Newmark Security reports 27% HCM revenue growth to £19.5m

Newmark Security reported at least £26 million of group revenue for FY2026, up 13% year on year, with HCM revenue rising 27% to £19.5 million and North American HCM revenue increasing 43% to £14.1 million. HCM annualized recurring revenue reached £3.9 million, and GT Connect/GT Services subscriptions more than doubled to 97,000. Offset by delays at Safetell, group net debt excluding leases increased to £4.8 million from £2.1 million, while the company remains in exclusive negotiations to dispose of Safetell and secured additional HSBC credit facilities.

Analysis

This is less a broad-growth story than a balance-sheet-and-mix inflection. The market is likely underappreciating that recurring revenue is becoming more software-like just as the company is de-emphasizing a lower-quality, working-capital-intensive segment; that combination can re-rate valuation even if headline growth looks mid-teens. The North American channel expansion matters because it shortens the path to scale without proportional opex, which should improve incremental margins over the next 2-4 quarters if partner productivity holds.

The key second-order effect is liquidity: the company is financing inventory and a lagging project pipeline while waiting on asset disposal, so the equity story is now partly a credit story. The new bank lines are a near-term backstop, but they also signal that working-capital drag is real and can suppress free cash flow conversion before it improves. If Safetell’s disposal does not produce cash, the market may start valuing the remaining business against more heavily levered small-cap peers rather than on reported growth alone.

Contrarian view: the obvious bullish read is that recurring subscriptions and certification wins should drive a multiple expansion, but that may already be partly priced in because the operational progress is visible and not especially scarce. The more interesting asymmetry is on the downside: any further contract slippage or inventory buildup would likely compress valuation quickly, because the equity currently lacks a cushion of strong net cash or large FCF. The catalyst window is the next 1-2 reporting periods, when investors will see whether partner-led growth is translating into cash generation rather than just revenue recognition.

Key Decisions for Investors

• Long NWT on pullbacks over the next 2-6 weeks, but size small: the setup is favorable if channel-led HCM growth persists, yet the balance-sheet overhang limits multiple expansion until free cash flow inflects.
• Pair trade: long NWT / short a higher-leverage small-cap industrial or security-services peer with weaker recurring revenue mix, targeting a 3-6 month relative re-rating as investors pay up for software-like revenue quality.
• Use the next results update as a catalyst check: if operating cash flow is still negative and net debt remains elevated, fade the rally; if recurring revenue and cash conversion both improve, add to longs for a 6-12 month hold.
• Avoid chasing the story purely on M&A optimism around Safetell; because the disposal may not bring cash in at close, treat it as optionality rather than a solvency fix.
• For event-driven accounts, consider a tactical call spread on NWT or a limited-risk long into the next operational disclosure, with the thesis that partner momentum and certifications support near-term sentiment but the leverage profile caps upside.