21 May 2015

 

Westminster Group Plc:

Final Results for the 12 months to 31 December 2014

 

 

Westminster Group Plc ('Westminster', the 'Company' or the 'Group'), the AIM listed supplier of managed services and technology based security solutions to governments and government agencies, non-governmental organisations (NGO's) and blue chip commercial organisations worldwide, is pleased to announce its Final Results for the 12 months ended 31 December 2014.

 

Key Points:

 

Operational:

 

·     2014 defined by the onset of the Ebola crisis in West Africa which Westminster responded to with alacrity and professionalism ensuring continuity of operations and safety of staff. Inevitably this was the prime management focus during the second half of the year.

·     Financial pressures from Ebola with lower passenger volumes and increased costs largely mitigated by timely fundraising and cost reductions.

·     Progress achieved on major projects prospect pipeline.

 

Financial:

 

·     Net Assets £2.42m (2013: £2.16m).

·     Revenue £3.5m (2013: £7.4m).

·     Improved gross margin of 56% (2013: 42.2%).

·     £2.7m cash raised through issue of equity in anticipation of reduced contribution from Ebola affected operations and to support asset purchases for Managed Services.

·     Financing charges reduced to £0.04m (2013: £0.09m) through reduced debt.

·     Cash balance £1.18m (2013: £0.71m).

·     Loss per share 4.94p (2013: 5.10p).

 

Contracts:

 

Africa - In November 2014 we announced a 21 year concession agreement with $300million revenue potential over the life of the contract for operation and management of ferry terminals and provision of high quality ferry service in West Africa. Contract signed four months after initial MoU.

Asia - $2.6m border crossing vehicle screening system.

Americas - pilot pipeline security trial for one of the world's largest government owned petrochemical companies with over 20,000km of unprotected pipeline.

United States - Letter of Intent received in September 2014 (contract subsequently signed in April 2015) for specialist detection solutions as part of a larger pilot project to protect an iconic bridge.

Mexico - 10 year franchise agreement worth £1.9m in franchise fees and minimum of £1.5m of business through Westminster International from year two.

Americas - $4.4m consultancy project for a government to carry out a comprehensive solutions based analysis and provide recommendations and proposals on long term solutions to improve national security.

 

Post Balance Sheet Events

 

·     £2.3m gross raised by the issue of convertible loan notes in April 2015 for general balance sheet strength and to support ongoing costs and business development, particularly around the expansion of the Managed Services division including new ferry service.

·     Impressive new flagship, 200 seat ferry vessel purchased and delivered to Sierra Leone.

·     MoU signed with airport authority in Asia for potential long term managed services at the country's international airports serving over 2.0m embarking passengers per annum, marking a new geographic region for Westminster.

·     $0.96 million contract secured in April 2015 (letter of intent received in Sept 2014) for iconic bridge protection project in USA.

·     Current administrative costs 18% lower than H1 2014.

·     Ebola outbreak significantly abating.

·     Passenger volumes in West Africa beginning to recover as airlines resume flights.

 

 

Commenting on the results and current trading Peter Fowler, Chief Executive of Westminster Group, said:

 

"2014 was a year defined largely by the Ebola crisis and our struggles to contain it.  We take great pride in what we achieved, however additionally feel disappointment with the lower than expected sales during this difficult period. 2015 by contrast, given the progress during 2014 and the momentum our business is now experiencing, gives me and the Board cause for optimism and we remain excited about our future growth prospects.

 

"Our Technology division has secured approximately $2.4m of orders in the first four months of 2015 including the $0.96m contract for the iconic bridge in the USA, and our Managed Services division signed the Asian Airport MoU in February 2015, both significant achievements. Our new flagship ferry vessel, Sierra Queen, has arrived in Sierra Leone and will be delivering revenues during 2015. Ebola is subsiding and passenger numbers are recovering."

 

 

Annual Report & Accounts and Notice of Annual General Meeting ('AGM') - the Annual Report & Accounts and Notice of AGM will be available on the Company's website - www.wsg-corporate.com - and will be posted out to shareholders by 6 June 2015.  The AGM of the Company will be held on 30 June 2015.

 

 

For further information please contact:

 

Westminster Group plc.	Tel: 01295 756 300
Peter Fowler (Chief Executive)
Ian Selby (Chief Financial Officer)
S. P. Angel Corporate Finance LLP (NOMAD + Broker)	Tel: 020 3470 0470
Stuart Gledhill/Katy Birkin
Walbrook PR (Financial PR)	Tel: 0117 985 8989
Tom Cooper/Paul Vann	0797 122 1972
	tom.cooper@walbrookpr.com

 

Notes:

 

Westminster Group plc is a leader in the supply of system solutions and products to the security, defence, fire protection and safety markets worldwide.

 

Westminster's principal activity is the design, supply and ongoing support of advanced technology security solutions, encompassing a wide range of surveillance, detection, tracking and interception technologies and the provision of long term managed services contracts such as the management and running of complete security services and solutions in airports, ports and other such facilities together with the provision of ferry services, manpower, consultancy and training services. The majority of its customer base, by value, comprises governments and government agencies, non-governmental organisations (NGO's) and blue chip commercial organisations.  For further information please visit www.wsg-corporate.com  

 

 

 

 

 

 

Chairman's Statement

 

Overview

 

I am pleased to present the Final Results for Westminster Group plc for the year ended 31 December 2014.

 

2014 was a challenging period in a number of ways, most notably as the Company battled with the impact of the unforeseeable Ebola crisis in West Africa.  This created operational pressures as we fought to both keep our airport operations open and still deliver a world class security service, whilst managing the financial pressures from the fall in passenger numbers and of course the health risk to our staff both local and expatriate. 

 

I am pleased to say that the Westminster team were resolute in dealing with these issues and showed their true professionalism in the face of adversity. This crisis response inevitably, and rightly, absorbed management time, and whilst this has naturally affected 2014's revenue performance, a significantly reduced operating cost base helped mitigate losses. 

 

The sales performance in the year however does not reflect the advances and achievements that the Company made in the year, both in terms of advancing new and existing opportunities and also in securing several large contracts (most notably the 21 year ferry contract in Sierra Leone) and whilst these did not reflect in 2014's results, they bode well for 2015 and beyond.  We have purchased the Sierra Queen which is now in country and this will be generating revenues in 2015. We believe that this new operation has revenue and cost synergies with the Managed Services airport operation and the combination of the two bodes well, particularly as passenger volumes improve as the Ebola outbreak subsides.

 

Interest in our Build Operate Transfer ("BOT") model for airport security continues to grow and we have continued to progress a number of opportunities through what can frequently be frustrating governmental signoff processes. I am pleased to report that in January 2015 we signed a Memorandum of Understanding with an airport in Asia and that those discussions are progressing towards a binding long term contract for an airport order of a magnitude greater than that in West Africa.  We continue to believe that this model represents an attractive proposition for airport operators as it delivers a world class security solution for no capital outlay, and we believe that this can produce returns for Westminster shareholders as evidenced by the improving financial performance before Ebola took hold.

 

We have a strong brand and growing international presence. In September 2014 we signed an important new 10 year Franchise Agreement in Mexico which offers tremendous scope for our business and we are in similar discussions for potential Franchises in other selected countries.

 

We are gaining further traction in the Americas with the successful completion of pipeline trials, our $4.4m consultancy contract awarded in December 2014 as well as from our recent contract win to help secure an iconic bridge in the United States.

 

We work closely with the Foreign Office and UK Diplomatic Missions in the various countries in which we operate and I am very grateful to the magnificent support these and UKTI provide our teams and operations around the world.

 

Our business development continues apace with both divisions focussing on large sales opportunities.  We are an international company and a deliberate strategy has been to diversify our geographic risk.  This has been proven by progress in the Americas and in Asia referred to above. We have strong relationships with the UK government and we continue to build on these, not only for supporting existing opportunities but as a source of new business.  

 

Airport opportunities continue to develop and, as I have previously reported, any one of these would be a major achievement and several would transform Westminster beyond recognition.

 

Staff and Board

 

As ever, our staff are key to delivering success. I would like to take the opportunity to express my appreciation to all our employees, both in the UK and our ever expanding overseas workforce, who have worked extremely hard during the year.

 

A true measure of the quality of any organisation (be it civil or military) is how well it responds under adverse circumstances. In this respect Westminster has not been found wanting and I am proud to be the Chairman of such a company, particularly during this difficult period.  I would like to pay tribute to its management and staff, especially those in West Africa, both expatriate and local, who maintained our operations and kept all our staff safe so that we can now get back to growth.

 

I would finally like to thank all our investors for their support and particularly to our strategic investors who are bringing their expertise to help deliver value for all.

 

Lt. Col. Sir Malcolm Ross GCVO, OBE

Chairman

 

 

 

Chief Executive's Statement

 

Business Review

 

2014 was a challenging year for Westminster given the severe Ebola crisis in West Africa which was devastating for the countries concerned and which created significant operational issues for our business and absorbed significant management resource. As the crisis developed the majority of airlines ceased flying to affected areas which created financial and logistical difficulties. We faced travel restrictions on personnel and goods, increased costs and significant reductions in revenues as passenger volumes fell, at their worst point to around 30% of normal traffic. However I am proud of how we dealt with this crisis, not only in maintaining full operations in difficult circumstances helping to keep the airport open and keeping all our staff safe, but also in terms of the support we provided to the local communities devastated by this crisis as well as the various relief organisations involved. I am especially proud of the fact that despite making cost reductions of over 15% from our central overhead (including directors' costs) we, unlike many companies in the region, maintained full employment of all our local staff in West Africa, where loss of income would create real hardship.

 

Despite the difficulties the Ebola crisis created, and the lower than anticipated sales performance, we did however achieve a number of successes and continued to expand and progress the many business opportunities we now have. I will expand further on these in the divisional review below.

 

Technology Division

 

The Technology division produced a mixed performance during 2014. Sales were disappointing overall, with run rate product and smaller system sales flat, and delays and timing issues on major project sales. This is partly a feature of the more lumpy nature of this division's business, particularly with major multi-million USD project sales which can take months, and in some cases years, to progress and are therefore more difficult to accurately forecast. The year's result was partly attributable to associated Ebola issues such as management distraction, and partly due to a falloff in web enquiries as a result of search engine algorithm changes, which we rectified during the year by undertaking a major search engine optimisation (SEO) programme.

 

However the sales performance of the Division does not reflect the progress that was made with both existing and new potential project opportunities. The Division was actively involved in numerous and ongoing major contract discussions, some of which are extremely large.  We have expanded our business development team to help close some of the advancing opportunities and manage our growing range of business opportunities. Whilst sales in the year were less than expected we never-the-less secured a wide range of contracts from around the world including some notable contract wins which I will expand on below.

 

In April 2014 we announced a $2.6m contract for the supply of a vehicle screening system for a border crossing in Asia, which had the potential to be extended to other border crossings if successful. The initial system installation was expected to be undertaken in late 2014 however due to ongoing discussions on extending the scope of works and the client's procurement process, this project is now expected to commence and be largely completed during the second half of 2015.

 

In August 2014 we announced that Westminster had been selected to undertake a pilot pipeline security trial for one of the world's largest government owned petrochemical companies with over 20,000km of unprotected pipeline within the Americas. This trial was successfully concluded in December 2014 and Westminster have now been selected as the preferred supplier for pipeline security utilising this specialist detection solution. Specific pipeline projects are now being identified and assessed by the client and orders are anticipated in 2015.

 

In our Interims in September 2014 we also announced that we had received a letter of intent to provide specialist detection solutions as part of a larger pilot project to protect an iconic bridge in the United States. I am delighted to have been able to announce that this initial $0.96m project became a firm contract in April 2015. The fact Westminster was selected to provide security solutions for this important and high profile project is testament to our reputation and global reach and is likely to lead to similar incremental business opportunities.

 

In September 2014 we announced we had signed a 10 year Franchise Agreement for Mexico which offers substantial business opportunities. The Franchisee will pay Westminster an annual franchise fee worth £1.9m over the 10 year period which commenced in October 2014 and is required to achieve at least £1.5m of business per annum with Westminster, commencing from year 2. Mexico is the second largest economy in Latin America and one of the "Mint" countries which are forecast as the next emerging economic giants. The IMF expects Mexico to be a top 10 global economy by 2018. This economic growth combined with internal security requirements make it a logical market for Westminster.

 

I am pleased to report that we and our Franchisee are receiving strong support from UKTI and the local British Embassy in Mexico and I was also invited to be a key speaker on airport security at the 4^th Mexican Infrastructure Summit in February 2015.

 

In December 2014 our Technology division announced a $4.4m consultancy project for a government in the Americas to carry out a comprehensive solutions based analysis and provide recommendations and proposals on long term solutions to improve national security to assist in the fight against terrorism, drugs and human trafficking. Following this initial contract, Phase 2 of the project will be to create a 15 - 25 year national security enhancement programme, which will involve a planned roll out of both technology based enhancements and managed services solutions and which would be developed under a separate cost agreement. Initial planning and logistics have been undertaken and in-country consultancy is expected to commence in Q2 2015. We expect this project to be largely completed in 2015, although some revenue may benefit 2016.

 

In addition to the contracts mentioned above we also secured numerous contracts in 2014 with a combined value of $1.84m and delivered equipment and services to new and existing clients all over the world.

 

Managed Services Division

 

As previously mentioned, the Ebola crisis had a dramatic impact on our West African airport operations with over 70% reduction in revenues during the height of the crisis.  Great credit is due to our management and staff who maintained full operations, kept all our staff safe and assisted with the containment and screening of people with Ebola (Westminster installed fever screening equipment in the airport at an early stage of the outbreak as well as providing essential safety equipment to our staff and others around the airport). Our efforts and investment in this respect were acknowledged by the authorities and I am pleased to report that none of our staff or their families were infected by the disease.

 

It is most encouraging to note, both from a business and humanitarian viewpoint, that this epidemic is now largely under control and the region is making great strides towards recovery. Passenger numbers are now improving, airlines are looking to resume flights and we expect this recovery to continue throughout the rest of 2015.  

 

Notwithstanding the issues and difficulties created by the Ebola crisis, our Managed Services division continued to make significant progress in a number of areas.

 

In August 2014 we announced that we had signed a Memorandum of Understanding (MoU) for the provision of a long term ferry service and in November 2014 I was delighted to announce that we had progressed negotiations and secured a 21 year Concession Agreement for the operation and management of ferry terminals and the provision of a professional ferry service in Sierra Leone across the estuary between the capital Freetown and the International Airport on the Lungi peninsula, through Westminster's subsidiary Sovereign Ferries. This contract is significant on a number of fronts:

 

·    The current ferry services are unable to cope with large volumes of passengers and can take over an hour to transport passengers to and from the airport. This therefore creates a bottleneck which is a potential limitation on the numbers of passengers passing through the airport. The new Sovereign Ferries service will be capable of transporting a full plane load of passengers across the estuary in around 15 minutes, in style and comfort thus significantly increasing the capacity of passengers through the airport, which in turn will benefit our airport security operations;

·     The ferry service will generate revenues from passengers travelling both to and from the airport, as well as other daily traffic of people wishing to travel back and forth, and so has revenue potential greater than that of our existing airport security operations;

·    The service can be expanded to cover other routes and provide cargo and charter services generating additional revenue streams;

·    The contract is for 21 years and therefore offers long term revenue generation.

 

Following the signing of the contract in November 2014 we began working on building the required infrastructure around the service, improving the terminals, recruiting staff and viewing and acquiring suitable vessels. In March 2015 we announced that we had acquired a 200 seat flagship vessel which has been named Sierra Queen and this arrived in Sierra Leone, to considerable acclaim, at the end of April 2015. Ex-Royal Navy staff including a lead captain and engineer have been recruited to head up the operation in Sierra Leone.

 

I am also pleased to report that interest in our airport security services from governments and airport operators from around the world continues to grow and we are currently in various stages of discussion with an increasing number of airports and countries. Consequently, the overall prospect pipeline has grown considerably with around 8.24m pax (June 2014: 3.8m pax) relating to airports we are prioritising and for which we are in greater dialogue. This is a significant improvement from last year and shows the growing momentum and interest in our services.  It should be noted that a number of these prospects are at very early stages and not all will progress to detailed discussions, however it does never-the-less indicate the potential for our business model over the next few years.

 

The pax numbers above do include the Asian airport mentioned below and the East African airport project which we have been in advanced discussions with for some time. The process for this particular airport has frustratingly taken far longer than anticipated due to the government's own internal processes however the project remains active and the authorities continue to engage with us on an exclusive basis for the long term security of the airport, albeit on their timescales. It is important to understand this is not necessarily indicative of the time frame for any other opportunities we are discussing as each project has its own dynamics and complexities. The ferry contract for example was signed in under four months after signing of the original MoU.

 

In February 2015 we announced the signing of a new MoU with a government in Asia which is significantly larger than either the West or East African operations and which is progressing through due diligence and assessment stages. The significance of the project, apart from its size and potential, is that it is in an entirely different part of the world creating resilience for our operations against regional issues such as Ebola and demonstrates that our reputation and interest in our services is truly international.

 

Airport security solutions and our experience in the sector represent a significant growth area for our Managed Services division, however this is certainly not the only area of expansion. We are in discussions with a number of port operators on similar long term managed services solutions as well as continuing to look at managed services opportunities beyond security.

 

Westminster Group Foundation

 

In October 2014 we announced the launch of the Westminster Group Foundation, a registered UK charity. Westminster has always endeavoured to support the communities in which it operates as well as charities both in the UK and overseas. With the growing Ebola Crisis in 2014 the launch of the Westminster Group Foundation and our Ebola Appeal was well timed to help alleviate some of the suffering of those affected, both directly and indirectly from the crisis. We have been greatly impressed by the support and generosity of many of our suppliers, advisors, shareholders and others who have contributed both financially and in kind and for which we are most grateful.

 

We are an integral part of the communities in which we operate and it is right we provide what support we can, particularly in times of crisis. To see more about its activities please visit the foundation website at www.wg-foundation.org. 

 

Business Outlook

 

I am pleased to report that 2015 has started on a positive note continuing the stronger finish to 2014. Our Technology division has secured approximately $2.4m of orders in the first four months including the $0.96m contract for the iconic bridge in the USA, and our Managed Services division signed the Asian Airport MoU in February 2015, both significant achievements. Our new flagship ferry vessel, Sierra Queen, has arrived in Sierra Leone and will be delivering revenues during 2015. Ebola is subsiding and passenger numbers are recovering.

 

In addition both divisions, Technology and Managed Services, are negotiating a number of sizeable potential projects and whilst of course there can be no certainty as to the outcome or timing of such discussions and whilst we obviously do not expect every prospect to reach contract stage, any one of these contracts can significantly add to our revenues, and several would transform our business beyond recognition.

 

We are pursuing opportunities and discussions to expand our Agent and Franchise network in strategic locations as well as building our influential business partner network.

 

We have a strong management team and an experienced board of Directors with over 100 years' experience in the security sector and with strong governmental connections. We have expanded and strengthened our business development team and are implementing new processes and procedures to monitor and increase conversion rates of our substantial prospect pipeline. We have clear strategic goals and objectives and a commitment to delivering on our vision.

 

2014 was a year defined largely by the Ebola crisis and our struggles to contain it.  We take great pride in what we achieved, however additionally feel disappointment with the reduced sales performance in this difficult period. 2015 by contrast, given the achievements in 2014 and the momentum our business is now experiencing, gives me and the Board cause for optimism and we remain excited about our future growth prospects.

 

P.D. Fowler

Chief Executive Officer

 

 

 

 

Chief Financial Officer's Report

 

Revenue

 

Revenues from our ongoing businesses were £3.5m (2013: £7.4m). The Technology division recorded revenues of £1.2m (2013: £4.4m). Orders of circa $7m were won by the Division in the period but were not delivered and were thus not recognised in 2014's revenue however provide better visibility into future performance.  Run rate, smaller sized, product orders were flat but this has improved in 2015 with a notable uplift in sales, both in terms of volumes and margins. The Managed Services division after commencing with a strong start to the year was then adversely impacted by the Ebola situation in West Africa which developed during the second half of the year. This saw a reduction of up to 70% of passenger volumes (and thus ticket derived revenues) as travel was curtailed, although in 2015 volumes have significantly improved.  Longmoor is transitioning from being UK centric to concentrate more on international operations which has initially reduced revenues to £0.1m (2013: £0.2m) but offers greater scope for future revenues and margins.

 

Gross Margin

 

Gross margin from our ongoing business rose to 56.0% (2013: 42.2%) due to the mix of business activities.

 

Operating Cost base

 

Our total operating and administrative costs were £4.3m (2013: £5.1m). As the Ebola crisis struck, the Company implemented a cost reduction program including certain headcount reductions, salary sacrifices as well as reducing Board remuneration and advisory costs. This program commenced at the start of the final quarter of 2014 and currently this cost base is some 18% less than during the first half of 2014.  A key strategy has been to ensure that we kept full employment of our local West African workforce at a point when many overseas organisations were shedding staff during the Ebola crisis. The vast majority of Longmoor's cost base is now variable and is only incurred against specific contracts, this has reduced cost by circa £0.1m per annum since the year end.

 

Financing Charges

 

Underlying financing charges were lower than the prior year due to a much reduced average convertible loan note balance during year and fell to £0.06m from £0.13m. 2013 benefitted from a one off £0.3m refund on the Synergy loan note which was repaid in that year.  Non cash amortised cost adjustments required under IFRS were a credit of £0.06m (2013: cost £0.25m). Overall finance charges fell from £0.09m to £0.04m.

 

Result for the Year

 

Our loss before taxation was £2.44m (2013: £1.99m). The direct contribution loss before depreciation from managed services contracts was £0.16m (2013: profit £0.67m).  At the Interims for the period to 30 June 2014, it had made an operating EBITDA margin of 28%, being an improvement on 2013 due to increasing operational efficiency and a growing passenger numbers pre-Ebola. Inevitably the dramatic fall off in passenger volumes resulted in an adverse margin impact of approximately £0.53m in the second half of the year.

 

Loss per share from continuing operations was 4.9p (2013: 4.1p) and overall loss per share was 4.9 p (2013: 5.1p).

 

Balance Sheet

 

Fixed Assets, Working Capital and Cash

 

The Group invested £0.4m in fixed assets during the year, with a large proportion of this being allocated to the ongoing West African airport project. The freehold at the Banbury HQ stood at £1.0m following certain improvements to the site. Our debtor book represented the last 42 days of sales on average (2013: 75 days). Average creditor days at the year-end were 36 (2013: 46). Cash balances at 31 December were £1.18m (2013: £0.71m).

 

Shareholders' funds stood at £2.42m (£2013: £2.16m).

 

Financing & Options

 

During the year the Company issued 8,196,181 new ordinary 10p shares raising £2.7m of cash and converting £0.22m of the 2016 convertible loan notes.  Equity for cash was issued at between 25p and 34p with an average share price of 35.7p per share. Of this total £1.25m was raised in August 2014 as a precaution against the onset of the Ebola crisis, and £1.0m was raised in December 2014 to help fund the boat purchase by Sovereign Ferries.

 

During the year the Company issued share options that vest on delivery of revenue targets to certain key business development partners.  This is in line with Westminster's strategy and the alignment with strategic partners who can add significant value by business development.

 

In March 2014 a partner was granted 0.5m options over 10p ordinary shares. These options have a strike price of 85p each and vest on delivery of the certain incremental revenues derived from Managed Services contracts.

 

In July 2014 another partner was granted 0.3m options over 10p ordinary shares in Westminster. These options have a strike price of 85p each and vest on achievement of GBP5 million of new Managed Services revenues directly generated by the partner within 3 years of commencement.

 

In both situations Westminster remains in full control of the contracts and associated accounting.

 

A further 0.43m share options were issued to employees under the EMI scheme at 51p and in December 2014 2.93m options were issued to the Board. These have an exercise price of 28.5p but cannot be exercised below 60p per share which represents 140% premium to the placing price in December 2014 and a 66% premium to the average equity price since July 2011. At that point a further 0.15m employee options were issued on that date at 28.5p.

 

Key Performance Indicators

 

The Group constantly monitors various key performance indicators for factors effecting the overall performance. At Group level the revenues and gross margin are monitored to give a constant view of the Group's operational performance. As employment costs are the single largest cost base for the Group the number of employees and employee costs are also monitored to ensure best use of resources.

 

The Managed Services division derives its revenues and cash flows based on the number of passengers using a facility such as an airport, therefore the number of passengers served is monitored along with the future potential of the division with reference to the number of potential airports and PAX in the divisional pipeline.

 

The Technology division measures its sales activity by reference to the value of quotes issued against sales enquiries and therefore monitors the average enquiries received per month and the potential value of those enquiries. Additionally the conversion rate by quantity is monitored to counter the effects of large scale enquiries which can distort value comparisons. Finally the number of countries and number of return customers are monitored to give a view on the performance of the division both pre and post sales.

 

Group	2014	2013
Revenue £'m	3.5	7.4
Gross Margin	56%	42%
# of Employees	213	201
Average Employee Cost per annum	£12,300	£13,500
Managed Services
Passengers Served ('000 per annum)	94	112
Potential PAX Pipeline (million per annum)	65	30
Potential Airport Pipeline (# of airports)	87	42
Technology
Average Enquiries Per Month	118	128
Average Value of Monthly Enquiries (£ 'million)	30.2	34.2
Conversion Rate by Volume	20.9%	24.7%
# of Countries Supplied	38	42
# of Return Customers	129	128

 

 

Post Balance Sheet Events

 

On 21 April 2015 the Company raised approximately £2.3m gross from the issue of 2 separate convertible loan notes. The full details are set out in note 11 to these preliminary results.

 

CTAC Litigation Update

 

The Company remains in negotiations with the vendors of CTAC Limited to resolve amounts due to Westminster and amounts in relation to the net asset shortfall.  Whilst broad agreement has been reached we are working on certain multi-jurisdictional aspects of the case to ensure Westminster's position is appropriately protected. Proceeds will be recognised in the financial statements as we receive assets and cash.

 

Ian Selby

Chief Financial Officer

 

 

 

			2014	2013
		Note
			£'000	£'000
Revenue - Continuing Operations			3,489	7,427
Revenue - Discontinued Operations			-	202
REVENUE			3,489	7,629
Cost of sales			(1,533)	(4,434)
Gross Profit - Continuing Operations			1,956	3,138
Gross Profit - Discontinued Operations			-	57
GROSS PROFIT			1,956	3,195
Administrative expenses			(4,360)	(5,098)
LOSS FROM OPERATIONS			(2,404)	(1,903)
Analysis of operating loss
Loss/ from operations			(2,404)	(1,903)
Amortisation			(4)	(7)
Depreciation			(163)	(251)
Operating loss from discontinued operations		8	-	(370)
Add back non-operating cost adjustments  & Operating		4	(681)	(474)
EBITDA Loss from underlying operations			(1,556)	(801)
Financing Charges	5		(37)	(88)
LOSS BEFORE TAX			(2,441)	(1,991)
Taxation	6		9	(9)
Loss for the year from continuing operations			(2,432)	(1,630)
Loss for the year from discontinued operations	8		-	(370)
LOSS  ATTRIBUTABLE TO EQUITY SHAREHOLDERS			(2,432)	(2,000)
TOTAL COMPREHENSIVE EXPENSE FOR THE YEAR ATTRIBUTABLE TO EQUITY SHAREHOLDERS			(2,432)	(2,000)
LOSS PER SHARE ON CONTINUING ACTIVITIES:
Loss per share from continuing operations	7		(4.94)	(4.09)
Loss per share from discontinued operations	7		-	(1.00)
LOSS PER SHARE			(4.94)	(5.09)

 

The accompanying notes form part of these preliminary financial statements.

 

 

 

 

WESTMINSTER GROUP PLC CONSOLIDATED STATEMENT OF FINANCIAL POSITION For the year ended 31 December 2014
			2014		2013
	Note		£'000		£'000
Goodwill			397		397
Other intangible assets			11		14
Property, plant and equipment			1,898		1,687
Investment in subsidiaries			-		-
TOTAL NON-CURRENT ASSETS			2,306		2,098
Inventories			72		103
Trade and other receivables			2,044		1,416
Cash and cash equivalents			1,180		707
TOTAL CURRENT ASSETS			3,296		2,226
TOTAL ASSETS			5,602		4,324
Share capital			5,515		4,695
Share premium			9,039		7,123
Merger relief reserve			299		299
Share based payment reserve			141		89
Equity reserve on convertible loan note			47		144
Revaluation reserve			134		134
Retained earnings			(12,757)		(10,325)
TOTAL SHAREHOLDERS' EQUITY			2,418		2,159
Borrowings	9		538		651
Deferred tax liabilities			53		53
TOTAL NON-CURRENT LIABILITIES			591		704
Deferred incomes			1,475		136
Trade and other payables			1,118		1,325
TOTAL CURRENT LIABILITIES			2,593		1,461
TOTAL LIABILITIES			3,184		2,165
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY			5,602		4,324

 

 

 

 

 

 

 

	Share capital		Share premium	Merger relief reserve	Share based payment reserve	Revaluation reserve	Equity Reserve on Convertible Loan Note	Retained earnings	Total
		£'000	£'000		£'000	£'000	£'000	£'000	£'000
AS OF 1 JANUARY 2014	4,695		7,123	299	89	134	144	(10,325)	2,159
Share based payment charge	-		-	-	52	-	-	-	52
Share issues	820		2,112	-	-	-	-	-	2,932
Cost of  share issues	-		(196)	-	-	-	-	-	(196)
Arising in the year	-		-	-	-	-	(97)	-	(97)
TRANSACTIONS WITH OWNERS	820		1,916	-	52	-	(97)	-	2,691
Total comprehensive expense for the year	-		-	-	-	-	-	(2,432)	(2, 432)
AS AT 31 DECEMBER 2014	5,515		9,039	299	141	134	47	(12,757)	2,418
AS OF 1 JANUARY 2013	3,257		3,654	299	56	134	-	(8,325)	(925)
Share based payment charge	-		-	-	33	-	-	-	33
Share issues	1,438		3,670	-	-	-	-	-	5,108
Cost of share issues	-		(201)	-	-	-	-	-	(201)
Arising in the year	-		-	-	-	-	144	-	144
TRANSACTIONS WITH OWNERS	1,438		3,469	-	33	-	144	-	5,084
Total comprehensive expense for the year	-		-	-	-	-	-	(2,000)	(2,000)
AS AT 31 DECEMBER 2013	4,695		7,123	299	89	134	144	(10,325)	2,159

 

 

 

 

 

 

CONSOLIDATED CASH FLOW STATEMENT

 

						2014	2013
					Note	£'000	£'000
LOSS BEFORE TAXATION						(2,441)	(1,991)
Adjustments						261	565
Net changes in working capital					10	535	(794)
NET CASH (USED IN) /FROM OPERATING ACTIVITIES						(1,645)	(2,220)
INVESTING ACTIVITIES:
Purchase of property, plant and equipment						(399)	(457)
Purchase of intangible assets						(1)	(5)
Proceeds from disposal of fixed assets						11	72
Advances to subsidiaries						-	-
CASH FLOW USED IN INVESTING ACTIVITIES						(389)	(390)
FINANCING ACTIVITIES:
Gross proceeds from the issues of Ordinary shares						2,704		3,081
Costs of share issues						(128)		(201)
Proceeds from the issue of convertible loan notes						-	1,118
Costs Associated with the issue of convertible loan notes						-	(108)
Repayment of short term borrowings						-	(704)
Interest paid						(69)	(90)
CASH FLOW FROM FINANCING ACTIVITIES				2,507			3,096
Net change in cash and cash equivalents				473			486
CASH AND EQUIVALENTS AT BEGINNING OF YEAR				707			221
CASH AND EQUIVALENTS AT END OF YEAR				1,180			707

 

The accompanying notes form part of these preliminary statements.

 

 

 

 

 

 

 

 

1.            General information and nature of operations

 

Westminster Group plc ("the Company") was incorporated on 7 April 2000 and is domiciled and incorporated in the United Kingdom and quoted on AIM.  The Group's financial statements for the year ended 31 December 2014 consolidate the individual financial statements of the Company and its subsidiaries (together referred to as "the Group"). Westminster Group plc and its subsidiaries design, supply and provide on-going advanced technology solutions and services to governmental and non-governmental organisations on a global basis.

 

 

2.             Summary of significant accounting policies

 

Basis of preparation

 

The Group financial statements have been prepared and approved by the Directors in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union.  The Company has elected to prepare its parent company financial statements in accordance with IFRS as adopted by the European Union.

 

The financial information is presented in the Company's functional currency, which is Great British Pounds ('GBP') since that is the currency in which the majority of the Group's transactions are denominated.

 

The accounts are prepared on a going concern basis. In assessing whether the going concern assumption is appropriate, management have taken into account all relevant available information about the future. As part of its assessment, management have taken into account the profit and cash forecasts, the continued support of the shareholders, loan note holders and Directors and management ability to affect costs and revenues.

 

Management regularly forecast results, financial position and cash flows for the Group. A sensitized budget for 2015 and 2016 has been prepared which includes revenues from major contracts that have already been secured by the end of April 2015, the predictable regular flow of smaller contracts, a much downgraded view of new Technology Division contracts and excludes incremental Managed Services contract wins. Based upon these projections the Group has adequate working capital for the 12 months following the date of signing these accounts. For this reason they continue to adopt the going concern basis in preparing the financial statements.

 

 

3.             Segment reporting

 

Operating segments ongoing business

 

The Board considers the Group on a Business Unit basis.  Reports by Business Unit are used by the chief decision-maker in the Group.  The Business Units operating during the year are the three operating companies Westminster Aviation, Westminster International, and Longmoor Security. This split of business segments is based on the products and services each offer. In 2013 Longmoor and Westminster Aviation both form the Managed Services Division and Westminster International is now referenced as the Technology division.  Disposed of businesses (RMS (CTAC) and IMS) are excluded from this analysis.

 

 

                 

 

	Managed Services Aviation	Technology	Group and Central	Managed Services Longmoor	Group Total
	£'000	£'000	£'000	£'000	£'000
Year ended 31 December 2014
Supply of products	-	890	-	-	890
Supply and installation contracts	-	267	-	-	267
Maintenance and Services	2,180	275	-	44	2,499
Close protection services	-	-	-	-	-
Training courses	9	-	-	63	72
Intragroup sales	-	(239)	-	-	(239)
Revenue	2,189	1,193	-	107	3,489
Segmental underlying EBITDA	380	(429)	(1,558)	51	(1,556)
Operating Exceptionals (note 4)	(530)	(10)	(54)	(87)	(681)
Depreciation & Amortisation	(129)	(10)	(23)	(5)	(167)
Apportionment of central overheads	(1,063)	(498)	1,645	(84)	-
Segment Operating result	(1,342)	(947)	10	(125)	(2,404)
Finance cost	-	-	(37)	-	(37)
Income tax (charge)/benefit	9	-	-	-	9
Loss for the financial year	(1,333)	(947)	(27)	(125)	(2,432)
Segment assets	1,331	1,899	2,313	59	5,602
Segment liabilities	462	1,880	821	21	3,184
Capital expenditure	280	6	110	3	400

 

 

 

 

 

	Managed Services Aviation	Technology	Group and Central	Longmoor Managed Services	Ongoing Operations	Discontinued (IMS/RMS)	Group Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Year Ended 31 December 2013
Supply of products	-	3,769	-	-	3,769	202	3,791
Supply and installation contracts	-	1,248	-	8	1,256	-	1,256
Maintenance and Services	2,790	252	-	28	3,070	-	3,070
Close protection services	3	-	-	6	9	-	9
Training courses	1	-	-	183	184	-	184
Intragroup sales	-	(861)	-	-	(861)	-	(861)
Revenue	2,794	4,408	-	225	7,427	202	7,629
Segmental underlying EBITDA	665	462	(1,804)	(127)	(804)	(370)	(1,174)
Operating Exceptionals	(310)	-	(64)	(100)	(474)	-	(474)
Depreciation & Amortisation	(182)	(30)	(41)	(4)	(257)	-	(257)
Apportionment of central overheads	(756)	(668)	1,532	(106)	2	-	2
Segment Operating result	(583)	(236)	(377)	(337)	(1,533)	(370)	(1,903)
Finance cost	-	-	(88)	-	(88)	-	(88)
Income tax (charge)/benefit	(9)	-	-	-	(9)	-	(9)
Loss for the financial year	(592)	(236)	(465)	(337)	(1,630)	(370	(2,000)
Segment assets	1,685	953	1,645	41	4,324	-	4,324
Segment liabilities	49	724	1,354	38	2,165	-	2,165
Capital expenditure	434	18	10	-	462	-	462

 

 

 

4.             Operating exceptional items

	2014	2013
	£'000	£'000
Exchange losses (gains)	(15)	(76)
(Profit)/loss on disposal of property, plant and equipment	20	5
Share based payments	52	33
Restructure costs -- Longmoor. 2014 represents fixed costs eliminated in the year	87	100
Loss of margin arising from fall in passenger numbers due to Ebola crisis	537	-
West Africa airport contract set up costs and ongoing Managed Services discretionary expansion	-	310
Other restructuring	-	102
	681	474

 

 

 

 

5.             Finance cost

	2014	2013
	£'000	£'000
Finance costs:
Interest payable on bank and other borrowings	(10)	(26)
Coupon Interest payable on convertible loan notes	(88)	(125)
(Fees)/Refund on Synergy Loan Note	-	315
	(98)	164
Finance income:
Amortised finance cost on convertible loan notes	61	(252)
	61	(252)
Finance costs and income, net	(37)	(88)

               

 

 

6.             Taxation

 

Analysis of (credit)/charge in year

		2014	2013
		£'000	£'000
Current year
Corporation tax		-	9
		-	9
		2014	2013
		£'000	£'000
Reconciliation of effective tax rate
Profit/(loss) on ordinary activities before tax		(2,441)	(1,991)
Loss on ordinary activities multiplied by the standard rate of corporation tax in the UK of 20.0% (2013: 23.5%)		(489)	(463)
Effects of:
(Income)/expenses not deductible for tax purposes		60	228
Capital allowances less than depreciation		85	10
Other short term timing differences		15	19
Recognised/unrecognised losses carried forward		329	206
Potential Charge in Overseas Subsidiary		(9)	9
Total tax charge/(credit)		(9)	9

 

 

Tax losses available for carry forward (subject to HMRC agreement) were £8.9m (2013: £6.5m).  

 

 

 

7.             Loss per share

 

Earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the year.

 

For diluted earnings per share the weighted average number of ordinary shares in issue is adjusted to assume conversion of all diluted potential ordinary shares. Only those outstanding options that have an exercise price below the average market share price in the year have been included.

 

The weighted average number of ordinary shares is calculated as follows:

	2014	2013
	£'000	£'000
Issued ordinary shares
Start of period	46,949	32,571
Effect of shares issued during the period	2,290	6,754
Weighted average basic and diluted number of shares for period	49,239	39,325

 

For the year ended 31 December 2014 and 2013 the issue of additional shares on exercise of outstanding share options would decrease the basic loss per share and there is therefore no dilutive effect. Loss per share excluding discontinued items was 4.94p (2013: 4.09p).

 

 

8.             Discontinued operations

 

On 26 March 2013, the Group entered into a sale agreement with a management buy-out team to dispose of RMS (CTAC) Integrated Solutions and International Monitoring Services Limited, which carried out all of the Groups UK alarm installation and monitoring operations. The disposal was for £200,000 to generate working cash flows for the expansion of the Groups other businesses. Consideration is paid over 12 months and if the disposed companies exceed certain revenue threshold then incremental consideration becomes payable.

 

The results of the discontinued operations which have been included in consolidated income statement were as follows:

 

Group	2013 £'000	2012 £'000	2011 £'000
Revenue Cost of sales	202 (145)	1,552 (964)	1,312 (929)
Gross profit Administration expenses	57 (427)	588 (953)	383 (929)
Loss before tax	(370)	(365)	(546)
Loss on the disposal of discontinued operations	(370)	(365)	(546)

 

 

 

 

 

9.             Convertible Loan Notes

 

The Group had the following convertible loan note outstanding during the year the key details of which are set out below:  This was varied as detailed in note 30 in April 2015.

 

Amount	£1.118m new funds received in June 2013 with £0.2m of the FY14 note rolling into this instrument.  By the balance sheet date all except £575,000 had converted into equity. Subsequent issue of £0.67m April 2015. £4m original capacity
Conversion Price	35p or > 35p for any further new issues after 1 May 2015 onwards
Security	Secured fixed and floating subordinate to HSBC
Redemption Date	19 June 2016 (renegotiated to 19 June 2018 in April 2015 as per note 30)
Management Fee	£25,000 per annum
Coupon	10%
Company can force conversion	Company can force conversion if > 65p for 15 working days after 19 June 2016. Company can make repayment without penalty if > 42p for 15 working days after 19 June 2016

 

                                               

 

 

Host Debt		2014			2013
			£'000		£'000
At 1 January			651		2,147
Issued in the Year			-		1,009
Amortised Finance Cost			46		249
Capital Adjustment regarding fees			-		(312)
Repayment			-		(858)
Conversion			(159)		(1,584)
At 31 December			538		651
	Reconciliation of Conversion		2014	2013
			£'000	£'000
	Amortised Loan Note Interest Cost Element		(61)	(314)
	Principal Amount Converted		220	1,898
			159	1,584

 

 

Analysis of movement in debt at principal value (excluding IFRS impacts), memorandum only

 

		2014		2013
			£'000	£'000
Opening Balance 1 January			795	2,575
Fresh Issue for Cash			-	1,117
Ref-und of previous payments			-	(296)
Repayment			-	(685)
Discount On redemption			-	(19)
Conversion into Equity			(220)	(1,897)
Closing Balance 31 December			575	795

 

 

 

10.          Cash flow adjustments and changes in working capital

 

The following non-cash flow adjustments and adjustments for changes in working capital have been made to (loss)/profit before tax to arrive at operating cash flow

	2014	2013
	£'000	£'000
Adjustments:
Depreciation, amortisation and impairment of non-financial assets	167	257
Loss on disposal of CTAC & other intangibles	-	176
Financing costs	37	88
Provision on intercompany debt	-	-
Loss /(Profit) on disposal of non-financial assets	5	11
Share-based payment expenses	52	33
Total adjustments	261	565
Net changes in working capital:
(Increase)/decrease in inventories	31	(26)
(Increase)/decrease in trade and other receivables	(628)	5
Increase/(decrease) in trade and other payables	1,132	(772)
Total changes in working capital	535	(793)

 

 

 

11.          Post balance sheet events

 

 

On 22 April 2015 the Group completed the following debt issues to for general balance sheet strength and will support ongoing costs and business development, particularly around the expansion of the Managed Services division.  They were structured in a way so as to minimise potential dilution to equity shareholders.

 

Variation of 2016 Convertible Secured Loan Note ("CSLN") and issue of further loan notes.

 

On 19 June 2013, the Company issued a CSLN enabling the drawdown of a maximum of £4m, with a three year duration, a 10% annual coupon and a conversion price of 35 pence.  As at that date, £1.318m of the CSLN had been drawn down. Subsequently £0.742m of this was converted into ordinary shares in the Company leaving £0.576m outstanding immediately prior to this announcement. The terms of this have been varied (as consented to by all existing loan note holders) so as to attract incoming investors (of which £0.67m subscribed on that day), the key terms of which are set out below:

 

·      Maturity date extended by 2 years to June 2018

·      The conversion price (for issues after 30 April 2015) can be greater than 35p

 

Westminster may repay the CSLN without penalty after the first year from the date of the announcement provided that the average share price for the 15 days prior to repayment is 42 pence or more.  Westminster may force conversion of the CSLN if the average share price on the 15 days before conversion is 65 pence or more. The CSLN holders may convert at any time during the term of the instrument at the holder's option. All other terms of the CSLN remain the same. These loan notes have a current capacity to issue a further £2,013,000 and are listed on the Channel Islands Stock Exchange.  

 

Zero Coupon Convertible Unsecured Loan Notes ("CULN").

 

The Company also issued a further £1,650,000 (gross) CULN with Darwin Strategic Limited ("Darwin"). The CULN is unsecured, has a zero coupon attached and will be divided into 66 individual notes with a par value of £25,000 each ("Par Value").

 

For each £25,000 loan note issued, Westminster has received 90% of the Par Value, equivalent to £22,500 per individual loan note. During the first 12 months, any number of the loan notes is callable in cash by Westminster at 100% of Par Value (subject to the right of a loan note holder to convert with agreed limitations as below).  Following the 1 year anniversary, any number of loan notes is callable at 102.5% of Par Value, equivalent to £25,625 per individual loan note. From 1 May 2016, Westminster is required to prepay 3 loan notes every month at 105% of Par Value, equivalent to £78,750 and these monthly repayments will mean no further equity issue from this instrument.

 

The loan notes are convertible at Darwin's election into new ordinary shares of 10p each in Westminster ("Ordinary Shares") at the conversion price, being the lesser of 39 pence per new Ordinary Share or 90% of the arithmetic average of the five lowest daily volume weighted average share price per Ordinary Share out of the ten trading days prior to conversion. The parties have also agreed to certain limitations on conversion volumes throughout the duration of the loan notes.  In addition to the other redemption rights the loan notes are redeemable in the event of a change of control or the occurrence of an event of default in cash at 110% of the Par Value.

 

Darwin was also issued with warrants (vested immediately) to subscribe for 1,100,000 new Ordinary Shares at an exercise price of 39 pence per new Ordinary Share. The warrants can be exercised over a two year period from the date of this announcement.

 

Westminster and Darwin have mutually agreed to the early expiration of the previous Equity Finance Facility which was put in place in April 2013.

 

12.          Publication of Non-Statutory Accounts

 

The financial information set out above does not constitute the Company's Annual Report and Financial Statements for the years ended 31 December 2014 or 2013.  The Annual Report and Financial Statements for 2013 have been delivered to the Registrar of Companies and those for 2014 will be delivered following the Company's annual general meeting.  The auditor's reports on both the 2014 and 2013 accounts were unqualified, did not draw attention to any matters by way of emphasis and did not contain statements under s498(2) or (3) of the Companies Act 2006.  Whilst the financial information included in this preliminary announcement has been computed in accordance with International Financial Reporting Standards (IFRSs) this announcement does not itself contain sufficient information to comply with IFRSs. Copies of the Annual Report and Financial Statements for the year to 31 December 2014 will be posted to shareholders by 6 June 2015 and will be obtainable from the Company's registered offices or www.wg-plc.com when published. The information in this preliminary announcement was approved by the Board on 20 May 2015.