AIM Snippet

Each month we trawl through hundreds of RNS statements from AIM companies. In this column we highlight an exceptional company announcement, particularly where we feel the market may not have taken full account of recent news. This month we highlight Newmark Security (NWT). Newmark is a holding company for specialist security companies providing electronic and physical security systems.

The ‘specialist systems’ include access control systems which control the movement of people and/or vehicles around a building or site. The Group also provide a number of specialist products for Banks such as the ‘Eclipse’ fast rising bullet resistant screen which acts as a defence against armed robbery. To read more about the solutions provided by Newmark please click here.

Newmark issued its final results for the year to 30 April 2010 on 26 July. A glance at the chart below will show that the market did not react favourably to these results and the shares have fallen back from 2.1 to 1.75 pence.

One factor which caused the share to drop back was a reference to order delays in the results. In particular this sentence from Chairman Maurice Dwek’s results statement may have unsettled shareholders: ‘Trading in the first few months of the new financial year has been variable for Grosvenor and Safetell due to the delay in placing orders by some customers prior to the general election and the emergency budget.’

The markets remain quite nervous and in these conditions investors focus very strongly on any less-than-good news and this, we believe, has been the case with Newmark. In our view there are a number of strong positives in the Group which will interest smallcap investors. We highlight four points in particular:

The results from Newmark were actually quite good. The group is profitable and pays a small (and increasing) dividend. Profits for 2010 were up 13% on the previous year.
The Chairman’s report ‘summary’ was positive for those who read past the first sentence. We reproduce below the full ‘Summary’ paragraph

‘Trading in the first few months of the new financial year has been variable for Grosvenor and Safetell due to the delay in placing orders by some customers prior to the general election and the emergency budget. As a consequence of this, the Board anticipates that whilst revenues are likely to be lower during the first half of the current year against strong prior half year comparatives, this temporary postponement of orders is expected to be caught up in the second half. The Board is therefore satisfied with the Group's current trading performance and is cautiously optimistic as to the future outlook of the Group. In particular, the Board is excited about its investment in ATM Protection although its contribution to the Group in the current year is difficult to gauge due to the uncertainty over the timing of the trial programme and the commencement of the roll out programme.’
The Group has a number of developments in hand that should help it to secure more business in the longer term. Earlier this year Newmark acquired a 60% stake in ATM protection (referred to above) which is developing a new method of deterring robbers. The new system causes bank notes to stick together when stolen from cash-in-transit delivery crews. The Group is also releasing SATEON, a new access control system at the start of 2011. With improved translation capabilities, this product is expected to appeal to a much wider client base than the JANUS product, which it will eventually replace.
The shares are not expensive. Based on Edison’s forecasts, the shares trade on a 2011 p/e of just 6.5 reducing to 6.0 in 2010. Edison’s recent research note can be downloaded from their site at http://www.edisoninvestmentresearch.co.uk/. Registration is required but it is free.

We believe that Newmark Security is an interesting prospect. As always, the purpose of this Snippet column is to highlight an interesting situation worthy of further research.