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Newmark Security eyeing migration opportunities as Sateon Advance gets warm reception

It was a tough year, but non-cash exceptional charges make the bottom line look worse than it would otherwise look
Post Office vans
The Safetell division’s performance was hit by a reduced contribution from time-delay cash handling equipment sales to the Post Office

Electronic and physical security systems provider Newmark Security PLC (LON:NWT) is looking to step-up migration of customers from its legacy Janus system to Sateon.

The company fell into the red in the year to 30 April and said the current year is also likely be a tough one, but it is encouraged by the growth opportunities offered by the large number of customers that have yet to make the move to its new Sateon Advance access control system.

The company also expects growth in revenue from its counter-terrorism products.

READ: Strategy boost still sought for Newmark Security with full-year results pending

Asset protection division hit by Brexit uncertainty

The full-year results revealed a decline in revenue to £16.04mln from £21.81mln the year before, with the fall almost entirely down to a fall in product revenue in the asset protection division (Safetell) to £5.87mln from £10.72mln.

Safetell’s performance was hit by a reduced contribution from time-delay cash handling equipment sales to the Post Office, while economic uncertainty before and after the Brexit vote also had an effect on orders.

The picture was less bleak in the electronic division (Grosvenor Technology), where revenue dipped 7.2% to £7.09mln from £7.63mln.

The significant investment that has been made in product development over the previous two years has resulted in major product releases. Both the Sateon Advance (access control) and GT-10 offerings (workforce management solution) have received a very warm reception from the market and several potentially high volume new contracts are at an advanced stage of negotiation, the company revealed.

With the products now launched, the directors have taken a £1.34mln non-cash charge relating to development costs and have written down goodwill by £1.27mln relating to legacy products.

READ: Newmark nets tidy profit on £1.5mln sale of its offices purchased earlier this year

Non-cash exceptional charges hit the bottom line

Those paper-based charges magnified the full-year loss, with the company posting a loss before tax of £5.23mln, compared to a profit the year before of £1.49mln.

Cash outflow from operating activities was £970l, versus an inflow the previous year of £1.76mln. Net cash at the end of the financial year stood at £1.37mln, versus £4.3mln the year before.

The company has opted not to pay a final dividend this time round, having paid a divi of 0.1p last year.

READ: Newmark Security to integrate UniKey's technology in its "at door" security solutions

Chairman expects another tough year but is encouraged by longer-term prospects

Maurice Dwek, chairman of Newmark, said the opportunity exists to boost Sateon revenues this year by migrating customers from Newmark’s legacy Janus product.

“Our new android terminal, GT-10, will simplify integrations for customers with android and browser based applications. This new product provides an opportunity to generate revenue in entirely new markets and Grosvenor has begun research across these markets to investigate the potential return on investment available, particularly focusing on sectors that offer 'as a service' (aaS) opportunities,” Dwek said.

“A focus on near term goals has delayed research in these areas; however, the board remains confident in the upside value of these opportunities and intends to pursue these markets as soon as resources allow,” he added.

“Within the asset protection division, Safetell already has a well-established blue chip customer list, particularly in the banking and finance sector, but is now expanding into other industries whilst offering a greater range of products across the board. Safetell has also entered into strategic partnerships with manufacturers of various additional security products manufactured within the UK and in Europe. Although these products have counter terrorism applications, they are also marketed to existing customers and markets that see a need for improved security on premises and increased safety for staff.

“We expect continued growth in revenue from our new Sateon Advance access control system and counter terrorism products but, in view of the ongoing economic uncertainty, we expect that this will be a difficult trading year. In the longer term, we look for continued growth in Sateon, revenue from our exciting new android terminal and recovery of sales in the asset protection division," Dwek said.

Shares in Newmark fell 0.212p to 0.938p in the first half hour of trading.

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