal to their book value.
21. Provisions
At 1 May 2016
Charged to income statement
At 30 April 2017
Due within one year or less
Due after more than one year
Leasehold
dilapidations
£’000
100
100
————
200
————
100
100
————
200
————————
Leasehold dilapidations relate 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. On recognition of the initial provision, an equal amount was
recognised as part of the cost of the leasehold improvements. This cost is recognised as depreciation of leasehold
improvements over the remaining term of the lease. The main uncertainty relates to estimating the cost that will
be incurred at the end of the lease.
43
22. Deferred tax
Deferred tax is calculated in full on temporary differences under the liability method using a tax rate of
17 per cent. (2016: 18 per cent.).
The movement on the deferred tax account is as shown below:
Group
2017
£’000
2016
£’000
Liability
At 1 May
Income statement
At 30 April
Deferred tax assets have been recognised in respect of all temporary timing differences giving rise to deferred tax
assets if it is probable that these assets will be recovered.
The movements in deferred tax assets and liabilities (prior to the offsetting of balances within the same jurisdiction
as permitted by IAS12) during the period are shown below.
Deferred tax assets and liabilities are only offset where there is a legally enforceable right of offset and there is
an intention to settle the balances net.
Details of the deferred tax liability, and amounts charged/(credited) to the consolidated income statement are as
follows:
Accelerated capital allowances
Other temporary and deductible differences
Available losses
Accelerated capital allowances
Other temporary and deductible differences
Available losses
44
There are unrecognised deferred tax assets as listed in note 7, which have not been recognised due to the
uncertainty of the timing of future profits.
325
(228)
335
(10)
———— ————
325
———— ————
———— ————
97
97
Liability/
(Asset)
2017
£’000
(192)
402
(113)
Charged/
(credited)
to income
2017
£’000
(25)
(258)
55
———— ————
(228)
———— ————
———— ————
Liability/
(Asset)
2016
£’000
(167)
660
(168)
Charged/
(credited)
to income
2016
£’000
(63)
(20)
73
———— ————
(10)
———— ————
———— ————
325
23. Share capital
Ordinary shares of 1p each
Allotted, called up and fully paid
At 1 May
Exercise of share options in year
Exercise of warrants in year
Authorised
At beginning and end of year
2017
Number
2016
£
Number
£
468,732,316
4,687,323
–
–
460,182,316
1,050,000
7,500,000
468,732,316
–
–
4,601,823
10,500
75,000
—————— —————— —————— ——————
4,687,323
—————— —————— —————— ——————
—————— —————— —————— ——————
—————— —————— —————— ——————
10,151,642
—————— —————— —————— ——————
1,015,164,192
1,015,164,192
468,732,316
10,151,642
4,687,323
In November 2011, the Company raised a facility of up to £300,000 through the issue of a 10% secured loan note
(“Loan Note”) with certain Directors of the Company. The Loan Notes actually issued were subsequently repaid in
full during the year ended 30 April 2012. In addition to the Loan Note, the Company entered into a warrant
instrument with the Loan Note holders whereby the Company granted to the Loan Note holders 30,000,000
warrants to subscribe for 30,000,000 new ordinary shares of 1 pence each in the Company at any time until
25 November 2016 at an exercise price of 1 pence (“the Warrants”) either for cash or in exchange for the release
of some or all of the debt owed to the Loan Note holders under the Loan Note instrument. As at 30 April 2017
there were Nil (2016: 21,750,000) warrants outstanding. Maurice Dwek, Non-Executive Chairman, has Nil warrants
outstanding (2016: 21,750,000).
24. Reserves
The share premium account represents the excess of the subscription price of shares issued over the nominal value
of those shares, less expenses of issue.
The merger reserve arose in the year ended 30 April 2003 when the Company made an offer to the Global
Depository Receipt (“GDR”) holders of Vema N.V. for the 49 per cent. of the issued share capital of that company
not already owned by the Group. The offer represented 1.5 Newmark shares for each GDR and the merger reserve
represented the excess of market value over nominal value of the shares issued.
Retained earnings represents the cumulative amount of retained profits/losses each year as reported in the income
statement.
Foreign exchange reserve represents the cumulative exchange differences on the retranslation of foreign
operations.
Dividends
Final dividend of 0.10 pence (2016: 0.10 pence) per ordinary share
paid during the year relating to the previous year’s results
2017
£’000
2016
£’000
469
460
———— ————
———— ————
The directors are proposing a final dividend of Nil pence per ordinary share (2016: 0.10 pence) totalling £Nil (2016:
£469,000).
45
25. Leases
Finance leases
Future lease payments are due as follows:
Not later than one year
Later than one year and not later than five years
Not later than one year
Later than one year and not later than five years
The present value of future lease payments are analysed as:
Current liabilities
Non-current liabilities
16
193
Minimum
lease
payments
2017
£’000
88
105
Interest
2017
£’000
9
7
Present
value
2017
£’000
79
98
———— ———— ————
177
———— ———— ————
———— ———— ————
Minimum
lease
payments
2016
£’000
107
69
Interest
2016
£’000
8
5
Present
value
2016
£’000
99
64
———— ———— ————
163
———— ———— ————
———— ———— ————
176
13
2017
£’000
79
98
2016
£’000
99
64
———— ————
163
———— ————
———— ————
177
All finance leases arise on motor vehicles which are denominated in sterling and tend to be for a period of
36 months.
Operating leases – lessee
The Group leases the majority of its properties. The terms of property leases vary, although they all tend to be
tenant repairing with rent reviews every 2 to 5 years.
The total future value of minimum lease payments due is as follows:
Not later than one year
Later than one year and not later than five years
Later than five years
Other
2017
£’000
96
147
–
Property
2017
£’000
197
708
134
Other
2016
£’000
54
143
13
———— ———— ———— ————
210
———— ———— ———— ————
———— ———— ———— ————
Property
2016
£’000
293
418
160
1,039
243
871
26. Share-based payment
In April 2007, the Group adopted the Newmark Security PLC EMI Share Option Plan which enabled the Board to
grant qualifying share options under the HM Revenue and Custom’s Enterprise Management Incentive (“EMI”) tax
code and also unapproved share options to employees and directors. The EMI share options vest and become
exercisable 3 years from the date of grant (subject to leaver and takeover provisions), or such other period of time
specified by the Remuneration Committee.
46
Date of Grant
October 2007
August 2013
November 2013
August 2014
September 2015
May 2016
Subscription
Price payable
1.50p
1.375p
1.45p
1.825p
3.325p
2.92p
No. of options
1,000,000
12,363,636
6,000,000
1,909,589
1,142,857
5,000,000
The remaining weighted average contractual lives for both Approved and Unapproved Options under this scheme
were 7.1 years (2016: 7.6 years).
The share based remuneration expense for equity settled schemes was £Nil (2016: £Nil).
There are no share based payment expenses for the year and therefore no further IFRS 2 disclosures are given.
27. Related party transactions
Details of directors’ remuneration are given in the Report of the Remuneration Committee on page 16.
28. Post balance sheet event
In May 2017, the Group’s wholly owned subsidiary, Grosvenor Technology Limited, acquired a new office property
for £1.2 million, funded 30% from the Company’s existing cash reserves and 70% from a bank loan, which was for
an initial five-year term with repayments and interest payable from month 13 onwards and carried interest at two
per cent. above the base rate.
On 11 August the Group announced that it had exchanged contracts for a sale and leaseback arrangement for the
same property. The property was sold for £1.525 million, after incurring refurbishment costs, part of which will be
used for the repayment of the bank loan. The lease arrangement is for a period of 15 years with stipulated
increases to the annual rental rate at the five and ten year anniversaries of the commencement of the lease
contract. The sale and lease back was completed on 5 September 2017.
47
COMPANY STATEMENT OF FINANCIAL POSITION
at 30 April 2017 – UK GAAP Financial Statements
Company number: 3339998
Note
2017
£’000
2017
£’000
2016
£’000
2016
£’000
2,917
3
————
2,920
(13,447)
————
Fixed assets
Investment in subsidiaries
Tangible assets
Current assets
Debtors
Cash and cash equivalents
3
4
5
Creditors: amounts falling due within one year
6
Net current liabilities
Total assets less current liabilities
Amounts falling due after one year
Long term borrowings
Net assets
Capital and reserves
Called up share capital
Share premium account
Merger reserve
Profit and loss account
Shareholder’s funds
7
8
The Company’s loss for the current year was £4,291k (2016: profit 1,579k)
The notes on pages 49 to 52 form part of these financial statements.
17,121
52
————
17,173
18,428
5
————
18,433
4,549
68
————
4,617
(11,690)
————
(7,073)
————
11,360
–
————
11,360
————
————
4,687
553
801
5,319
————
11,360
————
————
(10,527)
————
6,646
(46)
————
6,600
————
————
4,687
553
801
559
————
6,600
————
————
These financial statements were approved by the Board of Directors and authorised for issue on 14 September
2017.
M Dwek
Director
48
COMPANY STATEMENT OF CHANGES IN EQUITY
1 May 2015
Comprehensive income for the year
Profit and total comprehensive income
for the year
Contributions by and distributions to owners
Dividends
Share issues
Total contributions by and distributions
to owners
30 April 2016
1 May 2016
Comprehensive income for the year
Loss and total comprehensive loss for the year
Contributions and distributions to owners
Dividends
Total contributions and distributions to owners
Share
capital
£’000
4,602
Share
premium
£’000
549
Merger
reserve
£’000
801
Retained
earnings
£’000
4,200
Total
equity
£’000
10,152
1,579
———— ———— ———— ———— ————
1,579
–
–
–
(460)
89
———— ———— ———— ———— ————
(460)
–
–
85
–
–
–
4
4
85
(371)
———— ———— ———— ———— ————
11,360
———— ———— ———— ———— ————
———— ———— ———— ———— ————
4,687
5,319
(460)
553
801
–
4,687
553
801
5,319
11,360
(4,291)
———— ———— ———— ———— ————
(4,291)
–
–
–
–
–
–
–
(469)
———— ———— ———— ———— ————
(469)
———— ———— ———— ———— ————
6,600
———— ———— ———— ———— ————
———— ———— ———— ———— ————
4,687
(469)
(469)
559
553
801
–
–
49
NOTES FORMING PART OF THE FINANCIAL STATEMENTS OF THE COMPANY
for the year ended 30 April 2017
1.
Accounting policies
Basis of preparation
The financial statements have been prepared in accordance with Financial Reporting Standard 100 Application of
Financial Reporting Requirements (“FRS 100”) and Financial Reporting Standard 101 Reduced Disclosure
Framework) (“FRS 101”).
Disclosure exemptions adopted
In preparing these financial statements the company has taken advantage of all disclosure exemptions conferred
by FRS 101. Therefore these financial statements do not include:
•
•
•
•
•
•
Certain comparative information as otherwise required by EU endorsed IFRS;
Certain disclosures regarding the company’s capital;
A statement of cash flows;
The effect of future accounting standards not yet adopted;
Disclosure of related party transactions with other wholly owned members of the Group headed by Newmark
Security PLC; and
The disclosure of the remuneration of key management personnel.
In addition, and in accordance with FRS 101 further disclosure exemptions have been adopted because equivalent
disclosures are included in the company’s consolidated financial statements. These financial statements do not
include certain disclosures in respect of:
•
•
•
Share based payments;
Financial instruments; and
Impairment of assets.
Profit and Loss Account
Under Section 408 of the Companies Act 2006 the Company is exempt from the requirement to present its own
profit and loss account. The profit for the year ended 30 April 2017 is disclosed in the Statement of Financial
Position.
Property, plant and equipment
Items of property, plant and equipment are recognised at cost.
Depreciation is provided to write off the cost, less estimated residual values, of all fixed assets evenly over their
expected useful lives. It is calculated at the following rates:
Computer equipment
Fixtures and fittings
Motor vehicles
– 33 per cent. per annum straight line
– 10 per cent. per annum straight line
– 33 per cent. per annum straight line
Leased assets
Operating lease rentals are charged to the profit and loss account on a straight-line basis over the term of the lease.
Dividends
Dividends are recognised when they become legally payable. In the case of interim dividends to equity shareholders,
this is when paid. In the case of final dividends, this is when approved by the shareholders at the AGM.
Investments
Investments in subsidiary undertakings are stated at cost less provision for impairment, if any. The carrying values
are reviewed for impairment when events or changes in circumstances indicate that the carrying value may not
be recoverable.
50
Intercompany balances
Balances between group companies which reflect trading and funding activity are short term. Balances between
group companies are interest free and due on demand.
Critical accounting estimates and judgements
The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the next financial year are discussed below.
(a)
(b)
Estimated impairment of investment in subsidiaries
The Company tests annually whether investments in subsidiaries have suffered any impairment in
accordance with the accounting policy stated above.
The recoverable amounts have been determined based on value-in-use calculations. These calculations
require the use of estimates as detailed in note 12 of the Group accounts.
Estimated impairment of group company balances
The Company revises the solvency and future trading forecasts of subsidiaries to determine whether the
group company balances have suffered any impairment.
2.
Staff costs
Wages and salaries
Defined contribution pension cost
Employer’s national insurance contributions and similar taxes
The average number of employees, including directors, during the period was:
Office and management
3.
Investment in subsidiaries
Cost
At 1 May 2016
Capitalisation of group loan in year
At 30 April 2017
Impairment provision
At 1 May 2016
Provision in year
At 30 April 2017
Net book value at 30 April 2017
Net book value at 30 April 2016
2017
£’000
439
25
58
2016
£’000
436
22
51
———— ————
509
———— ————
———— ————
522
2017
Number
2016
Number
3
3
———— ————
———— ————
£’000
18,869
3,000
————
21,869
————————
441
4,307
————
4,748
————
17,121
————
————
————
————
18,428
————
The subsidiaries of Newmark Security PLC are listed in note 13 of the Group financial statements.
The annual impairment reviews indicated that provisions were necessary against the cost of investment in
subsidiaries for the electronic division as the directors focus on the new product ranges replacing the historical
products.
51
4.
Tangible assets
Cost
At 1 May 2016
Additions in the year
Disposals
At 30 April 2017
Depreciation
At 1 May 2016
Disposals
Charge for the year
At 30 April 2017
Net book value
At 30 April 2017
At 30 April 2016
5.
Debtors
Short
leasehold
improvements
£’000
Motor
Computers
Fixtures
vehicles & Fittings
£’000
£’000
Total
£’000
12
–
(12)
85
66
(76)
———— ———— ———— ————
75
———— ———— ———— ————
43
66
(43)
30
–
(21)
66
–
9
12
(12)
–
80
(76)
19
———— ———— ———— ————
23
———— ———— ———— ————
43
(43)
16
25
(21)
3
16
–
7
–
50
52
———— ———— ———— ————
———— ———— ———— ————
———— ———— ———— ————
5
———— ———— ———— ————
–
–
2
5
2017
£’000
2,869
33
15
2016
£’000
4,513
10
26
———— ————
4,549
———— ————
———— ————
2,917
2017
£’000
13,265
16
5
5
156
2016
£’000
11,546
31
15
–
98
———— ————
11,690
———— ————
———— ————
13,447
Amount due from group undertakings
Other debtors
Prepayments
All amounts shown under debtors fall due for payment within one year.
6.
Creditors: amounts falling due within one year
Amount due to group undertakings
Other taxation and social security
Other payables
Other short term borrowing
Accruals
52
7.
Long term borrowings
Finance lease creditor
The finance lease arises on a motor vehicle which is denominated sterling and is for a period of 36 months.
2017
£’000
46
2016
£’000
–
———— ————
———— ————
Minimum
Lease
payments
2017
£’000
9
50
Interest
2017
£’000
4
4
Present
value
2017
£’000
5
46
———— ———— ————
51
———— ———— ————
———— ———— ————
59
8
2017
Number
2016
£
Number
£
468,732,316
4,687,323
–
–
460,182,316
1,050,000
7,500,000
468,732,316
–
–
4,601,823
10,500
75,000
—————— —————— —————— ——————
4,687,323
—————— —————— —————— ——————
—————— —————— —————— ——————
—————— —————— —————— ——————
10,151,642
—————— —————— —————— ——————
1,015,164,192
1,015,164,192
468,732,316
10,151,642
4,687,323
Not later than one year
Later than one year and not later than five years
8.
Share capital
Allotted, called up and fully paid:
At 1 May
Exercise of share options in year
Exercise of warrants in year
Authorised
At beginning and end of year
In November 2011, the Company raised a facility of up to £300,000 through the issue of a 10% secured loan note
(“Loan Note”) with certain Directors of the Company. The Loan Notes actually issued were subsequently repaid in
full during the year ended 30 April 2012. In addition to the Loan Note, the Company entered into a warrant
instrument with the Loan Note holders whereby the Company granted to the Loan Note holders 30,000,000
warrants to subscribe for 30,000,000 new ordinary shares of 1 pence each in the Company at any time until
25 November 2016 at an exercise price of 1 pence (“the Warrants”) either for cash or in exchange for the release
of some or all of the debt owed to the Loan Note holders under the Loan Note instrument. As at 30 April 2017
there were Nil (2016: 21,750,000) warrants outstanding. Maurice Dwek, Non-Executive Chairman, has Nil warrants
outstanding (2016: 21,750,000).
Commitments under operating leases
9.
The total future value of minimum lease payments due is as follows:
Not later than one year
Later than one year and not later than five years
Later than five years
53
2017
Land and
buildings
£’000
29
–
–
2016
Land and
buildings
£’000
–
148
–
———— ————
———— ————
THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION.
If you are in any doubt as to any aspect of the proposals referred to in this document or as to the action you
should take, you should seek your own advice from a stockbroker, solicitor, accountant, or other professional
adviser.
If you have sold or otherwise transferred all of your shares, please pass this document together with the
accompanying documents to the purchaser or transferee, or to the person who arranged the sale or transfer so
they can pass these documents to the person who now holds the shares.
54
NEWMARK SECURITY PLC
(incorporated and registered in England and Wales under number 3339998)
NOTICE OF ANNUAL GENERAL MEETING
If you do not propose to attend the Annual General Meeting to be held at Grosvenor Suite, Millennium Hotel,
44 Grosvenor Square, London W1K 2HP on 17 October 2017 at 11.00 a.m. please complete and submit a proxy
form in accordance with the instructions printed on the enclosed form. The proxy form must be received no later
than 11.00 a.m. on 15 October 2017.
Notice is hereby given that the Annual General Meeting of the above-mentioned company (“the Company”) will
be held at Grosvenor Suite, Millennium Hotel, 44 Grosvenor Square, London W1K 2HP on 17 October 2017 at
11.00 a.m.
You will be asked to consider and pass the resolutions below. Resolutions 6 and 7 (inclusive) will be proposed as
special resolutions. All other resolutions will be proposed as ordinary resolutions.
Ordinary resolutions
1.
Annual report and financial statements
To receive and approve the accounts for the year ended 30 April 2017 together with the reports of the
directors and auditors thereon.
2.
3.
4.
5.
Rotation and retirement of director
To re-elect Marie-Claire Dwek as a director of the Company, who is retiring by rotation in accordance with
the articles of association of the Company.
Rotation and retirement of director
To re-elect Robert Waddington as a director of the Company, who is retiring by rotation in accordance with
the articles of association of the Company.
Appointment of auditors
To re-appoint BDO LLP of 2 City Place, Beehive Ring Road, Gatwick, West Sussex RH6 0PA as auditors of the
Company to hold office from the conclusion of the meeting until the conclusion of the next general meeting
of the Company at which accounts are laid and to authorise the directors of the Company to determine their
remuneration.
Remuneration of directors
THAT the remuneration of the directors be approved as set out in the accounts for the year ended 30 April
2017.
55
Authority to allot
Special Resolutions
6.
THAT, in accordance with section 551 of the Companies Act 2006 (“the 2006 Act”), the directors be generally and
unconditionally authorised to allot shares in the Company up to an aggregate nominal amount of £1,500,000,
being equal to approximately 32 per cent of the nominal amount of ordinary shares of the Company in issue on
the latest practicable date prior to the printing of the Notice of the Annual General Meeting, save that in the case
of the cancellation and re-grant of options under the terms of an employee share scheme or otherwise, the
cancelled options shall not be counted so that the aggregate nominal amount of equity securities which the
directors are empowered to allot shall be reduced only by the number of any unexercised options in existence from
time to time, any shares acquired on the exercise of options and any shares allotted under the authority of this
resolution provided that this authority shall, unless renewed, varied or revoked by the Company, expire on the
earlier of the conclusion of the next following annual general meeting of the Company and 15 months from the
passing of this resolution save that the Company may, before such expiry, make an offer or agreement which
would or might require shares to be allotted and the directors may allot shares in pursuance of such offer or
agreement notwithstanding that the authority conferred by this resolution has expired.
This resolution revokes and replaces all unexercised authorities previously granted to the directors to allot shares
or grant rights to subscribe for or to convert any security into shares, but without prejudice to any allotment of
shares or grant of rights already made, offered or agreed to be made pursuant to such authorities.
Disapplication of pre-emption rights
7.
THAT, subject to the passing of the resolution 6 above and in accordance with section 570 of the 2006 Act, the
directors be generally empowered to allot equity securities (as defined in section 560 of the 2006 Act) pursuant
to the authority conferred by resolution 6, as if section 561(1) of the 2006 Act did not apply to any such allotment,
provided that this power shall:
7.1. be limited to the allotment of equity securities up to an aggregate nominal amount of £450,000;
7.2
save that in the case of the cancellation and re-grant of options under the terms of an employee share
scheme or otherwise, the cancelled options shall not be counted so that the aggregate nominal amount of
equity securities which the directors are empowered to allot shall be reduced only by the number any
unexercised options in existence from time to time, any shares acquired on the exercise of options and any
shares allotted during the period set out in paragraph 7.3 below; and
7.3. expire on the earlier of the conclusion of the next following annual general meeting of the Company and 15
months from the passing of this resolution (unless renewed, varied or revoked by the Company prior to or
on that date) 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 and the directors may allot equity securities
in pursuance of any such offer or agreement notwithstanding that the power conferred by this resolution
has expired.
By order of the Board
BRIAN BEECRAFT
Company Secretary
Newmark Security PLC
91 Wimpole Street
London W1G 0EF
Registered in England and Wales No. 3339998
14 September 2017
56
Notes to the Notice of Annual General Meeting
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
Members that are entitled to attend and vote at the Annual General Meeting as set out in paragraph 6, are entitled to appoint a proxy to
exercise all or any of their rights to attend and to speak and vote on their behalf at the meeting. A shareholder may appoint more than one
proxy in relation to the Annual General Meeting provided that each proxy is appointed to exercise the rights attached to a different share or
shares held by that shareholder. A proxy need not be a shareholder of the Company. A proxy form which may be used to make such
appointment and give proxy instructions accompanies this notice.
To be valid any proxy form or other instrument appointing a proxy must be received by post or (during normal business hours only) by hand
at Capita Registrars, PXS, The Registry, 34 Beckenham Road, Beckenham, BR3 4TU no later than 11.00 a.m. on 15 October 2017.
The return of a completed proxy form, other such instrument or any CREST Proxy Instruction (as described in paragraph 9 below) will not
prevent a shareholder attending the Annual General Meeting and voting in person if he/she wishes to do so.
The statement of the rights of shareholders in relation to the appointment of proxies in paragraphs 1 and 2 above does not apply to Nominated
Persons. The rights described in those paragraphs can only be exercised by shareholders of the Company.
Any person to whom this notice is sent who is a person nominated under section 146 of the Companies Act 2006 to enjoy information rights
(a “Nominated Person”) may, under an agreement between him/her and the shareholder by whom he/she was nominated, have a right to be
appointed (or to have someone else appointed) as a proxy for the Annual General Meeting. If a Nominated Person has no such proxy
appointment right or does not wish to exercise it, he/she may, under any such agreement, have a right to give instructions to the shareholder
as to the exercise of voting rights.
To be entitled to attend and vote at the Annual General Meeting (and for the purpose of the determination by the Company of the votes they
may cast), Shareholders must be registered in the Register of Members of the Company as at close of business on 15 October 2017 (or, in the
event of any adjournment as at close of business on the date which is two days before the time of the adjourned meeting). Changes to the
Register of Members after the relevant deadline shall be disregarded in determining the rights of any person to attend and vote at the meeting.
As at 13 September 2017 (being the last business day prior to the publication of this Notice) the Company’s issued share capital consists of
468,732,316 ordinary shares of 1p each, carrying one vote each. Therefore, the total voting rights in the Company as at 13 September 2017
are 468,732,316.
CREST members who wish to appoint a proxy or proxies through the CREST electronic proxy appointment service may do so by using the
procedures described in the CREST Manual. CREST Personal Members or other CREST sponsored members, and those CREST members who have
appointed a service provider(s), should refer to their CREST sponsor or voting service provider(s), who will be able to take the appropriate action
on their behalf.
In order for a proxy appointment or instruction made using the CREST service to be valid, the appropriate CREST message (a “CREST Proxy
Instruction”) must be properly authenticated in accordance with Euroclear UK & Ireland Limited’s specifications, and must contain the
information required for such instruction, as described in the CREST Manual. The message, regardless of whether it constitutes the
appointment of a proxy or is an amendment to the instruction given to a previously appointed proxy must, in order to be valid, be transmitted
so as to be received by Capita Registrars (ID RA10) by 11.00 a.m. on 15 October 2017. For this purpose, the time of receipt will be taken to be
the time (as determined by the timestamp applied to the message by the CREST Application Host) from which the issuer’s agent is able to
retrieve the message by enquiry to CREST in the manner prescribed by CREST. After this time any change of instructions to proxies appointed
through CREST should be communicated to the appointee through other means.
CREST members and, where applicable, their CREST sponsors, or voting service providers should note that Euroclear UK & Ireland Limited does
not make available special procedures in CREST for any particular message. Normal system timings and limitations will, therefore, apply in
relation to the input of CREST Proxy Instructions. It is the responsibility of the CREST member concerned to take (or, if the CREST member is
a CREST personal member, or sponsored member, or has appointed a voting service provider, to procure that his CREST sponsor or voting
service provider(s) take(s)) such action as shall be necessary to ensure that a message is transmitted by means of the CREST system by any
particular time. In this connection, CREST members and, where applicable, their CREST sponsors or voting system providers are referred, in
particular, to those sections of the CREST Manual concerning practical limitations of the CREST system and timings.
The Company may treat as invalid a CREST Proxy Instruction in the circumstances set out in Regulation 35(5)(a) of the Uncertificated Securities
Regulations 2001.
Shareholders should note that it is possible that, pursuant to requests made by shareholders of the Company under section 527 of the
Companies Act 2006, the Company may be required to publish on its website a statement setting out any matter relating to: (i) the audit of the
Company’s accounts (including the auditor’s report and the conduct of the audit) that are to be laid before the Annual General Meeting; or (ii)
any circumstance connected with an auditor of the Company ceasing to hold office since the previous meeting at which annual accounts and
reports were laid in accordance with section 437 of the Companies Act 2006. The Company may not require the shareholders requesting any
such website publication to pay its expenses in complying with sections 527 or 528 of the Companies Act 2006. Where the Company is required
to place a statement on its website under section 527 of the Companies Act 2006, it must forward the statement to the Company’s auditor not
later than the time when it makes the statement available on the website. The business which may be dealt with at the Annual General Meeting
includes any statement that the Company has been required under section 527 of the Companies Act 2006 to publish on a website.
A corporation which is a member can appoint one or more corporate representatives who may exercise, on its behalf, all its powers as a
member provided that no more than one corporate representative exercises powers over the same share.
Voting on all resolutions will be conducted by way of a show of hands unless otherwise required.
The following documents will be available for inspection at 91 Wimpole Street, London W1G 0EF from 14 September 2017 until the time of
the Meeting and at the Meeting venue itself for at least 15 minutes prior to the Meeting until the end of the Meeting:
(a)
(b)
(c)
(d)
Copies of the service contracts of executive directors of the Company.
Copies of the letters of appointment of the non-executive directors of the Company.
Copies of the letter of appointment of the auditors of the Company.
Copies of the annual report and financial statements.
57
16.
Except as provided above, members who have general queries about the Meeting should use the following means of communication (no other
methods of communication will be accepted):
(a)
by post to Newmark Security PLC 91 Wimpole Street, London VV1G 0EF.
You may not use any electronic address provided either:
(a)
(b)
in this notice of annual general meeting; or
any related documents (including the chairman's letter and proxy form),
to communicate with the Company for any purposes other than those expressly stated.
58
sterling 169296