Financing & Trading Update

RNS Number : 9989X

Westminster Group PLC

12 May 2016

 

12 May 2016

Westminster Group Plc:

Financing and trading update

Westminster Group Plc ('Westminster', the 'Group' or the 'Company'), the AIM listed supplier of managed services and technology based security solutions to governments and government agencies, non-governmental organisations (NGOs) and blue chip commercial organisations worldwide, provides an update in respect of the financing of the business and an update on trading.

Financing update

As previously notified to the market, the Company has suffered from ongoing delays in the commencement of its West African ferry project and has also incurred additional costs due to necessary repairs. The Group has also suffered from delays in other larger projects, details of which are set out below.

While these delays have in part been offset by an improving performance of the Group's airport security operation, the Group will need to put in place additional financing in the near term.

The Board is currently exploring a number of potential financing options, which include directors' support and investment by strategic investors including a substantial strategic investment fund which is interested in joint venture arrangements relating to Westminster's aviation security business, Westminster Aviation Security Services Ltd (WASS).

Also, in order to provide additional financing flexibility and due to the Company's share price recently trading around or below its nominal share price of 10p, the Company is currently finalising plans for a capital reconstruction to reduce its nominal share capital to 1p. The Company will shortly issue a circular to shareholders with full details. The proposed change in nominal value will be subject to the passing of certain resolutions at a General Meeting.

Trading update

Unaudited management accounts for the first four months of 2016 show a continuing improvement in the profitability and cash generation of the aviation division which was loss making in the same period in 2015 due to the Ebola crisis.  Revenues in the Company's airport security operation have increased by over 85% as traffic has returned.  When combined with streamlined resources and operational leverage, this has led to a very significant improvement in the EBITDA performance of the Group as compared to the same period in 2015.

The Group's average EBITDA loss was approximately £40,000 per month in 2016 to date.  By comparison the loss on a similar basis in the first 6 months of 2015 was circa £930,000, with an implied monthly loss of circa £155,000. This performance improvement has been achieved by the improvement in traffic volumes referenced above and a lower cost base across the Group.

WASS and new MOU

As noted in the Group's announcement of 7 April 2016, the Group has benefitted from increasing passenger footfall as the recovery from Ebola continues. The first four months of 2016 are some 82.7% higher than the same period in 2015 - and April 2016 numbers are 87.3% ahead of April 2015. May numbers so far would indicate that this positive trend continues.  

Similarly, interest in the Group's airport security solutions remain strong, resulting in the signing of another new Memorandum of Understanding (MoU) for a long term (25 year) airport security programme for an international airport in the Middle East. WASS now has seven signed MoUs, some now at contract discussion stages, with various governments and airport authorities around the world, serving around 10.6 million embarking passengers annually. In addition, the Company has a number of other potential airport security prospects at various stages of discussion.

Technology Division

The Technology Division produced an improved performance during 2015 with revenues from external customers of around £1.7m (2014: £1.2m), an increase of some 43%. This excludes the work done by the Division in supporting the ferry and airport projects. In the first four months of 2016, the Technology Division has so far delivered run rate revenues of £304k against a comparative £880k (including c£500k from larger solution contracts) in the first four months of 2015. However the Technology Division revenues are lumpy in nature and so month on month comparatives are not an accurate measure as larger scale solutions contracts can occur at any time and the Division currently has several such prospects under discussion. In addition the Division continues to secure contracts for a wide range of products and services to a wide range of clients around the world.  By way of example, in recent months, the Division has supplied various products and services to UK prisons; security equipment to various airports in the UK and overseas; explosive detection equipment to a UN entity in Somalia; supplied screening equipment to the South African Police; as well as securing contracts with numerous other clients as far afield as the USA, Afghanistan, Kenya, Nigeria, Romania, Indonesia, Tanzania and China.

Unfortunately trading has been affected by certain project delays, details of which are set out below

Americas consultancy project

The Group had previously announced that due to delays in the Americas consultancy project it expected to recognise the principal revenue associated with this project by the end of 2016. This project continues to be impacted by delays in funding from the government concerned, which has been affected by the significant drop in the oil price. Whilst this means that it is now unlikely that material revenues will be recognised by the end of 2016, there remains a pressing security need and there is now an opportunity to pursue the airport project previously discussed under Westminster's Build-Operate-Transfer (BOT) programme and active discussions in this regard are also underway.

US Bridge project

This much smaller project has commenced and initial revenues received; however the main contractor has informed the Company that the project is facing delays. The Company is in regular dialogue with the main contractor but the Company currently has no clarity in relation to the expected timescales to completion of this project.

The Group expects to provide further detail in respect of its operations and current trading in its annual results for the year to 31 December 2015 which are expected to be published in June.

Ferry Project

We continue to wait for the slip to be available in order to complete inspections and repairs to the Sierra Queen and have been assured by the shipyard that they will slip the vessel at the earliest opportunity. This delay is of course a frustration for our clients, shareholders and ourselves who are anxious to see the vessel in operation. However once our second vessel, the Sierra Princess, which is already en route, arrives in country we are comforted that we will have greater resilience against such delays in future. In the meantime we have located the underwater obstruction which caused the latest accident and are making arrangements to remove it.

Despite the delays and frustrations involved in the start-up phase of this project the operation nevertheless remains a very significant opportunity for the Group.  Both arriving and departing passenger numbers are recovering strongly from the low levels during the Ebola period. In the first four months of 2016 a total of over 60,000 passengers passed through the airport, the vast majority of whom need to cross the estuary, so even a conservative 50% take-up of the service could generate significant monthly revenues and contribution.

Commenting on the update Peter Fowler, Chief Executive of Westminster Group, said:

"The last couple of years have been a challenging period for our Group with the Ebola crisis lasting longer and becoming more destructive than anyone had anticipated, coupled with the delays in the commencement of our ferry project in Sierra Leone, and the significant drop in oil prices having a knock on delaying factor with several of our key project opportunities.

"Despite these challenges, we have continued to expand our international presence and large scale project opportunities, particularly in our increasingly core focus airport security business, have the potential to transform the business.

"Whilst many of the issues faced have been beyond the Company's control, we have taken a critical look at our operations, learnt lessons with the benefit of hindsight, and are therefore undertaking a strategic review of our business to streamline operations and to ensure maximum shareholder benefit is achieved from the numerous large scale, long term and high margin opportunities we are developing and which we remain excited about."

For further information please contact:

Westminster Group plc.	Tel: [phone]
Peter Fowler (Chief Executive)
Ian Selby (Chief Financial Officer)
S. P. Angel Corporate Finance LLP (NOMAD & Broker)	Tel: [phone]
Stuart Gledhill
Walbrook PR (Financial PR)	Tel: [phone]
Tom Cooper/Paul Vann	0797 122 1972
	[e-mail]

Notes:

Westminster Group plc is a specialist security and services group operating worldwide via an extensive international network of agents and offices in over 50 countries.

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

 

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