Revitalised strategy delivering growth
The recent H115 results demonstrate that the strategic programme of actions instigated by Newmark Security's (LONDON:NWMS) new management is beginning to drive growth. As well as being desirable in itself, these activities reduce the dependence on any individual customer. The shares continue to trade at a significant discount to peers on all metrics.
Programme of strategic renewal
Since her appointment in April 2013, CEO Marie-Claire Dwek has instigated a sequence of changes that make more use of the group’s existing assets by strengthening the sales activity, developing new channels to market, encouraging closer ties between divisions, introducing products for complementary market segments and making a small acquisition. The combination of these steps makes the group less reliant on contracts from the Post Office, which, while they have made a welcome contribution to FY13, FY14 and H115 results, are expected to taper off between FY16 and FY20. We note that H215 performance is likely to be weaker than H115; however, we raise our FY15 PBT estimate by £0.5m to £2.5m.
H115 results demonstrate success of strategy
During H115 revenues grew by 34% (£3.0m) year-on-year to £11.9m. The CSI business, which was acquired in November 2013, contributed £1.2m of this increase. Organic sales growth was 21%. Asset Protection sales benefitted from branch refurbishment programmes for longstanding customers in the financial sector and higher levels of sales to the Post Office. Delivery and installation of products for this long-term programme are not on a regular schedule, so the associated turnover can vary significantly from year to year. More modest growth in the Electronic Division was driven by increased sales of workforce management products. Pre-exceptional operating profit rose by 76% to £1.6m despite increased costs associated with the investment in additional sales, marketing and product development personnel in both divisions to support future growth. The board has reaffirmed its commitment to a progressive dividend strategy.
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