Issue of Loan Notes, Trading Update & Ferry Update

RNS Number : 6689P

Westminster Group PLC

22 February 2016

 

22 February 2016

Westminster Group Plc:

Issue of Convertible Unsecured Loan Notes, Trading Update &

Ferry Project 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 (NGO's) and blue chip commercial organisations worldwide, is pleased to announce that the Company signed a subscription agreement ("Subscription Agreement") on 19 February 2016 for an additional 19 Convertible Unsecured Loan Notes ("CULN" or "Loan Notes") with Darwin Strategic Limited ("Darwin") with a value of £475,000 to fund development of its pipeline of commercial activities.

The Group traded at overall near break-even EBITDA in the month of January due to increasing passenger footfall at the Company's airport operations as the recovery form Ebola continues, together with contribution from the Technology Division and the cost controls implemented in 2015.  The net proceeds from the Loan Notes will be used to fund the growing pipeline of commercial opportunities; to include the increasing number of MoU's; and supported by the improving passenger numbers at the West African airport; the commencement of cargo operations where the capital spend is now complete to allow the acceptance of cargo loads; and the commencement of the imminent ferry service.  The quantity of near-term projects demonstrates the scale of the pipeline of operational opportunities.

The CULN is unsecured, has a zero coupon attached and will be comprised of 19 individual notes with a par value of £25,000 each ("Par Value") to give a total gross value of £475,000. Each Loan Note has a face value of £25,000. The Loan Notes may be converted to Westminster shares at 90% of the then ruling market price, or may be repaid by Westminster at 102.5% of face value, conversions are at the discretion of the Loan Note holder.  Subscription for the Loan Notes has been arranged by Darwin Strategic Limited (Darwin).  

Terms of the Loan Notes

The issue under the Subscription Agreement is subject to certain conditions, including no material breach of warranties and is issuable on signing of the Subscription Agreement.

Loan Notes can be converted into Ordinary Shares at the lower of 1) 20.15 pence; or 2) 90% of the arithmetic average of the volume weighted average share price per Ordinary Share for five trading days selected by Darwin out of the 10 trading days preceding conversion ("Conversion Feature").

In addition to the other redemption rights, the Loan Notes are redeemable at par in the event of a change of control of Westminster or on the occurrence of an event of default in cash at 120% of the Par Value. 

Darwin has also been issued with warrants to subscribe for 589,330 new Ordinary Shares at an exercise price of 20.15 pence per new Ordinary Share. The warrants can be exercised within 3 years of their issue.

Trading Update for the Year Ended 31 December 2015

Revenues are expected to be approximately £3.4m.  Technology Division sales were higher overall due to larger product sales in the first quarter of the year whilst Managed Services revenues were lower than 2014 due to the full year being impacted by Ebola.  Embarking passenger numbers at the West African airport steadily increased during the year (from a low point of c30% of normal volumes) and the airport has shown a positive contribution since February 2015.  The loss of revenues in 2015 compared to the pre-Ebola period was in the region of £1.4m for the year.  This comparison excludes the organic growth the airport was experiencing pre-Ebola.  Cost reductions were made during the year across the Group and non-depreciation ongoing costs have now been reduced by more than 25% since the pre-Ebola period.  

The Board continues to review options for further cost reductions. Gross margins have slightly improved compared to last year and operating results are expected to be materially better than 2014.

Ferry Project

The investment in setting up the 21 year Sierra Leone Ferry service contract continued during the year.  Following sea trials the vessel is close to being operational.  The delays in commencement of services, originally envisaged for July 2015, have cost the Company though significant lost revenues.  To provide context, the Company believes that the annual addressable market (before Ebola) to be over $9m, so this has materially impacted the business.  

Whilst these delays are frustrating, the economics of the operation should allow it to generate cash on a relatively small market share when the service commences and this should improve with the recovery from Ebola. The Board looks forward to providing further updates on the commencement of services.

2016 Trading so far

The Board is encouraged by trading in January 2016.  Increasing passenger footfall at the Company's airport operations as the recovery form Ebola continues together with contribution from the Technology Division have produced a much improved overall result. This was partly due to seasonal traffic but reflects an underlying positive trend.  Operating costs were circa £0.27m, reflecting further reductions which are now beginning to be come through.  This enabled the Company to produce an overall near break-even EBITDA in the month. Capital set up expenditure on the Ferry was significantly lower reflecting the advanced state of work on the Sierra Queen. The Group continues to target achieving cash break even during 2016 based on improving airport numbers, the ferry becoming operational and the contract book and run rate orders from the Technology Division with all new contract wins and revenue streams being incremental. 

The Group's strategy of developing long term, recurring revenue projects in various areas of the world continues to gather momentum with four important MoU's signed in the past 12 months, three of which have been signed in recent months, all for long term large scale airport security projects and we remain encouraged by the increasing interest being shown in our solutions. We are now progressing these existing opportunities and detailed survey works, planning and negotiations are in progress.

We believe that the recent sharp increase in airports signing MoU's (now 6m embarking passengers per annum) reflects an increased opportunity to develop and close further long term large scale recurring revenue contracts for the protection not just of airports but also for other critical infrastructure. This is against a backdrop of increasing focus by governments and airlines on potentially inadequate security at airports in emerging markets, global unrest, mass immigration and a rising threat of terrorism.

We look forward to updating the market further as contract discussions progress.

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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