Newmark Security focusing on cash amid supply chain crunch

Electronic and physical security system supplier Newmark Security said it was in a positive position for the rest of the financial year on Friday, despite recent margin pressures and supply chain issues impacting the business.

The AIM-traded firm said it had continued its focus on cash in light of challenges in managing inventory levels and a global shortage of components needed to build products.

It said it had not been immune to the worsening supply chain issues facing multiple sectors and businesses in recent weeks.

“These issues include material increases in freight costs and shipping timeframes, as well as increasing component costs and reduced availability,” the board said in its statement.

“The company has sought to bolster levels of stock held in order to build in a buffer to ensure that the global supply chain issues do not impact the group's ability to fulfil existing and anticipated client orders, and to better withstand the risk of future supply-chain disruption.”

That increased working capital outlay, coupled with the “significantly higher” freight costs and increased component costs, had negatively impacted gross margins and cash flows in the first four months of the year ending 30 April.

“As a result of this, the company has instigated a number of initiatives to improve profitability and cash flows.

“These initiatives, together with increasing demand from the United States and an improvement in revenues and margins in September, provides the board with confidence that the group is well positioned to navigate these market conditions for the rest of the financial year.”

At 1358 BST, shares in Newmark Security were down 15.79% at 0.8p.