Report and Financial
Statements
Year ended 30th April 2021
Report and Financial
Statements
Year ended 30th April 2021
Newmark Security PLC (AIM:NWT) delivers long-term shareholder value
through the provision of products and services in the security and data
sectors. From its locations in the UK and the US, the organisation operates
through subsidiary businesses positioned in specialist, high-growth markets.
Safetell provides physical security installations to numerous end-user
sectors. Products and services range from Asset Protection Solutions to
Counter Terror Deployments. Grosvenor Technology serves the Access
Control and Human Capital Management markets globally providing both
hardware and software to collect and secure data while maintaining privacy,
ensuring compliance and reducing operating costs for its clients. This is
typically provisioned through a recurring software as a service model.
Generating a greater proportion of its revenues from recurring services is
part of Newmark’s overarching strategy which is dedicated to building a
business that has long-term stability and sustainability at its core.
Company number: 3339998
Contents
About Newmark Security ..................................................................................................................................6
Highlights .......................................................................................................................................................................7
At A Glance ..................................................................................................................................................................8
Strategic Report
Chairman’s Statement ......................................................................................................................................11
Business Model ......................................................................................................................................................14
What We Do / Products ..................................................................................................................................15
Chief Executive Officer’s Review .............................................................................................................16
Our Divisions: Grosvenor Technology - People & Data Management .......................20
Our Divisions: Safetell - Physical Security Solutions ..............................................................24
Financial Review ....................................................................................................................................................28
Principal Risks & Uncertainties .................................................................................................................30
S172 Statement ....................................................................................................................................................32
Corporate Governance
Our Board ....................................................................................................................................................................34
QCA Principles ........................................................................................................................................................36
Directors’ Report ...................................................................................................................................................40
Directors’ Remuneration Report ...............................................................................................................43
Audit Report ..............................................................................................................................................................45
Financial Report
Financial Statements .........................................................................................................................................53
Shareholder Information
Shareholder Information ................................................................................................................................. 96
About Newmark Security PLC
Newmark’s products have become the industry standard in people and data security and the Company
benefits from long-term relationships with many blue-chip customers.
For over 25 years, Newmark Security has delivered long-term stakeholder value through the provision of products and
services in the security and data sectors. We continuously invest in innovative technology and, as a leading provider of
electronic and physical security systems, the business is well positioned in specialist, high-growth markets.
Grosvenor Technology is a market leader in global Access Control
and Human Capital Management solutions - with more than 25 years
of innovative engineering experience. Our product offering encompasses
hardware, software and cloud-enabled products and services for customers
of all sizes from all sectors. We specialise in providing innovative solutions
and support that endure.
For over 25 years, Safetell has been providing innovative security solutions to
end users across the public and private sectors. Products and services range
from asset protection solutions to counter-terror deployments. Safetell works
collaboratively with clients to design complete and value-add
solutions which leads to long-standing relationships, high degrees
of customer retention and significant proportions of repeat business.
4
Newmark’s products
have become industry
standard in people and
data security and the
company benefits from
long-term relationships
with many blue-chip
customers.
Marie-Claire Dwek
Chief Executive Officer
Newmark Security
Newmark Security PLC - Report and Financial Statements 2021 Highlights
Revenue
£17.7M
Marginally behind last year at
£17,658,000 (2020: £18,767,000),
a decrease of 5.9%
Gross Profit Margin
37.5%
Gross profit margin decreased
to 37.5% (2020: 39.7%)
Operating Profit
£79,000
Operating Profit before
exceptional items was £79,000
(2020: £604,000)
Operating Loss after exceptional items
Tax Credit
-£38,000
•Operating loss after exceptional
items was £38,000 (2020:
Operating profit £305,000)
£297,000
Tax credit of £297,000 (2020:
credit of £896,000)
Profit After Tax For The Year
£171,000
(2020: £1,127,000)
Earnings Per Share
0.04p
(2020: 0.24p)
Cash generated from operations
before exceptional items
£245,000
(2020: £1,267,000)
Investment In Development
£744,000
(2020: £886,000)
People and Data Management division
(Grosvenor Technology)
Revenues from Human Capital
Management (HCM) increased by 6%
to £9,659,000 (2020: £9,142,000)
Successful onboarding of new
customers and of significant end users
to existing customers has shown
growth year on year. After removing
the impact of the expected reduction
in revenue from the Ultimate and
Kronos merger HCM has grown by
41% year on year.
Access Control revenues reduced
by 29% to £2,988,000 (2020:
£4,215,000).
Existing Access Control Legacy Janus
product revenue reduced by 4% whilst
Sateon revenue decreased by 50%.
The Janus C4, our Integrated Security
Management and Access Control
product, provides a single-platform,
multi discipline solution and attained
£351,000 of revenue in a COVID
impacted year (2020: £383,000).
Physical Security Solutions division
(Safetell)
Revenue decreased by 7% to
£5,011,000 (2020: £5,410,000),
which, in a year disrupted by reduced
access to customer sites and other
precautionary measures, shows a
turning point for Safetell with product
revenue being generated from new
lines of business.
Commenting on the results, Maurice
Dwek, Chairman of Newmark Security,
said “It has been an encouraging year
for Newmark Security, and the Group
has continued to trade effectively,
considering the circumstances and
challenges we all faced. We have
navigated the impacts of Covid-19
successfully, while also driving the
business forward with a strong focus
on growth.”
“As we emerge from a year of
unprecedented turmoil across the
world, Newmark Security is in a
healthy position. We have further
strengthened our teams, developed
valuable new technology, and
expanded the range of products and
services for our customers. We have
exchanged some older contracts for
a number of exciting new products
which have significant potential for
our customers and for our business.
During the year we invested time in
researching and formulating a strategic
business plan which identifies the
Group’s growth potential over a three-
to-five-year time frame.”
– Marie-Claire Dwek, Chief Executive
Officer
5
Newmark Security PLC - Report and Financial Statements 2021 At A Glance
Group Annual Revenue
£17.7m (-5.9%)
Workforce Management Technology
for global markets and Access Control
products for the UK market.
Annual Revenue
HCM Revenue
£12.6m (-5%)
£9.6m (+6%)
Access Control Rev.
Gross Margin
£3.0m (-29%)
36.5% (-1.3%)
Designs, develops, installs and
maintains a diverse range of physical
security solutions to a variety of sectors.
Annual Revenue
Products
£5.0m (-7%)
£3.2m (+19%)
Service
Gross Margin
£1.8m (-34%)
40.1% (-4.3%)
6
Newmark Security PLC - Report and Financial Statements 2021 At A Glance
Revenue Split by Division and line of business
2021
Safetell Products
18%
Safetell Service
10%
Access Control
17%
HCM
55%
0%
10%
20%
30%
40%
50%
60%
2020
Safetell Products
Safetell Service
Access Control
HCM
14%
15%
22%
0%
10%
20%
30%
40%
50%
60%
49%
112
Employees
5
Locations
596
Customers
7
Newmark Security PLC - Report and Financial Statements 2021 Strategic Report
8
Newmark Security PLC - Report and Financial Statements 2021 Overview
Having refocused the strategic
direction of the Company in
recent years, putting greater
emphasis on a recurring revenue
model, our transition continues.
We rolled out and implemented
our strategy across the Group
during the year, laying the
groundwork for future success.
Driving growth in our People and Data
Management division
This focus has helped us drive for
growth. We continued to make good
progress with our Human Capital
Management (HCM) business in
North America this year. Our ability
to provide technical solutions and
hardware without the need for
us to physically attend a site has
been a huge advantage during the
pandemic as well as developing
COVID-related solutions such as
temperature readings and improved
facial recognition for masks. We
also onboarded a number of new
contracts, including our first Clock as
a Service (ClaaS) contract with the
Market Intelligence Group. In addition,
following investments in both our
hardware and software platforms, two
of our longstanding US HCM clients
subscribed to our Cloud provisioned
software, remotely connecting new
and existing timeclock devices with
our platform.
On the Access Control side, our latest
security management platform, Janus
C4, performed well in the year given
the impact of COVID, albeit from a very
modest base. I am delighted that we
extended our contract with Gamanet,
upon whose technology the platform
Chairman’s Statement
Maurice Dwek
Chairman
Newmark Security
“It has been an encouraging year
for Newmark Security, and the Group
has continued to trade effectively, given
the circumstances and challenges we all
faced. We have navigated the impacts of
Covid-19 successfully, while also driving
the business forward with a strong
focus on growth.”
relies, and this will enable us to put the
maximum focus on Janus C4 in the
years ahead.
Resilience and flexibility in our Physical
Security Solutions division
With COVID-19 hampering our service
and technical engineers’ ability to
work onsite safely during lockdowns,
our Safetell team in the UK adapted
quickly and with great resilience to
protect the business and deliver for
their customers in our traditional
markets. We continue to make
progress, cementing our existing client
relationships further, bringing new
product lines to the market, and I was
extremely pleased to see that we won
new projects this year with customers
whose businesses remained in
operation throughout the initial UK
lockdown.
Performance ahead of expectations
Overall performance across the
Group during the year was ahead
9
Newmark Security PLC - Report and Financial Statements 2021 Chairman’s Statement
COVID-19 towards the ‘new normal’
for everyone, I am confident that we
are emerging as a stronger business,
well-positioned for growth.
Board and governance
The Board and its Committees
maintain a robust governance
framework, using individuals’
experience to provide independent
challenge and ensure that good
governance is promoted across
the Group. We follow the Quoted
Companies Alliance Corporate
Governance Code (“QCA Code”), and
details on how the Company applies
the principles of the QCA Code are
set out in our Corporate Governance
section on pages 34 to 39.
Our Group Finance Director, Graham
Feltham, has left the Group in
September 2021. I would like to thank
Graham for his important contribution
to Newmark Security over the past two
years and wish him well for the future.
Paul Campbell-White has joined us as
our new Chief Financial Officer, also
in September, having most recently
from our people and our management
team.
We refinanced the business with a
government-backed £2 million loan
under the Coronavirus Business
Interruption Loan Scheme (“CBILS”).
The facility has been fully drawn down,
helping us to reduce interest charges
on other borrowings, and enabling us
to continue with core development
activities to support future growth.
We have already brought the majority
of people back to work, having largely
returned to normal operations across
the Group. As we move on from
of management’s expectations, with
revenue for the year from operations
slightly down at £17,658,000 (2020:
£18,767,000), largely due to the
impact of COVID-19 in the first half
of the year, with a much stronger
performance in the second half. A loss
from operations of £38,000 (2020:
profit of £305,000) was incurred.
Revenue in the People and Data
Management division (Grosvenor)
fell by 5.3% from £13,357,000 to
£12,647,000, while revenue in the
Physical Security Solutions division
(Safetell) was down 7.4% from
£5,410,000 to £5,011,000. A full
Financial Review of our results is
included within the Strategic Report on
pages 28 to 29.
Moving on from Covid-19 into the
‘new normal’
The pandemic has had a major impact
on our people and the business, both
operationally and financially. Some
difficult choices had to be made, and
a series of cost reduction initiatives
were implemented across the Group
including furloughs and temporary pay
cuts and some redundancies. However,
I am proud of the brilliant response
10
Newmark Security PLC - Report and Financial Statements 2021 Chairman’s Statement
coming year. On behalf of the Board, I
would like to extend my thanks for all
the hard work and resilience shown by
our teams this year, and I look forward
to a successful 2021/22.
Maurice Dwek
Chairman
9 September 2021
held the position of Chief Commercial
Officer at CognitionX, a technology
company in the events space.
Going concern
The Board continues to have a
reasonable expectation that the
Company and the Group have
adequate resources to continue
in operational existence for the
foreseeable future. We are in a good
position following COVID-19, although
cash remains a key focus, especially
with the challenges we face managing
our inventory levels and dealing with
the global shortage of components
we need to build our products. We
continue to work closely with our bank
(HSBC), through which we have our
CBILS facility. Post the balance sheet
date we have agreed a temporary
£200,000 extension to our overdraft
facility until 1 November 2021 and are
currently in discussion with our primary
bankers to increase our UK invoice
discounting facility and introduce a
US invoice discounting facility. We
have also renegotiated our covenant
on the CBILS facility in light of our
investment for growth.
The group is currently operating ahead
of revenue expectations albeit with a
different phasing of certain lines of
business with varying margins which
result in a reduced margin. The latest
forecast of the Group exceeds the
Tangible Net Worth (TNW) covenant
test by 13.5% and will be tested
more fully when a revised forecast
is completed in October. As a
consequence of the revised forecast
findings the Group would explore the
existing covenant test level with our
Banking partners, HSBC, should the
covenant headroom fall short of 10%.
Overall, the business has performed
better than our own internal
forecasting had suggested during
the COVID-19 period, and we are
optimistic that this trend will continue
in the next 12 months, supported
by sensitised forecasts, accordingly,
the directors consider it appropriate
to prepare the accounts on a going
concern basis.
Dividend
The Board is not recommending the
payment of a dividend for the year
ended 30 April 2021 (2020: £Nil).
Outlook
While the Group has inevitably been
affected by the global pandemic and
restrictions imposed in the UK and
internationally, I am pleased with the
progress we have made this year.
We enter the new financial year with
growing optimism, we continue to
invest in the US, and we expect to
benefit from the rollout of our focused
strategy and build a greater proportion
of recurring revenues. The outlook for
our HCM business in the Rest of the
World is also very promising, as we
develop our capabilities and onboard
new customers.
Our Physical Security Solutions
division, Safetell, stands out in the
UK market as a ‘one stop shop’ for
customers looking for a solution to
their security issues. In particular, we
expect to see growth in the year ahead
in new product lines in the Entrance
Control and Auto-door categories.
I am confident we are set up for
growth and, overall, expect the Group
to show an increase in revenue in the
11
Newmark Security PLC - Report and Financial Statements 2021 Business Model
Key Resources
Value Creation
Our Customers
Longevity and experience
Newmark has been providing products
and services for over 25 years and
is recognised as being an innovator
within the sectors it serves.
Our people
Our people are dedicated, passionate
specialists in their field.
Established relationships
Newmark has longstanding and deep
relationships right along the value
chain, whether that’s with suppliers,
installers, resellers or customers.
We value our relationships and
understand the long term benefits and
opportunities they can bring.
Investment
Newmark continues to invest in
research and development allowing
it to stay ahead of the curve and
ensure the highest levels of secure
technologies for its customers. We
have sustained investment in emerging
technologies and markets through
the years and this has allowed us
to remain current, competitive and
positioned for growth.
We provide solutions – not just
products
Newmark designs, manufactures and
provides solutions for our customers.
We form long term partnerships with
our customers through provision of
consultancy advice and service and
maintenance agreements for our
products.
Specialist products and services
We take good positions in high growth
sectors, providing specialist products
and services to our customers. The
Group is continually innovating in fields
such as biometrics, Cloud services
and mobile authentication to ensure
its products are at the forefront of the
sectors it operates in.
Drive efficiency through innovation
Every business seeks to create an
environment in which it can operate
more efficiently and with greater levels
of productivity. Achieving these goals,
while providing smart, safe and secure
workspaces is the added-value that
Newmark Security brings.
Our customers
Safetell provides its products and
services directly to the end users.
While Grosvenor Technology provides
some products and services directly
to end users, it’s more common to
trade through a channel of specialist
providers of broader services. In
access control, this is through security
installers or systems integrators and in
HCM its through software houses or
Value Added Resellers (VARs).
Outputs
Long term partnerships:
The Company benefits from long-term
relationships with many blue-chip
customers.
Recurring revenue streams:
Our longer term strategy is to build
a business that generates a greater
proportion of its revenues from
recurring services over time. We will
achieve this through encouraging
subscription services and continuing
to invest in the cloud provision of both
our software and hardware.
Access Control
Security Installers
/ Integrators
Human Capital Management
purpose-built software &
hardware
Value Added Resellers
HCM Software Vendors
Physical Security Products
Construction / Security Installers
E
n
d
U
s
e
r
s
Physical Security Servicing
12
Newmark Security PLC - Report and Financial Statements 2021
Business Model
Grosvenor Technology: People & Data Management Division
Access Control
Human Capital Management
Safetell: Physical Security Solutions
13
Newmark Security PLC - Report and Financial Statements 2021 CEO Review
onboarded new customers, and
continued to strengthen our presence
in high-growth, specialist data and
security markets.
Market focus
In a year when everything seemed
to stop, the evolution in some of
our markets gained pace, spurred
on by the challenges presented
by the pandemic. There is growing
demand for new technologies to
handle things like touchless entry
and facial recognition, with or without
masks; and for systems that can
be maintained effectively without a
physical on-site presence. There are
also new opportunities as customers
turn their attention to creating safer
workspaces.
The market is moving away from
stand-alone Access Control solutions,
towards integrated Access Control,
Intruder, CCTV, Fire and Building
Management, all of which can be
provided within a single platform.
Since COVID-19, there has been a
push for smarter devices that can
carry out contactless temperature
checks for employees, visitors and
customers to identify abnormal body
temperatures, and so reduce the risk
of infection.
We put a strong focus on developing
our market intelligence during
the year. It’s through a continuous
and thorough understanding of
our markets that we can target the
product developments and offerings
that will make a difference for our
customers. There are a number of
important trends we seek to address,
with one of the most important being
data protection and quality. This is
Marie-Claire
Dwek
Chief Executive
Officer
Newmark Security
“As we emerge from a tough year, I
believe Newmark Security is in a strong
position – we have enhanced our teams,
developed valuable new technology, and
expanded the range of products and
services we offer our customers. We’ve
even exchanged some older contracts
for a number of fantastic new projects,
which I believe have the potential to
take us to the next level.”
Overview
We made significant progress
in the year to 30 April 2021,
despite the impact of COVID-19
and related lockdowns and
restrictions. Our proactive
response to the global pandemic
in the early months of the year
supported our business, people
and customers, while the Group’s
trading activity recovered strongly
in the second half.
We demonstrated our resilience and
ambition during the year, investing in
the development of both our hardware
and software platforms to support
future growth. At the same time,
we built on existing relationships,
14
Newmark Security PLC - Report and Financial Statements 2021 CEO Review
driven not just by stronger legislation
in the US and Europe, but also by
the increasing need for companies to
present themselves as responsible and
trustworthy in a competitive market.
We continue to see growth in the
Human Capital Management (HCM)
market being facilitated through the
technology ‘drivers’ of high-speed
internet availability and the subsequent
mass shift to Cloud based computing.
We are developing our HCM software
platforms with a Cloud and Application
Programming Interface (“API”) first
approach. This approach prioritises
the use of a Cloud infrastructure
along with APIs to provide seamless
connectivity and integration between
back-end and front-end systems for
customers.
Products and services our customers
can rely on
Newmark Security benefits from long-
term relationships with many blue-chip
customers and I was pleased to see
that we had considerable success
this year both in onboarding new
customers and developing strong
prospects for the future.
In our HCM businesses in particular,
we continue to generate a greater
proportion of our revenues from
recurring services. This remains a
key part of our strategy. Combined
with our existing strengths in data
privacy, security and providing end-
to-end solutions, I believe this will be
an important growth driver for the
business in the years ahead.
This will enable us to focus on both
Security as a Service (SaaS) and our
unique offering, Clock as a Service
(ClaaS), which allows customers to
choose any clock, bundled with our
GT Services, and benefit from one
low-cost monthly fee, with a no-quibble
lifetime warranty.
Our focus is all about giving our
customers confidence in what we
can deliver for them – total data
management, device management, and
identity management, which ensures
they have total regulatory compliance
and a highly secure environment built
in. It’s all part of the service.
We have extended our contract
for Janus C4, our latest security
management platform for Access
Control, for a further three years. This
recognises the fact that the platform
has been well received by both
existing and prospective customers,
and that uptake is increasing, following
our investments in additional training
resource to support clients adopting
the platform.
Following its reorganisation last
year, our Safetell business had
identified new markets, products and
customers that complemented its
existing offering. While COVID-19
has delayed the market launch of
some of these new products, I was
pleased to see that the business has
proactively addressed the new market
opportunities this year by replacing
traditional business with new business.
Investing in growth
That’s why I am so excited about our
newly developed Cloud platform, which
we expect to launch in the winter.
Despite the challenges of operating
under COVID-19 restrictions, the
Group continued to trade in all
divisions this year. I’m immensely
proud of the resilience and flexibility
our people showed, handling
unprecedented pressures and
providing uninterrupted services to
our customers. During the year, we
have had to respond to component
shortages and global challenges in our
supply chain, however we maintained
our productivity levels and continued to
onboard valuable new accounts.
While we took the difficult decision
to furlough colleagues at the height
of the crisis, many of us were able to
work seamlessly from home. We’ve
put new policies in place and complied
with all regulations, and I’m delighted
to say that we are now very much on
the other side of the disruption, with
all colleagues back to work, and a firm
investment strategy in place to build
back better.
We are investing in both people and
technology. As a growing business, it
is vital that we have the right people
in the right roles. We also need to
upgrade our underlying systems to
support growth and new lines of
business. That means investing in our
customer relationship management
(CRM), enterprise resource planning
(ERP), people management and
marketing systems to ensure we
manage our day-to-day business
activities and organise our key
resources more effectively.
Overview of Divisional Performance
People and Data Management division
Having achieved significant growth in
the previous three years, Grosvenor
Technology continued to perform
well, though revenues decreased by
5.6% overall, to £12,647,000 (2020:
15
Newmark Security PLC - Report and Financial Statements 2021 CEO Review
£13,357,000). This included revenue
from HCM, which increased by 5.7%
to £9,659,000 (2020: £9,142,000),
and revenue from Access Control,
which fell by 29.1% to £2,988,000
(2020: £4,215,000). This reduction
in revenues came as COVID-19
impacted some of our clients’ end-user
projects, and the anticipated reduction
in HCM sales to Ultimate Software
(following the merger of Ultimate
Software Group and Kronos).
Human Capital Management (HCM)
Our HCM sales at GT Clocks in North
America were slightly lower, largely
due to the Ultimate Software merger,
though revenues have held up well
overall. We have onboarded new
clients, including an HCM software
company that provides HR and Payroll
solutions to over 30,000 businesses.
Also, one of our existing partners
entered into an agreement, expected
to be worth approximately £2.9 million
over three years, to supply the GT10,
our flagship hardware device, to an
international retailer.
We continue to engage with several
Tier 1 target HCM software providers
in the US, who are interested in our
next generation hardware. And three
of our longstanding HCM clients in
the country have subscribed to our
Cloud provisioned software, which
means they are remotely connecting
new and/or existing timeclock devices
16
with our platform with a new addition
in the year for both a ClaaS and SaaS
subscription.
In our Rest of World HCM business,
we also continued to negotiate with
new Tier 1 clients for both products
and services. While the effects of
COVID-19 impacted our revenues,
particularly in Europe, they held up
better than expected and improved in
the second half of the year.
Access Control
albeit at a diminishing rate.
I was pleased to see sales have
held up in our latest access control
platform, Janus C4, which can be
considered a full Security Management
System (SMS). Our ability to onboard
new partners has been severely
hampered, as we have not been able
to conduct face-to-face visits during
much of the year, and this limited the
number new installations that took
place.
With the vast majority of our Access
Sales of Sateon, our previous
Control sales coming from the UK,
national and regional restrictions
imposed to control the spread of
COVID-19 resulted in a dramatic fall in
demand – as our installation partners
were only carrying out essential
maintenance, rather than new installs.
A drop in the sales of our legacy Janus
product range was also expected, as
this platform is no longer installed in
our ‘new’ systems. However, many
end-user sites still use legacy Janus
products, and this continues to
generate revenues for the business,
flagship access control platform, also
decreased in the year – partly due
to the business development focus
on Janus C4, which was expected,
but also as a result of supply chain
disruptions arising from border
restrictions and other impacts of the
pandemic.
Physical Security Solutions division
Revenue in the Physical Security
Solutions division decreased by 7.4%
to £5,011,000 (2020: £5,410,000),
due the impact on trading activity of
COVID-19 and the expected reduction
Newmark Security PLC - Report and Financial Statements 2021 CEO Review
as there is a continued shift from
traditional markets to innovative new
markets.
With such exciting times ahead, ‘Living
our Values’ will be especially important.
If and when we encounter setbacks,
clarity about our essential values will
hold us together, as we work to deliver
our business vision and goals. That will
underpin our “will-to-win.”
I have worked with the Leadership
Team to articulate a Vision, a Mission
and a set of Core Values for Newmark
Security Group. Since launching
this programme I am committed to
consistently reinforce it throughout our
companies. I believe bringing people
together in this way is an important
step in our evolution as business. It is
a key part in our growth story, as well
as enhancing Newmark Security’s
profitability and our enterprise value for
shareholders.
Marie-Claire Dwek
Chief Executive Officer
9 September 2021
in work with the Post Office Network
Transformation having come to an end.
However, we built on existing client
relationships and won new projects in
the year, pivoting the business where
necessary to help customers meet
the challenges they faced during the
extensive lockdowns in the UK.
While COVID-19 meant our service
and technical engineers were often
unable to work onsite safely, and
many projects were delayed during
lockdowns, it was a busy year as
new opportunities arose in helping
customers create safer workspaces.
Notably, demand rose for products
such as hygiene screens and night-
pay hatches that would protect our
customers’ employees and customers
alike.
Pent up demand and a significant
order book, thanks to our expanded
product range and a wider customer
base, drove a stronger performance
in the second half of the year. Safetell
also took the opportunity to build
a full demonstration facility where
customers can now view our full
product range, including our Autodoor
and Entrance Control products.
Changes to our senior team
I would like to take this opportunity
to say thank you again to all of
our colleagues in what has been
a challenging year for everyone.
Safetell’s Managing Director, Paul
Lovell, made the decision to retire on
30 June 2021, having been with the
Group since 1991. I’m sure everyone
will join me in wishing Paul the best
for the future, and I am grateful for
the contribution he has made to the
business over the past 20 years. The
search for Paul’s permanent successor
is ongoing, but for the moment Safetell
is in the extremely capable hands of
Bob Darke, who kindly agreed to step
in as Interim Managing Director.
We have also recruited Brian Hack
as our new Global Operations and
Supply Chain Director for Grosvenor
Technology in the US. Brian is very
experienced in the HCM industry and
I am sure he will play a key role in
ensuring our business in the US has
the solid platform it needs to meet our
ambitious growth targets.
Gearing up for future growth
As we emerge from a tough year,
I believe Newmark Security is in a
strong position – we have enhanced
our teams, developed valuable new
technology, and expanded the range
of products and services we offer our
customers. We’ve even exchanged
some older contracts for a number of
fantastic new projects, which I believe
have the potential to take us to the
next level.
Over the next five years, I am confident
we can increase our penetration into
the vibrant US market, and significantly
increase our turnover across the
Group. That will mean building our
capabilities and skills-base further and
earning a market-leading reputation
for customer service.
We’ll also need to continue onboarding
major Software Houses as part of
our HCM businesses, and a renewed
focus on Janus C4 should see a
transition away from legacy products
in our Access Control operations.
In Safetell, I expect to see an even
greater diversification of product lines,
17
Newmark Security PLC - Report and Financial Statements 2021 People & Data Management Division
Revenue Information
People & Data Management Division
Legacy Janus
Sateon Advance
Janus C4
Total Access Control
HCM Rest of World
HCM US
Total HCM
Division Total
2021
£’000
1,491
1,146
351
2,988
3,150
6,509
9,659
2020
£’000
1,549
2,283
383
4,215
3,238
5,904
9,142
12,647
13,357
Increase/
(Decrease)
£’000
Percentage
Change
%
(58)
(1,137)
(32)
(1,227)
(88)
605
517
(710)
(4)
(50)
(8)
(29)
(3)
10
6
(5)
Overview of performance and future
greatly benefited from our relationship
with Ultimate and will continue to work
with them.
The reduction of business with
Ultimate was largely offset as GT
Clocks onboarded new clients,
including an HCM software company
that provides HR and Payroll solutions
to over 30,000 businesses. During
the year, one of our existing partners
also entered into a new agreement to
supply our flagship hardware device,
the GT10, to an international retailer.
Our specialist offering continues
to gain traction in the sector and
in the year, our US based business
generated 52% (2020: 44%) of our
total revenues for this division. We
still believe the HCM business in the
Americas represents our greatest
opportunity, and we are increasing
our business investment in our
At Grosvenor Technology, we
provide security and attendance
solutions via our Access Control
and Human Capital Management
(HCM) businesses. Our Janus
access control product was the
world’s first Windows-based
access control platform and has
been installed at over 10,000
sites globally. In our HCM line of
business, we help turn diverse
data into real information while
increasing security, ensuring
compliance, and reducing time
and cost for our partners.
Growth opportunities in North America
Following a three-year period of
good growth, Grosvenor Technology
continued to trade well across all lines
of business and regions in a more
challenging year. Our HCM revenues
in North America, through our trading
name of GT Clocks held up well,
although they were affected by the
merger between Ultimate Software
and Kronos, who make their own
device, and as a result we saw lower
sales to this key customer. We have
18
Newmark Security PLC - Report and Financial Statements 2021 People & Data Management Division
people and technology to future
proof the business and maximise this
opportunity.
We are investing in the development
of both hardware and software
platforms to support our growth in
the HCM market globally. During the
year, a big focus for our hardware,
electronics and software teams has
been the development of our latest
Android based timeclock, the GT8,
which launched close to the end of the
financial year in April.
Launch of the GT8 Timeclock
The GT8 is a thoroughly modern timeclock with an 8” full-colour
high-resolution touch screen providing the user with a concise, impressive
interaction, comparable to the latest mobile devices. It is a step forward
in technology – a next generation device using the latest processors with
hardware encryption for biometric data that meets US and
European legislation.
The timeclock uses the Android 10 operating system, which means
applications for the device can be easily developed using familiar tools and
frameworks. The GT8 can also be updated remotely Over The Air (“OTA”),
keeping the operating system up-to-date and secure.
We launched the GT8 in April 2021, and we have had a tremendous
response from the market. We are already in negotiations with one of our
Tier 1 clients about the potential of supplying the GT8, and we are extremely
confident that the clock will generate good business over the next year.
Building on our strong reputation
Above all, we are investing in our
reputation for providing reliable
and high performing hardware.
That’s how we have been successful
in onboarding new Tier 1 clients in
the US, and why we remain in
negotiation with others. We are
talking with several major HCM
software providers about supplying
them with our next generation
hardware and a range of
complementary Software as a Service
(SaaS) solutions.
These services are becoming as
important as the hardware for some
clients. This is encouraging as we try
to balance our hardware sales with our
Software as a Service (SaaS)
offering, which provides us with
recurring income and bolsters the
flow of cash into the business.
We also offer Clock as a Service
(ClaaS), which brings everything
together by allowing customers to
choose any clock, bundled with our
GT services, for one low-cost
monthly fee.
Managing data privacy and security
Another element of building a strong
reputation is how we manage data
privacy and data security, in particular
biometric data, such as fingerprints
and face identification. In the US, there
are different rules for biometric data
capture and what you can do with it,
depending on which state you are in,
while in Europe and the UK, we have
to adhere to General Data Protection
Regulation (“GDPR”) rules.
It is complex, which is why we have
also invested significantly in our
workflow management of biometric
data. That has meant gathering the
consent of people for using their data
in the US and Europe, and ensuring
that we have annual penetration
testing of our systems, both timeclock
and Cloud platforms. We are dealing
with this ahead of any potential Federal
legislation in the US, reassuring our
customers that we are secure, and
future proofing our systems.
New Cloud platform
With our newly developed Cloud
19
Newmark Security PLC - Report and Financial Statements 2021 People & Data Management Division
Steady progress in our Access
Control business
Our Access Control business is
predominantly centred on the UK,
and government restrictions imposed
to control the spread of Covid-19
resulted in a sharp fall in demand
through much of the year – as many
shops, venues and offices were closed.
For those that were open, investing in
upgrading their security systems was
understandably not a priority.
We now view our Sateon platform,
the successor to our original Janus
product range, as mature and
complete, with development efforts
limited to essential bug fixes and
maintenance. Sateon Advance, which
is the last iteration of this platform,
continues to be used by some access
control installers and integrators, while
many end-user sites still use legacy
Janus products. These platforms
continue to generate revenues for the
business, albeit at a diminishing rate.
Our Services
The SaaS we provide customers are offered through two distinct brands:
Manages the services we provide and our clients’ connection to the Cloud.
Protects our clients’ assets, and is essentially a lifetime hardware warranty.
We also have a dedicated Professional Services team to help us onboard
customers quickly. They tailor solutions to our clients’ requirements,
building an end-to-end solution to meet their needs.
our existing HCM clients, and – while
hardware sales remain the mainstay
of our business – the trend towards
enquiries for our subscription ‘data
management’ services has continued
during the year.
platform due to launch in the winter,
we are using a Cloud and Application
Programming Interface (“API”) first
approach. This means we can prioritise
the use of a Cloud infrastructure
along with APIs to provide seamless
connectivity and integration between
back-end and front-end systems for
customers. We have incorporated
new technologies to support Internet
of Things (IoT) connectivity to the
platform, and we have significantly
expanded its middleware capabilities –
which will enable smoother integration
with our partners’ time management
platforms, and help us onboard
customers, as our systems will talk to
each other better.
HCM business outside of the US
While around two thirds of the world’s
HCM business is in the US, or is
dependent on the US, our Rest of
World HCM business continues to
trade well, with revenues only down
3% in the year. We are building on
the strong partnerships we have with
20
Newmark Security PLC - Report and Financial Statements 2021
People & Data Management Division
pandemic. Even without that, we have
seen enormous price hikes in certain
components, and we have limited
opportunities to pass that on to the
market due to contractual obligations
where the price is fixed.
This situation appears likely to
continue, which means that our margin
will become increasingly squeezed.
This further highlights the need for our
business strategy to balance capital
sales with a subscription model, as
that makes margin at the point of sale
much less relevant.
In our efforts to mitigate this challenge,
we are looking to rationalise our
global supply chains over the next
12 months. Having been in business
in Europe for decades, our primary
supply infrastructures are UK-based,
with contract manufacturers based in
Hungary and Poland, and a lot of our
components coming from the Far East.
However, most of our growth now
comes from the US, which is a much
more recent development, and we
need to address that.
We have employed a new Vice-
President of Operations and Supply
Chain based in the US. He will work
with the third party logistics company
we use in the US to improve our local
supply chain, but, more importantly,
we need to build out our operational
capability in the US. We are looking at
the potential of a supply chain based
wholly within the US, and what that
would mean to our business in the
region. A rationalisation of our supply
chain and procurement could allow us
to manufacture in dollars and sell in
dollars in the US, while allowing for a
failover if there is a problem with our
supply chain in Europe or the US.
The future
In 2021, we have invested in our
business, bolstered our strategy, and
built the momentum we need to push
for growth in the year ahead.
Although we expect to see some
progress in Access Control, and
the business is in a good place, the
biggest opportunities are likely to
come in our HCM businesses. We
have ambitious growth plans in the UK
and the EU, where we have onboarded
new clients, with more good prospects
lined up.
However, the real step change for
Grosvenor Technology could come
in the US, where we will grow our
business with existing partners
and look to onboard new Tier 1
clients with a compelling offering
that encompasses a combination of
market-leading technology, products
and services.
“We are making significant investments in our
people in our US business, expanding the
team at GT Clocks to serve the market better.
As a result, our labour costs will increase, but
we are building out our capabilities to fuel
future growth.”
Andy Rainforth
Chief Commercial Officer
Grosvenor Technology
21
Focus on our Janus C4 Security
Management System
Janus C4, our latest access control
platform has progressed well during
the year, maintaining reasonably
consistent revenues despite the impact
of COVID. Janus C4 is the first time
we have ever gone to an external
third party and bought a solution from
them, but it represents an advance
on previous systems, as it is a fully
Integrated Security Management
System (“ISMS”), integrating
traditionally disparate offerings such as
CCTV, Fire Safety, Intrusion Detection
and Energy Management to create a
seamless, single platform solution that
protects buildings and people.
Unfortunately, our ability to onboard
new partners with Janus C4 has been
severely hampered, as we have not
been able to conduct face-to-face
visits during much of the year, and this
limited the number of new installations
that took place. As restrictions ease,
the ISMS is starting to gather more
interest from our installation partners,
so we are optimistic it will gain traction
in the remainder of 2021 and 2022.
Rationalising our supply chain
One of the biggest challenges we have
faced during the year has been on the
supply side. The supply of components
like semiconductors has been
affected by various socio-economic
factors, not least of which have been
freight restrictions due to the global
Newmark Security PLC - Report and Financial Statements 2021 Physical Security Solutions Division
Revenue Information
Physical Security Solutions Division
Products
Services
Division Total
2021
£’000
3,220
1,791
5,011
2020
£’000
2,695
2,715
5,410
Increase/
(Decrease)
£’000
Percentage
Change
%
525
(924)
(399)
19
(34)
(7)
Overview of performance and future
At Safetell, our team of industry
experts are here to provide
a professional service and a
personal response to all our
customers’ needs. We help them
create safe and secure places
for their people and customers,
by designing, installing and
maintaining physical security
solutions that best meet their
evolving requirements.
Re-focusing our business and services
During a year that has brought unique
challenges for many businesses, we
have worked hard to transform the
Safetell business, both through the
introduction of new product lines,
and with new ways of working. Our
traditional market – supplying and
installing fast rising screens in the
banking sector – is being impacted
by falling numbers of bank branches,
so we are steadily adapting our offer
to use our skills and coverage to
install and Entrance Control solutions
and Automatic Door installation &
maintenance.
We made good progress in the
Autodoor market business this year,
and plan to increase the pace of
growth in this area significantly. We
now look after around half of the
network for a major petrol retailer,
Our security products and services are
used in many environments, including:
• NHS
• Finance, Safety Deposit Centres and Jewellers
• Education and Local Authorities
• Corporate Buildings
• Stadia, Leisure and Hospitality
• Retail, ATM and Petrol Forecourts
• Government, Police and Prisons
• Data Centres and Utilities
22
following their approach to us 18
months ago. We are particularly
proud of our record in repairing and
upgrading their doors rather than
replacing them all, saving them
thousands of pounds each time. We
refitted around 100 of their sites
during the last year – attending
their premises, changing the glass,
changing the locks and bringing
them up to standard. We expect to do
increased numbers with them over the
next two years at least, giving us good
repeat revenue.
Entrance Control projects have even
greater potential to drive our business,
as typically they generate bigger
contracts, and they take less time to
manage and install. We secured our
first order with a major watch retailer
this year, and installation on that is
now complete.
Overall, we have grown our quote
bank, in this sector alone, from
nothing to around £1.1 million.
However, we recognise we are still
in the early days of this initiative,
as Entrance Control sales take a
while to come to fruition – they
are not quick wins. It can be an 18
month long process, as our range
has to be specified in the plans by
the architects, everything has to go
through planning, and the Entrance
Newmark Security PLC - Report and Financial Statements 2021 Physical Security Solutions Division
Control requirement is the last thing
to be installed.
To promote our Entrance Control
initiative, we’ve completely refitted
our showroom to incorporate all our
Entrance Control equipment, allowing
customers to see first-hand the value
of what we offer.
Seizing new opportunities
Of course, while we were busy
building up these key product
lines, Covid-19 hit the country, and
measures to prevent the spread of
the virus have had a significant effect
on the Safetell business during the
year, both in our new and traditional
markets. With banks closed, the need
for screen servicing in their branches
stopped. However, many of our clients
operate from critical locations, such
as hospitals, retail sites, financial
hubs, and key buildings, so it was
important for us to adapt and pivot
the business in any way we could to
support customer needs during
the pandemic.
A good example of how we have
flexed what we do to meet a need in
the market is our work with Britain’s
leading supermarket chain during the
year. They had a problem where their
people were getting threatened or
attacked late at night. We designed
a screen system for them put on
their counters, protecting their staff
at around 130 sites, and generating
about £850,000 in turnover for us.
Bringing this product online has been
a major driver for Safetell over the last
12 months, and we now see it as a
long-term part of our range. Having
previously focused on very highly
specified, bulletproof screens, these
manual attack screens were new to
us, but many other retailers have the
same problem. We’re now taking these
products and selling them into other
convenience stores and supermarkets,
both in the UK and Ireland.
What makes Safetell different?
We offer a broad range of products
and services, and are able to provide
a ‘one-stop shop’ approach in a
fragmented market. None of our
competitors do everything that we
do. That’s why even when customers
come to us with a requirement for a
single product, we are keen to offer a
full solution. We have highly qualified,
experienced technical engineers who
can create bespoke designed solutions
that will ultimately save our customers
money and make them safer.
For example, when we supplied
around £250,000 worth of our
traditional products as part of a large
Metropolitan Police project at their
head office in London, we were
also in a position to offer our range
of Entrance Control equipment,
reception counters, speed gates,
23
Newmark Security PLC - Report and Financial Statements 2021 Physical Security Solutions Division
blast-proof walling, and bomb-proof
windows, along with service contracts
to maintain everything, significantly
increasing the quote and converting it
into an order.
Safetell has unique coverage in the
physical security market, and we offer
service contracts on everything we
the demand for new and innovative
solutions.
The new ‘Protect Duty’ legislation,
should it become law, will mean
that the owners and operators of
businesses and public spaces such as
concert halls, shopping centres and
parks will be legally bound to protect
A long-term relationship with Safetell
offers a complete package of products
and services:
•
Bespoke design capability to help select the most appropriate
solutions to meet various business needs
•
•
•
Professional and experienced project management with specialist
knowledge of demanding site conditions and high-risk locations
Specialist installation teams dedicated to working in disciplined
and challenging environments
Aftersales support and extended lifetime warranties to maintain
our products to the highest standards
their sites and shut them down in the
event of a terrorist attack. That means
they will need remote locking facilities,
screens on all their counters, and even
breakout facilities where people can
get to and stay safe. We anticipate that
many new opportunities will open for
us to support businesses that need to
comply with such new legislation.
Trust in our products and services
will also play an important role in
Safetell’s efforts to gain market share.
Two of our traditional products – a
level 4 attack rated door and a level 4
attack rated walling partition system
– have now been recertified by The
Loss Prevention Certification Board
(LPCB), an independent certification
body. Our products are listed on
the LPCB’s certification website,
redbooklive.com, which is accessible
by any client, architect, or member
of the public.
What’s ahead?
It’s going to be a busy year ahead for
do. That helps us build long-standing
relationships with clients, who can
rely on our multi-skilled installers and
engineers, while we enjoy ongoing
revenue streams through further
business and our follow-up services.
Market trends
The move away from our traditional
markets continues, in particular due
to the large number of bank branch
closures across the UK. However, this
has given us impetus to retrain our
field force to provide a wider package
of support to different industries and
different product markets.
Threats from crime and terrorism
continue to make physical security
a priority for businesses in most
sectors, while Covid-19 has increased
24
Newmark Security PLC - Report and Financial Statements 2021 Physical Security Solutions Division
Our fully accredited product portfolio
is designed to meet the changing
needs of our customers:
Building Security
Entrance Control
•
•
Manual attack and ballistic
resistant cash counters,
windows and moving security
screens
Bullet resistant doors and
partitions
• Security portals
Asset Protection
•
•
•
Certified secure portals and
revolving doors
Integrated speed gates to
control the flow of staff and
visitors to buildings
Door automation and remote
locking solutions
Other Products
•
•
•
Customised cash and asset
storage and protection
•
Counter-terror and target
hardening solutions
Cash and speech transfer units
•
Storage functions to reduce
risk of harm or damage to a
secure environment
Range of ‘touchless’ security
solutions
•
Other standard and bespoke
physical products and services
“The good thing about Safetell is that, rather
than just supplying one or two products, we
prefer to work with customers who bring
us problems we can help them to solve. No
competitor offers the wide expertise and full
range of products and services that we do.
That gives us an edge, which is helping us
grow our quote bank and order book.”
Sean McCrory
Sales & Projects Director
Safetell
Safetell. There’s a lot going on with
our product range, and our quote bank
and order book are both strong. Our
biggest challenges over the next year
will be to keep driving the Entrance
Control initiative, and to continue to
build on our service contracts and our
Autodoor operations.
We will look at potential new areas,
such as fire door maintenance and
inspection, as recent legislation means
that many of the fire doors out there
now need to meet a higher standard.
Our installers and engineers could
take that on without the need for
additional training, as long as they
are supported by proper qualified
inspectors on the job with them.
To achieve all that, and to push for
growth across the business, we’ll need
“We have made excellent progress
with our Autodoor and Entrance
Control initiatives during the year.
And we’ve been quick to upsell
where that meets a current need –
like including the ability to remotely
lock a door or include a traffic light
system to help manage the flow
of people. Getting closer to our
customers will help us meet all
their needs, and ultimately, grow
the business.”
Bob Darke
Managing Director (interim)
Safetell
to recruit new people to the team,
including a new permanent Managing
Director. However, with the right
resource in place, and the focus we
have put into the business this year,
Safetell will be in a strong position to
succeed.
25
Newmark Security PLC - Report and Financial Statements 2021 Financial Review
Revenue
Key Performance Indicators
People & Data Management Division
Access Control
HCM
Physical Security Division
Products
Service
Group Revenue
Total
Total
2021
£’000
2020
£’000
Increase/
(Decrease)
£’000
Percentage
Change
%
2,988
9,659
12,647
3,220
1,791
5,011
17,658
4,215
9,142
13,357
2,695
2,715
5,410
18,767
(1,227)
517
(710)
525
(924)
399
(1,109)
(29.1)
5.7
(5.3)
19.5
(34)
(7.4)
(5.9)
Group revenue reduced by (5.9%) to
£17.66million (2020: £18.77million).
The revenue performance has arrived
as expected with a far stronger
second half of the year. Given the
impact of COVID-19 the revenue
levels have been extremely positive
with further growth from HCM and a
turning point for Products at Safetell.
Further commentary and discussion
can be found in the relevant
divisional sections.
Gross profit margins have reduced to
37.5% (2020: 39.7%). Physical Security
Solutions division obtained a gross profit
of 40.1% (2020: 44.4%) being impacted
by selling lower margin COVID related
products during lockdown. People and
were also impacted by the necessary
timing difference of levels of sales activity
and furloughs.
Administrative expenses & average
employees
Administrative expenses before
exceptional items have fallen by 4.4% to
£6.55million (2020: £6.85million). This
has mainly been the result of furloughs,
which saved £183,000, and group-wide
contractual pay reductions along with
other savings in travel countered by
increased costs for legal contract work in
delivering our ClaaS and SaaS contracts
across multiple territories and consultancy
support for delivery of the Strategic
Business Plan. Overall average employees
During the year exceptional costs of
£117,000 (2020: £299,000) were
incurred with £181,000 (2020: £167,000)
of restructuring costs incurred as a result
of COVID-19 mainly in Grosvenor. An
exceptional credit of £64,000 (2020: cost
£82,000) related to the exit of a lease
commitment at Safetell whereby the asset
had been written down in the prior year.
Profitability
The Group achieved a Profit from
operations before exceptional items of
£79,000 (2020: £604,000) which is a
very positive outcome to a challenging
year. After exceptional items the Group
made a loss from operations of £38,000
(2020: profit £305,000) however this
Gross Profit
Gross Profit Margin
2021
£’000
6,629
37.5%
2020
£’000
7,449
39.7%
Increase/
Decrease
£’000
(820)
Percentage
Change
%
(11)
Data Management division was less
impacted at a gross margin of 36.5%
(2020: 37.8%) however the reduced sales
levels in Access Control had an impact on
margins with some fixed elements of cost
of sales such as licenses. Both divisions
have remained consistent at 112 (2020:
115) with a 3% reduction in staff costs
by £198,000 to £6,781,000 (2020:
£6,979,000).
Exceptional costs
operating loss turns into a profit after
tax for the year of £171,000 (2020:
£1,127,000) as a result of further tax
credits which are discussed in more detail
below.
26
Newmark Security PLC - Report and Financial Statements 2021 Taxation
A tax credit of £297,000 (2020:
£896,000) was recognised in the year.
This resulted from a current tax credit
of £420,000 (2020: £583,000). The
current tax credit is made up of the
continued revised R&D claim at Grosvenor
of £262,000 and a new R&D claim for
Safetell of £260,000, included within
this is a £185,000 catch up of prior year
credit, countered by a tax charge in the
Grosvenor Technology LLC of £42,000
with a prior year additional charge relating
to US tax on deferred revenue of £60,000.
An additional element of the claim related
to RDEC (Research and Development
Expenditure Claim) which resulted in a
£91,000 credit shown within operating
profit. A deferred tax charge of £123,000
(2020: credit £313,000) was driven by
timing of R&D at Grosvenor of £91,000
and on fixed assets at Safetell of £32,000.
In the prior year, the deferred tax credit
recorded largely related to a deferred tax
asset of £450,000 recognised on losses
arising in both the prior year and preceding
years. The asset was recognised based
on the expected future profitability of the
People and Data Management division.
Earnings per share
Earnings per share of 0.04p (2020: 0.24p)
was achieved being a reduction of 0.20p.
The decrease resulted from the reduction
in profitability related to COVID-19 and
the significant impact of both R&D credits
and deferred tax asset recognition in the
previous year.
Balance sheet
Net assets have reduced by £12,000
to £8,290,000 (2020: £8,302,000) as
a result of profit after tax less foreign
exchange losses on translation of the
US subsidiary. This is presented as an
increase to trade and other receivables
of £774,000 reflecting the increased
year end trading activity compared to
the prior year along with an additional
Financial Review
£132,000 for increase corporation tax
recoverable related to the R&D tax credit.
Inventory has increased by £581,000 as
a result of anticipated demand for finished
goods combined with some impact of
the global componentry shortage on
prices and additional purchases. Similarly
trade and other payables have increased
by £536,000 again related to levels of
year end trading activity. During the year
the Group entered into the Coronavirus
Business Interruption Loan Scheme
(“CBILS”) for a £2 million facility which
was immediately fully drawn and used
to repay £905,000 invoice discounting
borrowing.
Research & Development
The Group has reduced its investment by
£142,000 to £731,000 (2020: £873,000)
in the People and Data Management
division. The investment has been focused
on the cloud development of GT Connect,
our SaaS platform. Clock development
continued with enhancements to our
existing GT10 offering and we launched
the next generation device GT8 during the
year being more compact with enhanced
capabilities. The level of investment
reduced year on year owing to an
intentional slowing down of development
activity with the onset of COVID-19 to
safeguard our cash position and we were
pleased to recommence development
once additional financing was in hand.
Cashflow
During the year we have reduced
cash by £136,000 to £484,000
(2020: £620,000). Cash generated
from operating activities decreased
by £535,000 to £370,000 (2020:
£905,000) mainly driven by trading and
working capital outflow compared to
prior year of £1,022,000, a reduction in
exceptional cost by £182,000 and a net
tax receipt of £369,000 (2020: £nil).
As mentioned above we have continued
investment in research and development
and also property plant and equipment
of £1,016,000 (2020: £993,000) with
the main other movements related to the
£2,000,000 (2020: £nil) CBILS draw
down and the repayment of £905,000
(2020: drawdown of £212,000) of
invoice discounting and lease principle
repayments of £487,000 (2020:
£475,000).
Cashflow forward currency contracts
During the year we executed our foreign
exchange strategy by entering into forward
contracts. The strategy effectively hedges
75% of excess USD and reduces the
level of volatility compared to using spot
rates. The contracts manage our currency
mismatch between an increasing US
Dollars (USD) position from revenues
and the existing cost base in both GBP
and Euros. The adopted process involved
currency forecasting three quarters
ahead and taking out tranches of
forward contracts for 25% of each of the
forecasted quarters relating to our excess
USD position.
“The Group achieved a profit from operations
before exceptional items of £79,000 (2020:
£604,000) which is a very positive outcome
to a challenging year”
Graham Feltham
Group Finance Director
Newmark Security
27
Newmark Security PLC - Report and Financial Statements 2021 Principal Risks & Uncertainties
Risk management is integral to
the way the Board and leadership
team manage the Group and
each divisional Managing
Director monitors and reports
on their most significant risks
on a continuing basis. Risks
are reviewed by the Board on a
quarterly basis and actions are
taken as appropriate to provide
reasonable mitigation against
those risks.
The principal risks facing the
business, the potential impact
and mitigating actions are
detailed below:
Market conditions
The risk of further future lockdowns
could result in a period of depressed
trading activity and delays in customer
projects. The impact is somewhat
reduced by the geographic spread
and the nature of our customers.
Commercially we have been sensitive
to the evolving demands of our
customers but we also operationally
monitor activity levels for support and
new business. The Group Finance
Director monitors cashflows and
potential financing opportunities and
discusses these regularly with the
Board in order to support the reduced
cash generation from lower levels of
trading. Lag effects of COVID-19 such
as the global componentry shortage
have constricted certain lines of supply
which has meant longer lead times
for ordering and an increase in cost
to purchase. The Group monitors
the position regularly with detailed
inventory modelling and welcomes
the onboarding of Brian Hack into
the team at Grosvenor as Operations
and Supply Chain Director. Brexit has
resulted in an additional administration
burden but as yet has not significantly
impacted trading.
Sales of new products
The Group has incurred substantial
strategic expenditure on new
developments within the People and
Data Management division, based
on market intelligence. Due to the
dynamic nature of the market itself
there is a risk of the market needs
moving on during the development
process. 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 Physical Security Solutions
division are from 1 to 3 year service
agreements and there is the risk
that these may not be renewed due
to cost reduction programmes, by
managing the contract externally or
by utilising in-house resource. 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 without an
overriding contract resulting in less
certainty over future revenues. 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.
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.
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 quality auditors the quality
control systems are reviewed and
improved on an on-going basis to
ensure that the Group is addressing
this risk through a certification process
which is undertaken by a recognised
and reputable authority before being
brought to market.
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 weekly 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
28
Newmark Security PLC - Report and Financial Statements 2021 Principal Risks & Uncertainties
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 and regular cash forecasts
in order to assess the required level of
short-term financing to draw down on.
Market risk
Market risk 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 arises when individual
Group entities enter 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. During the year a
forward contract currency strategy was
implemented to reduce the volatility
of exchange rate fluctuations to the
Group.
29
Newmark Security PLC - Report and Financial Statements 2021 S172 Statement
The Companies Regulations 2018
require Directors to explain how
they considered the interests of key
stakeholders and the broader matters
when performing their duty to promote
the success of the Company under s172.
This includes considering the interest of
other stakeholders which will have an
impact on the long-term success of the
company. This s172 statement explains
how the Directors act accordingly.
Key Board decisions
During the year the Board approved the
Strategic Business Plan spanning the period
to 30 April 2025 which has a number of
significant workstreams attributed to it driving
increased shareholder value.
1. Initiate a US expansion plan and market
intelligence forum at Grosvenor ensuring
considered and executable plans are in
place. This involves investment in people
and processes which support scalable and
sustaninable growth in the existing business
and to drive both ClaaS and SaaS uptake.
2. Invest in enterprise wide internal systems
at Grosvenor Technology in order to support
the effective roll out of SaaS and ClaaS as
well as streamlining processes and further
enabling staff capability.
3. Invest in our people by communicating core
values, investing in our skills inventory and
mobilising recruitment for growth.
The Board took the decision to take out a
£2m Coronavirus Business Interruption Loan
(CBILS) during the year. This was to ensure
that the short-term cash availability during the
peak of the COVID pandemic was secured.
The Board took a number of difficult
decisions during the year relating to the
COVID pandemic. For a 3-month period all
of the employees of the group took a 10%
pay reduction and a number of the staff
were placed on furlough. A number of staff
were made redundant as the group looked
to secure its short-term future during the
pandemic and as a new five year strategic
business plan process was undertaken.
As part of the new strategic business plan
the Board has also considered its funding
arrangements and after the year end date has
extended the overdraft facility.
Approval
The Strategic Report was approved by order
of the Board on 9 September 2021.
By order of the Board.
M-C Dwek
Director
Regular updates and announcements
The decisions of the Board and with wider business are reflected
Wider team meetings used to ensure
provided to the market.
within budgets and 5 year plans. Which are then flexed and
understanding and engagement in
Closely engage with Allenby, our
updated for changing environments.
business priorities.
brokers, to ensure fair practices are
Formally the Board consists of a PLC Board however each quarter
Fair dealings and management of
in place
the PLC Board combines with the Exec teams of each division for
issues and grievances.
presentations and strategic discussions.
Attendance on retail events such
as Mello provides engagement with
investors with the presentations made
available on our website.
Utilise Investor relations and Financial
PR experts to support when needed.
Act fairly
between
shareholders
Long term
impact of board
decisions
Promote
success to our
shareholders
Significant emphasis placed on
employee safety enhanced regarding
COVID outbreak.
Employee questionnaires utilised to
engage and obtain sentiment.
Focus on the right people in the right
role with good support and training
programmes with succession
planning in place.
Interest
of our
employees
Interest
of other
Regular updates and meetings
with HSBC.
Communications with customers and
Understanding our customers’ needs
and providing solutions in partnership
is the ethos behind our operations.
High standards
of business
Group HR operates seamlessly across
conduct
Stakeholders
suppliers focus over last 12 months.
the divisions and acts truly to ensure
fit for purpose practices are in place.
Finance is integrated with decision
making and ensures adequate
controls are in place.
Focus on improved systems and
processes to support our people to
perform EG ISO
30
Impact
of community and
environment
Trade shows and exhibitions with our
own stands utilised to engage with
our customer base.
Online training initiated for Installers.
Provide solutions to facilitate the proper usage of Personally
Continuously improve websites.
Identifiable Information when utilising our products.
Following COVID we will commence a programme for measuring
and improving the impact we have on the community and the
environment.
Newmark Security PLC - Report and Financial Statements 2021 Corporate Governance
Our Board
Chairman’s Introduction
The Board and its Committees
have a fundamental role in
the governance framework by
using their wide experience in
providing independent challenge
and support and ensuring that
good governance is promoted
across the different businesses
within the Group. The Board is
responsible for the success of the
Group and providing leadership
within the framework of existing
controls and ensures that its
duties to shareholders and other
stakeholders are understood.
The Board
A brief summary of the career history
of each of the Directors is given below
showing their vast experience in senior
management positions across a wide
variety of industries.
Maurice Dwek - Chairman
Maurice Dwek was the founder of the Dwek Group in 1963 as a distributor of PVC products with factories
involved in engineering and other consumer products. The company was listed on the London Stock Exchange
in 1973 and he was Director of Subsidiary Companies and subsequently responsible for Group acquisitions and
disposals. He disposed of this interest in 1988 through a management buyout. Subsequently he was Chairman
of Arlen PLC (electronics) and Owen & Robinson PLC (sports footwear, retailing and jewellery) and floated
Newmark Security on the Alternative Investment Market of the London Stock Exchange in 1997 and was
Executive Chairman until 2005.
Marie-Claire Dwek - Chief Executive Officer
Marie-Claire Dwek was Marketing Director of Newmark Technology Limited (specialised electronic security
systems) 1996-2000, responsible for the planning, leadership and strategic marketing. Between 2002–2013
Marie-Claire was responsible for the management and investment in various property portfolios for Motcomb
Estates and joined Newmark Security as Chief Executive Officer in 2013. Marie-Claire regularly attends training
courses and modules for executive development e.g. Cranfield University. Any changes in the business environment
are monitored and researched closely within the leadership team and with the CEO. Strategic responses are formed
accordingly and executed with Board approval. Trade journals and news articles are used to keep abreast of current
market conditions.
Graham Feltham - Group Finance Director
Graham Feltham is a Fellow Chartered Accountant qualifying in 2000 whilst working with Ernst & Young.
Subsequent to Ernst & Young, Graham worked at Belron International Ltd, the world’s largest vehicle glass repair
and replacement company. Following his time at Belron, Graham spent approximately five years at StatPro Group
plc, an AIM listed Software development group, as European Financial Controller and Group Financial Controller,
where he managed the external financial reporting and performance and analysis teams. Following StatPro, Graham
spent over four years as Group Financial Controller of Safetykleen Group, a private equity owned group specialising
in a recurring book of business in surface cleaners and with annual revenues of over £235 million. Graham played a
key role in the sale of Safetykleen by Warbug Pincus to APAX Partners for £800 million in 2017.
Graham has stepped down as Group Finance Director in September and has been replaced by Paul Campbell-
White as Chief Financial Officer.
32
Newmark Security PLC - Report and Financial Statements 2021 Our Board
Michel Rapoport - Non-Executive Director
Michel Rapoport held various senior positions in Ripolin (paint) in Paris between 1974-79 including President
1976-79. He then worked at Alcatel (telephony and electronics) 1979-91 including President Mailing and Shipping
products division 1990-91. He moved to Pitney Bowes between 1991-95 where he was Chairman Pitney Bowes
France and Vice President Pitney Bowes International. Michel was president and CEO of Mosler ($300m revenue
physical and electronic security products and services) 1995-2001 and was President and CEO at Laroche
Industries Inc., (chemical product manufacturer and distributor) between 2001 and 2005. He has been managing
partner of SAR Industries (real estate holdings) since 2007. Michel thus brings to the Board his experience from
holding senior positions in similar industries, and his knowledge of operating in US markets which is particularly
relevant given the growth in revenue from that source in the current year.
Robert Waddington - Non-Executive Director
Robert Waddington qualified as a Chartered Accountant in 1964. He was a director of Hambros Bank Ltd from
1984 to1997, and director/chairman of a number of private companies involved in engineering, property, and steel
stockholding between 1996 and 2008. He was also a director from 1997 to 2006 of Stanley Leisure PLC, a UK
Stock Exchange listed company operating in the Betting and Gaming industries. Robert therefore contributes his
experience from holding senior positions in different businesses as well as his financial and accounting knowledge.
Terence Yap - Non-Executive Director
Terence Yap, a Singapore citizen resident in Hong Kong, is currently the Chairman of Guardforce AI Co Ltd, a group
focusing on delivering technologically innovative security solutions within the Asia Pacific region. Prior to this he was
Chief Executive of Guardforce Cash Solutions (Thailand) a leading security solution provider with more than 12,000
international employees. From 2006 to 2014 he was Chief Financial Officer of China Security and Surveillance
Technology, Inc which was listed on both the NYSE and Dubai International Financial Exchange.
Throughout his career Terence has developed specific skill sets regarding change management, investor
relations, capital market operations and corporate restructuring. Terence has over 25 years’ experience in the
telecommunications and security sectors and is a member of the Hong Kong Security Services Training Board, a
Fellow member of the Hong Kong Institute of Directors, a Fellow member of the Chartered Management Institute
(UK) and a member of the Australian Institute of Company Directors.
33
Newmark Security PLC - Report and Financial Statements 2021 Governance Principles
We have adopted the Quoted
Companies Alliance Corporate
Governance Code (“QCA Code”) to
assist in putting into place an effective
corporate governance framework
which will deliver results. Your Board
understands that good governance
is one of the foundations of its
sustainable growth strategy. The
Chairman is responsible for Corporate
Governance in the Group. There were
no key governance related matters that
occurred in the year and no significant
changes in governance arrangements.
Details on how the Company applies
the principles of the QCA Code are set
out below.
Principle 1: Establish a strategy
and business model which
promote long-term value for
shareholders
Newmark Security is a leading provider
of people and data management and
physical security solutions through its
subsidiaries, Grosvenor Technology
Limited and Safetell Limited, in the UK,
and Grosvenor Technology LLC in the
USA, with exports to Europe and USA,
and worldwide through our established
customer base. The Company aims
to help address some of the major
challenges facing corporations in an
environment of ever-increasing global
security concerns and add value
for all of our stakeholders through
partnership and innovation. We will
continue to develop exceptional and
secure products backed up by industry
leading support. The Company strategy
is focused on delivering growth
through the development of new
products, providing its customers with
much-needed peace of mind whilst
also improving business efficiency
and flexibility through innovative
technology. The three core markets
served, Access Control, Human Capital
Management (HCM) and physical
security, are anticipated by industry
analysts to grow significantly in the
medium to long-term. The company
takes a ‘deep and narrow’ approach
in each of these markets through the
provision of products and services that
are highly developed and specialist,
thus delivering tangible added-value
to its downstream partners and
creating barriers to entry to potential
competitors.
Grosvenor Technology’s products are
at the cutting edge of access control
and human capital management
technology. The business is well
positioned to capitalise on the
crossover between these two aspects
of electronic security and continued
investment ensures that it stays at the
forefront of this marketplace. Long
term strategies are in place to increase
recurring revenues through the
provision of more cloud-based services
on an ongoing basis, particularly in
the HCM sector. This is envisaged
to deliver greater shareholder value
over time as both quantity and quality
of earnings increase through this
strategy.
Safetell is one of the industry leaders
in a number of high-demand physical
security products and is perfectly
placed to service the industry. The
market for asset security products
and services is fast growing with the
ever-increasing threat of terrorism
and crime placing security high on
the priority list for corporate clients.
It is the policy of the Company to
maintain the highest standards of
product quality meeting statutory and
regulatory requirements by the control
of its sales, purchasing, production,
delivery, installation and service
activities.
The principal risks and uncertainties
associated with the business activities
are set out on page 30 of the
Strategic Report.
Principle 2: Seek to understand
and meet shareholder needs and
expectations
The Company engages with
shareholders through a variety of
traditional and digital media. In addition
to regulatory announcements and
reports, the Company communicates
through a variety of channels. The
CEO participates in periodic interviews
with online investor news platforms
and channels as well as giving regular
non- material updates on social media
platforms. The Company makes
announcements in industry, trade and
general business publications and
through RNS feeds.
Subject to COVID-19 restrictions, the
Board members attend AGMs and
welcome shareholder attendance. Our
corporate broker maintains a dialogue
with our institutional investors and
arranges meetings with the Executive
Directors as required. The website
contains an overview of the markets
operated in, the Company’s vision and
strategy and multi-media detail of the
separate Physical Security Solutions
and People and Data Management
divisions. Historic reports, statements,
announcements and share price
information are also accessible within
the website (https://newmarksecurity.
com).
Principle 3: Take into account
wider stakeholder and social
responsibilities and their
implications for long-term
success (see also s172 section)
The Company recognises that there
are several resources and relationships
that are considered to be strategically
important. These include major clients,
key suppliers, value added resellers
and our banking partners and these
relationships are managed at a senior
34
Newmark Security PLC - Report and Financial Statements 2021 Governance Principles
level within each division with the
most important receiving additional
executive attention.
The Company further identifies
the need to nurture and develop
relationships with all stakeholder
groups. Feedback is gathered
from customers through sales and
marketing functions with key customer
meetings. Regular supplier reviews are
conducted to ensure the Company’s
and vendors’ needs and ambitions
are met.
The Company recognises the
importance of its employees to
its achievements. Regular internal
communication meetings are
conducted across all sites to ensure
employees are knowledgeable about
a number of topics. Questions and
suggestions are encouraged through a
range of formal and informal channels
directly to divisional Managing
Directors. These employee feedback
channels have led to a number of
tangible outputs and changes to
working practices. Our staff expect
to be able to work in a safe and
comfortable environment, and to be
provided with the necessary skills and
knowledge to perform their work to the
required standard. We provide ongoing
training wherever required and conduct
routine appraisals with the staff.
Principle 4: Embed effective
risk management, considering
both opportunities and threats,
throughout the organisation
The Board has overall responsibility for
the Group’s systems of internal control
and risk management. The Board
identifies the major business risks
with management and establishes
appropriate procedures to measure
and manage those risks. These involve
a system of measurement, control and
reporting on a variety of internal and
external factors. There are detailed
procedures for the production of
budgets covering profit and loss
accounts, balance sheets and cash
flows. Monthly subsidiary and group
management accounts are produced
with comparisons against budget and
prior year.
Management also reports on major
changes in the business environment
including any possible impact on
forecasts.
The principal risks and uncertainties
associated with the business activities
are set out in the Strategic Report on
page 30.
Principle 5: Maintaining the
Board as a well-functioning,
balanced team led by the Chair
The Chairman’s role is to ensure that
the Board operates effectively to
deliver the long term success of the
Group. This includes ensuring that the
Non-Executive Directors always have
access to the executive management
team to provide both support and
challenge, all directors are able to
express their views openly at Board
meetings and that all directors are
encouraged to bring independent
judgement to bear on all issues.
There are specific instructions in
place for the timetable and content
of Board papers so that the directors
are properly briefed before the Board
meetings. 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, to
approve major capital expenditure and
to review budgets.
At 30 April 2021, the Board
comprised a Non-Executive Chairman,
two Executive Directors and three
Non-Executive Directors. 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.
Board meetings are held a minimum of
four times a year and the Board of the
Parent Company also attend the Board
meetings of the subsidiary companies
on the same day. All members of
the Board attended all four Board
meetings held over the last year. The
Board members also have discussions
during the year on the progress of the
Group and any particular issues which
arise. All Directors commit the time
necessary to meet their responsibilities
as directors. There were two meetings
of both the Audit and Remuneration
Committee during the year, both of
which were attended by all members
of those committees.
For the year under review two of the
four Non-Executive Directors are
considered to be independent. Maurice
Dwek and Michel Rapoport are not
considered to be independent in view
of their substantial shareholdings in
the Company. However, the Board
considers that both Mr Dwek and Mr
Rapoport bring a wealth of experience
from across a range of businesses,
as well as their knowledge of being
involved in listed and other companies
together with their experience of the
People and Data Management and the
Service industry.
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
35
Newmark Security PLC - Report and Financial Statements 2021 Governance Principles
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.
Marie-Claire Dwek and Graham
Feltham, as Executive Directors, are
full time employees of the company
during the year. In September 2021
Graham Feltham resigned as a
Director. There are no minimum time
commitments for the Non-Executive
Directors who spend whatever time
is required to fulfil their duties and
responsibilities.
Principle 6: Ensure that between
them the Directors have the
necessary up-to-date experience,
skills and capabilities
The CEO works closely with the
senior leadership teams of the
subsidiary companies to keep abreast
of market trends, economic trends,
technological advances and customer
expectations to remain agile and
adjust to the changing times. She
meets with customers and suppliers
on a regular basis. She also regularly
attends security exhibitions in the
UK and worldwide as well as forums,
corporate and networking events, and
keeps the Board up to date with all
developments.
Changes in the business and
economic environment are discussed
fully at Board meetings. The Board is
informed of changes in accounting
requirements by the Company auditors
and in regulatory requirements by
the NOMAD via the Group Financial
Director.
Principle 7: Evaluate Board
performance based on clear
and relevant objectives, seeking
continuous improvement
The Chairman carried out an
evaluation of the Board during the
year and deemed that it was working
satisfactorily, in particular:
1. The good mix of skills and
experience of the Board members.
2. The amount of challenge and
expression of views at meetings.
3. The attendance of all the Company
Board members at the subsidiary
company Board meetings.
4. The level of information, both
financial and operational, available
prior to and at the Board meetings.
5. Matters arising at each meeting are
followed up promptly and the results
reported back to Board members.
The performance of the Board is
kept under continuous review. The
Board does not consider that it is
appropriate to perform a more formal
board appraisal process utilising third
parties at the current date, taking into
consideration the size and nature of
the Company. However, this will be
kept under review and the board will
consider on an annual basis whether
to implement a more formal appraisal
process.
Principle 8: Promote a corporate
culture that is based on ethical
values and behaviours
The Group aims to have a corporate
culture that keeps staff satisfied in
their roles and fully motivated so
that staff retention levels are high,
and absenteeism is low. All senior
management are aware of our culture.
Staff are encouraged to submit ideas
and suggestions as to how this can
be achieved. The Group also tries
to ensure that the staff have the
appropriate lifestyle benefits and are
provided with appropriate development
training, both internally and externally.
All senior leadership team members
(including Group Human Resources
manager) attend monthly management
meetings, attended by both
Executive Directors, to report on their
department’s activities and where
relevant to highlight any issues with
customers, suppliers, employee or
other stakeholders.
The Group is committed to maintaining
high standards for the environment,
and our relationship with employees,
customers and suppliers. The Group
is committed to being environmentally
friendly and we have identified the key
waste streams from our businesses
so that the amount of landfill is
reduced by separating waste into
these different streams. Records are
maintained as evidence that these
forms of waste are separated and
collected by licensed waste collection
companies and these are reported at
management meetings. Our efforts
with stakeholder groups are detailed
under principle 3 above.
Principle 9: Maintain governance
structures and processes that are
fit for purpose and support good
decision making by the board
The Chief Executive Officer, Marie-
Claire Dwek, is responsible for the
day-to-day management of the
business, developing the Group’s
strategy for discussion with the Board
and then implementing that strategy.
The Group Finance Director, Graham
Feltham, was responsible for the
financial reporting of the Group and
supporting the CEO in developing
and implementing the Group strategy.
Graham resigned as a Director and
left the Group in September 2021.
Paul Campbell-White has joined the
business as Chief Financial Officer
in September 2021 as Graham’s
replacement. The two Executive
Directors have prime responsibility for
engagement with shareholders.
36
Newmark Security PLC - Report and Financial Statements 2021 The Non-Executive Directors, Michel
Rapoport, Robert Waddington and
Terence Yap are responsible for
bringing their expertise and judgement
in assisting in the development
of strategy and measuring its
performance, challenging the
Executive Directors and reviewing their
performance. All Directors are required
to notify the Company Secretary of
any conflicts of interest and there have
been no such relationships declared.
The Audit Committee assists the
Board and its terms of reference
are included on the company web
site. Its composition, duties and
main activities during the year
is included in the Report of the
Directors. The terms of reference of
the Remuneration Committee are
included on the company web site.
Its composition, duties and main
activities during the year is included
in the Directors’ Remuneration report.
There is no Nomination Committee.
Given the size of the business, all
senior appointments are considered
by the Board as a whole. The matters
reserved for the Board are set out
under Principle 5. The Board will
continue to monitor the governance
framework in line with the Group’s
plans for growth and will make further
adjustments and improvements as
required.
Principle 10: Communicate how
the company is governed and
performing by maintaining a
dialogue with shareholders and
other relevant stakeholders
The Board communicates with
shareholders through the annual
report and accounts, interim report
other regulatory announcements,
the Annual General Meeting (AGM)
and one-on-one meetings with both
existing and potential shareholders.
At the end of the Annual General
Governance Principles
Meeting shareholders are encouraged
to express their views to the Directors.
Corporate information is available to
shareholders and other stakeholders
on the Company website including
details of the activities of the different
businesses, and announcement. The
Company also receives updates from
its corporate brokers on the views of
shareholders.
The Directors’ remuneration report is
on page 32 and an overview of the
Audit Committee’s duties and activities
during the year are on page 30 and on
the Corporate Governance section of
the Company’s website.
Maurice Dwek
Chairman
9 September 2021
37
Newmark Security PLC - Report and Financial Statements 2021 Directors’ Report
The Directors submit their annual
report and audited financial statements
of the Group for the year ended 30
April 2021.
Financial results and dividends
The Board is proposing a dividend of
Nil per share (2020: Nil per share).
Directors
The Directors who served during the
year and to the date of signing were
as follows:
M Dwek
M-C Dwek
G Feltham (resigned 3 Sept 2021)
M Rapoport
R Waddington
T Yap
Details of the Directors’ service
contracts are shown in the Directors’
remuneration report on page 43.
M Rapoport and M-C Dwek retire
in accordance with the articles of
association. M Rapoport and M-C
Dwek 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 18 to the financial statements.
Likely future developments in the
business of the Company
Information on likely future
developments, exposure to relevant
risks and subsequent events in the
business of the Group has been
included in the Strategic Report and in
note 26 - Subsequent events, of which
there are none stated.
Directors
Directors’ interests
The beneficial and other interests
of the Directors in the shares of the
Company as at 30 April 2021 and 30
April 2020 were as follows:
M Dwek(a)
M Rapoport
R Waddington
M-C Dwek
Percentage holding at
30 April 2021
30 April 2021
30 April 2020
20.2%
12.5%
0.9%
0.5%
94,799,467
58,555,000
4,400,000
2,500,000
94,799,467
23,055,000
3,300,000
2,500,000
G Feltham
(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.
800,000
0.2%
800,000
The interests of Directors in Share Option Schemes operated by the Company at 30 April 2021 and 30 April 2020 were as follows:
Number of Ordinary Shares under
EMI Scheme 30 April 2021
Number of Ordinary Shares under the
EMI Scheme 30 April 2020
M-C Dwek
G Feltham
28,668,4274
5,900,000
28,668,274
5,900,000
The Directors had no other interests
in the shares or share options of the
Company or its subsidiaries.
Research & Development (R&D)
The Group is committed to on-going
R&D. 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
£731,000 (2020: £877,000). This
is discussed further in the Financial
review.
Going concern
Based on the Group’s latest trading,
future expectations and associated
cash flow forecasts, the Directors
have considered the Group cash
requirements and forecast covenant
compliance and are confident that the
Company and the Group will be able
to continue trading for a period of at
least twelve months following approval
of these financial statements, being the
going concern period.
In August 2020, the Group secured
a £2 million financing facility from its
bankers, HSBC, via the Coronavirus
Business Interruption Loan Scheme
38
Newmark Security PLC - Report and Financial Statements 2021 Directors’ Report
(“CBILS”). This loan is for a term of 6
years, with the first year being interest,
repayment and covenant free under
the Business Interruption Payment
scheme. The original covenant requires
the Group to deliver a pre-debt service
cashflow of 1.2 times the level of
debt service commencing for the year
end 30 April 2022, based on audited
accounts. As a result of the Strategic
Business Plan certain investments were
identified and factored into a forward
looking model. Management identified
that the investments and cash outlay
may result in a potential default of the
covenant and therefore the Directors
agreed a waiver of the debt service ratio
to be replaced by a Tangible Net Worth
(“TNW”) test applicable for the year
ended 30 April 2022 based on audited
accounts. This test uses the calculation
of Net Assets less Intangible Assets
and requires the result to exceed
£3.1million. No other financing facilities
of the Group have any covenant
requirements.
As a combined result of COVID-19
pandemic global componentry shortage
and the requirement to increase stock
levels to meet anticipated demand,
inventory levels have increased by
£1.5 million since January 2021 which
has reduced the levels of available
headroom in our facilities. Management
are in advanced discussions with the
Group’s primary bankers in respect
of an extension to the UK invoice
financing facility and a new US invoice
financing facility. Both facilities are
expected to be finalised imminently
and Management have the ongoing
support of the Group’s primary bankers
should there be any unforeseen delays.
Management have recently secured an
additional overdraft facility of £200,000
to reach a £450,000 facility as a short
term, interim measure to 1 November
2021 to cover earlier stock purchases.
The expected overall outcome will make
the Group more flexible in determining
mix of financing and provides a
USD currency liability supporting our
hedging strategy. Whilst the Group’s
going concern assessment includes
the assumption that these facilities
will be received and the Group has the
support of the Bank, the directors have
also considered forecast scenarios
to September 2022 excluding this
additional financing.
As at 30 April 2021 no financing facility
was being utilised apart from the CBILS
loan of £2 million although following
the year end the invoice discounting
facility has been utilised to finance
additional stock purchases. The level
of invoice discounting available varies
with the open book of trade debtors at
any point in time and therefore the level
of financing fluctuates with indicative
numbers being analysed above.
The Group is currently operating
ahead of revenue expectations albeit
with a different phasing of certain
lines of business with varying margins
which result in a reduced margin. The
latest forecast of the Group results in
exceeding the TNW covenant test by
13.5% and will be tested more fully
when a revised forecast is completed
in October. As a consequence of the
revised forecast findings the Group
would explore the existing covenant test
level with our Banking partners, HSBC,
should the covenant headroom fall
short of 10%. Further scenario testing
and sensitivity analysis was completed
to model certain criteria that would
indicate a potential covenant breach
against the latest formally approved
budget. A shortfall of sales against
forecast of 3.4% or a reduction in
Gross Material Margin by 2.8% points
would result in a covenant breach at
April 2022 with an improving position
thereafter. Management are confident
that the shortfalls will not occur and
are undertaking regular reviews and
forecasts to ensure this. Management
are confident that the Group would
be able to meet loan repayments
and working capital outflows with the
required levels of cash to proceed with
investing in the Group in partnership
with our banking partners within the
going concern review period. The
Group is expected to be able to operate
within existing finance facilities, based
on Management’s detailed monthly
cashflow forecasts to September 2022.
Should profits or cashflow movements
fall behind expectations in this period,
and there be an unexpected delay to
the additional financing arrangement
beyond October 2021, the Group
expects to be able to extend the
overdraft in order to cover any delay in
finalising the additional financing. With
this financing, the group could see a
drop in operating profit of up to 20%,
combined with some negative working
capital movements and remain cash
positive. Accordingly, the Directors
consider it appropriate to prepare the
financial statements on a going concern
basis.
Audit Committee
The Audit Committee comprises R
Waddington, M Dwek and M Rapoport
and a copy of its written terms of
reference are included on the web site.
The Audit Committee principal duties
are as follows:
• Reviewing and approving the interim
results for the six months ended 31
October 2020.
• Agreement of the independence of
the auditors and their planning report
for the year end financial statements
including the proposed audit fees and
non-audit services.
• Reviewing and approving the audited
annual report and accounts for the year
ended 30 April 2021.
• Discussion with the external auditors
39
Newmark Security PLC - Report and Financial Statements 2021 Directors’ Report
of any accounting or financial issues
arising in the course of their work.
• Discussion of the auditors’
assessment of the adequacy of internal
controls.
The main areas of activity during the
year included:
• Discussion of the development costs
capitalised.
• Impairment reviews of the underlying
businesses.
• Review and discussion of going
concern and forecasts including the
impact of COVID-19.
Remuneration Committee
The Remuneration Committee
comprises M Rapoport, M Dwek and R
Waddington and 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
Directors’ Remuneration report is set
out on pages 43 and 44 and the terms
of reference are on the website.
Directors’ responsibilities
The Directors are responsible for
preparing the annual 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
accounting standards in conformity with
the requirements of the Companies
Act 2006 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
40
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:
and detection of fraud and other
irregularities.
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.
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.
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 9 September
2021. By order of the Board
M-C Dwek
Director
9 September 2021
• 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 international
accounting standards in conformity with
the requirements of the Companies
Act 2006, subject to any material
departures disclosed and explained
in the financial statements and the
company financial statements in
accordance with United Kingdom
Generally Accepted Accounting
Practice (United Kingdom Accounting
Standards and applicable law).
• 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
Newmark Security PLC - Report and Financial Statements 2021 Directors’ Remuneration Report
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
2021 comprised three existing
Non-Executive Directors, Maurice
Dwek, Michel Rapoport and Robert
Waddington.
The relevant parts of the career history
of the members of the Remuneration
Committee are summarised in the
Corporate Governance on page 34.
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. The Committee
approved the implementation of
a 10% contractual pay reduction
throughout the Group for a three
month period between April and July
2020. Bonuses are awarded based on
company performance as contractually
stipulated.
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. 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.
The Company entered into a service
agreement on 9 September 2019 with
Mr Feltham which may be terminated
by either party serving six months’
notice. Mr Feltham left the business on
3 September 2021.
Loss of office
When determining any loss of office
payment for a departing Director
the Committee will always seek
to minimise cost to the Company
while complying with the contractual
terms and seeking to reflect the
circumstances in place at the time.
The Committee reserves the right
to make additional payments where
such payments are made in good
faith in discharge of an existing legal
obligation (or by way of damages for
breach of such an obligation); or by
way of settlement or compromise
of any claim arising in connection
with the termination of an Executive
Director’s office or employment.
Director’s emoluments
Emoluments of the directors (including
pension contributions) of the Company
during the year ended 30 April 2021
were as follows:
Consul-
tancy
£’000
Salary
£’000
Fees
£’000
Bonus
£’000
Other
Benefits*
£’000
Total
£’000
Pension
£’000
Total incl.
pension
£’000
Executive Directors
M-C Dwek
G Feltham
Non Executive Directors
M Dwek(a)
M Rapoport
R Waddington
T Yap
2021
2020
-
-
78
-
-
-
78
80
203
130
-
-
-
-
333
360
-
-
-
25
25
25
75
50
79
-
-
-
-
-
79
87
31
4
17
-
-
-
52
66
313
134
95
25
25
25
617
643
24
7
-
-
-
-
31
28
337
141
85
25
25
25
648
671
*Includes £13,000 for share options expense
Emoluments of the highest paid Director were £337,000 (2020: £332,000). Bonus payments are based on performance against set targets at an increasing percentage of salary for the extent of
exceeding the agreed targets. The Directors’ share interests are detailed in the Directors’ Report on page 40. (a) The Company paid a consultancy fee of £78,000 (2020: £80,000) to Arbury Inc., a
company 51 per cent. owned by M Dwek.
41
Newmark Security PLC - Report and Financial Statements 2021 Directors’ Remuneration Report
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 24
to the financial statements.
The number of approved share options
issued to the Directors are as follows:
No. of options
Date of grant
Subscription price
payable
12,363,636
August 2013
1,909,589
1,142,857
7,312,500
5,939,692
5,900,000
September 2014
September 2015
October 2019
October 2019
October 2019
1.8p
1.8p
1.8p
1.8p
1p
1.7p
M-C Dwek
M-C Dwek
M-C Dwek
M-C Dwek
M-C Dwek
G Feltham
There were no options granted
or exercised during the year with
2,005,952 (2020: 812,500) vesting.
Approval
This remuneration report was approved
by order of the Board on 9 September
2021.
By order of the Board
M-C Dwek
Director
9 September 2021
42
Newmark Security PLC - Report and Financial Statements 2021 Independent Auditor’s Report
TO THE MEMBERS OF NEWMARK
SECURITY PLC
Opinion on the financial statements
In our opinion:
• the financial statements give a
true and fair view of the state of the
Group’s and of the Parent Company’s
affairs as at 30 April 2021 and of the
Group’s profit for the year then ended;
• the Group financial statements have
been properly prepared in accordance
with international accounting standards
in conformity with the requirements of
the Companies Act 2006;
• 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.
We have audited the financial
statements of Newmark Security
Plc (the ‘Parent Company’) and its
subsidiaries (the ‘Group’) for the
year ended 30 April 2021 which
comprise the consolidated income
statement, the consolidated statement
of comprehensive income, the
consolidated and parent company
statements of financial position, the
consolidated statement of cash flows
and the consolidated and parent
company statements of changes
in equity and notes to the financial
statements, including a summary of
significant accounting policies.
The financial reporting framework that
has been applied in the preparation
of the Group financial statements
is applicable law and international
accounting standards in conformity
with the requirements of the
Companies Act 2006. The financial
reporting framework that has been
applied in the preparation of the
Parent Company financial statements
is applicable law and United Kingdom
Accounting Standards, including
Financial Reporting Standard 101
Reduced Disclosure Framework
(United Kingdom Generally Accepted
Accounting Practice).
Basis for opinion
We conducted our audit in accordance
with International Standards on
Auditing (UK) (ISAs) and applicable
law. Our responsibilities under those
standards are further described in the
Auditor’s responsibilities for the audit
of the financial statements section
of our report. We believe that the
audit evidence we have obtained is
sufficient and appropriate to provide a
basis for our opinion.
Independence
We remain independent of the
Group and the Parent Company
in accordance with the ethical
requirements that are relevant to our
audit of the financial statements in
the UK, including the FRC’s Ethical
Standard as applied to listed entities,
and we have fulfilled our other ethical
responsibilities in accordance with
these requirements.
Conclusions relating to going concern
In auditing the financial statements,
we have concluded that the Directors’
use of the going concern basis of
accounting in the preparation of the
financial statements is appropriate.
We have identified going concern
as a Key Audit Matter, with the risks
most likely to adversely affect the
Company’s ability to continue as a
going concern being the Group’s
reliance on external funding to
maintain cashflows, covenant
compliance and increased uncertainty
around the longer-term impact on
the economy and impact on Group
operations.
Our evaluation of the Directors’
assessment of the Group and the
Parent Company’s ability to continue
to adopt the going concern basis of
accounting included the following key
procedures:
• We obtained and reviewed post
year end covenant documentation for
the CBILs covenant update for the
year ending April 2022 to confirm
management have correctly calculated
covenant forecast and sensitivity
analysis.
• We obtained and reviewed
communications with the Group’s
primary bankers with regards to
additional financing, including the
overdraft and UK invoice financing
extensions and US invoice financing
facility and confirmed that these were
appropriately considered in cash flow
forecast and sensitivity analysis.
• We reviewed FY21 results
against budgets as an indicator of
management budget accuracy.
• We reviewed management’s
budgets split by division and parent
company, as relevant to the going
concern period, including a detailed
assessment and discussion of
assumptions made relating to revenue
growth, gross margins and overheads
year on year movements.
• We performed a detailed review of
management’s monthly cash flow base
case to September 2022, being the
going concern period, against audit
evidence from our review of the FY22
budget and FY21 audit actuals.
• We completed a detailed review and
performed additional scenario testing
of management stress testing.
• We compared the cash requirements
shown by the forecasts above to
43
Newmark Security PLC - Report and Financial Statements 2021 Independent Auditor’s Report
the available facilities of the group,
including additional facilities obtained
or in the process of being finalised
subsequent to year end, including the
overdraft extension and US invoice
discounting and satisfied ourselves
that the Group was not dependent
upon the facilities currently in the
process of being finalised to enable
the Group to operate as a going
concern.
• We reviewed the disclosures in
the financial statement against best
practice guidance and accounting
standards.
Based on the work we have
performed, we have not identified
any material uncertainties relating to
events or conditions that, individually or
collectively, may cast significant doubt
on the entity’s ability to continue as a
going concern for a period of at least
twelve months from when the financial
statements are authorised for issue.
Our responsibilities and the
responsibilities of the Directors
with respect to going concern are
described in the relevant sections
of this report.
100% (2020: 100%) of Group profit before tax
Coverage
100% (2020: 100%) of Group revenue
97% (2020: 100%) of Group total assets
2021
2020
Revenue Recognition
Going Concern
Existence and valuation
of inventory
Recoverability of goodwill
and non-current assets
Yes
Yes
No
Yes
Yes
Yes
Yes
Yes
Key audit matters
Materiality
Group financial statements as a whole
Existence and valuation of inventory is no longer considered to be a key audit matter
as we were able to attend the onsite stock counts at 30 April 2021
£182,000 (2020: £188,000) based on 1% average revenue for 2021 and 2020
(2020: 1% of 2020 revenue). An average measure was used in the current year to
account for temporary fluctuations in performance as a result of COVID-19.
An overview of the scope of our audit
Our Group audit was scoped by
obtaining an understanding of
the Group and its environment,
including the Group’s system of
internal control, and assessing the
risks of material misstatement in
the financial statements. We also
addressed the risk of management
override of internal controls, including
assessing whether there was evidence
of bias by the Directors that may
have represented a risk of material
misstatement.
Audit work to respond to the assessed
risks was performed directly by the
Group audit engagement team, and
full scope audit procedures were
performed on all four operating
entities within the group, which were
considered to be the significant
components of the group. Analytical
procedures were carried out where
relevant on the non-significant
components. All work was carried out
by the Group engagement team.
44
Newmark Security PLC - Report and Financial Statements 2021 Independent Auditor’s Report
Key audit matters
Key audit matters are those matters
that, in our professional judgement,
were of most significance in our
audit of the financial statements of
the current period and include the
most significant assessed risks of
material misstatement (whether or
not due to fraud) that we identified,
including those which had the greatest
effect on: the overall audit strategy,
the allocation of resources in the
audit, and directing the efforts of the
engagement team. These matters
were addressed in the context of our
audit of the financial statements as
a whole, and in forming our opinion
thereon, and we do not provide a
separate opinion on these matters.
In addition to the matters described
in the Conclusions relating to going
concern section we have determined
the matters below to be the key audit
matters to be communicated in
our report.
Key audit matter
Revenue
Recognition (Notes
1 and 2)
As detailed in note 1 and 2, the
Group’s revenue relates to the sale of
products and services recognised at
a point in time (delivery), and services
recognised over time.
There is a risk around the
identification of performance
obligations and application of IFRS
15 for material new and existing
contracts and ensuring revenue
around the year end is recognised in
the appropriate period.
We therefore determined the
recognition of revenue to be a key
audit matter.
How the scope of our audit addressed the key audit matter
Our audit work included, but was not restricted to, the following:
We reviewed management’s assessment of the separable
performance obligations attached to a sample of revenue contracts
against the requirements of IFRS 15 and sample tested sales
transactions over the period to confirm appropriate and consistent
revenue recognition policies had been applied.
We sample tested revenue transactions from the sale of support
and maintenance services in the final month of the audit period and
the first month of the new financial year, tracing to delivery notes or
confirmation of service completion to confirm the timing and amount
of revenue recognised.
We selected a sample of products dispatched in the final month of
the year and first month post year end from the goods dispatched
notes listing and confirmed the timing and associated performance
obligations had been applied correctly.
We tested a sample of deferred and accrued revenue, recalculating
expected revenue and deferred/accrued revenue based on the
status of work performed at year end. The status of the work
performed was verified against timesheet data or the period of the
contract covered to date.
We tested a sample of post year-end credit notes to related invoices
to check that revenue was recognised in the correct period.
We reviewed material manual journals to revenue to confirm that
they had been posted in line with normal business transactions or
supporting evidence obtained from management.
Key observations:
We did not identify any indicators to suggest that revenue has not
been recognised appropriately in accordance with IFRS 15.
45
Newmark Security PLC - Report and Financial Statements 2021 Independent Auditor’s Report
Key audit matters continued...
Our audit work included, but was not restricted to, the following:
We have assessed management’s impairment review: we
recalculated the CGU component’s value in use using our calculated
discount rate, based on applicable gearing, risk and equity premiums,
and methodology in line with accounting standards and compared
these values against the CGU component value and the investment
in subsidiaries value.
We have challenged and assessed the reasonableness of the
CGU component level FY22 budgets and expected growth rate
assumptions within the impairment models through discussions with
management, comparisons to the industry and, where appropriate,
agreement to supporting documentation and historical trends.
We have performed sensitivity analysis over the key assumptions
used by management, specifically the discount rate, long term
growth rate and operating profit, and reviewed the disclosures in
group note 11 and parent company note 3 against accounting
standard requirements, including the impact of changes in key
assumptions.
Key observations:
We did not identify anything to suggest that management’s
impairment review failed to identify indicators impacting the
recoverability of goodwill and non-current assets in the group or
investments in subsidiaries in the parent.
Recoverability of
goodwill and non-
current assets
- Group (Notes 1,
10 and 11)
Recoverability of
Parent Company
Investment in
subsidiaries –
Parent Company
(Note 1, 3)
The Group’s accounting policy in
relation to impairment of goodwill and
intangible assets is included within
note 1 and further explained in note
10 of the group financial statements.
The Parent Company’s accounting
policy on investment in subsidiaries is
included within Company note 1.
Accounting standards require
management to perform an
impairment review annually to
consider possible impairment in
goodwill and consider whether there
are any indicators of impairment
impacting other group non-
current assets and investments in
subsidiaries balance in the parent
company.
Management exercise significant
judgement in determining the
underlying assumptions used in
the impairment review of the two
operating cash generating units
(CGUs). These assumptions include
the discount rate, the forecast
operating margins and the growth
rate. There was increased uncertainty
over operating results in the short to
medium term due to COVID-19.
Because of the judgements exercised
by management over this area we
determined it to be a key audit matter.
46
Newmark Security PLC - Report and Financial Statements 2021 Independent Auditor’s Report
Our application of materiality
Group financial statements
Parent company financial statements
2021
£
2020
£
Materiality
182,000
188,000
Basis for determining
materiality
1% average
revenue for 2021
and 2020
1% revenue for
2020.
Rationale for the
benchmark applied
Loss making entity, revenue is key
performance driver.
Average used in 2021 to mitigate COVID
19 impact.
2021
£
125,000
2% Parent
Company net
assets
2020
£
102,000
54% of Group
materiality.
Parent company is primarily a holding
company and includes significant investment
balances. In the prior year Parent company
materiality was restricted to a percentage
of group materiality for group aggregation
purposes.
Performance materiality
127,000
133,000
87,500
71,400
Basis for determining
performance materiality
70% Group
materiality based
on various factors
including the
expected total value
of known and likely
misstatements,
brought forward
misstatements,
and the number of
material estimates.
70% Group
materiality based
on various factors
including the
expected total value
of known and likely
misstatements,
brought forward
misstatements,
and the number of
material estimates.
70% materiality
based on various
factors including
the expected
total value of
known and likely
misstatements,
brought forward
misstatements,
and the number of
material estimates.
70% materiality
based on various
factors including the
expected total value
of known and likely
misstatements, brought
forward misstatements,
and the number of
material estimates.
threshold that, in our view, warranted
reporting on qualitative grounds.
Component materiality
We set materiality for each component
of the Group based on a percentage
of between 46% and 90% of Group
materiality dependent on the size and
our assessment of the risk of material
misstatement of that component.
Component materiality ranged from
£83,000 to £163,800. In the audit of
each component, we further applied
performance materiality levels of 70%
of the component materiality to our
testing to ensure that the risk of errors
exceeding component materiality was
appropriately mitigated.
Reporting threshold
We agreed with the Audit Committee
that we would report to them all
individual audit differences in excess
of £3,600 (2020: £3,800). We also
agreed to report differences below this
47
Newmark Security PLC - Report and Financial Statements 2021 Independent Auditor’s Report
Other information
The directors are responsible for
the other information. The other
information comprises the information
included in the Annual Report and
Financial Statements, other than the
financial statements and our auditor’s
report thereon. Our opinion on the
financial statements does not cover
the other information and, except to
the extent otherwise explicitly stated
in our report, we do not express
any form of assurance conclusion
thereon. Our responsibility is to read
the other information and, in doing so,
consider whether the other information
is materially inconsistent with the
financial statements or our knowledge
obtained in the course of the audit,
or otherwise appears to be materially
misstated. If we identify such material
inconsistencies or apparent material
misstatements, we are required to
determine whether this gives rise
to a material misstatement in the
financial statements themselves. If,
based on the work we have performed,
we conclude that there is a material
misstatement of this other information,
we are required to report that fact.
We have nothing to report in this
regard.
Other Companies Act 2006 reporting
Based on the responsibilities
described below and our work
performed during the course of
the audit, we are required by the
Companies Act 2006 and ISAs (UK)
to report on certain opinions and
matters as described below.
Strategic report and
Directors’ report
In our opinion, based on the work undertaken in the course of the audit:
the information given in the Strategic report and the Directors’ report for the financial year for
which the financial statements are prepared is consistent with the financial statements; and
the Strategic report and the Directors’ report have been prepared in accordance with applicable
legal requirements.
In the light of the knowledge and understanding of the Group and Parent Company and its
environment obtained in the course of the audit, we have not identified material misstatements in
the strategic report or the Directors’ report.
Matters on which
we are required to
report by exception
We have nothing to report in respect of the following matters in relation to which 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.
Responsibilities of Directors
As explained more fully in the
Directors’ responsibilities statement,
the Directors are responsible for the
preparation of the financial statements
and for being satisfied that they give a
true and fair view, and for such internal
control as the Directors determine is
necessary to enable the preparation of
financial statements that are free from
material misstatement, whether due to
fraud or error.
In preparing the financial statements,
the Directors are responsible for
assessing the Group’s and the
Parent Company’s ability to continue
as a going concern, disclosing, as
applicable, matters related to going
concern and using the going concern
basis of accounting unless the
Directors either intend to liquidate the
Group or the Parent Company or to
48
Newmark Security PLC - Report and Financial Statements 2021 Independent Auditor’s Report
cease operations, or have no realistic
alternative but to do so.
Auditor’s responsibilities for the audit
of the financial statements
Our objectives are to obtain reasonable
assurance about whether the financial
statements as a whole are free from
material misstatement, whether due to
fraud or error, and to issue an auditor’s
report that includes our opinion.
Reasonable assurance is a high level
of assurance, but is not a guarantee
that an audit conducted in accordance
with ISAs (UK) will always detect a
material misstatement when it exists.
Misstatements can arise from fraud
or error and are considered material
if, individually or in the aggregate,
they could reasonably be expected
to influence the economic decisions
of users taken on the basis of these
financial statements.
Extent to which the audit was
capable of detecting irregularities,
including fraud
Irregularities, including fraud, are
instances of non-compliance with laws
and regulations. We design procedures
in line with our responsibilities,
outlined above, to detect material
misstatements in respect of
irregularities, including fraud. The
extent to which our procedures are
capable of detecting irregularities,
including fraud is detailed below:
• We gained an understanding of
the legal and regulatory framework
applicable to the Group and the
industry in which it operates and
considered the risk of non-compliance
or fraud by the Group.
• We considered these risks to be
highest within areas of material
estimation, including impairment of
goodwill and non-financial assets,
calculation of provisions against
inventory and receivables and valuation
of deferred tax assets, as well as
transactions around the year-end and
manual journals at component and
consolidation level.
• We designed audit procedures
at both the Group and significant
component levels to detect material
misstatements due to fraud and error.
• We focused on laws and regulations
that could give rise to a material
misstatement in the Group and
Parent Company financial statements,
including, but not limited to, IFRS,
Companies Act 2006 and certain
requirements from UK and US tax
legislation.
• Our tests included, but were not
limited to, agreement of the financial
statement disclosures to underlying
supporting documentation, review
of correspondence with regulators
and legal advisors, enquiries of
management and review of board
minutes
• We also addressed the risk of
management override of internal
controls, including testing journals
and evaluating whether there was
evidence of bias by the directors
that represented a risk of material
misstatement due to fraud. To address
the risk of fraud due to revenue
recognition through our journals
testing we obtained a list of journal
entries to revenue and reviewed
manual postings with values greater
than predetermined thresholds.
• We communicated relevant identified
laws and regulations and potential
fraud risks to all engagement team
members and remained alert to any
indications of fraud or non-compliance
with laws and regulations throughout
the audit.
Our audit procedures were designed
to respond to risks of material
misstatement in the financial
statements, recognising that the risk of
not detecting a material misstatement
due to fraud is higher than the risk
of not detecting one resulting from
error, as fraud may involve deliberate
concealment by, for example, forgery,
misrepresentations or through
collusion. There are inherent limitations
in the audit procedures performed and
the further removed non-compliance
with laws and regulations is from the
events and transactions reflected in
the financial statements, the less likely
we are to become aware of it.
Misstatements can arise from fraud
or error and are considered material
if, individually or in the aggregate,
they could reasonably be expected
to influence the economic decisions
of users taken on the basis of these
financial statements.
A further description of our
responsibilities is available on
the Financial Reporting Council’s
website at: www.frc.org.uk/
auditorsresponsibilities. This
description forms part of our auditor’s
report.
Use of our report
This report is made solely to the
Parent 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 Parent Company’s members those
matters we are required to state to
them in an auditor’s report and for no
49
Newmark Security PLC - Report and Financial Statements 2021 Independent Auditor’s Report
other purpose. To the fullest extent
permitted by law, we do not accept or
assume responsibility to anyone other
than the Parent Company and the
Parent Company’s members as a body,
for our audit work, for this report, or for
the opinions we have formed.
Nick Poulter (Senior Statutory
Auditor)
For and on behalf of BDO LLP,
Statutory Auditor
Guildford, UK
9 September 2021
BDO LLP is a limited liability
partnership registered in England
and Wales (with registered number
OC305127).
50
Newmark Security PLC - Report and Financial Statements 2021 Financial Statements
Financial Statements
Consolidated income statement for the year end 30 April 2021
Revenue
Cost of sales
Gross profit
Administrative expenses
Profit from operations before exceptional items
Exceptional redundancy costs
Other exceptional costs
(Loss)/profit from operations
Finance costs
(Loss)/profit before tax
Tax credit
Profit for the year
Attributable to:
- Equity holders of the parent
Earnings per share
- Basic (pence)
- Diluted (pence)
Note
2
3
3
3
6
7
8
8
Consolidated statement of comprehensive income
Profit for the year
Foreign exchange on the retranslation of overseas operation
Total comprehensive income for the year
Attributable to:
- Equity holders of the parent
The notes on pages 58 to 88 form part of these financial statements.
52
2021
£’000
17,658
(11,029)
6,629
(6,667)
79
(181)
64
(38)
(88)
(126)
297
171
171
0.04
0.04
2021
£’000
171
(196)
(25)
2020
£’000
18,767
(11,318)
7,449
(7,144)
604
(167)
(132)
305
(74)
231
896
1,127
1,127
0.24
0.24
2020
£’000
1,127
26
1,153
(25)
1,153
Newmark Security PLC - Report and Financial Statements 2021
Financial Statements
Consolidated statement of financial position at 30 April 2021
Note
2021
£’000
2020
£’000
Assets
Non-current assets
Property, plant and equipment
Intangible assets
Deferred tax
Total non-current assets
Current assets
Inventory
Trade and other receivables
Cash and cash equivalents
Total current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Other short-term borrowings
Total current liabilities
Non-current liabilities
Long term borrowings
Provisions
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
Total attributed to equity holders
Non-controlling interest
TOTAL EQUITY
The notes on pages 58 to 88 form
part of these financial statements.
9
10
7
13
14
15
16
17
20
21
22
22
22
22
1,088
5,505
206
6,799
3,125
4,438
484
8,047
1,262
5,234
329
6,825
2,544
3,664
620
6,828
14,846
13,653
3,782
627
3,246
1,351
4,409
4,597
2,047
100
2,147
6,556
8,290
4,687
553
801
(302)
2,511
8,250
40
8,290
654
100
754
5,351
8,302
4,687
553
801
(106)
2,327
8,262
40
8,302
53
Newmark Security PLC - Report and Financial Statements 2021 Financial Statements
Consolidated statement of cash flows for year ended 30 April 2021
Cash flow from operating activities before exceptional items
Net profit after tax from ordinary activities
Adjustments for: Depreciation, amortisation and impairment
Exceptional items
Finance cost
Gain on sale of property, plant and equipment
Share based payment
Income tax (credit)/expense
Operating profit before changes in working capital and provisions
(Increase)/decrease in trade and other receivables
(Increase)/decrease in inventories
Increase/(decrease) in trade and other payables
Cash generated from operations before exceptional items
Exceptional items
Cash generated from operations after exceptional items
Income taxes received
Cash flows from operating activities
Cash flow from investing activities
Acquisition of property, plant and equipment
Sale of property, plant and equipment
Research and development expenditure
Cash flow from financing activities
Bank loans received
Principal paid on lease liabilities
(Repayment)/proceeds on invoice discounting
Interest paid on lease liabilities
Interest paid
Decrease in cash and cash equivalents
Cash and cash equivalents at beginning of year
Exchange differences on cash and cash equivalents
Cash and cash equivalents at end of year
The notes on pages 58 to 88 form part of these financial statements.
54
Note
3
3
6
3
7
15
9
10
17
23
16
23
2021
£’000
171
1,033
117
88
(5)
13
(297)
1,120
(805)
(652)
582
245
(244)
1
369
370
(272)
-
(744)
(1,016)
2,000
(487)
(905)
(37)
(51)
520
(126)
620
(10)
484
2020
£’000
1,127
1,022
299
74
(58)
13
(896)
1,581
290
71
(675)
1,267
(362)
905
-
905
(150)
43
(886)
(993)
-
(475)
212
(44)
(30)
(337)
(425)
1,041
4
620
Newmark Security PLC - Report and Financial Statements 2021 Financial Statements
Consolidated statement of changes in equity
Share
capital
Share
premium
Merger
reserve
Foreign
exchange
reserve
Retained
earnings
Amounts
attributable
to owners
of the
parent
Non-
controlling
interest
Total
equity
£’000
£’000
£’000
£’000
£’000
£’000
£’000
£’000
4,687
553
801
(302)
2,511
8,250
40
8,290
At 1 May 2020
Profit for the period
Other comprehensive (loss)
Total comprehensive (loss) for
the year
Transactions with owners
Share based payment
As at 30 April 2021
At 30 April 2019
Impact of IFRS 16 Lease
transition (note 23)
4,687
553
801
(106)
-
(196)
(196)
2,327
171
-
171
8,262
171
(196)
(25)
-
-
-
-
-
-
-
-
-
-
-
-
4,687
-
553
-
801
(132)
1,165
-
-
22
At 1 May 2019 as restated
4,687
553
801
(132)
Profit for the period
Other comprehensive income
Total comprehensive income
for the year
Transactions with owners
Share based payment
-
-
-
-
-
-
-
-
-
-
-
-
-
13
13
7,074
22
7,096
1,127
26
1,187
1,127
-
-
26
26
1,127
1,153
-
13
13
40
-
-
-
-
8,302
171
(196)
(25)
13
40
-
40
-
-
-
-
7,114
22
7,136
1,127
26
1,153
13
As at 30 April 2020
4,687
553
801
(106)
2,327
8,262
40
8,302
The notes on pages 58 to 88 form part of these financial statements.
55
Newmark Security PLC - Report and Financial Statements 2021 Financial Statements
1. Accounting policies
Newmark Security PLC (the
“Company”) is a public limited
company, limited by shares, registered
number 3339998 in England & Wales.
The consolidated financial statements
of the Company for the year ended 30
April 2021 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 accounting standards in
conformity with the requirements of
the Companies Act 2006.
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.
56
None of the new standards or
amendments to standards have had
any impact on the accounting policies
of the group in the year.
No new standards that are not yet
effective have been early adopted or
are expected to have a material impact
on the Group’s profit or loss.
Going concern
Based on the Group’s latest trading,
future expectations and associated
cash flow forecasts, the Directors
have considered the Group cash
requirements and forecast covenant
compliance and are confident that the
Company and the Group will be able to
continue trading for a period of at least
twelve months following approval of
these financial statements, being the
going concern period.
In August 2020, the Group secured
a £2 million financing facility from its
bankers, HSBC, via the Coronavirus
Business Interruption Loan Scheme
(“CBILS”). This loan is for a term of 6
years, with the first year being interest,
repayment and covenant free under
the Business Interruption Payment
scheme. The original covenant requires
the Group to deliver a pre-debt service
cashflow of 1.2 times the level of
debt service commencing for the year
end 30 April 2022, based on audited
accounts. As a result of the Strategic
Business Plan certain investments
were identified and factored into a
forward looking model. Management
identified that the investments and
cash outlay may result in a potential
default of the covenant and therefore
the Directors agreed a waiver of the
debt service ratio to be replaced by
a Tangible Net Worth (“TNW”) test
applicable for the year ended 30 April
2022 based on audited accounts. This
test uses the calculation of Net Assets
less Intangible Assets and requires the
result to exceed £3.1 million. No other
financing facilities of the Group have
any covenant requirements.
As a combined result of COVID-19
pandemic global componentry
shortage and the requirement
to increase stock levels to meet
anticipated demand, inventory levels
have increased by £1.5 million since
January 2021 which has reduced the
levels of available headroom in our
facilities. Management are in advanced
discussions with the Group’s primary
bankers in respect of an extension to
the UK invoice financing facility and a
new US invoice financing facility. Both
facilities are expected to be finalised
imminently and Management have
the ongoing support of the Group’s
primary bankers should there be any
unforeseen delays. Management
have recently secured an additional
overdraft facility of £200,000 to reach
a £450,000 facility as a short term,
interim measure to 1 November 2021
to cover earlier stock purchases. The
expected overall outcome will make
the Group more flexible in determining
mix of financing and provides a
USD currency liability supporting our
hedging strategy. Whilst the Group’s
going concern assessment includes
the assumption that these facilities
will be received and the Group has the
support of the Bank, the directors have
also considered forecast scenarios
to September 2022 excluding this
additional financing.
As at 30 April 2021 no financing
facility was being utilised apart from
the CBILS loan of £2 million although
following the year end the invoice
discounting facility has been utilised
to finance additional stock purchases.
The level of invoice discounting
available varies with the open book
of trade debtors at any point in time
and therefore the level of financing
Newmark Security PLC - Report and Financial Statements 2021 Financial Statements
fluctuates with indicative numbers
being analysed above.
The Group is currently operating
ahead of revenue expectations
albeit with a different phasing of
certain lines of business with varying
margins which result in a reduced
margin. The latest forecast of the
Group results in exceeding the TNW
covenant test by 13.5% and will be
tested more fully when a revised
forecast is completed in October. As a
consequence of the revised forecast
findings the Group would explore
the existing covenant test level with
our Banking partners, HSBC, should
the covenant headroom fall short of
10%. Further scenario testing and
sensitivity analysis was completed
to model certain criteria that would
indicate a potential covenant breach
against the latest formally approved
budget. A shortfall of sales against
forecast of 3.4% or a reduction in
Gross Material Margin by 2.8% points
would result in a covenant breach at
April 2022 with an improving position
thereafter. Management are confident
that the shortfalls will not occur and
are undertaking regular reviews and
forecasts to ensure this. Management
are confident that the Group would
be able to meet loan repayments
and working capital outflows with the
required levels of cash to proceed with
investing in the Group in partnership
with our banking partners within
the going concern review period.
The Group is expected to be able
to operate within existing finance
facilities, based on Management’s
detailed monthly cashflow forecasts
to September 2022. Should profits
or cashflow movements fall behind
expectations in this period, and
there be an unexpected delay to the
additional financing arrangement
beyond October 2021, the Group
expects to be able to extend the
overdraft in order to cover any delay in
finalising the additional financing. With
this financing, the group could see a
drop in operating profit of up to 20%,
combined with some negative working
capital movements and remain cash
positive. Accordingly, 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.
Basis of consolidation
The Group financial statements
consolidate the results of the company
and all of its subsidiary undertakings
drawn up to 30 April 2021.
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.
Revenue
Performance obligations and timing of
revenue recognition
The majority of the group’s revenue
is derived from selling hardware,
with revenue recognised at a point
in time when control of the goods
has transferred to the customer.
This is generally when the goods are
delivered to the customer. However,
for export sales, control might also
be transferred when delivered either
to the port of departure or port of
arrival, depending on the specific
terms of the contract with a customer.
There is limited judgement needed in
identifying the point control passes:
once physical delivery of the products
to the agreed location has occurred,
the group no longer has physical
possession, usually will have a present
right to payment (as a single payment
on delivery) and retains none of the
significant risks and rewards of the
goods in question.
Software sales are recognised
when the license key is given to the
customer, as the customer has a right
to use the Group’s intellectual property
as it exists at a point in time when
the licence is granted (a ‘passive’
license). There is ongoing support
provided but this is a distinct separate
performance obligation, and provided
under a separate contract. There are
no significant upgrades provided that
are fundamental to the ongoing use of
the license by the customer.
The Group provides support and
service contracts to customers, which
are invoiced separately to the goods
and software noted above and are
considered to be distinct performance
obligations. The revenue from support,
Software-as-a-Service (SaaS) and
Clocks-as-a-Service (ClaaS) contracts
in the people and data management
division is recognised over time as the
customer simultaneously receives and
consumes the benefits of the service
over the life of the contract. The
revenue is recognised straight line over
the life of the contract.
In the Physical Security Solutions
division, most service revenue is
recognised at a point in time and is
based on the company fulfilling its
performance obligations with work
completed in any given month. For
some smaller contracts a regular fee
is charged for a period of service
rather than per visit and is therefore
recognised over time.
57
Newmark Security PLC - Report and Financial Statements 2021 Financial Statements
The Group also provide maintenance
and installation services. Revenue for
maintenance contracts is recognised
at a point in time, as and when
maintenance work is performed for the
customer and is based on the level of
work required at that time. Revenue for
installation services is also recognised
at a point in time, when the work has
been completed. Where there is an
additional fee for project management
relating to the installation, this is
treated as one performance obligation
and invoiced when the installation is
complete.
Determining the transaction price
The Group’s revenue is derived from
fixed price contracts for each revenue
stream and therefore the amount
of revenue to be earned from each
contract is determined by reference to
those fixed prices.
Allocating amounts to performance
obligations
For most contracts, there is a fixed unit
price for each product or service sold,
with reductions given for bulk orders
placed at a specific time. Therefore,
there is no judgement involved in
allocating the contract price to allocate
to each revenue stream sold to one
customer. Where a customer orders
more than one service (i.e. product,
installation and ongoing service), the
Group is able to determine the split of
the total contract price between each
revenue stream by reference to each
standalone selling price (all revenue
streams are capable of being, and are,
sold separately).
Payment terms
Payment for all revenue streams noted
above is due between 30 and 60
days after the invoice is raised. For all
revenue recognised at a point in time,
the invoice is raised when the product
or service has been supplied. Deferred
income arises where invoices relate
to maintenance visits for several sites
and not all have been visited at year
end. Accrued income is recognised
following a service visit that requires an
application process to be adhered to
under the main contract spanning 1-3
years. Once the application process is
finalised an invoice is raised and the
value is removed from accrued income.
For service revenue recognised over
time, the invoice is raised on a monthly
basis for most customers.
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. Other
non-financial assets are subject to
impairment tests whenever events or
changes in circumstances indicate
that their carrying value may not be
recoverable. Where the carrying value
of an asset exceeds its recoverable
amount (i.e. 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 (i.e. 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
58
Newmark Security PLC - Report and Financial Statements 2021 Financial Statements
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 main functional currency of the
Group’s operating entities.
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 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) assets and liabilities are translated
at the closing rate at the date of the
statement of financial position;
(ii) 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
measured at amortised cost.
The Group’s financial assets comprise
trade and other receivables, accrued
income, cash and cash equivalents.
Trade and other receivables, excluding
VAT receivables, are measured initially
at fair value and subsequently at
amortised cost using the effective
interest rate method, less provision
for impairment. Impairment provisions
for current trade receivables are
recognised based on the simplified
approach within IFRS 9 using a
provision matrix in the determination
of the lifetime expected credit
losses. During this process the
probability of the non-payment of the
trade receivables is assessed. This
probability is then multiplied by the
amount of the expected loss arising
from default to determine the lifetime
expected credit loss for the trade
receivables. For trade receivables,
which are reported net, such provisions
are recorded in a separate provision
account with the loss being recognised
within overheads 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, overdraft, accruals,
loan and invoice discount account.
All financial liabilities are measured
initially at fair value and subsequently
at amortised cost using the effective
interest method.
Cash flow hedges
Cash flow hedges are accounted
for under fair value. Fair value is
calculated by establishing the mark
to market value. Movements on the
fair value are reflected in the income
statement with the fair value being
reflected in current assets or liabilities
on the balance sheet.
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.
Leases
For any new contracts entered into the
Group considers whether a contract is,
or contains a lease. A lease is defined
as ‘a contract, or part of a contract,
that conveys the right to use an asset
for a period of time in exchange for
consideration’. To apply this definition
the Group assesses whether the
contract meets three key evaluations
which are whether:
• the contract contains an identified
asset, which is either explicitly
identified in the contract or implicitly
specified by being identified at the
time the asset is made available to
the Group
• the Group has the right to obtain
59
Newmark Security PLC - Report and Financial Statements 2021 Financial Statements
substantially all of the economic
benefits from use of the identified
asset throughout the period of use,
considering its rights within the
defined scope of the contract
• the Group has the right to direct the
use of the identified asset throughout
the period of use. The Group assess
whether it has the right to direct ‘how
and for what purpose’ the asset is
used throughout the period of use
Lease liabilities are measured at
the present value of the contractual
payments due to the lessor over the
lease term, with the discount rate
determined by reference to the rate
inherent in the lease unless (as is
typically the case) this is not readily
determinable, in which case the
group’s incremental borrowing rate
on commencement of the lease is
used. Variable lease payments are
only included in the measurement
of the lease liability if they depend
on an index or rate. In such cases,
the initial measurement of the lease
liability assumes the variable element
will remain unchanged throughout
the lease term. Other variable lease
payments are expensed in the period
to which they relate.
On initial recognition, the carrying
value of the lease liability also includes:
• amounts expected to be payable
under any residual value guarantee;
• the exercise price of any purchase
option granted in favour of the Group if
it is reasonable certain to assess that
option;
• any penalties payable for terminating
the lease, if the term of the lease
has been estimated on the basis of
termination option being exercised.
Right of use assets are initially
measured at the amount of the
lease liability, reduced for any lease
incentives received, and increased for:
• lease payments made at or before
commencement of the lease;
• initial direct costs incurred; and
• the amount of any provision
recognised where the group is
contractually required to dismantle,
remove or restore the leased asset
(typically leasehold dilapidations)
Subsequent to initial measurement
lease liabilities increase as a result
of interest charged at a constant rate
on the balance outstanding and are
reduced for lease payments made.
Right-of-use assets are amortised on
a straight-line basis over the remaining
term of the lease or over the remaining
economic life of the asset if, rarely,
this is judged to be shorter than the
lease term. When the Group revises
its estimate of the term of any lease
(because, for example, it re-assesses
the probability of a lessee extension
or termination option being exercised),
it adjusts the carrying amount of the
lease liability to reflect the payments to
make over the revised term, which are
discounted using a revised discount
rate. The carrying value of lease
liabilities is similarly revised when
the variable element of future lease
payments dependent on a rate or
index is revised, except the discount
rate remains unchanged. In both cases
an equivalent adjustment is made to
the carrying value of the right-of-use
asset, with the revised carrying amount
being amortised over the remaining
(revised) lease term. If the carrying
amount of the right-of-use asset is
adjusted to zero, any further reduction
is recognised in profit or loss.
All leases are accounted for by
recognising a right-of-use asset and a
lease liability except for:
• Leases of low value assets; and
• Leases with a duration of 12 months
or less.
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 hardware and firmware
development costs are amortised
over seven years being the period the
Group expected 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.
Software development costs are
generally written off over four years
which is deemed to be an accurate
reflection of the useful economic life
of the products developed.
Each project is reviewed individually
between Finance and the Technical
Director regularly to ascertain
appropriate accounting treatment.
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, trademarks and
copyright
Costs associated with licences,
patents, trademarks, copyrights etc.
are capitalised as incurred and are
amortised over the expected life of
60
Newmark Security PLC - Report and Financial Statements 2021 Financial Statements
the asset of seven years or to another
period if specified in the contract.
of financial position differs from its tax
base, except for differences arising on:
Taxation
• the initial recognition of goodwill;
Income tax expense represents the
sum of the tax currently payable or
receivable and deferred tax.
Research & Development (R&D)
claims are made each year on the
basis that the Group overcomes
technological uncertainties. This
work is carried out for the internal
development of hardware and software
in the Groups own products and
services that it sells and also carries
out this work on behalf of other
companies. The internal development
R&D claim results in a deduction that
can be used to reduce tax payable
or shown as a credit within current
tax, at a reduced rate, as a cash tax
credit. Where the Group performs the
research and development on behalf
of other companies a Research and
Development Expenditure Credit
(RDEC) is claimed whereby a credit is
received within administration costs as
reducing the costs to serve.
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 unless the tax is
adjusted regarding a previous period
whereby the appropriate rate is used
accordingly.
Deferred taxation
Deferred tax assets and liabilities are
recognised where the carrying amount
of an asset or liability in the statement
• 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
• 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
evenly over the length of the lease
–
Plant and machinery
20 per cent. per annum straight line
Fixtures and fittings
10-15 per cent. per annum straight
line
Computer equipment
25-33.3 per cent. per annum straight
line
Motor vehicles
25-33 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
61
Newmark Security PLC - Report and Financial Statements 2021
Financial Statements
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 included within the overall cost of
the right of use asset and depreciated
over the remaining term of the lease.
income statement in the year in which
they become payable.
Holiday pay provision
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. This is measured at the
undiscounted salary costs of the future
holiday entitlement and so accrued at
the balance sheet date.
Government grants
A government grant is recognised only
when there is reasonable assurance
that the Group will comply with any
conditions attached to the grant
and that the grant will be received.
The grant is recognised net against
the costs that they are intended to
compensate.
Cash and cash equivalents
Non-controlling interests
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
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.
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.
Estimates
(a) Estimate – cash forecasts used for
value in use of cash-generating units
and going concern review
The Group tests annually whether
goodwill, intangible and tangible
assets have 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 derived from cash
forecasts . These calculations require
the use of estimates as detailed in
note 11 including forecasts from
formally approved cash projections
to April 2025. Management uses
judgement to estimate the extent
and timing of future cashflows. The
forecasts used to assess the going
concern within the review period to
September 2022 are based on the
same operating forecasts as the
impairment review.
(b) Estimate - value of recognised
deferred tax relating to losses
The Group tests the recoverability of
tax losses based on recent results
combined with Management’s
projections. Management reviews
profitability over a period of 5 years
and assesses the utilisation of tax
losses prior to being in a position
of tax paying. Management uses
judgement to estimate the quantum
of taxable losses that will be utilised
and recognises a deferred tax asset as
appropriate. See note 7.
Judgements
(a) Judgement - Development costs
Development costs on internally
developed products are capitalised
if it can be demonstrated that the
expenditure meets the criteria set out
on page 50. 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.
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Newmark Security PLC - Report and Financial Statements 2021 Financial Statements
2. Revenue
The Group has disaggregated revenue into various categories in the following table which is intended to:
• depict how the nature, amount, timing of revenue are affected by economic data and the relationship with the revenue
recognition policy above.
People and Data
Management division
Physical Security
Solutions division
Group
2021
£’000
2020
£’000
2021
£’000
2020
£’000
2021
£’000
2020
£’000
Product sales (includes hardware and
software)
11,941
12,635
3,220
2,054
15,161
14,689
Installation and Professional Services
241
Support, Service and SaaS contracts
Recurring revenue - point in time
Recurring revenue - over time
-
465
12,647
96
-
626
13,357
Revenue recognised as follows
Point in time
Over time
12,182
465
12,647
12,731
626
13,357
-
641
241
737
1,575
216
5,011
4,795
216
5,011
2,500
215
5,410
5,195
215
5,410
1,575
681
17,658
2,500
841
18,767
16,977
681
17,658
17,926
841
18,767
Support, Service, SaaS and ClaaS contracts have a recurring nature to the contracts whereby the customer has purchased
products along with a contract usually spanning 12 – 36 months for maintenance and call outs, warranty, technical support
or for SaaS contracts – device, data and identity management services. The nature of certain contracts such as support,
maintenance, SaaS and ClaaS are consumed over the course of the contract whereas the customer benefits from service
and call out obligations at the time of delivery.
Primary Geographic Markets
UK
USA
Belgium
Netherlands
Middle East
Sweden
Switzerland
Ireland
Other
2021
£’000
8,425
7,237
854
676
37
20
81
43
285
17,658
2020
£’000
9,872
6,224
1,010
690
349
5
55
63
499
18,767
There was one customer that accounted for more than 10% of Group revenue at £3.2 million (2020: one customer
accounted for more than 10% of revenue at £3.5 million).
63
Newmark Security PLC - Report and Financial Statements 2021 Financial Statements
3. Profit from operations
This has been arrived at after charging/(crediting):
Note
Staff costs
4
Exceptional redundancy costs
Exceptional adjustments for onerous lease surrender (2020: impairment of an asset)
Exceptional costs relating to group rationalisation project
Depreciation of property, plant, and equipment
Amortisation of intangibles assets
Foreign exchange differences
9
10
(Profit) on disposal of tangible non-current assets
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:
- Audit of subsidiary companies
- Tax compliance
- Other services (shown above as group rationalisation project)
2021
£’000
6,781
181
-
(64)
560
473
17
(5)
2020
£’000
6,979
167
50
82
618
405
62
(21)
2021
£’000
2020
£’000
15
25
45
30
-
15
33
44
30
50
115
172
Exceptional Costs
During the year exceptional costs of £117,000 (2020: £299,000) were incurred with £181,000 (2020: £167,000) of
restructuring costs incurred as a result of COVID-19 mainly in Grosvenor as compared to the previous year whereby the
restructuring costs were derived from the continued streamlining of positions at Safetell. An exceptional credit of £64,000
(2020: cost £132,000) related to the exit of a lease commitment at Safetell whereby the asset of £82,000 had been
written down in the prior year along with £50,000 as a result of the group rationalisation project.
64
Newmark Security PLC - Report and Financial Statements 2021 Financial Statements
4. Staff costs
Staff costs (including the Executive Directors and excluding exceptional redundancy costs) comprise:
Wages and salaries
Share options expense
Defined contribution pension costs
Employer’s national insurance contributions and similar taxes
The average numbers employed (including the Executive Directors) were:
Management, sales and administration
Production
2021
£’000
5,861
13
261
646
6,781
2021
No.
56
56
112
2020
£’000
6,008
13
353
605
6,979
2020
No.
56
59
115
Furlough credits of £183,000 were received during the year and recognised in the lines where the costs were incurred.
Key management remuneration (comprising the Executive Directors and Directors of subsidiary companies):
Defined contribution pension costs
Salaries*
Employers national insurance contributions and similar taxes
Share options expense
2021
£’000
1,202
89
103
13
1,407
2020
£’000
1,243
123
156
13
1,535
The emoluments of the Directors of the parent company are set out in the Directors’ remuneration report on page 43.
*Includes termination costs of £90,000 in prior year.
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Newmark Security PLC - Report and Financial Statements 2021 Financial Statements
5. Segment information
Description of the types of products and services from which each reportable segment derives its revenues
The Group has two main reportable segments:
• People and Data Management 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 HCM hardware only, for time-
and-attendance, shop-floor data collection, and access control systems. This division contributed 71.6 per cent. (2020:
71.2 per cent.) of the Group’s revenue.
• Physical Security Solutions division (previously called the 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 28.4 per cent. (2020: 28.8 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.
Segment assets and liabilities exclude group company balances.
People
and Data
Management
division
2021
£’000
Physical
Security
Solutions
division
2021
£’000
Total
2021
£’000
Revenue from external customers
12,647
5,011
17,658
Finance cost
Depreciation
Amortisation
Segment profit before income tax
Additions to non-current assets*
Disposal/modification of non-current assets
Reportable segment assets
Reportable segments liabilities
54
301
470
1,115
1,012
322
10,657
2,575
18
246
-
161
254
440
2,515
1,435
72
547
470
1,276
1,266
762
13,172
4,010
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Newmark Security PLC - Report and Financial Statements 2021 Financial Statements
People and Data
Management
division
Physical Security
Solutions
division
2020
£’000
13,357
50
324
405
1,623
999
-
10,250
3,022
2020
£’000
5,410
24
280
-
(12)
132
159
2,961
1,782
Total
2020
£’000
18,767
74
604
405
1,611
1,131
159
13,211
4,804
Revenue from external customers
Finance cost
Depreciation
Amortisation
Segment profit before income tax
Additions to non-current assets
Disposal of non-current assets
Reportable segment assets
Reportable segments liabilities
Reconciliation of reportable segment revenues, profit or loss, assets and liabilities to the Group’s corresponding amounts:
Total revenue for reportable segments
Revenue
Profit or loss before income tax expense
Total profit or loss for reportable segments
Parent company salaries and related costs
Other parent company costs
Profit before income tax expense
Corporation taxes
Profit after income tax expense
Total assets for reportable segments
Assets
Parent company assets
*
Group’s assets
Total liabilities for reportable segments
Liabilities
Parent company liabilities
**
Group’s liabilities
2021
£’000
17,658
1,276
(868)
(534)
(126)
297
171
13,172
1,674
14,846
4,010
2,546
6,556
*PLC bank overdraft is set off against other group cash balances and has therefore been included within the asset line owing to an offsetting arrangement that is in place with HSBC.
**Parent company liabilities include dormant companies’ intercompany balances which eliminate fully.
2020
£’000
18,767
1,611
(755)
(625)
231
896
1,127
13,211
442
13,653
4,804
547
5,351
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Newmark Security PLC - Report and Financial Statements 2021 Financial Statements
Geographical Information
Geographical information:
Non-current assets by location of assets
UK
USA
2021
£’000
6,384
209
6,593
Other material items
Reportable
segment
totals
2021
£’000
1,266
762
PLC
2021
£’000
Group
Totals
2021
£’000
-
-
1,266
762
Reportable
segment
totals
2020
£’000
1,131
159
Other material items
Additions to non-current assets
Disposals and modifications of
non-current assets
Depreciation and amortisation
1,017
16
1,033
1,009
6. Finance costs
PLC
2020
£’000
43
66
14
Lease interest cost
Invoice discounting
2021
£’000
37
51
88
2020
£’000
6,456
40
6,496
Group
Totals
2020
£’000
1,174
225
1,023
2020
£’000
44
30
74
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Newmark Security PLC - Report and Financial Statements 2021 Financial Statements
7. Tax and deferred tax
Current tax expense
UK corporation tax on profit for the year
Overseas corporation tax
Adjustment to provision in prior periods
Origination and reversal of temporary differences
Recognition of previously unrecognised deferred tax assets
Deferred tax expense
2021
£’000
(337)
42
(125)
(420)
169
(46)
123
Total tax (credit) / charge
(297)
2020
£’000
(176)
29
(436)
(583)
137
(450)
(313)
(896)
The reasons for the differences 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:
2021
£’000
(Loss)/profit before income tax
(126)
Expected tax (credit)/charge based on the standard rate of corporation tax in the UK
of 19.0 per cent. (2019: 19.0 per cent)
Research and development allowances
Effects on profits on items not taxable or deductible for tax purposes
Recognition of previously unrecognised deferred tax assets
Utilisation of unrecognised deferred tax
Temporary differences on deferred tax liabilities
Different tax rates applied in overseas jurisdictions
(24)
(199)
(77)
46
-
71
11
Adjustments for tax credit relating to previous periods
(125)
Total tax (credit)
(297)
2020
£’000
231
44
(176)
23
(450)
61
35
3
(436)
(896)
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Newmark Security PLC - Report and Financial Statements 2021 Financial Statements
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
2021
£’000
177
4,591
4,768
2021
£’000
2
321
323
2020
£’000
185
4,678
4,863
2020
£’000
-
338
338
Deferred tax
Deferred tax is calculated in full on temporary differences under the liability method using a tax rate of 19 per cent. (2020:
19 per cent.) The March 2021 Budget announced a further increase to the main rate of corporation tax to 25% from 1
April 2023 and was substantively enacted in May 2021. As this rate had not been substantively enacted at the balance
sheet date, as result deferred tax balances as at 30 April 2021 continue to be measured at 19%. If the deferred tax rate
were to reverse at the substantively enacted rate, the impact on the deferred tax balance would be £65,000.
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:
Asset/(liability)
At 1 May 2020
Income statement (charge)/credit
At 30 April 2021
Asset/(liability)
At 1 May 2019
Income statement (charge)/credit
At 30 April 2020
Total
329
(123)
206
16
313
329
Accelerated
capital
allowances
Other
temporary/
deductible
differences
Available
losses
185
(39)
146
213
(28)
185
(442)
(84)
(526)
(333)
(109)
(442)
586
-
586
136
450
586
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Newmark Security PLC - Report and Financial Statements 2021 Financial Statements
Deferred tax assets have been recognised in respect of available losses which are expected to be matched against future
trading profits. Management reviews the estimate mid-year and assesses whether latest projections impact the level of
recognised deferred tax. Management allow for a fluctuation in projections and apply a level of cautiousness to recognition
so that it allows for profit fluctuations. A 10% fluctuation in future profitability could result in a change of £120,000 to the
recognition of deferred tax.
There are unrecognised deferred tax assets as listed above, which have not been recognised due to the uncertainty of the
timing of future profits.
8. Earnings per share (EPS)
Profit used in basic and diluted EPS
171
Numerator
2021
£’000
2020
£’000
1,127
Weighted average number of shares used in basic EPS
468,732,316
468,732,316
Weighted average number of dilutive share options
5,939,692
3,449,903
Weighted average number of shares used in diluted EPS
474,672,008
472,182,219
Denominator
The total number of share options are disclosed in note 24. The weighted average number of dilutive share options relate
to options, without any performance criteria, issued with an exercise price being less than the average mid-market price.
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:
Earnings per share - basic and diluted
Exceptional costs
Earnings per share before exceptional items
Reconciliation of earnings
Profit for calculation of basic and diluted earnings per share
Exceptional costs
Profit before exceptional items
2021
£’000
0.04
0.02
0.06
171
117
288
2020
£’000
0.24
0.06
0.30
1,127
299
1,426
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Newmark Security PLC - Report and Financial Statements 2021 Financial Statements
9. Property plant and equipment
Right
of use
land and
buildings
Right of
use plant,
machinery /
motor vehicles
Leasehold
improve-
ments
Plant,
machinery
and motor
vehicles
Computers,
fixtures and
fittings
Total
£’000
£’000
£’000
£’000
£’000
£’000
Cost
Balance at 1 May 2020
Additions
Disposals
Lease modification
Net exchange differences
Balance at 30 April 2021
975
62
(138)
(283)
(2)
614
Depreciation
Balance at 1 May 2020
(356)
Disposals
Lease modification
Net exchange differences
Depreciation
Balance at 30 April 2021
Net book value 30 April 2021
Cost
Balance at 1 May 2019
Adjustments on transition to
IFRS16
Additions
Disposals
Net exchange differences
138
160
1
(237)
(294)
320
-
973
-
-
2
Balance at 30 April 2020
975
Depreciation
Balance at 1 May 2019
Adjustments on transition to
IFRS16
Impairment
Disposals
Net exchange differences
Depreciation
Balance at 30 April 2020
Net book value 30 April 2020
-
-
(82)
-
(2)
(272)
(356)
619
72
697
188
(29)
-
(3)
853
(314)
24
-
-
(199)
(489)
364
-
654
138
(96)
1
697
-
(189)
-
74
-
(199)
(314)
383
686
29
(153)
-
-
562
(567)
153
-
-
(40)
(454)
108
612
-
74
-
-
686
(553)
-
-
-
-
(14)
(567)
119
283
61
(80)
-
(2)
262
1,426
4,067
182
(79)
-
(12)
522
(479)
(283)
(19)
1,517
3,808
(281)
(1,287)
(2,805)
80
-
2
(15)
(214)
48
833
(425)
-
(126)
1
283
(594)
189
-
126
(1)
(1)
(281)
2
79
-
8
474
160
11
(69)
(560)
(1,269)
(2,720)
248
1,088
1,347
-
76
(3)
6
2,792
1,202
288
(225)
10
1,426
4,067
(1,154)
(2,301)
-
-
3
(4)
-
(82)
203
(7)
(132)
(618)
(1,287)
(2,805)
139
1,262
Newmark Security PLC - Report and Financial Statements 2021 Financial Statements
10. Intangible assets
Development
costs
Licenses,
patents
and
copyrights
£’000
£’000
Goodwill
£’000
Other
£’000
Total
£’000
Gross carrying amount
Balance at 1 May 2020
6,872
Additions - internally developed
Additions - external costs
-
-
Balance at 30 April 2021
6,872
Amortisation and impairment
Balance at 1 May 2020
(4,137)
Amortisation
-
Balance at 30 April 2021*
(4,137)
8,681
501
230
9,412
(6,222)
(464)
(6,686)
Carrying amount 30 April 2021
2,735
2,726
Gross carrying amount
Balance at 1 May 2019
6,872
Additions - internally developed
Additions - external costs
-
-
Balance at 30 April 2020
6,872
Amortisation and impairment
Balance at 1 May 2019
(4,137)
Amortisation
-
Balance at 30 April 2020*
(4,137)
7,808
497
376
8,681
(5,823)
(399)
(6,222)
Carrying amount 30 April 2020
2,735
2,459
48
-
13
61
(17)
(6)
(23)
38
44
-
4
48
(11)
(6)
(17)
31
9
-
-
9
-
(3)
(3)
6
-
-
9
9
-
-
-
9
15,610
501
243
16,354
(10,376)
(473)
(10,849)
5,505
14,724
497
389
15,610
(9,971)
(405)
(10,376)
5,234
*balance includes impairment provisions for Goodwill of £4,137,000 and Development costs of £3,578,000 totalling
£7,715,000
The Group has no contractual commitments for development costs (2020: £Nil).
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Newmark Security PLC - Report and Financial Statements 2021 Financial Statements
11. Goodwill and impairment
The carrying amount of goodwill is allocated to the cash generating units (CGU’s) as follows:
People and Data Management division
2021
£’000
2,735
2,735
2020
£’000
2,735
2,735
The recoverable amounts have been determined from value in use calculations based on cash flow projections from
formally approved projections from the Strategic Business Plan updated with the results from the annual budget process
covering a four year period to 30 April 2025. The value in use exceeded the carrying value by £17.9 million (2020: £7.5
million). The additional headroom arises from a combination of carrying out a robust strategic review at a customer by
customer level along with the impact of uncertainty in the previous years estimates relating to COVID. The discount rate
that was applied was 17 per cent. for the People and Data Management division (2020: 15 per cent.), representing the
pre-tax discount rate that reflects the current market assessment of the time value of money and risk specific to the
asset. The compound revenue growth rate for the People and Data Management division increased to 16 per cent. (2020:
12 per cent.). The growth rate reflects the impact of customer expansion supported by existing products and products
being delivered in the short term. The gross margin assumed in the forecasts is 38% to 42% (2020: 34% to 40%) with
improvement due to product mix and material cost savings. The impairment review applied sensitivities reducing the long
term growth rate to 1 per cent. which indicated no impairment. If the discount rate is increased to 20 per cent., there is no
impairment. In order for the carrying value to equate to the value in use the discount rate would need to increase by 27%.
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Newmark Security PLC - Report and Financial Statements 2021 Financial Statements
12. Subsidiaries
The subsidiaries of Newmark Security PLC, all of which have been included in these consolidated financial statements, are
as follows in the current and prior year:
Country of
incorporation
Proportion
of ownership
interest (*)
Name
Custom Micro Products Limited
Newmark Technology Limited
(2a)
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
(2b)
(2c)
Grosvenor Technology Hong Kong Limited
(4)
Newmark Group Limited
Sateon Limited
ATM Protection (UK) Limited
ATM Protection Limited
(2d)
(2e)
Grosvenor Technology LLC (2a)
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
100%
100%
100%
100%
100%
100%
100%
98%
100%
100%
100%
100%
100%
86.70%
86.70%
100%
Activity
Dormant
Dormant
Dormant
Dormant
Trading
Dormant
Holding
Dormant
Dormant
Trading
Dissolved
Dormant
Dormant
Non-trading
Non-trading
Trading
(1) The shares held in all companies are ordinary shares
(2) The investments in subsidiary companies are held directly by the Company apart from the following:
(a) Owned by Grosvenor Technology Limited
(b) Owned by Vema BV 51 per cent., Newmark Security PLC 47 per cent.
(c) Owned by Vema NV
(d) Owned by Safetell Limited
(e) 100 per cent. Owned by ATM Protection (UK) Limited
(3) The registered offices for Group companies are as follows:
For all the companies incorporated in Great Britain and the Netherlands the registered office 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.
(4)
Grosvenor Technology Hong Kong Limited registered office was Unit 1902, Prosperity Place, 6 Shing Yip Street
Kuon Tong, Kowloon Hong Kong and was formally deregistered and dissolved on 17 July 2020.
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Newmark Security PLC - Report and Financial Statements 2021
Financial Statements
13. Inventories
Raw materials and consumables
Work in progress
Finished goods and goods for resale
Less provision for slow moving and obsolete stock
Opening provision
Stock written off
Provided for in year
Closing Provision
The amount of inventories consumed in the year was £7,530,000 (2020: £7,658,000).
14. Trade and other receivables
Trade receivables
Less provision for impairment
Trade receivables (net)
Other receivables
Accrued income
Prepayments
Corporation tax recoverable
2021
£’000
1,719
220
1,479
(293)
3,125
2021
£’000
(350)
57
-
(293)
2021
£’000
2,496
(40)
2,456
429
103
631
819
4,438
2020
£’000
1,425
132
1,337
(350)
2,544
2020
£’000
(289)
40
(101)
(350)
2020
£’000
2,296
(54)
2,242
223
150
362
687
3,664
At 30 April 2021 £nil (2020 £896,000) of trade receivables had been transferred to a provider of invoice discounting
services. The Group is committed to secure any of the debts transferred and therefore continues to recognise the debts
sold within trade receivables until the debtors repay or default. Since the trade receivables continue to be recognised,
the business model of the Group is not affected. The proceeds from transferring the debts are included in other financial
liabilities until the debts are collected or the Group makes good any losses incurred by the service provider.
The Group applies the IFRS 9 simplified approach to measuring expected credit losses using a lifetime expected credit
76
Newmark Security PLC - Report and Financial Statements 2021 Financial Statements
loss provision for trade receivables and contract assets. To measure expected credit losses on a collective basis, trade
receivables and contract assets are grouped based on similar credit risk and aging. The contract assets have similar risk
characteristics to the trade receivables for similar types of contracts.
The expected loss rates for the Physical Security Solutions division are based on the historical credit losses experienced
over the three year period prior to the period end, the risk profile of the customer mix and the assumption that this mix will
not change significantly. Credit insurance also exists for those customers where it is believed that there might be a credit
risk.
The expected loss rates for the People and Data Management division are also based on the historical credit losses
experienced over the three year period prior to the period end, the ageing of debtors, the credit control procedures which
are in place and the type of business customer which is not expected to change significantly. Where necessary for
customers with a different risk profile and for new customers, the customer’s most recent financial and any forward looking
information is reviewed on an individual basis.
The historical loss rates are then reviewed for current and forward-looking information on macroeconomic factors affecting
the Group’s customers which are normally not expected to change significantly in the geographic areas in which those
customers are based. The impact of COVID was considered in the prior year however the risk was not realised and, along
with taking out a trade credit insurance policy in Grosvenor, similar to the existing policy at Safetell, the risk is seen to
reduce reflected in a lower expected loss ratio for 2021.
At 30 April 2021 trade receivables of £164,000 (2020: £300,000) were past due but not impaired. The ageing analysis
of these receivables is as follows:
Current
£’000
30 days past
due
60 days past
due
£’000
£’000
120 days
past due
£’000
2,322
(30)
(1.3%)
1,975
(33)
(1.7%)
111
(2)
(1.8%)
220
(2)
(0.9%)
9
-
54
(8)
0.0%
(14.8%)
63
(2)
38
(17)
(3.2%)
(44.7%)
Total
£’000
2,496
(40)
(1.6%)
2,296
(54)
(2.4%)
As at 30 April 2021
Gross carrying amount
Loss provision
Expected Loss ratio
As at 30 April 2020
Gross carrying amount
Loss provision
Expected Loss ratio
Certain contracts require an applications process to be followed whereby the services are carried out, validated with the
customer and then invoiced. These amounts are recorded as accrued income collected in the year, without impairment,
prior to validation and following the service. These total £103,000 (2020:150,000) and are not included in the above table.
Movements on Group provisions for impairment of trade receivables are as follows:
Opening balance
(Decrease)/increase in provisions
Closing balance
2021
£’000
54
(14)
40
2020
£’000
16
38
54
The movement on the provision for impaired receivables has been included in the administrative expense line in the income
statement.
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Newmark Security PLC - Report and Financial Statements 2021 Financial Statements
15. Trade and other payables
Trade payables
Other tax and social security
Other payables
Deferred income
Accruals
Holiday pay provision
Corporation tax payable
2021
£’000
2,085
473
160
282
727
36
19
3,782
All deferred income brought forward in 2021 and 2020 has been fully recognised in the current year.
Reconciliation of exceptional items included within trade and other payables:
Brought forward
Charge in the year
Paid
Non cash credit/impairment related to property lease/asset
Carried forward
16. Short term borrowings
Lease creditor (note 23)
Invoice discount account
Bank loan
2021
£’000
(94)
(117)
244
(64)
(31)
2021
£’000
386
-
241
627
2020
£’000
1,316
579
167
480
604
70
30
3,246
2020
£’000
(239)
(299)
362
82
(94)
2020
£’000
446
905
-
1,351
The invoice discount account is secured by a debenture on all assets of Grosvenor Technology Limited, and a corporate
guarantee and indemnity from the parent company and Safetell Limited.
Information about fair values on the financial liabilities is given in note 19.
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Newmark Security PLC - Report and Financial Statements 2021 Financial Statements
17. Long term borrowings
Lease creditor (note 23)
Bank loan
2021
£’000
288
1,759
2,047
2020
£’000
654
-
654
Information about fair values on the financial liabilities is given in note 19.
In August 2020, the Group secured a £2million financing facility from its bankers, HSBC, via the Coronavirus Business
Interruption Loan Scheme (“CBILS”). This loan is for a term of 6 years, with the first year being interest, repayment and
covenant free under the Business Interruption Payment scheme. The covenant requires the Group to deliver a pre-debt
service cashflow of 1.2 times the level of debt service commencing for the year end 30 April 2023. As a result of our
increased level of investment we have renegotiated our 30 April 2022 covenant to a Tangible Net Worth (Net assets less
intangible assets) of £3.1m.
18. 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 Strategic report on page 30.
Financial instruments
Categories of financial assets and liabilities are detailed below:
Amortised
cost
2021
£’000
Fair value
2020
£’000
2021
£’000
2020
£’000
Current financial assets
Trade and other receivables*
Foreign exchange derivative contracts
Cash and cash equivalents
Total current financial assets
2,665
-
484
3,149
2,416
-
620
3,036
-
10
-
10
**includes accrued income and excludes VAT receivable
-
-
-
-
79
Newmark Security PLC - Report and Financial Statements 2021 Financial Statements
Current financial liabilities
Trade and other payables
Accruals and holiday pay provision
Loans and borrowings
Total current financial liabilities
Non-current financial liabilities
Loans and borrowings
Total non-current financial liabilities
Total financial liabilities
Financial liabilities measured at
amortised cost
2021
£’000
2,245
763
627
3,635
2,047
2,047
5,682
2020
£’000
1,483
674
1,351
3,508
654
654
4,092
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, apart from as mentioned
within the expected credit loss review in note 14, 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 receivables, other receivables excluding VAT and accrued income
Cash and cash equivalents including overdrafts
Trade and other payables including holiday pay and accruals
Invoice discounting
Lease liabilities.
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.
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’s policy is to ensure that the Group has sufficient funds to meet its liabilities when they become due. The Group has
one major central bank facility under which any overdrafts can be offset against cash balances held by other UK subsidiaries.
Both Grosvenor Technology Limited and Safetell Limited have invoice discounting facilities. The Group Finance Director
receives daily reports of all bank and invoice discount accounts, and the balance of the available invoice discount facility.
80
Newmark Security PLC - Report and Financial Statements 2021 Financial Statements
Overdraft and banking facilities are renewed annually.
Budgets are prepared by each subsidiary and approved by the Group Board so that the cash requirements of the Group
facility are anticipated and revised forecasts will be produced for any major variances from budget.
The maturity analysis of the undiscounted financial liabilities measured at amortised cost 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
2021
£’000
3,111
178
429
2,237
5,955
2020
£’000
3,111
119
239
684
4,153
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.
In line with Group policy potential new customers are subject to a financial review, including where possible, external
credit ratings, before goods or services are supplied. This is used to set credit terms and purchase limits (representing
the maximum open amount they can order without requiring approval) for each customer. 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
mangement otherwise pro forma invoices are raised requiring payment in advance. Credit insurance is obtained by the
Group when considered appropriate. A review of the existing credit loss exposure can be found in note 14.
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 exposed to currency risk on financial liabilities which are denominated in currencies other than sterling and
this risk is measured against costs of purchasing in foreign currencies. The Group is also exposed to currency risk on the
translation of profits generated in the US.
During the year we executed our foreign exchange strategy by entering into forward contracts. The strategy effectively
hedges 75% of excess USD and reduces the level of volatility compared to using spot rates. The contracts manage our
currency mismatch between an increasing USD position generated from revenues and the existing cost base in both GBP
and euros. The adopted process involved currency forecasting three quarters ahead and taking out tranches of forward
contracts for 25% of each of the forecasted quarters relating to our excess USD position. As at 30 April 2021 contracts
were in place for $1,488,084 which would translate to £1,089,443 on settlement over following three quarters. The fair
value gain of £10,000 has been recognised in other debtors as a reflection of the mark to market value.
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Newmark Security PLC - Report and Financial Statements 2021 Financial Statements
Functional currency of individual entity
As of 30 April the net exposure to foreign exchange risk in currencies other than the functional currency of that operating
company was as follows:
Net foreign currency financial assets/(liabilities)
Pound sterling
US Dollar
Euro
2021
£’000
1,234
1,234
2020
£’000
283
283
2021
£’000
(412)
(412)
2020
£’000
(226)
(226)
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 decrease in pre-tax profit for the year and decrease of net assets of
£91,000 (2020: £52,000). A 10 per cent. weakening in the exchange rates would, on the same basis, have increased pre-
tax profit and increased net assets by £75,000 (2020: £63,000).
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.
Loan covenants are disclosed in note 17.
The cash-to-adjusted-capital ratios were as follows:
Loans and borrowings
Less cash and cash equivalents
Net borrowings
Net borrowings to adjusted capital ratio
Total equity
2021
£’000
2,674
(484)
2,190
8,290
26.4%
2020
£’000
2,005
(620)
1,385
8,302
16.7%
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Newmark Security PLC - Report and Financial Statements 2021 Financial Statements
19. 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:
Rate
2021
Period
2021
Years
Rate
2020
Period
2020
Years
Sterling
10.17%
4.37
5.45%
1.93
Fair values
The book value and fair values of financial liabilities are as follows:
Lease liabilities (2019: Finance lease liabilities)
Bank Loan
Book
value
2021
£’000
2,000
674
2,674
Fair
value
2021
£’000
2,242
704
2,946
Book
value
2020
£’000
-
1,100
1,100
Fair
value
2020
£’000
-
1,160
1,160
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 2021 and 2020 are equal to their book value.
20. Provision
As at 1 May 2020 and 30 April 2021
Leasehold
dilapidations
£’000
100
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.
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Newmark Security PLC - Report and Financial Statements 2021 Financial Statements
21. Share Capital
Ordinary shares of 1p each
Allotted, called up and fully paid
2021
2020
Number
£
Number
£
At 30 April
468,732,316
4,687,323
468,732,316
4,687,323
Authorised
At 30 April
1,015,164,192
10,151,642
1,015,164,192
10,151,642
22. 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.
23. Leases
The group’s liabilities relating to leased assets are as follows:
Lease Liability at 30 April 2020
Additions
Interest payments
Interest expense
Lease surrendered (non cash)
Lease modification (non cash)
Lease payments
Lease Liability at 30 April 2021
Existing liability described as finance leases
Recognised under transition rules IFRS 16 Leases
1 May 2019 restated
Additions
Interest payments
Interest expense
Lease payments
Lease Liability at 30 April 2020
84
2021
(1,100)
(248)
37
(37)
64
123
487
(674)
2020
(252)
(1,180)
(1,432)
(143)
44
(44)
475
(1,100)
Newmark Security PLC - Report and Financial Statements 2021 Financial Statements
The group mainly enters into leases for properties, vehicles and office equipment such as photocopiers. In the assessment
of the right of use asset valuation management consider available extension and termination options and apply the most
likely contract end date that will be utilised.
The lease liability repayment profile is shown below:
Lease payments
Finance charges
Net present values at 30 April 2021
Total
£’000
1,160
(60)
Lease payments
Finance charges
Net present values at 30 April 2020
1,100
Total
£’000
704
(30)
674
Within
1 yr
£’000
478
(32)
446
Within
1 yr
£’000
404
(18)
386
1-2
years
£’000
382
(19)
363
1-2
years
£’000
232
(10)
222
2-3
years
£’000
230
(8)
222
2-3
years
£’000
63
(2)
61
3-4
years
£’000
64
(1)
63
3-4
years
£’000
5
-
5
4-5
years
£’000
6
-
6
The nature of the right of use assets contracts are described below:
No of
right
of use
assets
leased
Range of
remaining
term
(years)
5
22
4
1-2
0 to 5
0-3
No of
leases
with
extension
option
No of
leases
with
option to
purchase
-
-
-
-
21
-
Average
remaining
lease term
2-4 years
1-2 years
2-3 years
Office building
Vehicles
Other Equipment
No of
leases
with
variable
payments
linked to
index
-
-
-
No of
leases with
termination
option
2
-
-
See note 9 for further disclosures of the Group’s Right of Use Assets. There are no significant short term or variable lease
expense payments however the Newmark Security PLC main office is a short term rental agreement with the rentals being
reflected through administration expenses of £56,000 (2020: £55,000).
85
Newmark Security PLC - Report and Financial Statements 2021 Financial Statements
24. Share based payments
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.
2021
2021
2020
2020
Subscription
price payable
(pence)
No. of
options
Subscription
price payable
(pence)
No. of
options
1.800
1.800
1.800
1.800
1.800
1.800
2.920
2.920
1.800
1.800
1.000
1.000
1.700
1.700
12,363,636
12,363,636
1,909,589
1,909,589
1,142,857
1,142,857
2,000,000
2,000,000
7,312,500
7,312,500
5,939,692
5,939,692
5,900,000
5,900,000
1.800
1.800
1.800
1.800
1.800
1.800
2.920
2.920
1.800
1.800
1.000
1.000
1.700
1.700
12,363,636
12,363,636
1,909,589
1,909,589
1,142,857
1,142,857
2,000,000
2,000,000
7,312,500
7,312,500
5,939,692
5,939,692
5,900,000
5,900,000
Date of Grant
August 2013
August 2013
August 2014
August 2014
September 2015
September 2015
May 2016
May 2016
October 2019
October 2019
October 2019
October 2019
October 2019
October 2019
Weighted average share prices
1.72
36,568,274
1.72
36,568,274
1 Share options modified in October 2019 by cancelling and issuing new options retaining the same traits as the
cancelled share options with an updated subscription price at a weighted average impact of 0.22p
2 Change reflects cancelled share options for scheme leavers at a weighted average share price of 1.66p
3 New share options issued at a weighted average share price of 1.52p
The remaining weighted average contractual lives for both Approved and Unapproved Options under this scheme were
5.3 years (2020: 6.3 years). The total number of exercisable share options outstanding at 30 April 2021 was 19,853,582
(2020: 17,847,630). The share based remuneration expense for equity settled schemes was £13,000 (2020: £13,000).
25. Related party transactions
Details of Directors’ remuneration are given in the Directors’ Remuneration report on page 43.
26. Subsequent events
There are no subsequent events
86
Newmark Security PLC - Report and Financial Statements 2021
Financial Statements
Company Statement of Financial Position
At 30 April 2021 Financial Statements
Company Number: 3339998
Note
2021
£’000
2021
£’000
2020
£’000
2020
£’000
Fixed assets
Investment in subsidiaries
Tangible assets
Intangible assets
Deferred tax asset
Current assets
Debtors
Creditors: amounts falling due within one year
3
4
4
5
6
4,133
(12,767)
Net current liabilities
Total assets less current liabilities
Amounts falling due after one year
Long term borrowings
7
Net assets
Capital and reserves
Called up share capital
Share premium account
Merger reserve
Profit and loss account
Shareholder’s funds
8
8
8
16,361
21
6
35
16,423
(8,634)
7,789
(1,772)
6,017
4,687
553
801
(24)
6,017
3,402
(13,795)
16,619
34
9
35
16,697
(10,393)
6,304
(22)
6,282
4,687
553
801
241
6,282
The Company’s loss for the current year was £278k (2020: profit £83k) The notes on pages 91 to 95 form part of these
financial statements. These financial statements were approved by the Board of Directors and authorised for issue on 9
September 2021.
M-C Dwek
Director
9 September 2021
87
Newmark Security PLC - Report and Financial Statements 2021
Financial Statements
Company Statement of Changes in Equity
Share
capital
Share
premium
Merger
reserve
Retained
earnings
Total
equity
01 May 2020
4,687
553
801
241
6,282
Comprehensive Income/(loss) for the year
Income and total comprehensive income/(loss) for the
year
Transaction with owners
(278)
(278)
Share based payments
-
30 April 2021
4,687
-
553
-
801
13
(24)
13
6,017
01 May 2019
4,687
553
801
145
6,186
Comprehensive Income/(loss) for the year
Income and total comprehensive income/(loss) for the
year
Transaction with owners
Share based payments
-
30 April 2020
4,687
-
553
-
801
83
13
241
83
13
6,282
88
Newmark Security PLC - Report and Financial Statements 2021 Financial Statements
1. Accounting Policies
Basis of preparation
Profit and Loss Account
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”). All policies
are the same for the Group and
company except as noted.
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:
Under Section 408 of the Companies
Act 2006 the Company is exempt
from the requirement to present its
own profit and loss account. The loss
for the year ended 30 April 2021 is
£278,000 (2020: profit of £83,000).
Tangible and Intangible assets
Items of property, plant and equipment
and intangible website costs 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:
• Certain comparative information
as otherwise required by the UK
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;
• The disclosure of the remuneration of
key management personnel; and
• Separate disclosure of lease maturity
analysis.
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; and
• Financial instruments.
Computer equipment –
33 per cent. per annum straight line
Fixtures and fittings –
10 per cent. per annum straight line
Motor vehicles –
over the term of the lease, usually 3
years on a straight line basis.
Website costs are amortised –
33 per cent. per annum straight line
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
Annual General Meeting (“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.
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. Impairment
provisions for intercompany balances
are recognised based on a forward
looking expected credit loss model.
The methodology used to determine
the amount of the provision is
based on whether there has been
a significant increase in credit risk
since initial recognition of the financial
asset. For those where the credit risk
has not increased significantly since
initial recognition of the financial asset,
twelve month expected credit losses
along with gross interest income are
recognised. For those for which credit
risk has increased significantly, lifetime
expected credit losses along with the
gross interest income are recognised.
For those that are determined to be
credit impaired, lifetime expected credit
losses along with interest income on a
net basis are recognised.
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) Estimated impairment of
investment in subsidiaries
Where indicators of an impairment
exist the carrying value is compared to
the recoverable amount to identify the
extent of the impairment.
The recoverable amounts are
determined based on value-in-use
calculations. These calculations require
the use of estimates as detailed in
note 3 of the company accounts.
89
Newmark Security PLC - Report and Financial Statements 2021 Financial Statements
2. Staff costs
Staff costs (including the Executive Directors) comprise:
Wages and salaries
Defined contribution pension costs
Employer’s national insurance contributions and similar taxes
The average numbers employed (including the Executive
Directors) were:
Office and management
3. Investment in subsidiaries
2021
£’000
656
32
68
756
2021
No.
4
4
2020
£’000
502
30
66
598
2020
No.
3
3
£’000
Cost
At 1 May 2020 and 30 April 2021
21,869
Impairment provision
At 1 May 2020
Impairment
At 30 April 2021
Net book value
At 30 April 2021
At 30 April 2020
5,250
258
5,508
16,361
16,619
The subsidiaries of Newmark Security PLC are listed in note 12 of the Group financial statements.
Impairment reviews were completed for operating cash generating units of People and Data Management division and the
Physical Security Solutions division. The recoverable amounts have been determined from value in use calculations based
on cash flow projections from formally approved projections covering a four year period to 30 April 2025 (2020 – five year
period). The discount rate that was applied was 17 per cent. for the People and Data Management division and 15% for
the Physical Security Solutions division (2020: 15 per cent. both), representing the pre-tax discount rate that reflects the
current market assessment of the time value of money and risk specific to the asset.
For People and Data Management division the value in use exceeded the carrying value by £17.9 million (2020: £7
million). The additional headroom arises from a combination of carrying out a robust strategic review at a customer by
customer level along with the impact of uncertainty in the previous years estimates relating to COVID. The compound
revenue growth rate for the People and Data Management division increased to 16 per cent. (2020: 4 per cent.). The
90
Newmark Security PLC - Report and Financial Statements 2021 Financial Statements
gross margin assumed in the forecasts is 38 per cent. to 42 per cent. (2020: 34% to 40%) with improvement due to
product mix and material cost savings.
For the Physical Security Solutions division the value in use fell below the carrying value by £258,000 (2020: exceeded
by £1.5 million). The compound annual revenue growth rate for the year ended April 2021 to the year ended April 2025
is growing at a 6% rate (2020: reduction of 6%). The gross margin assumed in the forecasts is 40% to 41% (2020: 43%
to 45%). The impairment has been adjusted through the income statement and is a reflection of the division undergoing
a transitionary period whilst being impacted by COVID. By reducing the long term growth rate to 1 per cent. an additional
impairment of £120,000 would be arrived at. An increase in the discount rate by 2 per cent. would arrive at an additional
impairment of £258,000.
For the People and Data Management division the growth rate reflects the impact of customer expansion supported
by existing products and products being delivered in the short term. The impairment review applied sensitivities reducing
the long term growth rate to 1 per cent. which indicated no impairment. If the discount rate is increased to 20 per cent.,
there is no impairment. In order for the carrying value to equate to the value in use the discount rate would need to
increase by 26.5%.
4. Tangible and intangible assets
Right of use
Motor vehicles
Computers Fixtures
and Fittings
Total Tangible
assets
Intangible
Website costs
£’000
£’000
£’000
£’000
Cost
Balance at 1 May 2020
Balance at 30 April 2021
Depreciation
Balance at 1 May 2020
Depreciation
Balance at 30 April 2021
Net book value 30 April 2021
Cost
Balance at 1 May 2019
Additions
Disposals
Balance at 30 April 2020
Depreciation
Balance at 1 May 2019
Disposals
Depreciation
Balance at 30 April 2020
Net book value 30 April 2020
34
34
(4)
(9)
(13)
21
66
34
(66)
34
(60)
66
(10)
(4)
30
11
11
`
(7)
(4)
(11)
-
11
-
-
11
(3)
-
(4)
(7)
4
45
45
(11)
(13)
(24)
21
77
34
(66)
45
(63)
66
(14)
(11)
34
9
9
-
(3)
(3)
6
-
9
-
9
-
-
-
-
9
91
Newmark Security PLC - Report and Financial Statements 2021 Financial Statements
5. Debtors
Amount due from Group undertakings
Prepayments
2021
£’000
4,125
8
4,133
All amounts shown under debtors fall due for payment within one year.
6. Creditors: amounts falling due within one year
Bank overdraft*
Bank loan
Trade payables
Amount due to group undertakings
Other taxation and social security
Other payables
Lease creditor
Accruals
2021
£’000
141
241
47
11,815
262
-
8
253
12,767
2020
£’000
3,386
16
3,402
2020
£’000
1,455
-
-
11,814
210
-
8
308
13,795
*The overdraft relates to a Group composite overdraft facility, which is in a net cash positive position at the year end and
there is a legal right and intention to settle this net.
7. Long term borrowings
Lease creditor (2020: Finance lease creditor)
Bank loan
2021
£’000
14
1,758
1,772
2020
£’000
22
-
22
The lease arises on a motor vehicle which is denominated sterling and is for a period of 36 months.
In August 2020, the Group secured a £2 million financing facility from its bankers, HSBC, via the Coronavirus Business
Interruption Loan Scheme (“CBILS”). This loan is for a term of 6 years, with the first year being interest, repayment and
covenant free under the Business Interruption Payment scheme. The covenant requires the Group to deliver a pre-debt
service cashflow of 1.2 times the level of debt service commencing for the year end 30 April 2023. As a result of our
increased level of investment we have renegotiated our 30 April 2022 covenant to a Tangible Net Wealth (Net assets less
intangible assets) of £3.1 million.
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Newmark Security PLC - Report and Financial Statements 2021 Financial Statements
8. Share capital
2021
2020
Number
£
Number
£
Ordinary shares of 1p each
Allotted, called up and fully paid
At 30 April
468,732,316
4,687,323
468,732,316
4,687,323
Authorised
At 30 April
1,015,164,192
10,151,642 1,015,164,192
10,151,642
A description of reserves is included in note 22 of the Group notes.
93
Newmark Security PLC - Report and Financial Statements 2021 Shareholder Information
Directors, Secretary and Advisors
Country of incorporation of parent company:
England and Wales
Legal form:
Public company limited by shares
Directors:
M Dwek
M-C Dwek
M Rapoport
R Waddington
T Yap
Registered office:
91 Wimpole Street, London W1G 0EF
Company number:
3339998
Auditors:
BDO LLP, 31 Chertsey Street, Guildford, Surrey GU1 4HD
Nominated Adviser and Brokers:
Allenby Capital Limited, 5 St. Helens Place, London EC3A 6AB
Registrars:
Link Group, PXS1, Central Square, 29 Wellington Street, Leeds, LS1 4DL
Solicitors:
Bracher Rawlins LLP, 77 Kingsway, London WC2B 6SR
95
Newmark Security PLC - Report and Financial Statements 2021
Notes
96
Newmark Security PLC - Report and Financial Statements 2021 Notes
97
Newmark Security PLC - Report and Financial Statements 2021