Investors should look through a dip in profitability next year as Newmark Security (NWT:AIM) builds out its sales and marketing capabilities, says Newmark Security CEO Marie-Claire Dwek.
Revenue was lower in the second half of Newmark’s financial year than the first and profit looks set to fall in the year ahead.
Shares in Newmark, which supplies security systems including bomb-proof doors and bullet-proof screens trade 25% lower at 3.6p today though they are up 92% year-to-date.
But CEO Dwek put forward an upbeat message about the future of the business as it transitions from an engineering-led model to a sales and marketing-led approach.
‘When I became CEO, Newmark was primarily an engineering company,’ Dwek says.
‘Now we’re building out a sales and marketing function and we’re getting some good traction from that approach.’
Dwek was unable to outline the quantum of the profit short-fall in the year ahead because budgets will not be agreed for the next two or three weeks.
‘We’re expecting a downturn in profitability this year because of reduced activity in our Post Office contract,’ says chief executive Marie-Claire Dwek.
‘This year we will continue to invest in new product development and we expect the benefits of that to come through in the 2016/17 financial year.’
Shares previously warned of lumpy contract flow, notably Newmark's negotiations with the Post Office.
New projects are being pursued to try and increase earnings diversification. Developments in the year ahead may include a Workforce Management terminal project in the US after in-principle terms were agreed with a channel partner in May.
Further investment is being made in the US, as well as a new office in Hong Kong which opened in June to improve the reach of Newmark's products.
Early attempts to expand its SATEON office access control terminals into the small and medium sized enterprise (SME) market are also providing encouraging results, Dwek tells Shares.
Results for the year to 30 April 2015 show strong gains in revenue, earnings, cash flow generation and the dividend. Net cash on the balance sheet is £4 million and current assets less total liabilities is also £4 million, around 0.8p a share.