Interim Results

RNS Number : 3515N

Westminster Group PLC

28 September 2012

 



28 September 2012

Westminster Group Plc

Interim Results for the six months ended 30 June 2012

Westminster Group Plc ('Westminster', the 'Company' or 'the Group'), the AIM listed supplier of managed services, system solutions and products to the security, defence, fire protection and safety markets worldwide, is pleased to announce its Interim Results for the six months ended 30 June 2012.

Westminster operates globally from its headquarters in Banbury, Oxfordshire, and has an international network of regionally appointed agents.  These agents commission local workforces for the installation and maintenance of each solution in their respective territories, giving unparalleled in-territory knowledge, maintenance support and after sales service.

Key Points:

Financial

·    Revenues grew by 220 % to £5.72m (2011: £1.79m)

·    Gross margin increased to 28% (2011: -1%)

·    Operating Loss reduced by 93% to £0.1m (2011: £1.9m loss)

·    Loss per share reduced to 1.07p (2011: 11.47p loss)

·    Cash balances at 30 June £0.45m (2011: £0.32m)

·    £0.5m equity issued in April 2012 and, since the period end, £1.4m of 8% convertible unsecured loan issued to improve working capital and reduce borrowing costs

·    West African Airport Contract generating recurring cash flows

Operational

·    Move to a recurring revenue model advanced with Airport Contract win

·    Extension of franchise based sales model

·    Longmoor training academy successfully relocated to Heythrop Park.

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

"2012 has so far represented a quantum leap for Westminster both strategically and financially.  These results demonstrate the continued momentum in the business that has been building over recent years. 

"It is without doubt that those currently working with Westminster as strategic partners can appreciate the unique position achieved by the Group and are keen to participate in the future success of the organisation."

Enquiries:

Westminster Group plc	Tel: [phone]
Peter Fowler (Chief Executive)
Ian Selby (Chief Financial Officer)
Fairfax I.S. PLC (Nomad + Broker)	Tel: [phone]
Stuart Gledhill/Katy Birkin
Winningtons Financial (Financial PR)	Tel: [phone]
Tom Cooper/Paul Vann	0797 122 1972 [e-mail]

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, risk assessments and close protection services. These can range from product only assignments, such as the supply of specialised scanners, to the design and implementation of an integrated system solution such as a border detection and surveillance system. The majority of its customer base, by value, comprises governments and government agencies, non governmental organisations and blue chip commercial organisations.

Overview and Operational Update

I am pleased to report that the strong momentum and trading we experienced during 2011 has been maintained throughout the first half of the year.

We continue to receive record enquiries and both our order intake and revenues in H1 2012 are substantially ahead of the same period last year.

In January 2012 we launched our new aviation security business, Westminster Aviation Security Services Ltd, to focus on our ever increasing aviation based activities. In February 2012 we secured a 15 year contract to provide the complete ground security services for a West African airport (the 'Airport Contract') with fees paid directly to Westminster by the airlines on a 'per passenger' basis.

When we initially announced this contract, we announced a potential revenue value in excess of $150million USD over the term of the contract. However, a review of operations and potential growth in passenger numbers would indicate that we may achieve the forecast figure of $150m by the year 8 break point rather than the full contract term of 15 years. Should that be the case, the revenue potential for the full contract term would be substantially higher than initially forecast.  Airport operations are expanding and other airlines are planning on commencing operations, aided by a security environment which has been acknowledged by airlines and regulatory bodies as improving.  We are investing in improving the cargo security processes which should increase freight volumes as the local economy grows, and we expect that this investment will generate further revenues.

This Airport Contract is indicative of our move towards a more managed services focussed business with long term, recurring revenue streams and I am pleased to report that we are in discussions with a number of other similar project opportunities.

In addition to the Airport Contract we have secured a number of other notable contracts within our chosen markets including a contract to supply scanning and detection equipment to an airport in Saudi Arabia as well as a sizeable contract for the supply of security equipment to the security services of a Sub-Saharan Government. In addition, we have secured contracts to supply sophisticated countermeasures to a Gulf State police force, sophisticated surveillance equipment to a Middle East Government and numerous contracts to other governmental and blue chip clients worldwide.

In May 2012 we announced the opening of the new Longmoor Training Academy in response to the increasing demand for Longmoor CP courses which will enable the company to further expand the range and scope of its courses, both residential and non-residential. Demand for Longmoor's training courses is significantly ahead of the previous year and the division's performance is much improved.  We believe that the move to a dedicated facilty has helped increase volumes.

In May 2012 we also announced the opening of our first franchise operation in Nigeria which is a target market for Westminster and the operation has already secured an initial governmental contract worth over $0.2m and has built a strong pipeline of major sales opportunities. This is a good business model for the Group building on our strong brand and I am happy to report that discussions are underway for several other territory franchises.

One of the key strategies of the Group is to develop strategic alliances and in particular investment from strategic investors who can add value to the business in key markets. I am pleased to report that we have been very successful in this respect. In April 2012 we announced a £0.5m equity investment from a strategic investor in West Africa who can help deliver sizeable business opportunities in that region. In July 2012 we announced that we had raised approximately £1.4m net of expenses through the issue of 8% unsecured convertible loan notes from new strategic investors who were chosen for their ability to open new markets and significant potential new business in Asia. I am pleased to announce these investors have already introduced some very interesting potential projects to the Company.

We continue to receive record levels of enquiries and to demonstrate our ability to deliver complex and innovative solutions and secure a broad range of contracts in our target markets globally.  We are encouraged by the exciting growth opportunities for the Group over the next few years.

Forward Strategy

Westminster's strategy is to grow its profits and shareholder value by generating predictable recurring profits from long term contracts for the protection of critical infrastructure in growth markets.  We have also created a well known brand within the sector as well as a strong distribution network, and we have begun to capitalise on this by the adoption of a franchise model. This produces high margin franchise fees as well as margins on the sales of projects and products. We believe this approach will help maximise our presence in certain high growth markets.  We will continue to invest in our infrastructure and resources to ensure that we have the right team in place to deliver such contracts.

Peter Fowler

Chief Executive Officer

Financial and Operating review

The period showed a far stronger financial performance than the same period last year.  Revenues grew by 220% to £5.72m (2011: £1.79m) on the back of contract deliveries for solution sales signed in 2011 and with the initiation in May 2012 of the Airport Contract signed in February 2012.  Our gross margin improved to 28% (2011: 1% negative).  Airline passenger numbers (against which we get a fee) under our Airport Contract were in line with our expectations, and this source of higher margin business has helped increase our overall gross margin. 

Our administrative expenses of £1.7m were slightly less than those from the previous year, however when adjusted for certain non-recurring items they stood at £1.8m (2011: £1.6m) the increase of £0.2m largely arising from the establishment costs of the African Airport Contract which commenced in February 2012 and for which revenues were recorded from May 2012 onwards.  £0.1m was received from certain former employees under terms of their compromise agreements.

Our operating loss was therefore reduced by 94% to £0.1m (2011: £1.9m loss).  Our financing costs increased as previously announced due to the impact of the increasing management fee on the loan from Synergy Capital. Our net loss for the period was therefore £0.3m (2011: £2.7m loss) and this reduced the loss per share by 93% to 1.07p (2011: 11.47p loss).

Cash balances were £0.45m (2011: £0.32m) and the debtor book stood at £2.05m (2011: £1.56m).  This increase in the debtor book was due to increased sales volumes.  The average days sales outstanding at the end of the period was 63 days (2011: 160 days).  This reduction was achieved through stronger credit terms, the use of letters of credit and the commencement of cash receipts under the Airport Contract. 

During the period the Group issued £0.5m of new ordinary shares to strategic investors in Nigeria and, since the interim balance sheet date of 30 June 2012, the Group issued £1.4m of unsecured convertible loan notes which carry a coupon of 8% and have a conversion price of 27.5p to Asian based strategic investors. The proceeds of these fundraisings are for general working capital purposes and paying down the Synergy Loan.

Ian Selby

Chief Financial Officer

Outlook

The Group has set out a clear strategy to move to becoming a business which is profitable on the basis of regular recurring revenues.  We have made good progress on this and our successful delivery of the "managed services" Airport Contract to date has helped generate a more predictable stream of income.  I am pleased to report that we continue to progress discussions with other airports and similar infrastructure sites in high growth territories, to deliver similar contracts.

Our pipeline continues to grow against a backdrop of major global drivers. As in previous years we are at advanced stages of negotiation with certain solution sales prospects and, whilst we currently expect these to benefit the current financial year the timescales and ability to recognise revenues can be subject to change due to factors beyond our control, and we will update the market as events unfold. This combined with the contracts won in the year, the successful introduction of a recurring revenue model and the ever increasing enquiry levels, means that the Directors are increasingly optimistic about the future for Westminster.

Sir Malcolm Ross

Chairman

Westminster Group plc

Condensed consolidated statement of comprehensive income for the six months ended 30 June 2012
		6 months	6 months	Year
		to 30 June	to 30 June	to 31 Dec
		2012	2011	2011
	Note	Unaudited	Unaudited	Audited
		£'000	£'000	£'000
Revenues		5,717	1,788	10,065
Cost of sales		(4,122)	(1,818)	(7,606)
Gross (Loss) / Profit		1,595	(30)	2,459
Administrative expenses		(1,708)	(1,879)	(4,087)
LOSS FROM OPERATIONS		(113)	(1,910)	(1,628)
Financing costs	5	(214)	(145)	(400)
Finance income		(0)	(0)	44
PROFIT/(LOSS) BEFORE TAX		(327)	(2,055)	(1,984)
Income tax		-	(727)	(727)
PROFIT/(LOSS)  ATTRIBUTABLE TO EQUITY SHAREHOLDERS		(327)	(2,782)	(2,711)
TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO EQUITY SHAREHOLDERS		(327)	(2,782)	(2,711)
EARNINGS PER SHARE ON CONTINUING ACTIVITIES:
Basic in pence	4	(1.11)	(11.47)	(10.19)

Condensed consolidated statement of financial position at 30 June 2012
		6 months	6 months	Year
		to 30 June	to 30 June	to 31 Dec
		2012	2011	2011
		Unaudited	Unaudited	Audited
	Note	£'000	£'000	£'000
Goodwill		397	397	397
Other intangible assets		208	253	245
Property, plant and equipment		1,069	1,070	1,028
TOTAL NON-CURRENT ASSETS		1,674	1,720	1,670
Inventories		85	181	112
Corporation tax recoverable		-	-	50
Trade and other receivables		2,052	1,564	1,222
Cash and cash equivalents		445	322	414
TOTAL CURRENT ASSETS		2,582	2,067	1,798
TOTAL ASSETS		4,256	3,787	3,468
Share capital		3,257	2,425	2,693
Share premium		3,654	3,369	3,449
Merger relief reserve		299	299	299
Share based payment reserve		33	31	33
Revaluation reserve		134	134	134
Retained earnings		(7,048)	(6,792)	(6,721)
TOTAL SHAREHOLDERS' EQUITY		329	(534)	157
Trade and other payables		-	-	99
Borrowings		1,001	961	963
Embedded derivative		4	48	4
Deferred tax liabilities		99	97	99
TOTAL NON-CURRENT LIABILITIES		1,104	1,106	1,165
Borrowings		37	150	81
Trade and other payables		2,786	3,065	2,065
TOTAL CURRENT LIABILITIES		2,823	3,215	2,146
TOTAL LIABILITIES		3,927	4,321	3,411
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY		4,256	3,787	3,468

Condensed consolidated statement of changes in equity
for the six months ended 30 June 2012
	Share capital	Share premium		Merger relief reserve	Share based payment reserve	Revaluation reserve	Retained earnings	Total
	£'000	£'000		£'000	£'000	£'000	£'000	£'000
AS OF 1 JANUARY 2012	2,963	3,449		299	33	134	(6,721)	157
Issue of Shares	294	206		-	-	-	-	500
TRANSACTIONS WITH OWNERS	294	206		-	-	-	-	500
Loss for the period	-	-			-	-	(327)	(327)
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD ATTRIBUTABLE TO SHAREHOLDERS	-	-		-	-	-	(327)	(327)
AS AT 30 JUNE 2012	3,257	3,655		299	33	134	(7,048)	327
AS OF 1 JANUARY 2011	2,425	3,369		299	27	134	(4,010)	2,244
Share based payment charge	-	-		-	4	-	-	4
TRANSACTIONS WITH OWNERS	-	-		-	4	-	-	4
Loss for the period	-	-		-	-	-	(2,782)	(2,782)
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD ATTRIBUTABLE TO SHAREHOLDERS	-	-		-	-	-	(2,782)	(2,782)
AS AT 30 JUNE 2011	2,425	3,369		299	31	134	(6,792)	(534)

	Share capital	Share premium	Merger relief reserve	Share based payment reserve	Revaluation reserve	Retained earnings	Total
	£'000	£'000		£'000	£'000	£'000	£'000
AS OF 1 JANUARY 2011	2,425	3,369	299	27	134	(4,010)	2,244
Share based payment charge	-	-	-	8	-	-	8
Share issues	538	108	-	-	-	-	646
Cost of share issues	-	(28)	-	-	-	-	(28)
Deferred tax adjustment	-	-	-	(2)	-	-	(2)
TRANSACTIONS WITH OWNERS	538	80	-	6	-	-	624
Loss for the year	-	-	-			(2,711)	(2,711)
TOTAL COMPREHENSIVE INCOME FOR THE YEAR ATTRIBUTABLE TO SHAREHOLDERS	-	-	-	-	-	(2,711)	(2,711)
AS AT 31 DECEMBER 2011	2,963	3,449	299	33	134	(6,721)	157

Westminster Group plc
Condensed consolidated statement of cash flows
for the six months ended 30 June 2012
		6 months	6 months	Year
		to 30 June	to 30 June	to 31 Dec
		2012	2011	2011
Note		Unaudited	Unaudited	Audited
		£'000	£'000	£'000
LOSS BEFORE TAX		(327)	(2,055)	(1,984)
Adjustments                                                              6		268	270	606
Net changes in working capital                                 6		(137)	1,955	1184
NET CASH (USED IN)/FROM OPERATING ACTIVITIES		(196)	170	(194)
INVESTING ACTIVITIES:
Purchase of property, plant and equipment		(56)	(10)	(28)
NET CASH USED IN INVESTING ACTIVITIES		(56)	(10)	(28)
FINANCING ACTIVITIES:
Gross proceeds from the issue of Ordinary Shares		500	-	646
Costs of the share issue		-	-	(28)
	Repayment of short term borrowings	-	-	(110)
	Interest Paid	(215)	(99)	(283)
	NET CASH FROM/(USED IN) FINANCING ACTIVITIES	285	(99)	375
	Net change in cash and cash equivalents	31	61	153
	CASH AND EQUIVALENTS AT BEGINNING OF PERIOD	414	261	261
	CASH AND EQUIVALENTS AT END OF PERIOD	445	322	414

Notes to the condensed consolidated financial statements for the 6 month period ended 30 June 2012

1.   General information and nature of operations

Westminster Group plc (the "Company") and its subsidiaries (together the "Group") design, supply and provide ongoing support for advanced technology security, safety, fire and defence solutions to a variety of government and related agencies, non-governmental organisations and mainly blue chip commercial organisations. The Group currently operates through a network of  agents located in 45 countries.  Agents typically generate sales leads and work with the Group in preparing tender documentation. The majority of the agents are based in the Middle East, the Far East and Africa. The Company was incorporated on 7 April 2000 and is domiciled and incorporated in the United Kingdom and is listed on the AIM Market of the London Stock Exchange.

2.   Basis of preparation

These unaudited condensed consolidated interim financial statements are for the six months ended 30 June 2012. The Group has not adopted the reporting requirements of International Accounting Standard (IAS) 34 'Interim Financial Reporting'. They have been prepared following the recognition and measurement of principles of IFRS as adopted by the European Union. The statements do not include all of the information required for full annual financial statements and should be read in conjunction with the consolidated financial statements of the Group for the year ended 31 December 2011.

The condensed consolidated interim financial statements have been prepared in accordance with the accounting policies adopted in the last annual financial statements which were for the year ended 31 December 2011.

This condensed consolidated interim financial statement for the six months ended 30 June 2012 has neither been audited nor reviewed by the Group's auditors. The financial information for the year ended 31 December 2011 set out in this interim report does not constitute statutory accounts as defined in section 434 of the Companies Act 2006. The statutory accounts for the year ended 31 December 2011 have been reported on by the Company's auditors and delivered to the Registrar of Companies. The report of the auditors was unqualified and did not contain a statement under section 498(2) or 498(3) of the Companies Act 2006.

Going concern

These interim financial 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 and bondholders, as well as Directors and management ability to affect costs and revenues.

Basis of consolidation

The Group financial statements consolidate those of the Group and its subsidiary undertakings drawn up to 30 June 2012. Subsidiaries are entities over which the Group has the power to control the financial and operating policies so as to obtain benefits from their activities. The Group obtains and exercises control through voting rights. Consolidation is conducted by eliminating the investment in the subsidiary together with the parent's share of the net equity of the subsidiary.

3.   Functional and presentational currency

The financial information has been presented in pounds sterling, which is the Group's presentational currency. All financial information presented has been rounded to the nearest thousand.

4.   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 dilutive potential ordinary shares.  Only those outstanding options that have an exercise price below the average market share price in the year have been included.

For each period the issue of additional shares on exercise of outstanding share options would decrease the basic loss per share and therefore there is no dilutive effect.

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

	6 months to 30 June	6 months to 30 June	Year ended  31 Dec
	2012	2011	2011
	Unaudited	Unaudited	Audited
	£'000	£'000	£'000
Issued ordinary shares
Start of period	29,630	24,256	24,256
Effect of shares issued during the period	991	-	2,341
Weighted average basic/diluted number of shares for period	30,621	24,256	26,597
Loss per share
Loss attributable to shareholders	(327)	(2,782)	(2,711)
Basic loss per share in pence	(1.07)	(11.47)	(10.19)

5.   Financing Costs

	6 months to 30 June		6 months to  30 June	Year ended  31 Dec
	2012		2011	2011
	Unaudited		Unaudited	Audited
	£'000		£'000	£'000
Finance costs:
Interest payable on bank borrowings		(2)	(7)	(33)
Other interest		(15)	(15)	(181)
Interest payable on Convertible Loan Notes		(158)	(92)	(120)
Amortised finance cost on Convertible Loan Notes	(39)		(31)	(66)
	(214)		(145)	(400)
Finance income:
Fair value movement of embedded derivative in Convertible Loan Notes	-		-	44
	-		-	44
Finance costs and income, net	(214)		(145)	(356)

6.         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 before tax to arrive at operating cash flow:

	6 months to 30 June	6 months  to 30 June		Year to 31 Dec
	2012	2011		2011
	Unaudited	Unaudited		Audited
	£'000	£'000		£'000
Fair value movements embedded derivative	-	-		(44)
Adjustments:
Depreciation, amortisation and impairment of non-financial assets	54	165		170
Interest expenses	214	99		400
Loss on disposal of non-financial assets	-	2		72
Share-based payment expenses	-	4		8
Total adjustments	268	270		606
Net changes in working capital:
Decrease/(increase)in inventories	27	48		117
Decrease /(Increase) in trade and other receivables	(780)	233		525
(Decrease)/increase in trade and other payables	616	1,673		542
Total changes in working capital	(137)	1,955		1,184

7.   Material post balance sheet events

On 14 July 2012 the Company issued approximately £1.4m of Convertible Unsecured Loan Stock to strategic investors who operate in Asia. This carries a conversion price of 27.5p, a coupon of 8% and is repayable at the end of June 2017.

8.   Approval of interim financial statements

The interim financial statements were approved by the board of directors on 27 September 2012.

9.   Copies of Interim Financial Statements

A copy of the interim financial statement is available on the Company's website, www.wg-plc.com and from the Company's registered office, Westminster House, Blacklocks Hill, Banbury, Oxfordshire, OX17 2BS.

 

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