Shares in Newmark Security PLC (LON:NWT) have risen by around 4% over the past month helped by news last week that the group had sold off its business premises in Poole for £1.525mln, netting the physical and electronic security provider a £360,000 profit.
The AIM-quoted group, which only purchased the offices back in May for £1.2mln, will now lease back the same building from the new owner in a deal which will see Newmark remain in the building for the next 15 years.
READ: Newmark nets tidy profit on £1.5mln sale of its offices purchased earlier this year
Investors welcomed that deal, but over the year-to-date so far, Newmark shares are still 9% lower as the market continues to wait for CEO Marie-Claire Dwek’s strategy moves to bear fruit.
In a note at the start of August, broker Cantor Fitzgerald noted that this strategy - involving material investment in new products, new customer acquisition and new geographies - is taking longer than originally hoped.
In a note to clients, Cantor analyst Richard Hickinbotham said: “Whilst the opportunity pipeline continues to build, its conversion into sales is much slower than expected.
“There is also an adverse impact from maturing contracts and difficult trading conditions affecting sales of certain legacy products.”
But, he added: “Nevertheless, on our revised forecasts, the Group retains a significant net cash position in FY2017E and we believe this is the support for management’s expectation of a maintained FY2016E dividend.”
Hopes for pegged payout
Newmark held its dividend at 0.1p per share in full-year 2016 despite seeing a fall in profits.
The Cantor analyst reinstated a ‘hold’ rating with a 1.8p target on Newmark shares – which currently trade at 1.28p each – having had both under review previously.
He said the neutral stance “reflects a lack of immediate visibility, given a dependence on a high number of new product launches over the coming months, and investors’ need to see positive sales momentum established.”
Newmark’s results for the full-year to April 30 are due to be delivered in the near future, with the numbers expected to show a significant fall on the previous year’s outcome, with the group having swung to loss in the first half, as revenue dropped due to lower equipment sales to the Post Office and a hit to orders after the UK's vote to leave the European Union in June 2016.
READ: Newmark Security eyeing the counter-terrorism solutions market
The half-year numbers, posted on January 30, saw the electronic and physical security systems firm report a pre-tax loss of £816,000 for the six months to the end of October, against a profit £761,000 a year earlier as revenue fell to £8.4mln from £11.2mln.
Going forward, Newmark said it would focus on developing business in counter-terrorism products, "in line with changing global demand for physical security".
Back at the end of May, Newmark said it is eyeing an increase in recurring revenue through a partnership with US-based UniKey Technologies.
The two companies agreed to collaborate on the development of the US company’s access control technology and the creation of new products using UniKey's patented and proprietary 'CORE' platform, which provides a "frictionless at door experience" for the end user.
READ: Newmark Security to integrate UniKey's technology in its "at door" security solutions
The plan is for Newmark’s Grosvenor Technology unit to develop and sell products using UniKey’s technology, with the first such product expected later this year.
Newmark’s CEO Dwek said: “We are excited about the advantage UniKey will bring to Grosvenor Technology compared to its peers in several strategically important markets.
“This technology leap will bring further differentiation to both our Access Control and Workforce Management products and is expected to accelerate our growth of recurring revenue.”
“It's a key step on our journey towards being an 'as a service' provider," she added.
In the same month Newmark also revealed that Grosvenor Technology had formed a strategic relationship with a leading distributor of products and services to professional security.
Grosvenor teamed up with Videcon Ltd to help push its new Sateon Advance product, supplying Videcon with a range of access-control hardware and software products and services, on an original equipment manufacturer basis.
READ: Newmark Security's UK subsidiary forms strategic relationship
Videcon will market this range under its Concept-Pro brand as 'Concept Pro Access Control', and it will carry the tagline 'Powered by Grosvenor Technology'.
The range is based on Sateon Advance, a next generation range of hardware that utilises Grosvenor Technology's Sateon software platform to provide a seamless access-control solution, Newmark said.
The group has been ploughing significant amounts of money into developing the Sateon Advance access control system, as well as an Android-based terminal for workforce management (WFM) called GT-10.
New range provides seamless control
Sateon's advanced range provides customers with a seamless access control solution, combining hardware and software in one package, and helping deliver smart, low energy environments, Newmark said.
Meanwhile, the WFM terminals enable customers to expand their use of work force management beyond 'clocking in/clocking out' to incorporate features such as scheduling staff training and work assignments, holiday booking and biometric fingerprint readers that stop an employee clocking in for an absent work-mate.
Newmark Security has a number of blue-chip clients, including the second largest retailer in the world, and the biggest retailer in the UK.
Many of its products are tailor-made, big ticket items that are sold into major construction and refurbishment projects.
The uncertainty in the run-up last year’s Brexit vote made customers wary of sanctioning big projects, and the outcome of the vote did little to change that view, weighing on Newmark’s first-half results.
Hopefully, however, with the group’s new focus on counter-terrorism products, and the push to secure recurring revenues, the upcoming full-year results will show that the CEO’s strategy moves are starting to provide a boost.