NEWMARK SECURITY PLC (NWT) — Investment Research Note

Executive summary

Newmark is transforming from a mixed physical/electronic security conglomerate into a pure-play Human Capital Management (HCM) data business through its Grosvenor Technology subsidiary, which sells time-and-attendance clocks (GT4/GT4-Lite/GT8), a cloud platform (GT Connect), and a new tablet SaaS (GT Tablet) into partners like Paychex/Paycor, Oracle, SAP, Workday and Synerion. The 5-year trajectory shows steady HCM revenue compounding (£9.7m FY21 → £19.5m FY26, ~15% CAGR) with recurring ARR up from £0.15m (2021) to £3.9m (April 2026), a strengthening North American franchise (FY26 NAM revenue +43%), and post-July-2026 divestment of loss-making Safetell for £1 to focus capital 2026-07-29 disposal. The single most important point today: at 110p / £10.4m mcap, the market is valuing a growing, ARR-heavy HCM business at ~0.5x forward sales, but the balance sheet (net debt £4.8m rising to ~£2.0m of Safetell-related cash outflows at completion) and residual Access Control uncertainty temper the re-rating case.

Fair value estimate

Methodology: SOTP-style forward earnings multiple on the continuing HCM/Access Control business, cross-checked against EV/Sales.

Key inputs:

• FY26 continuing HCM revenue £19.5m 2026-05-21 FY trading update, +Access Control ~£2m (under review)
• HCM operating profit +30% YoY in FY26 2026-05-21; ARR £3.9m at April 2026
• Assume FY27 continuing revenue £24-26m at maintained HCM growth; group EBIT ~£2.0-2.8m post central costs; PAT £1.0-1.6m
• Net debt post-Safetell disposal ~£4.5-5.0m (Safetell absorption + short-term overdraft top-up)
• Apply 10-15x forward earnings (AIM microcap growth stock discount, meaningful net debt, execution risk)

Fair value range: 95p – 155p per share (implied market cap £8.9m – £14.6m).
Midpoint: ~125p / £11.7m mcap.
Versus latest disclosed mcap of £10.4m (110p): absolute upside ~14% — a fair rating with mild upside skew, not an obvious mispricing.

Sector context

Classification confirmed: Industrial Goods & Services (ICB), though functionally this is now closer to specialist B2B enterprise-tech/HCM edge hardware & SaaS. The quality profile is below typical listed workforce-management peers (Workday, Ceridian/Dayforce, Paychex) on scale and gross margin (Group GP ~40%), and below UK enterprise SaaS peers on ARR mix, but delivering higher revenue growth than most traditional industrials. Listed comparables are all much larger: Paychex, Workday, ADP — Newmark supplies into these ecosystems rather than competing. Closer AIM-scale analogues in edge hardware + cloud (e.g. IntelliAM AI, Cerillion) trade at premium multiples reflecting higher SaaS purity.

Investment thesis

• HCM growth is real and accelerating in North America: HCM revenue +27% to £19.5m FY26 with NAM +43% to £14.1m, ARR £3.9m (+8% headline, +26% ex-Mexican customer runoff), monthly device subscriptions up 137% to 97,000 2026-05-21 FY trading update. Three new Tier-1 partners added including AI-workforce specialist Legion — this is genuine channel expansion, not marketing noise.
• Safetell disposal removes a cash-drain and unlocks a focused pure-play: FY25 Safetell operating loss £0.6m and further losses in H2 FY26; disposal to management for £1 stems the bleed, and management can now concentrate capital on Grosvenor 2026-07-29 disposal, 2026-05-21 FY trading update.
• Direct-to-End-user pipeline with Oracle/SAP/Workday is monetising: First D2E sales achieved in FY26, RFPs flowing from large multinationals, GT Tablet PEPM SaaS live. If any single partnership scales, revenue drop-through to profit is disproportionate given the fixed-cost engineering base 2026-01-15 half-year; 2025-09-04 final results.

Key risks

• Balance sheet stress: Net debt rose to £4.8m at April 2026 (from £2.1m a year earlier) — a large jump for a £10m mcap company — driven by inventory build, Q4 timing and Safetell losses; completion of Safetell disposal will consume a further ~£2m of cash to settle HSBC facilities and creditors 2026-07-29 disposal. Any HCM demand hiccup would make covenants uncomfortable.
• Customer concentration and channel dependency: The business is highly dependent on a few Tier-1 HCM software partners (previously UKG loss caused a real revenue hole in FY23); one Mexican partner runoff already visible in FY26 ARR; consolidation among partners (Paychex/Paycor, ADP/Workforce) is a persistent structural risk 2025-09-04 final results, 2024-09-10 final results.
• Governance / related-party overhang: 21.3% shareholder Thalassa publicly challenged the Board in October 2025 forcing INED changes and LTIP review; family-controlled (Dwek); Safetell disposed to its own MD as a related-party transaction 2025-10-15, 2026-07-29. Not fatal but flags of a small-cap governance profile.

Operating leverage

Grosvenor exhibits moderate-to-improving operating leverage. The fixed cost base is meaningful — engineering/R&D (~£0.5m annualised), enterprise sales team, SOC 1/SOC 2 compliance infrastructure, central plc costs — while incremental HCM revenue increasingly comes as GT Connect subscriptions and PEPM SaaS (>70% gross margin at scale). FY26 evidence: HCM revenue +27% delivered HCM operating profit +30% 2026-05-21, demonstrating >1x operating leverage but not the 2-3x of a pure SaaS business (hardware still ~50%+ of HCM revenue). A 10-20% revenue beat above plan on the D2E pipeline could plausibly add 40-70% to operating profit, given central costs are essentially fixed and gross margin mix is trending up. Not spectacular capital-light leverage, but real.

Value-trap signals

• Rising net debt without commensurate profit uplift in FY26 (£2.1m → £4.8m).
• Repeated 5+ year "no dividend" policy despite profitability signals ongoing reinvestment need.
• Related-party disposal of a sub for £1 to a Board director.
• No visible institutional broker coverage; Allenby Capital sole NOMAD/broker.
• Historical multi-year drift as strategic review has dragged on 12+ months.

None are individually fatal, but collectively they explain why the stock has languished; the disposal completion is the key catalyst to remove the overhang.

Earnings vs. expectations

Newmark rarely provides explicit numerical FY guidance; consensus is not visible in the RNS filings. Pattern versus qualitative expectations set at each interim/AGM:

• FY23 → FY24: FY23 trading update flagged "return to profitability" and delivered (£0.1m PAT vs prior loss) — in line.
• FY24 → FY25: Interim results guided H2-weighted profit growth; delivered £0.7m PAT vs £0.1m — beat.
• FY25 → FY26: January 2026 interim guided full-year profit "ahead of prior year"; May 2026 trading update confirmed HCM +27% and 30%+ HCM operating profit growth but noted Safetell losses and Access Control write-down likely, and net debt up materially — mixed / broadly in line at HCM level, miss at group net debt level.

Overall pattern: modest beats at the HCM level, in-line group results with recurring negative surprises from the non-HCM units — which is precisely what the Safetell disposal is now addressing.

Conviction

3 — moderate.

Anchors: (1) audited five-year revenue and ARR history is clean and trending consistently upward; (2) explicit disclosure of Safetell financials at disposal makes the pro-forma continuing business estimable; (3) partner names are verifiable Tier-1 enterprises.

Caveats: (1) I cannot see FY26 audited profit numbers yet (published September 2026); (2) Access Control strategic review outcome is unresolved and could involve a further write-down; (3) net debt trajectory is unusually volatile for a company this small, making forward FCF hard to model with precision.