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Some extracts from Paycor's new investor presentation, for its just-reported Q2 2024:-
"$38B underserved market with strong growth potential"
"Subscription-based business model with 94% FY’23 recurring revenue"
"
"Paycor HCM (PYCR) Q2 2024 Earnings Call Transcript
... Adam Ante -- Chief Financial Officer
... We ended the quarter with $62 million of cash and no debt.
As we look ahead, demand continues to be healthy for modern HCM solutions. ...
There's plenty of runway for sustainable growth as the vast majority of U.S. employees are still being paid by legacy systems. It's an essential capability for any business, and we're delivering compelling ROI for clients to switch. Adding to our opportunity is the continual expansion of our HCM suite, which has increased over 75% since fiscal 2019.
We are demonstrating margin expansion as we scale the business and believe there is significant opportunity to drive further leverage. We believe we are well-positioned to deliver strong revenue growth and improve profitability over the long term. ..."
https://www.fool.com/earnings/call-transcripts/2024/02/07/paycor-hcm-pycr-q2-2024-earnings-call-transcript/
From Paycor's earnings call yesterday.
Its market is still in its early stages of growth, its offering is compelling, and its margins are expanding: all of which support a strongly confident outlook, especially when combined with the company's high level of recurring revenue:-
"Paycor HCM (PYCR) Q2 2024 Earnings Call Transcript
By Motley Fool Transcribing – Feb 7, 2024 at 8:30PM
Rachel White -- Vice President, Investor Relations
Good afternoon, and welcome to Paycor's earnings call for the second quarter of fiscal year 2024, which ended on December 31. On the call with me today are Raul Villar, Jr., Paycor's chief executive officer; and Adam Ante, Paycor's chief financial officer. ... With that, I'll turn the call over to Raul.
Raul Villar -- Chief Executive Officer
Thank you, Rachel, and thank you all for joining us to discuss Paycor's fiscal second-quarter results. We had another strong quarter with revenue growth of 20% year over year. Margins expanded 130 basis points over the prior year, while we continue to invest in sales expansion and in our innovative HTM suite. HCM demand is healthy.
Our deal pipeline is up significantly year over year, and our win rates remain strong. We continue to excel upmarket, especially among the higher end of SMB and enterprise customers with thousands of employees who tend to purchase a more holistic solution and are driving higher attach rates and higher average deal sizes. Our results demonstrate our consistent execution against our two primary growth drivers: increasing the number of employees on our platform and expanding the amount we charge per employee per month or PEPM. ...
We remain on track to grow our direct sales force approximately 20% this fiscal year to strategically increase our sales coverage in the largest U.S. metropolitan areas. As we expand our sales coverage, we are also increasing our broker coverage. We increased the number of active referring brokers by over 25% from the prior year, and 50% of our field bookings in the quarter were broker-influenced.
... This month, we introduced two powerful data-driven analytical tools that empower frontline leaders to unlock the potential of their people and business performance. ...
... Paycor recently received five branded hall technology awards which on our HR technology trailblazers. While we were acknowledged across our HCM suite, the core leadership framework that we launched a year ago won gold for the best advance in online coaching tools. ...
... We continue to strategically incorporate AI to add value to customers within our HCM suite, elevate our customer experience, and improve our efficiency and our customer experience organization. ..."
https://www.fool.com/earnings/call-transcripts/2024/02/07/paycor-hcm-pycr-q2-2024-earnings-call-transcript/
Paycor's excellent Q2 results surpassed estimates by quite some margin, which is great news for NWT:-
"Paycor HCM, Inc. (PYCR) Q2 Earnings and Revenues Surpass Estimates
Zacks Equity Research
Wed, February 7, 2024 at 10:45 PM GMT
Paycor HCM, Inc. (PYCR) came out with quarterly earnings of $0.11 per share, beating the Zacks Consensus Estimate of $0.09 per share. This compares to earnings of $0.08 per share a year ago. These figures are adjusted for non-recurring items.
This quarterly report represents an earnings surprise of 22.22%. A quarter ago, it was expected that this company would post earnings of $0.04 per share when it actually produced earnings of $0.07, delivering a surprise of 75%.
Over the last four quarters, the company has surpassed consensus EPS estimates four times.
Paycor HCM, Inc. , which belongs to the Zacks Internet - Software industry, posted revenues of $159.54 million for the quarter ended December 2023, surpassing the Zacks Consensus Estimate by 2.61%. This compares to year-ago revenues of $132.86 million. The company has topped consensus revenue estimates four times over the last four quarters.
The sustainability of the stock's immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management's commentary on the earnings call.
Paycor HCM, Inc. Shares have lost about 7.4% since the beginning of the year versus the S&P 500's gain of 3.9%.
What's Next for Paycor HCM, Inc.
While Paycor HCM, Inc. Has underperformed the market so far this year, the question that comes to investors' minds is: what's next for the stock?
There are no easy answers to this key question, but one reliable measure that can help investors address this is the company's earnings outlook. Not only does this include current consensus earnings expectations for the coming quarter(s), but also how these expectations have changed lately.
Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. Investors can track such revisions by themselves or rely on a tried-and-tested rating tool like the Zacks Rank, which has an impressive track record of harnessing the power of earnings estimate revisions. ..."
https://finance.yahoo.com/news/paycor-hcm-inc-pycr-q2-224507743.html
"Paycor Announces Second Quarter Fiscal Year 2024 Financial Results
... Second Quarter and Recent Business Highlights
• Introduced Pay Benchmarking, providing market salary insights to enable competitive compensation strategies. More real-time data gives leaders greater confidence employees are paid fairly to drive retention and offers are extended at competitive rates.
• Launched Labor Forecasting, empowering leaders to right-size their labor costs to their operations by leveraging historical data and demand data forecasts, such as revenue, sales volume or customer foot traffic, to maximize ROI and service quality.
• Gained momentum with our Embedded HCM Solution, demonstrated by robust sales among existing partners and a growing pipeline of interested partners.
Business Outlook
Based on information as of today, February 7, 2024, Paycor is issuing the following financial guidance:
Third Quarter Ending March 31, 2024:
• Total revenues in the range of $185 - $187 million.
• Adjusted operating income* in the range of $45 - $46 million.
Fiscal Year Ending June 30, 2024:
• Total revenues in the range of $650 - $656 million.
• Adjusted operating income* in the range of $104 - $108 million.
*We are unable to reconcile forward-looking adjusted operating income to forward-looking loss from operations, the most closely comparable GAAP financial measure, because the information needed to provide a complete reconciliation is unavailable at this time without unreasonable effort.
Conference Call Information
Paycor will host a conference call today, February 7, 2024, at 5:00 p.m. Eastern Time to discuss its financial results and guidance. To access this call, dial 1-877-407-4018 (domestic) or 1-201-689-8471 (international). The access code is 13741610. A live webcast and replay of the event will be available on the Paycor Investor Relations website at investors.paycor.com.
About Paycor
Paycor’s human capital management (HCM) platform modernizes every aspect of people management, from recruiting, onboarding, and payroll to career development and retention, but what really sets us apart is our focus on leaders. For more than 30 years, we’ve been listening to and partnering with leaders, so we know what they need: a unified HR platform, easy integration with third party apps, powerful analytics, talent development tools, and configurable technology that supports specific industry needs. That’s why more than 30,000 customers trust Paycor to help them solve problems and achieve their goals. ..."
https://investors.paycor.com/news-releases/news-release-details/paycor-announces-second-quarter-fiscal-year-2024-financial
Paycor HCM (NASDAQ: PYCR), a major North American partner of Grosvenor Technology, has just announced its second quarter results today, after close of the US markets.
And they should further buoy the confidence of NWT shareholders:-
"Paycor Announces Second Quarter Fiscal Year 2024 Financial Results
February 07, 2024 16:15 ET
• Q2 Total revenues of $159.5 million, an increase of 20% year-over-year, while expanding margins
• Q2 Recurring revenue of $147.2 million, an increase of 18% year-over-year
• Raised FY’24 revenue guidance to $650 - $656 million, an increase of 19% year-over-year at the top end of the range
CINCINNATI, Feb. 07, 2024 (GLOBE NEWSWIRE) -- Paycor HCM, Inc. (Nasdaq: PYCR) (“Paycor”), a leading provider of human capital management (“HCM”) software, today announced financial results for the second quarter fiscal year 2024, which ended December 31, 2023.
“Paycor’s strong 20% year-over-year revenue growth is the latest demonstration of our success expanding employees and PEPM on our platform,” said Raul Villar, Jr., Chief Executive Officer of Paycor. “Quarterly recurring revenue growth accelerated 2% sequentially driven by continued success up-market and strong year-end form filings while our Embedded HCM Solution gained momentum.”
“We are proud of the operational performance across the business, which delivered margin improvement of 130 basis points year-over-year while we continued to invest in powerful analytics that empower frontline leaders. We remain optimistic about the HCM demand environment and opportunity to deliver strong revenue growth and improved profitability over the longer-term.”
Second Quarter Fiscal Year 2024 Financial Highlights
• Total revenues were $159.5 million, compared to $132.9 million for the second quarter of fiscal year 2023.
• Operating loss was $26.2 million, compared to $31.6 million for the second quarter of fiscal year 2023.
• Adjusted operating income* was $23.3 million, compared to $17.6 million for the second quarter of fiscal year 2023.
• Net loss was $26.2 million, compared to $27.5 million for the second quarter of fiscal year 2023.
• Adjusted net income* was $18.7 million, compared to $13.6 million for the second quarter of fiscal year 2023.
*Adjusted operating income and adjusted net income are non-GAAP financial measures. Please see the discussion below under the heading "Non-GAAP Financial Measures" and the reconciliations at the end of this press release for information concerning these and other non-GAAP financial measures. ..."
https://investors.paycor.com/news-releases/news-release-details/paycor-announces-second-quarter-fiscal-year-2024-financial
"Retail Crime in the UK – and How To Address It
01 February, 2024
Shop theft has reached record highs in the retail sector, with nearly half of retailers claiming that theft has increased dramatically in the past year. According to reports, organised crime syndicates target retailers, shoplifting or stealing high-value goods to resell elsewhere. This harrowing trend puts staff and customers at risk.
In 2023, Tesco announced that they would roll out hundreds of safety screens in Express stores and petrol station kiosks across the UK as a response to increasing incidents of crime against retailers, particularly a concerning increase in assaults against staff. These screens enclose the side of the till where staff are most vulnerable and stand above head height, protecting staff against assault. Designed to prevent the theft of high-value items, such as alcohol, beauty products, cigarettes, and other items often kept behind counters, it’s become a valuable deterrent against crime. ...
Cost-effective solutions like Safetell’s SafeShield UL Security Glazing safeguard staff and counter areas against physical attacks and attempts to vault over the counterwork to snatch high-value items kept behind the counter. This solution is specifically tailored for operations involving the secure transaction of goods or objects, like express retail environments or petrol forecourts. ..."
https://www.safetell.co.uk/insights/retail-crime-in-the-uk-and-how-to-address-it/
"Combatting Criminal Activity in Petrol Stations
01 February, 2024
There is an alarming increase in theft and crime in the retail sector. According to the ACS Voice of Local Shops survey, nearly two-thirds of retailers have experienced theft in their stores. More than a third say theft has increased. While all retailers are at risk, petrol forecourts are especially vulnerable.
Operating at late hours, often handling large amounts of cash, and a lack of staffing and security means that these retailers are prime targets for both opportunistic and organised criminals. ...
The best defence against these crimes is to install safety screens. Tesco and other stores have already committed to the installation of safety screens in more than 250 Express locations and petrol forecourts in a bid to improve the safety and well-being of their employees. ...
Safetell facilitates seamless operations without compromising safety with products that include the CashFast and Night Pay Hatch Drawers. ...
Safetell is Safety Pass Alliance (SPA) accredited, which means they are accredited to install products in forecourts across the UK. ..."
https://www.safetell.co.uk/insights/combating-criminal-activity-in-petrol-stations/
"Insights
Keep up to date on our product news, business announcements and industry-related content on how to effectively and efficiently secure and maintain your organisation."
https://www.safetell.co.uk/insights/
A final point about the debt I would make is that some debt can actually be a GOOD thing.
From Hargreaves Lansdown "Investment Times", Issue 150 - autumn 2021, page 28, re debt:-
"There's a school of thought that says debt is always bad for a company's balance sheet. I disagree. Debt in moderation has the potential to boost results and fund expansion that would otherwise require the issue of new shares.... the important thing is that companies invest in projects with a higher rate of return than the interest rate. ...Of course debt needs to be kept within sensible limits. Unfortunately, there's no iron rule for what classes as sensible - it depends on the exact details of the particular business ..."
Net cash stagnating on a company's balance sheet can be a sign of a 'go nowhere' company with its best days behind it, & no good business use for the cash.
And it can be similar with dividends: Warren Buffet's Berkshire Hathaway vehicle (a 10,000-bagger) has NEVER paid a dividend.
Indeed of the more than 700 companies listed on AIM, only c. 200 are dividend-paying.
So I would prefer a company with very exciting growth opportunities, like NWT, which of course need money to exploit them.
How much do you think it costs to 'conquer America', with exciting technology, like NWT have done?: it's not cheap, but now it's payback time.
Dab808 Posts: 219 Price: 72.00 Strong Buy
Thoughts "we remain a strong buy!" (of course I would say that) 30 Jan 2024 11:36
" ... So to summarise, I believe there will be a profit between £0.7m and £1.5m for FY 2024! And for FY 2025 based on similar a similar approach a minimum of £1.5m to £3m. ..."
Dab,
Two particular points to note re this:-
1. NWT would have no tax to pay on this profit, because of prior tax losses (NWT should have c. £6M. in tax credits).
2. Pre-tax profit is stated AFTER debt repayments (capital & interest).
So by the end of its year ending 30.4.25, based on Dab's forecasts, NWT's net debt could potentially be history.
And that's even without any reduction in inventory, which has been held at heightened levels because of global supply chain challenges.
And once the debt is paid off, that alone should give an immediate further boost to profitability.
Note that NWT already has net assets greater than its market capitalisation, despite writing off £ millions of R&D investment to the profit-&-loss account as it occurs - rather than capitalising it like some less prudent technology companies.
And if you were to net off NWT's inventory against net debt, that could potentially neutralise the net debt by the end of NWT's current year ending 30.4.24.
The debt payments and interest are also very well covered, with plenty of leeway.
And the only debt with any covenant requirement is a Coronavirus Business Interruption Loan Scheme ("CBILS") loan, which are treated comparatively benignly.
The rest of the debt is invoice discounting, which is far less expensive than invoice factoring.
In invoice factoring, the customer pays the factor company directly. Whereas in invoice discounting, the customer doesn't pay the discounter company, but pays the same company as normal (i.e. NWT in this case).
Invoice discounting is typically used by larger companies than with invoice factoring, and with more creditworthy customers.
Also remember that NWT's last new placing of new shares was nearly 20 years ago - and even this was to help fund an acquisition.
Since then NWT has successfully navigated the credit crunch a decade and a half ago, and the COVID-19 global pandemic earlier in this decade, all without any real dilution.
So well done to them for that, and I think they have earnt a lot of investor respect and trust for this.
I caught up with Marie-Claire this evening on my email sent yesterday.
As always she needed to be cognisant of disclosures. We chatted through the interim results and performance over 1H 23 and 1H 24. Based on our discussions I see no reason to doubt the forecasts I have calculated although MC couldn't obviously comment. Interestingly she was keen to point out the higher margins on the new business verses UKG, which was one of the first deals they did on HCM. I took away from that discussion that there is more margin and profits to come through from a similar revenue position.
We discussed forecasts and how we position our growth. Again MC confirmed that profit forecasts are still something she is keen to avoid in the near term but with reoccurring revenues growing quickly there are areas where forecasts could potentially be made. She would consider what and when although didn't see this happening in the near term.
I explained my dividend comment and asked her to consider what we can say around when we might see the return of a dividend. I flagged that any comments in terms of the reinstatement of a dividend would be seen as positive as it would be stressing to the market that profits are growing. Again she was keen to stress we were profitable in Q2 and the momentum is strong as disclosed more profit in Q3 and Q4. I stressed the trading update to be issued in May/Jun should ram home this point. To state we are 'ahead' or 'significantly ahead' in profit terms for FY24 over 23 would be hugely positive. She took this onboard.
We discussed the announcements of dates. A FY results date is already pencilled in for September. This will be announced around a month in advance of the publication of the results.
I advised that I had continued to increase my stake. MC reminded me that she and other family members cannot buy more shares due to the limits in place as she is part of "Dwek Concert Party" (see RNS 01062020. I took this as she'd like to buy more shares but cannot. I had forgotten about this and thought WOW, none of our biggest shareholders can actually buy more without a takeover. No They are not sellers but cannot buy more, this is a potential reason we are undervalued. I flagged that it would be great to see Paul as CFO buying some as again this would flag positive vibes. Again she got the point I made.
Overall whilst MC could give me no new news this was a highly informative and useful call to share what as a shareholder I'd like to see the company doing better and for MC to remind me that what they have put into the market is very much in line with what we should expect.
I see no reason to doubt that we will make profits in Q2, Q3 and Q4 and that 2025 will be much better again. BUY BUY BUY.......
martyn's law generated business will be the *****essential non-discretionary business: legally required, and also of massive importance.
the risks to life and property being combated are just vast, especially with increased global conflict at the moment, now including new uk involvement - in helping to protect red sea shipping.
and the potential economic hit from a major terror attack scaring people away from public places could be many billions.
nwt clearly has very valuable products, services, and expertise to help combat these threats, with demand likely to outstrip supply.
and as the investment community wakes up to this new law and its implications (which includes increased costs for many businesses) i would expect to see nwt highlighted as a/the pre-eminent listed share beneficiary.
this is clearly a major business and investment opportunity, and i'm not aware of a better play on it than nwt.
"Martyn’s Law: Safeguarding public spaces with comprehensive security
... Access Control in focus
As an industry innovator, Grosvenor Technology welcomes Martyn’s Law as a progressive step to enhance security in public spaces. The legislation highlights the importance of access control in mitigating the impact of terrorist attacks. Grosvenor highlights two critical focus areas for building security systems: maintaining premium quality security and providing comprehensive access management.
Grosvenor’s product range significantly emphasises uncompromised security, empowering building managers to address potential vulnerabilities proactively. Issues like card cloning are highlighted as potential risks, prompting a call to consider upgrading legacy systems with robust encryption-driven hardware and software.
Comprehensive access control emerges as an essential element, encompassing features such as lockdown functionality, anti-passback systems, personnel tracking, safe corridors, secure access for emergency services, and seamless integration with other security systems.
The JanusC4 system aligns with Martyn’s Law requirements, providing a robust solution for evolving security needs. Ongoing development focuses on refining and improving products, ensuring the company stays ahead in meeting the demands of a changing security landscape.
Supporting the introduction of Martyn’s Law
Martyn’s Law is about more than just products; it’s about protecting people, developing comprehensive security plans, robust processes, and thorough staff training. The company pledges dedicated support to its customers, recognising the importance of collaborative efforts to implement the law successfully.
After the Manchester Arena tragedy, Martyn’s Law emerges as a crucial initiative to fortify public spaces against potential threats. Through its subsidiaries, Safetell and Grosvenor Technology, Newmark Security stands ready to help organisations upgrade their security."
https://newmarksecurity.com/insights/martyns-law-safeguarding-public-spaces-with-comprehensive-security/
"Martyn’s Law: Safeguarding public spaces with comprehensive security
... Enhancing physical security
Safetell recognises the profound impact Martyn’s Law could have on over 650,000 UK businesses. As detailed, the bill suggests varying levels of responsibility based on venue capacity, potentially requiring mandatory physical updates. To navigate these changes effectively, companies should review existing plans, promote awareness, and keep informed about when the legislation will be formally passed into law.
Entrance Control is a central component of Safetell’s approach, encompassing security portals, speed gates, full-height turnstiles, tripod turnstiles, swing gates, rotating doors, and security pass doors. These products address the specific requirements outlined in Martyn’s Law, offering a range of security resistance levels and customisation options to cater to diverse business needs.
Safetell encourages businesses to conduct thorough security assessments, aligning them with Martyn’s Law requirements. Assessments should focus on potential risks and vulnerabilities and implement preventive measures. Companies can proactively address security gaps and create robust action plans by completing a comprehensive evaluation.
Proactive risk mitigation
Martyn’s Law, in its current draft, emphasises the importance of risk assessments for different tiers of businesses. Safetell advises organisations to adopt proactive risk mitigation strategies, such as installing mandatory physical updates like bollards, intruder detection technology, tactical CCTV, and secure entrances. These measures enhance security and align with potential future legal requirements.
Martyn’s Law also underscores the significance of collaborating with local authorities and law enforcement to ensure a cohesive and coordinated approach to security. Sharing insights, conducting joint drills, and staying abreast of evolving threats can enhance preparedness and response capabilities. ..."
https://newmarksecurity.com/insights/martyns-law-safeguarding-public-spaces-with-comprehensive-security/
New on NWT's website: a new article on Martyn's Law (Protect Duty legislation); which is the first one on this topic on NWT's own website, following on from previous ones on Safetell's & GT's websites last year:-
"Martyn’s Law: Safeguarding public spaces with comprehensive security"
https://newmarksecurity.com/insights/
"Insights
Martyn’s Law: Safeguarding public spaces with comprehensive security
Almost seven years after the event, the impact of the 2017 Manchester Arena bombing still weighs heavily. The event has prompted the UK to undergo significant legislative changes to enhance national security, improve intelligence-sharing mechanisms, and bolster counter-terrorism measures. The most recent development is Martyn’s Law, which was confirmed as coming into law in the King’s Speech in November 2023.
Martyn’s Law, also referred to as The Terrorism (Protection of Premises) Bill, is a response to the tragic events of the Manchester Arena bombing, and represents a crucial step forward in ensuring the safety and security of publicly accessible locations. Advocated by Figen Murray, the mother of Martyn Hett, who tragically lost his life in the bombing, this legislation aims to strengthen security measures in public spaces across the UK.
The introduction of Martyn’s Law is a commitment to preventing similar incidents in the future and underscores the need for businesses and venues to implement robust security protocols. Once passed into law, it will compel businesses to develop action plans and assess potential terror attack risks.
Currently, the government is seeking public views via a consultation to ensure the bill strikes the right balance between public protection and avoiding undue burdens on smaller premises. As it stands, businesses with a capacity of more than 100 people (standard tier) will be required to implement measures such as training and evaluation.
Venues with a capacity of more than 800, or those with over 250 employees, will have increased responsibility, including risk assessments and more detailed security plans. The draft bill also proposes a strict inspection and enforcement regime, including sanctions for breaches.
In response to the confirmation of Martyn’s Law, Newmark Security, with its subsidiaries Safetell and Grosvenor Technology, is taking a proactive stance to improve public safety and protection against terrorism. Our commitment extends beyond mere compliance, emphasising a dedication to fortifying security measures and contributing to the overall preparedness of public spaces. ..."
http://newmarksecurity.com/insights/martyns-law-safeguarding-public-spaces-with-comprehensive-security/
You’ll also note the power of the market expecting the results. Previously RNS’s would be a surprise, the fact that we are now organised, with dates in the diary leads to speculation and potential buying. Please continue to ensure these dates are published.
So what for 2H, full year 24 and 2025? I have to say there is some clamour from investors to get some forecasts into the market. The Allenby Capital note was good but needed forecasts. I know you have previous stressed that these have been difficult for the company to provide but with re-occurring revenues and increasing certainty around contracts I personally think we are missing a trick. The 3 contract wins for example, simple statements of belief that these might add £3m+ to revenues adds significant weight to the message. I have done my own forecasts (below) that provide significant room for manoeuvrer around trading that will help guide investors on the trend and provide more confidence in the strategy. Again a simple message that we see 2024 FY ahead of 2023 would have gone down really well.
I know we need to tread a fine line in over promising but I genuinely believe we can publish a minimum or a range, or opt for simple statements like ahead. Views like these would have led to the price perhaps stabilising higher than where we are or even accelerating further. In the interests of all shareholders I think you need to be reconsidering the position on forecasts even if it is within ranges that you feel comfortable. That said, by my forecast we remain in bargain territory so I have upped my stake to 3.4% and I will continue to support the price on any further dips. We have an exciting 18 months ahead that will hopefully stretch into years and I am very much enjoying the ride.
Dear Marie-Claire,
I hope you and Paul are keeping well.
Thanks, and despite the small loss, congratulations on the most recent interim update! There were no real surprises for me other than perhaps the cash position, where I expected with inventories to fall over the period (which they did) creating a more neutral position in 1H 24 over 2H 23. This has also led to the debt position growing again which I’d like to see stabilise/reverse although this might need to be balanced with the payment of a small dividend at some point in the next 18 months. The company has generated £125m of revenues since 2016/17 (last dividend in 2015/16) of which shareholders have received nothing.
I thought you delivered an excellent update via the Proactive interview, you were very confident, both in the way you presented and the overall results and future outlook. The detail in both the interim release and Allenby Capital note has really helped in terms of understanding the impact of UKG and allowed some forecasting on where we might end FY 24 and 2025.
You’ll be aware that I and others had reached out via social media and through investment boards to broaden our message. This led to some excitement into these results and the share price accelerating to 90p the night before results. The pullback to 70p should not be seen as a negative, the results themselves suggest we were a little ahead of ourselves but the fact we moved from 30p in Q1 23, to 55p by Q3 23 and 70p into Q4 23 is a significant improvement in confidence in the strategy!
Indeed fft100. There are a number of ways we could have put it better, another way (if we were making £150k profit per month out of UKG) would be to have a view that with UKG we'd have expected a a profit in the region of £800k for 1H24, not a loss £100k. And thus if we'd had UKG profit for 1H 24 over 1H 23 would have shown a 60% YoY increase in profitability! That said there are rules and I am no expert on what we can and cannot disclose.
On Safetell, personally I'd run with doors and keep Safetell for a bit a least, the early turnaround signs look good and there was at least some capacity (in protection) that allowed growth without adding too much cost. Move forward and with economies of scale and re-occurring incomes, profits could come on the back of a successful strategy. The spinning out of GT into the US however might be a more sensible move (hedgehog and I shared views on this in the past and I also raised with Marie-Claire). We need to see the full value of the new contracts but if the US grows in 2H and the RoW strategy continues its growth then that business alone is worth $50m.
On your point around forecasts - I have sent the a note to Marie-Claire that I'll copy above.
Dab. Excellent stuff. They should have you writing the RNS :-). Don't understand why NWT didn't put the underlying figures in the RNS. The method they choose just causes confusion and the headlines (which most people don't get past) look awful and deter a further look, especially when there are 10-20 companies reporting every day that week.
Only 3 months to see if you are right. Though, if they choose the same reporting style as last year's TU most people will not be any the wiser as to actually what happened or why !
The lack of *any* forecasts in the broker report is also a turn off for potential new investors.
Still think they should get rid of the doors division. Too small and probably a mgmt distraction from the main business in the USA.
A new (c. three minutes) NWT video interview on Proactive Investors yesterday:-
"Newmark Security says momentum gained in its fiscal first half has continued into 2024
Published: 12:22 29 Jan 2024 GMT
Written by: Stephen Gunnion
Newmark Security PLC (AIM:NWT) CEO Marie-Claire Dwek takes Proactive's Stephen Gunnion through the company's first-half performance, which revealed strong underlying growth.
The company, which designs and manufactures physical security products, intelligent access control, timekeeping and identity management solutions, reported first-half revenues of £10.4 million and a gross profit of £3.9 million, marking an 11% increase after adjusting for the departure of UKG, a former client.
Notably, EBITDA soared to £5.8 million. The addition of three major clients in the first quarter contributed significantly to revenue. Additionally, Newmark Security has been actively expanding its service offerings, resulting in a notable increase in recurring revenue in HCM, totaling £2.3 million for the year.
Dwek expressed optimism about returning to profit after tax in the second quarter, anticipating a strong second half of the year bolstered by new clients and strategies. The company's focus on attracting more blue-chip customers across various sectors, including software houses in the US and major UK retailers, has been fruitful. Newmark Security's access control division has also seen success with blue-chip clients in the UK through distributors and dealers.
Looking ahead, the sales pipeline remains strong for the second half of the year. Newmark Security's strategic plan, which includes attaching services to hardware and introducing new products to existing partners, is proving successful."
https://www.proactiveinvestors.co.uk/companies/news/1039562/newmark-security-says-momentum-gained-in-its-fiscal-first-half-has-continued-into-2024-1039562.html
Thanks for that excellent work, Dab.
If anything, NWT is an even stronger buy now than it was at the start of last year, in the 30s: the strongest of strong buys, for what could be one of the all-time great growth stocks, still available for a comparative pittance.
Fft100 you wanted a forecast so here's my thoughts on profits.
In 1H23 all was wonderful, we had UKG baked into the numbers and we made a £500k operating profit.
UKG continued into the 2H 23 but only partially, let's assume 2 months and we made a £200k loss in the 2H 23. (Full year £300k profit plus tax rebate so £400k)
So the differential in 1H over 2H was -£700k.
When UKG ended, we effectively started to lose £150k of profit in the 2H 23 per month (from month 9) of the year, steadily reducing.
So what about 1H 24, well we made a £100k loss. 1H 24 is a £600k improvement in 2H 23. However, if loses of £150k per month had continued (no UKG revenues) then actually the loss would have been £900k and thus we we’re £800k improved (with continued growth).
So - in the 2H 24 the growth trajectory is therefore a minimum of £800k of profit, and thus £700k of FY 2024 is the absolute minimum. However, if the upside of growth is consistent (new contracts etc) we could be nearer FY number of £1.5m.
So to summarise, I believe there will be a profit between £0.7m and £1.5m for FY 2024! And for FY 2025 based on similar a similar approach a minimum of £1.5m to £3m.
Strong BUY
Allenby Capital's Company Note on NWT is a 14-page document, featuring a current NWT price of 91p at the top.
Note that their research is intended for professionals and institutional investors, so lesser mortals should perhaps stop reading now!
Here are a few extracts:-
"Interims from Newmark Security plc, a leading provider of electronic and physical security systems, indicate further progress against its 2025 Growth Strategy of increasing the proportion of recurring revenue and services. Hardware-enabled software and services substantially increases Newmark’s addressable market, offers greater revenue visibility and margin accretion. At Grosvenor Technology (Human Capital Management and Access Control), annualised recurring revenue increased 77% in H1 to £2.3m meanwhile Safetell, the provider and maintainer of integrated doors solutions and physical security division, maintained its revenue growth (+24%) following its 2022 restructuring, product portfolio refresh and increased focus on services revenue. Newmark returned to profit in Q2 and this has continued in H2 and management anticipates FY revenue growth in both divisions. As higher gross margins and operational gearing come through, we would anticipate a rapid growth in profits."
"The loss of UKG had been anticipated for some time following the acquisition of Kronos Inc by Ultimate Software, a customer of Newmark’s GT clocks, in 2020, and subsequent renaming. Kronos was a multinational provider of workforce management and HCM software but also a major manufacturer of time clocks. The combination of two large HCM software companies but also one of the largest device manufacturers has created an opportunity for independents, such as Grosvenor, and it has secured three additional HCM software providers in H1. This has derisked the division but also created additional software and services revenue opportunities.
Within HCM, revenue in North America fell 20%, reflecting the UKG loss, to £3.9m but increased 42% in Rest of World to £2.1m, continuing the trend of FY23. Excluding the impact of UKG, underlying revenue growth for North America was 8%. Grosvenor has been successful in displacing competitor clock products through its entry level devices coupled with recurring revenue services and can also offer a higher level of cybersecurity with GT Connect achieving ISO 27001 certification."
"Management reports that the company returned to profit after tax in Q2 and this trend is continuing in H2. Overall, FY24 revenue is expected to grow in both Safetell and Grosvenor, despite the UKG loss, supported by a good spread of public and private sector contracts. As higher gross margin revenue streams grow, coupled with the effect of operational gearing, we would anticipate an acceleration in in profit growth. The current financing facilities are sufficient to execute its current plans."
https://www.allenbycapital.com/our-research/
I've noticed that some of the material on NWT's website has just been refreshed, and here's a snippet that is particularly worth noting:-
"Through our dedication to providing exceptional security supported by beneficial value-add services, we are strongly positioned for exponential – and profitable – growth."
https://newmarksecurity.com/about/
Exponential profitable growth: that's as bullish as I've seen from the company - people who aren't known for their hyperbole - and it does highlight just how confident they are of the outlook here.
This heading on the home page is also new:-
"The Innovators of Security"
https://newmarksecurity.com/
This is a noticeably greater emphasis on the company's cutting-edge innovation: innovation which helps to distinguish it, and make it so special.
And it certainly seems sensible to emphasise this.
"Ensuring Data Privacy in the Digital Age
... Building Trust With ISO27001
Data security goes beyond just technological realms; it necessitates the need for greater awareness and responsibility from everyone; those that hand out data, as well as those that collect, process and store it. And this is where standards like ISO27001 play a pivotal role.
ISO27001 is, essentially, a blueprint for data protection. It outlines best practices for everything from employee training and access controls to incident response protocols and risk management. By implementing this comprehensive framework, businesses can create robust defences against data breaches and cultivate a culture of data security.
But while more business embrace this standard, there is still a way to go. We should all accept responsibility for managing and protecting our digital lives, and Data Privacy Day serves as the perfect opportunity to remind us of that.
At Grosvenor Technology, we prioritise the security of data above all else, and we encourage you to do the same."
https://www.grosvenortechnology.com/insights/ensuring-data-privacy-in-the-digital-age/
"Data Privacy Day (known in Europe as Data Protection Day)[1] is an international event that occurs every year on 28 January.[2] The purpose of Data Privacy Day is to raise awareness and promote privacy and data protection best practices. It is currently observed in the United States, Canada, Qatar[3], Nigeria, Israel[4] and 47 European countries."
https://en.wikipedia.org/wiki/Data_Privacy_Day
Another excellent new article just added to Grosvenor Technology's website: and a very apposite one, just ahead of Data Privacy/Protection Day tomorrow:-
"Insights
Ensuring Data Privacy in the Digital Age
Data security goes beyond just technological realms; it necessitates the need for greater awareness and responsibility from everyone; those that hand out data, as well as those that collect, process and store it.
Paul Smith
Head of Quality & Compliance
The digital revolution has entirely transformed our lifestyles and landscapes; from the daily scrolling of social media to the loyalty cards that exchange data for deals, our information is captured and catalogued in an abundance of ways.
But this increase in data collection and processing goes hand-in-hand with the more sinister practice of data theft. A recent report by Cybersecurity Ventures estimates that a global cyberattack will occur every 11 seconds in 2023, highlighting the urgency of robust data protection measures.
While malicious actors undoubtedly pose a significant threat, a surprising statistic emerges: 22% of data breaches stem from human error. This underscores the critical role of employee awareness and training in safeguarding sensitive information.
Types of cybersecurity threats typically include:
Phishing
Is the practice of sending fraudulent emails that resemble emails from reputable sources. The aim is to steal sensitive data like credit card numbers and login information. It’s the most common type of cyber-attack.
Ransomware
Is a type of malicious software. It is designed to extort money by blocking access to files or the computer system until the ransom is paid. Paying the ransom does not guarantee that the files will be recovered or the system restored, however.
Malware
Is a type of software designed to gain unauthorised access or to cause damage to a computer. It can steal data, disrupt operations, and even cause permanent damage.
Social engineering
Is a tactic that adversaries use to trick you into revealing sensitive information. They can solicit a monetary payment or gain access to your confidential data. Social engineering can be combined with any of the threats listed above to make you more likely to click on links, download malware, or trust a malicious source. ..."
https://www.grosvenortechnology.com/insights/ensuring-data-privacy-in-the-digital-age/