Final Results

RNS Number : 4621E

Westminster Group PLC

31 May 2012

 



31 May 2012

Westminster Group Plc:

Final results to 31 December 2011

Westminster Group Plc ('Westminster', 'the Company' or 'the Group'), the AIM listed supplier of system solutions and products to the security, defence, fire protection and safety markets worldwide, is pleased to announce its final results for the 12 months ended 31 December 2011.

Highlights from the period include:

Financial

·      Record Order Intake during the year of £14.7m (2010: £3.2m)

·      Record annual revenues achieved £10.1m (2010: £3.8m)

·      Gross margins improved to 24% (2010: 10%)

·      Underlying operating profits in the second half of the year £0.65m (2010: loss £1.8m)

·      Underlying operating loss reduced by 62% to £1.6m (2010: loss £4.2m)

·      Cash at 31 December 2011 £0.4m (2010: £0.3m)

·      Placing raised £0.61m net of expenses

Operating

·      A network of over 100 agents in place with new additions in Turkey, Malaysia, Indonesia and India

·      "Super Agent" model successful and generating profitable orders

·      Multi-million pound contract award  for advanced security systems for the palaces of a Middle Eastern royal family

·      Multi-million contract award for advanced technology scanning vehicles for a West Africa police force

·      Board strengthened with the appointment of a new CFO, Ian Selby in July 2011 and Matt Wood appointed as non executive director in December 2011

·      Longmoor Security management strengthened with the appointment of a new Chief Operating Officer, Maj (Retd) Keith Wright, a highly experienced ex Special Forces (22 SAS) training officer

Post Year End

·         New aviation division formed, Westminster Aviation Security Services Ltd and highly experienced aviation expert, Dr Phil Jackson, appointed as Chief Operating Officer

·         Major new contract award in February 2012 to protect a West African international airport with potential revenues in excess of $150m across its 15 year life, generating recurring revenue

·         Strategic investor with influence in target markets subscribing for £0.5m new shares

·         10 year Franchise business established in Nigeria providing minimum of £1.7m in franchise fees over the term plus substantial project revenue potential

·         Commencement of West African airport contract with revenue flow from 1 May 2012

·         Longmoor Training Academy opened May 2012

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

"2011 has been a year of record achievements marking an inflection point for the Group. The investment we have made over the last few years in building our global presence has begun to produce meaningful results."

On current trading and prospects Mr Fowler added:

"The strong momentum and trading we experienced during 2011 has continued into 2012.

"We have a solid order book, growing recurring revenues, improving gross margins, a robust business plan and vision. We have clear strategic goals and objectives and a commitment to the continuing development of our operational infrastructure. We are delivering on our vision and are now seen as a truly global security business. We have a strong management team which has been further strengthened and an experienced board of Directors. Accordingly we are confident of a solid performance for 2012 and exciting growth prospects beyond."

Annual Report and Accounts

The final results announcement can be downloaded from the Company's website (www.wg-plc.com).  Copies of the Annual Report and Accounts (as well as the notice of Annual General Meeting) will be sent to shareholders by 1 June 2012 for approval at the Annual General Meeting to be held on 27 June 2012.

For further information please contact:

Westminster Group plc	Tel: [phone]
Peter Fowler (Chief Executive)
Ian Selby (Chief Financial Officer)
Fairfax IS Plc (NOMAD + Broker)	Tel: [phone]
Stuart Gledhill / Katy Birkin
Winningtons Financial (Financial PR)	Tel: [phone]
Tom Cooper / Paul Vann	0797 122 1972

Notes to Editors:

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.

Chairman's Statement

Overview

I am pleased to present the accounts of Westminster Group plc for the year ended 31 December 2011. We delivered a strong performance during the year both in terms of orders and revenue, culminating in record revenues of £10.1m, some 265% of those in 2010. This resulted in an underlying (adjusted for the items in note 4) operating profit £0.65m in the second half of the year which helped reduce the operating loss before taxation by 62% to £1.6m (2010: loss £4.2m).

Our strong brand and international reputation has helped us win several multi-million pound contracts in 2011 as well as numerous other significant contracts from prestigious clients around the world. Demand for our services continues to grow and we are experiencing record enquiries, increasing order flow, improving margins and conversion rates. I am pleased to report that the momentum established in 2011 has continued into 2012 and we have already secured a major multi-million, multi-year recurring revenue contract.

Strategy

In the difficult economic climate faced by many countries in the western world today, our decision to focus on being an export led business operating globally but with a primary focus on the high growth and emerging economies of the Middle East, Asia and Africa can be seen to be a wise one. We are not a manufacturer and are product agnostic, being able to promote and deliver the most appropriate solutions for our customers' needs. We are therefore not reliant on any particular region, customer, technology or supplier. Our agency network has grown and strengthened during the year, and in 2012 we announced our first franchise in Nigeria. We continue to work with potential strategic investors as they can bring added value to the business, and we were pleased in April 2012 to receive a £0.5m strategic investment.

Our strategy is to continue with this model and to expand our international footprint and broad range of products and services with an increasing focus on high margin and long term recurring revenue. A key part of this strategy on building a recurring revenue model is to develop long term 'managed services' business and we have made a good start in that respect with the latest airport contract secured in February 2012 which is a multimillion pound, multi-year contract for the provision of complete security services at a West African airport. I am pleased to report this project is already underway and producing revenue. I am also pleased to report that we are in discussions regarding a number of other potentially similar projects.

In our industry it is vitally important that we maintain the highest standards of corporate governance. You will see in the Directors' report on corporate governance all the detailed measures we take to ensure that our standards, and those of our agents, can stand any scrutiny by Government or other official bodies.

Staff and Board

We strengthened the executive board during the year with the appointment of Ian Selby as CFO in July and he has quickly become a valued member of the team, and Matt Wood as a non executive director in December.

I would like to take the opportunity to express my appreciation to all our employees, both in the UK and overseas, who have worked extremely hard during the year. As a service based business, our staff are vital to the continued growth and development of our business and we are fortunate in having a highly committed and dedicated workforce and their dedication is crucial to how we are able to rapidly grow our business and develop our worldwide reputation. We have been  strengthening our senior team in 2011 and 2012 with key appointments to help take the Company to the next stage of its growth and I warmly thank them for all that they have done for us.

Finally, I would like to thank you, our shareholders for your continued support.

Lt. Col. Sir Malcolm Ross GCVO, OBE

Chairman

CEO Review

Business Overview

The Group's principal activity is the design, supply and ongoing support of advanced technology security, defence, fire and safety solutions, together with risk management, close protection and training services. Our principal clients are governments and related agencies, non-governmental organisations (NGOs), military establishments, airports, sea ports, banks, power stations and blue chip commercial organisations worldwide.

2011 has been a year of record achievements marking an inflection point for the Group. The investment we have made over the last few years in building our global presence has begun to produce meaningful results.

Our vision is to build a global security business focused on delivering 'end to end' integrated security solutions to high growth and emerging markets around the world. Over the past few years much of our efforts have been employed in building our international presence and we have invested heavily in developing our agent network and establishing a strong corporate brand which is now well recognised by our target customers.

We are now seeing the benefit of all this effort and investment. We have a truly global footprint with over 100 agents and offices in 46 countries, we have a track record of successfully delivering complex security solutions around the world and have an extensive and impressive 'blue chip' customer base. We operate one of the largest security websites in the world (www.wi-ltd.com) and are now receiving record levels of enquires and have an active quote bank of over £350m. We are securing substantial orders including several multi-million pound contracts, and in 2011 produced a record revenue performance with sales of £10.1m, 265% of those recorded in 2010.

This momentum is continuing into 2012 and we have already secured a wide range of contracts around the world including a 15 year contract with a potential value in excess of $150m for ground security services at a West African airport. This brings to the Group a powerful, transactionally driven recurring cash flow, and we are in active discussions to replicate this model.  We believe that such deals are transformational for our business and thus for shareholder returns.

Our Markets

We are a British based but internationally focussed and export led security business with our focus outside of the UK being predominantly the high growth regions of the Middle East, Asia and Africa, but with growing interest from South America and Eastern Europe.

We operate in a market which is considerable, growing and unlikely to see any contraction in the foreseeable future. Hundreds of billions USD are spent by Governments and corporations annually on security issues. Today, as we face international terrorism on a global scale, the fundamental need to protect national borders, transportation and infrastructure, buildings, assets and people is a matter of the highest importance.

Many developing economies are now flourishing thanks to the discovery of and demand for minerals and other natural resources together with opportunities presented by international trade. In order to fully capitalise on these market opportunities, Governments and large national and multinational corporations are being forced to invest in effective security, defence, fire and safety solutions, to protect their interests from the continuing significant threat of international crime and terrorism. Economies in many parts of Asia and the Middle East are flourishing however, civil unrest, together with national, geographical and religious disputes, all drive the need for effective security solutions. Frequently the competitive landscape in these territories is underdeveloped and fragmented.

To be successful in this market requires meeting exacting criteria: credibility, professionalism and experience, with a demonstrable track record and, crucially, 'in-country' knowledge and connections. These, together with the political and logistical issues presented in many countries, present a significant barrier to entry for many companies.

Whilst there are many companies providing security services in one form or another, there are relatively few doing so on a global basis due to the reasons previously given and the logistical and cultural difficulties in dealing with many diverse countries around the world and even fewer who can do so in providing fully integrated services. Westminster, with its global presence and growing international reputation, is well placed to take advantage of such opportunities and this is evidenced by the record levels of enquiries we are now receiving.

We have demonstrated our ability to deliver complex and innovative solutions to an impressive list of clients worldwide and have therefore clearly established credibility and a demonstrable track record with governments and blue chip organisations, which stand us in good stead to secure and deliver increasing business within this target market.

The scope of our services ranges from the regular supply of a wide array of products and services to the design and provision of large scale major projects to our governmental and commercial clients worldwide. Whilst the provision of large scale major projects may have long lead times and can be subject to delays such as those experienced in 2010, it is such projects that we believe can deliver substantial growth. In this respect we made good progress in 2011, securing several large scale prestigious contracts.

Strategy

The Group's strategy is to build shareholder value through the generation of long term recurring profitable cash flows.

Our vision of building a global security business has meant our strategy in recent years has been devoted to establishing a credible worldwide network of agents who can provide in-country logistics support, manpower, intelligence and, critically for our clients, on-going service support once we have provided the goods or services. We now have an extensive agent network in 46 countries covering every continent (with the exception of Antarctica), which has helped us achieve our global exposure. However, our strategy is to build on and improve this network replacing underperforming agents. As this agent network has matured, 'Super Agents' have evolved in key markets who have the size and financial strength to prime and finance major contracts.

Additionally, in 2012 we have introduced a franchise model which allows the franchisee to operate exclusively under the Westminster brand in the given territory. They are responsible for setting up offices and marketing in accordance with the Westminster brand.  This is at their cost and is subject to the payment of an annual franchise fee to Westminster. All goods and services will continue to be sourced centrally via Westminster. This means we achieve greater brand awareness and in-country representation at no cost and for no loss of margin, indeed this is revenue accretive due to the franchisee fee. It is a good model, is already now in operation and something we intend to roll out to other regions.

The next stage of our strategy is to deliver increasing recurring revenue streams both from the maintenance and servicing of the equipment and systems we are delivering around the world and also from the expansion of our Alarm Receiving Centre (ARC). In addition we are also moving towards being a managed services business by providing long term recurring revenue services, an example of such is the recent 15 year airport contract.

We are committed to delivering this strategy largely through organic growth, but complemented by strategic and earnings enhancing acquisitions.

Divisional Review

Our strategy of building a global security business is very much on track and I am pleased to report we delivered a strong performance in 2011 with record enquiries, record orders and record revenue performance from our activities worldwide.

We are encouraged that not only are our enquiry levels for our Group services now at an all time high, averaging around 345 per month, but the size and complexity of the enquiries we receive is growing also which is a testament to our growing international reach and reputation.

We have made good progress with integration and expansion of all our operating subsidiaries and now have a complementary group of companies which enable us to offer clients a complete end to end solution for all their needs including consultancy, risk assessments, installation, maintenance & monitoring of technology solutions, the provision of specialist equipment, the supply of manned security and comprehensive training services.

A review of Group companies follows:

Westminster International

Our international business had an excellent year both in terms of revenue and expansion. We have strengthened our business development team with new appointments and continue to expand our international agent network with new agents in Malaysia, Indonesia, India and Turkey.  We now have over 100 agents in 46 countries.

We hosted numerous delegations from governments, organisations and corporations at our UK head office for presentations and demonstrations at our 4.5 acre demonstration grounds. We carried out a number of large scale trials of technologies for potential clients both here in the UK and overseas. We travelled extensively around the world meeting with agents and potential customers, including a number of senior governmental figures in different countries.

Westminster International has secured and delivered the international contracts listed in the Global Markets Review below.  We have a significant active quote bank and are negotiating on a number of very large projects any one of which, if secured, would further transform our business.

Longmoor Security

Longmoor is our close protection and training business which is now performing well and its training courses are running at an all time high.

In July 2011 we appointed a new Chief Operating Officer, Major (retd) Keith Wright who has transformed Longmoor and has brought added professionalism and direction to the business.  The company has seen a dramatic improvement in operational performance since his arrival. Prior to joining Longmoor, Keith had an illustrious service career including 34 years unbroken service with the Special Air Service where he was ultimately in charge of training services.

Enquiries for training courses are at an all time high, which is helped by the several thousand leavers from the UK forces who receive a resettlement allowance on leaving which may be used for funding training courses such as Longmoor.

In addition Longmoor is receiving increasing enquiries for large scale training and operational services from governments and security organisations, and we are optimistic of future growth in this business

RMS (CTAC) Integrated Solutions

Following our acquisition of CTAC in April 2010 we have now stabilised and restructured the business. The installation side of the business has now been merged with our existing UK systems integration business, RMS, and the combined entity is now trading as RMS (CTAC) Integrated Solutions.  This will serve to improve customer service whilst reducing our ongoing cost base. The Alarm Receiving Centre (ARC) which was part of the CTAC acquisition has been separated into its own entity International Monitoring Services (see below).

The combined RMS (CTAC) business had a good year and secured several new contracts including a major UK stately home worth several hundred thousand pounds in revenue. The business continues to serve a wide range of UK customers including a major UK utility and has over 1,000 sites under maintenance.

The Group is pursuing warranty claims against the vendors of CTAC and hopes to reach a resolution during 2012.

International Monitoring Services

The strategic objective of acquiring CTAC in 2010 was to acquire its 24 hour Alarm Receiving Centre (ARC) which generates regular recurring revenue and has very substantial capacity for expansion. The ARC is built, operated and certificated to the National Security Inspectorate (NSI) Gold standard, the highest level of such certification in the UK, and monitors alarm and video signals from over 1,000 systems across the UK.

The ARC has now been established as an independent operating division under the name of International Monitoring Services which more closely reflects the international services the centre will be providing. Whilst relatively small in 2011, we have invested in a dedicated sales resource to support anticipated growth. We are already in discussions with several major corporations and governmental clients around the world regarding the provision of large scale monitoring services, which, if successful, would generate significant additional recurring revenue. In addition we are differentiating from the commoditised UK market by offering a range of high value additional services such as asset tracking, lone worker monitoring and travel services.

Global Markets Review

In 2011 we delivered a wide range of services and solutions to clients worldwide and a review of just some of that activity is given below.

The Middle East

The Middle East remains a key focus market for us and one we have been actively developing throughout the year with considerable success.

We secured a major multi-million pound contract to provide comprehensive security including radar, sonar and specialist surveillance equipment to protect a number of Royal Palaces in a Gulf country. This is an extremely prestigious contract award that was won against major multinational competitors following technical trials and demonstrations of our solutions. The project took several years from initial enquiry to contract award and is illustrative of the length of time that can be involved in major projects of this type.

Other projects include vehicle control equipment for the Royal Commission in Saudi Arabia, explosive detection equipment for the Japanese Embassy in Iraq, a major consultancy contract for a major telecommunications company within the Middle East, Blast suppression equipment for a major client in the UAE and X-Ray screening equipment to a number of countries including Iraq, Palestine and Lebanon

Africa

Africa is an important market for us and one where we see significant growth opportunities. This view is supported by a recent IMF report which stated that seven out of the 10 fastest growing economies in the world in 2012 will be in Africa. We see the African commodity boom generating additional security requirements as governments and private organisations seek to protect their infrastructure and assets.

During 2011 we continued to secure a wide range of contracts for a diverse range of equipment in the region. For example we secured a multi-million pound contract to supply specialist scanning vehicles to a West African police force, we supplied personnel monitoring equipment to Morocco, we protected a major oil company's premises in Egypt against blast damage, we supplied advanced security investigation equipment to the security services in Southern Africa as well as a wide range of security equipment and solutions to countries such as Algeria, Rwanda, Uganda, Republic of Sudan, Tunisia and South Africa.

The Americas

We see South America as a potential growth market and our activities in the region continue to grow. We have secured a number of valuable contracts in the region including x-ray scanning equipment for the prison service in Guyana, CCTV surveillance to the UN in Haiti, poison detection equipment to the USA. We also carried out a major security audit for a high profile client in Mexico, supplied personal safety equipment to a Juvenile Detention Centre in the USA, specialist shoe scanning equipment to Sony within the USA as well as other equipment to the Americas and Canada

Asia Pacific

The Asia Pacific region is another key focus area for the Group where we anticipate growing demand for our services.  We have received a number of significant enquiries for our products and services in the region during 2011 and secured a number of contracts including specialist vehicle surveillance equipment to Siemens in India, radiation detection equipment to Japan, covert surveillance and counter terrorism equipment to Vietnam, explosive detection and other security equipment to embassies and organisations in Afghanistan together with a range of equipment and solutions to countries such as Thailand and Malaysia.

UK & Europe

Whilst Westminster is principally focused on providing niche products and services to international growth markets, the UK is the main focus for RMS (CTAC) and the vast majority of our Longmoor training is currently with UK customers.

During 2011 we achieved a number of notable contract awards including integrated solutions to several high net worth properties in the UK including a stately home, a CCTV control centre for Wembley, security protection to a major Gulf State embassy in London and various solutions to major clients such as South Hook LNG, British American Tobacco and the Foreign and Commonwealth Office (FCO). In addition we continue to deliver multiple products to the UK Prison Services, as well as protecting a large number of UK Utility sites.

Current Trading and Outlook

The strong momentum and trading we experienced during 2011 has continued into 2012.

In January 2012 we launched our new aviation security business to focus on our ever increasing aviation business. At the same time we recruited an extremely experienced aviation security expert, Dr Philip Jackson, as the new Chief Operating Officer of the business. In February 2012 we secured a 15 year airport security contract in West Africa for the provision of a wide range of detection and surveillance technologies as well as the deployment of security personnel within the terminals, the airside zone and the airfield perimeter with fees paid by the airlines based on embarking passenger numbers.  This is our largest ever contract.

When we initially announced this contract in February we announced a potential revenue value in excess of $150 million USD over the term of the contract, however following a review of operations and potential growth in passenger numbers we revised our estimates and updated the market in April suggesting 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 substantial. 

I am pleased to announce our operations at the airport in question formally commenced on 1st May 2012 and we have already made a notable difference to the airport's and travelling public's security. Within the first two weeks of operations we have arrested an intruder on the runway, detected a person carrying a weapon before they reached the aircraft, discovered a package with illegal contraband, dealt with a left luggage parcel including using explosive detection dogs and discovered a person trying to smuggle currency out of the country concealed within their clothing. We have received recognition from international bodies for the considerable improvements we have made to the airport security which is likely to lead to more airlines looking to bring operations to the airport, further increasing revenues. The first few weeks of operations and review of passenger numbers would indicate that our revenue expectations are sound and that the growth potential is real.

In addition to the airport contract mentioned above we have secured a contract to supply scanning and detection equipment to an airport in Saudi Arabia as well as a sizable contract for the supply of security equipment to the security services of a Sub-Saharan government.

In May 2012 we also 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. New courses offered will include: expanded ship's security officer training, conflict management, hostile environment awareness advanced trauma medical, hostage rescue and survival training, major incident management and communications.

The Academy is a 19,000 sq ft, 30 bedroom, self contained training centre comprising of a number of training rooms, lecture halls, catering and leisure facilities all set within 442 acres of grounds in central England with easy access to the M40. The Academy has been secured on a leasehold basis of an initial 12 month term with the option to extend for a further 4 years. The unrestricted access to the facilities will allow for significant operational efficiencies to be achieved resulting in a wider range of courses being offered and at better potential profit margins.

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. Westminster's reputation in these markets is significantly enhanced with each new contract delivered.

We have a solid order book, growing recurring revenues, improving gross margins, a robust business plan and vision. We have clear strategic goals and objectives and a commitment to the continuing development of our operational infrastructure. We are delivering on our vision and are now seen as a truly global security business. We have a strong management team which has been further strengthened and an experienced board of Directors. Accordingly we are confident of a solid performance for 2012 and exciting growth prospects beyond.

P.D. Fowler

Chief Executive Officer

Chief Financial Officer Review

Income Statement

I am pleased to report that the Group achieved record order intake of £14.8m (2010: £3.2m), this resulted in revenues of £10.1m, 265% of the £3.8m recorded in 2010. The benefit of these orders was largely felt in the second half of the year with revenues of £8.2m (2010: £1.6m) being achieved. These orders included a substantial element of higher gross margin solution sales which drove overall gross margins for the year from 10% to 24%. The Group remained an export led organisation with 74% (2010: 43%) of its revenues being non-European markets. We are particularly pleased that export sales to high growth markets such as the Middle East and Africa grew by 460% to £7.4m (2010: £1.6m).

Administrative costs were £4.1m (2010: £4.6m).  When adjusted for the items detailed in note 4 to the accounts, the underlying operating cost base was reduced by approximately 3% to £3.1m (2010: £3.2m). The average number of employees during the year was 64 (2010: 66).  In the second half of the year administrative cost reduction programs were put in place, the full benefit of which should be felt in 2012 and this will enable resources to be redirected to support the growth of the business.

The Group generated operating profit of approximately £0.28m (2010: loss £3.10m) in the second half of the year and consequently the annual operating loss fell by 62% to £1.6m (2010: £4.2m). When adjusted for the items detailed in note 4, the underlying operating profit in the second half year was £0.65m (2010: loss £1.8m), and therefore the annual loss on this basis was reduced by 77% to £0.65m (2010: loss £2.8m).

Financing costs were £0.4m (2010: £0.2m) which included £0.3m (2010: £0.1m) from the 2014 convertible loan note which was revised in October 2010.  The remainder of the financing costs relate to other smaller loans of £0.1m (2010:  £0.02m).  Finance income of £0.04m (2010: £0.14m) arose from the annual revaluation of the embedded derivative within the convertible loan note.  The taxation charge of £0.73m (2010: gain £0.38m) represents the reversal of the previously recognised deferred tax asset held at 31 December 2010 which was reversed in our interim results for the six months ended 30 June 2011.

The overall loss for the year after tax was therefore reduced by 29% to £2.7m (2010: £3.8m).

Statement of Financial Position

The Group's principal assets are £0.4m cash (2010: £0.3m), trade receivables of £1.0m (2010:  £0.9m) and the 4.5 acre freehold site at the head office in Banbury which is carried at £0.9m.  Improved commercial payment terms were achieved with customers (such as confirmed letters of credit and payments in advance) on orders received in the year.  This reduced the average credit period taken by customers from 109 days to 48 days.

Trade payables increased to £1.3m (2010: £1.0m) as business volumes rose. Similarly deferred income rose to £0.45m (2010: £0.19m) on the back of increased contract wins and sales volumes. At the end of the year performance bonds relating to a single contract of £0.17m (2010: £0.23m) were outstanding. The Group fully impaired the opening £0.6m carrying value of amounts due from an African government. These arose from a contract announced in 2008, and no revenue was recorded against this in 2011. This impairment has been taken due to uncertainty as to the eventual timing of the receipt as a result of instability in that country. However as the Group is in active dialogue regarding further growth opportunities in that country, it does expect this to be collected at a future date and will recognise the profit at the point when cash is collected.

During the year the Company issued 5,375,004 shares for cash raising £0.65m (prior to costs of £0.03m) which was used for general working capital purposes. The Company took out a short term loan of £0.15m in May 2011, of which £0.08m was outstanding at the balance sheet date. The Company is engaged in constructive discussions regarding a variation or refinancing of the convertible loan note and will update the market accordingly.  On 27 April 2012 the Company issued and allocated 2,941,176 ordinary shares for cash to a strategic investor, raising £0.5m which will be used for working capital purposes and to support the rollout of the African airport project.

Cash Flow Statement

Our net cash flow improved by 159% to £0.15m (2010: £0.06m). This was largely due to stronger trading which reduced the outflow of cash from operating activities by 83% to £0.2m (2010:£1.2m).

Loss Per Share

The Group recorded a much reduced basic and diluted loss per share of 10.19p (2010: loss 20.54p)

Key Performance Indicators

The main performance indicators used in 2011 were gross profit margin, operating profit and loss and individual job profitability. The Group management information contains significant detail concerning operational performance and, as well as the above measures, the Board reviews the ratio of operating profit to operating cash flows, administrative expenses compared to budget as well as debtor ageing and revenue visibility.

In addition to the main financial indicators, the Board reviews a range of non-financial indicators. The business is long-term in nature, major projects can take years to develop to the point of order. Therefore operational management monitors enquiry activity very closely. The Group maintains an extensive quote book of live enquiries which are reviewed on a regular basis with all call activity logged. We particularly focus on those enquiries where decisions are expected imminently. In addition, the number and average size of orders are carefully reviewed to identify any emerging trends in order sizes or products demanded. The use of these indicators ensures that we are informed of, and in control of, the finances of the Group.

The following table shows the key non-financial indicators that are relevant to the Group

The number of enquiries is rising substantially each year, which is an important indicator of the effectiveness of the Group's marketing efforts This demonstrates how large individual orders can have a dramatic impact on the results for the year.

	2011	2010
Order Intake (£m)	14.7	3.2
Quote Bank (£m)	350	300
Average sales enquiries per month	345	300
Closing order book £m	4.7	0.2

The nature of the Group's business has always meant that precise timing of orders and deliveries against them can be difficult to forecast. This is frequently due to matters beyond the Group's control.  Our strategy of increasing recurring revenues to offset this volatility has moved forwards and since the year end, the Group has significantly grown the recurring revenue base with the African airport contract which was won in February 2012.  We look to this and similar long term recurring revenue prospective sales to underpin the Group's cash flows going forward to remove the volatility which is inherent with large single sales orders.

Ian Selby

Chief Financial Officer

Statement of Comprehensive Income for the year ended 31 December 2011

		2011		2010
	Note
		£'000		£'000
Revenue	3	10,065		3,797
Cost of sales		(7,606)		(3,398)
Gross profit		2,459		399
Administrative expenses		(4,087)		(4,568)
LOSS FROM OPERATIONS		(1,628)		(4,169)
Analysis of loss from operations
Loss from operations		(1,628)		(4,169)
Operating cost adjustments	4	980		1,399
Loss from underlying operations		(648)		(2,770)
Financing costs	5	(400)		(190)
Finance income	5	44		136
LOSS BEFORE TAX		(1,984)		(4,223)
Income tax	6	(727)		383
LOSS ATTRIBUTABLE TO EQUITY SHAREHOLDERS		(2,711)		(3,840)
OTHER COMPREHENSIVE INCOME
Revaluation of non-current assets		-		14
Deferred tax movement on revaluation of  non-current assets		-		4
TOTAL COMPREHENSIVE INCOME FOR THE YEAR ATTRIBUTABLE TO EQUITY SHAREHOLDERS		(2,711)		(3,822)
LOSS PER SHARE:
Basic and fully diluted in pence	7	(10.19)		(20.54)
All the activities of the Group are classed as continuing.

Consolidated Statement of Financial Position for the year ended 31 December 2011

		2011	2010
		£'000	£'000
Goodwill		397	397
Other intangible assets		245	323
Property, plant and equipment		1,028	1,164
Trade and other receivables		-	1
Deferred tax asset		-	727
TOTAL NON-CURRENT ASSETS		1,670	2,612
Inventories		112	229
Corporation tax recoverable		50	50
Trade and other receivables		1,222	1,747
Cash and cash equivalents		414	261
TOTAL CURRENT ASSETS		1,798	2,287
TOTAL ASSETS		3,468	4,899
Share capital		2,963	2,425
Share premium		3,449	3,369
Merger relief reserve		299	299
Share based payment reserve		33	27
Revaluation reserve		134	134
Retained earnings		(6,721)	(4,010)
TOTAL SHAREHOLDERS' EQUITY		157	2,244
Trade and other payables		99	141
Borrowings		963	897
Embedded derivative		4	48
Deferred tax liabilities		99	97
TOTAL NON-CURRENT LIABILITIES		1,165	1,183
Borrowings		81	-
Trade and other payables		2,065	1,472
TOTAL CURRENT LIABILITIES		2,146	1,472
TOTAL LIABILITIES		3,411	2,655
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY		3,468	4,899

Consolidated Statement of Changes in Equity for the year ended 31 December 2011

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

AS OF 1 JANUARY 2010	1,492	2,304	299	22	116	(416)	3,817
Share based payment charge	-	-	-	8	-	-	8
Deferred tax adjustments	-	-	-	(3)	-	-	(3)
Issue of shares for the acquisition of subsidiary	79	-	246	-	-	-	325
Exercise of share options	2	-	-	-	-	-	2
Other share issues	852	1,415	-	-	-	-	2,267
Cost of  other share issues	-	(350)	-	-	-	-	(350)
Merger relief reserve utilised in respect of impairment of associated goodwill	-	-	(246)	-	-	246	-
TRANSACTIONS WITH OWNERS	933	1,065	-	5	-	246	2,249
Loss for the year	-	-	-	-	-	(3,840)	(3,840)
Other comprehensive income
Revaluation of non-current assets	-	-	-	-	14	-	14
Deferred tax liability on revaluation of non-current assets	-	-	-	-	4	-	4
TOTAL COMPREHENSIVE INCOME FOR THE YEAR ATTRIBUTABLE TO SHAREHOLDERS	-	-	-	-	18	(3,840)	(3,822)
AS AT 31 DECEMBER 2010	2,425	3,369	299	27	134	(4,010)	2,244

Consolidated Statement of Cash Flows for the year ended 31 December 2011

	Note
		2011	2010
		£'000	£'000
LOSS BEFORE TAX		(1,984)	(4,223)
Adjustments	8	606	1,139
Net changes in working capital		1,184	1,923
NET CASH FROM OPERATING ACTIVITIES		(194)	(1,161)
INVESTING ACTIVITIES:
Purchase of property, plant and equipment		(28)	(187)
Purchase of intangible assets		-	(1)
Cash costs of acquisition of subsidiary net of cash acquired		-	(579)
Proceeds from disposal of fixed assets		-	12
NET CASH USED IN INVESTING ACTIVITIES		(28)	(755)
FINANCING ACTIVITIES:
Gross proceeds from the issue of  new Ordinary shares		646	2,269
Costs of share issue		(28)	(350)
Gross proceeds from the issues of Loan Notes		150	-
Repayment of short term borrowings		(110)	-
Proceeds from finance leases		-	192
Interest paid		(283)	(136)
NET CASH FROM FINANCING ACTIVITIES		375	1,975
Net change in cash and cash equivalents		153	59
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD		261	202
CASH AND EQUIVALENTS AT END OF PERIOD		414	261
Notes:

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 listed on the London Stock Exchange AIM Market.

Westminster Group plc and its subsidiaries 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.

2.     Basis of Preparation

Basis of preparation

The principal accounting policies of the Group are set out in the Group's 2010 annual report and accounts and these remain unchanged for the year ended 31 December 2011.

Going concern

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 and Directors and management ability to affect costs and revenues.

Management regularly forecast profit, financial position and cash flows for the Group. A worst-case scenario (which represents a significant downgrade compared to internal budgets and targets) for 2012 and 2013 has been prepared. Revenues are forecast from major contracts that have already been secured by the end of April 2012, from the predictable regular flow of smaller contracts and revenues from new major contracts based on reduced probabilities compared to management expectation of the contracts being won. The contract for the African airport signed in February 2012 is expected to generate significant amounts of cash on a recurring monthly basis and therefore the business going forward is a fundamentally different business model compared to the current product and solution sales business and reduces the liquidity risk of the Group. Based upon these projections the Group has adequate working capital for the 12 months following the date of signing these accounts.

In the event that the Directors are of the opinion that the cash flow forecasts might not be achieved then further measures will be taken. These could include cost reductions, disposal or closure of loss making subsidiaries, delaying capital expenditure, and the raising of equity from existing or new shareholders.

3.  Segment reporting

(i) Operating segments

The following segment information has been prepared in accordance with IFRS 8 Operating Segments, which defines requirements for the disclosure of financial information of an entity's operating segments. IFRS 8 follows the management approach, which is the basis for decision making within the Group.

The Board considers the Group on a business unit basis. Reports by Business Unit are used by the chief decision-maker of the Group.  The Business Units are the four operating companies: Westminster International, RMS Integrated Solutions, Longmoor Security and CTAC. This split of business segments is based on the products and services each offer.

Westminster International provides advanced technological products, systems and solutions, RMS Integrated Solutions provides low voltage systems for high-rise buildings, Longmoor Security provides close protection training, consultancy and services and CTAC provides high end security solutions and operates an alarm receiving centre.

		Westminster International Limited	RMS Integrated Solutions Limited	Longmoor Security Limited	CTAC Limited	Westminster Group plc	Group
		£'000	£'000	£'000	£'000	£'000	£'000
2011
Supply of products		1,584	16	1,496	-	-	3,096
Supply and installation contracts		5,082	359	61	787	-	6,289
Maintenance and service		54	150	-	-	-	204
Close protection services		-	-	31	-	-	31
Training courses		-	-	445	-	-	445
Revenue		6,720	525	2,033	787	-	10,065
Segment results before central overheads		413	(75)	9	(471)	(1,504)	(1,628)
Apportionment of central overheads		(811)	(376)	(244)	(356)	1,787	-
Segment result		(398)	(451)	(235)	(827)	283	(1,628)
Finance cost		-	-	-	(20)	(380)	(400)
Finance income		-	-	-	-	44	44
Income tax		(541)	-	(185)	-	(1)	(727)
Loss for the financial year		(939)	(451)	(420)	(847)	(54)	(2,711)
Segment assets		865	71	66	358	2,108	3,468
Segment liabilities		1,382	179	76	226	1,548	3,411
Capital expenditure		12	-	-	-	16	28
Depreciation and amortisation		47	3	1	20	99	170

		Westminster International Limited	RMS Integrated Solutions Limited	Longmoor Security Limited	CTAC Limited	Westminster Group plc	Group
		£'000	£'000	£'000	£'000	£'000	£'000
2010
Supply of products		867	13	1	-	1	882
Supply and installation contracts		864	248	-	762	-	1,874
Maintenance and service		45	77	-	-	-	122
Close protection services		-	-	397	-	-	397
Training courses		-	-	522	-	-	522
Revenue		1,776	338	920	762	1	3,797
Segment results before central overheads		(862)	(472)	(380)	(300)	(2,155)	(4,169)
Apportionment of central overheads		(988)	-	(471)	(347)	1,806	-
Segment result		(1,850)	(472)	(851)	(647)	(349)	(4,169)
Finance cost		-	-	-	(8)	(182)	(190)
Finance income		-	-	-	-	136	136
Income tax charge		494	(61)	(43)	-	(7)	383
Loss for the financial year		(1,356)	(533)	(894)	(655)	(402)	(3,840)
Segment assets		2,622	138	502	462	1,175	4,899
Segment liabilities		616	215	624	439	761	2,655
Capital expenditure		5	-	4	12	167	188
Depreciation and amortisation		63	4	1	37	175	280
Revaluation of property		-	-	-	-	14	14
Impairment of investment		-	-	-	-	763	763

(ii) Geographical areas

The Group's international business is conducted on a global scale, with agents present in all major continents. The following table provides an analysis of the Group's sales by geographic market, irrespective of the origin of the goods/services:

			2011	2010
			£'000	£'000
United Kingdom			2,559	2,172
Africa			2,316	610
Middle East			4,493	854
Rest of the World			697	161
			10,065	3,797

4.   Schedule of Adjustments to Underlying Operating Costs		2011	2010
		£'000	£'000
Amortisation of CTAC intangible		(59)	-
Provision in valuation of stock		(40)	-
Provision against consumer debt in Longmoor		(145)	-
Foreign exchange gains		43	93
Exceptional bad debt		-	(545)
Acquisition costs		-	(38)
Impairment of CTAC goodwill		-	(763)
Impairment of property plant and equipment		-	(146)
Impairment of African receivables and accrued income		(616)	-
Loss on disposal of property, plant and equipment		(66)	-
Legal and professional costs arising from CTAC litigation		(97)	-
		(980)	(1,399)

5.     Finance costs and income

		2011	2010
		£'000	£'000
Finance costs:
Interest payable on bank borrowings		(33)	(16)
Other interest and financing costs including management fees on Convertible Loan Notes		(181)	-
Interest payable on Convertible Loan Notes		(120)	(120)
Amortised finance cost on Convertible Loan Notes		(66)	(54)
		(400)	(190)
Finance income:
Fair value movement of embedded derivative in Convertible Loan Notes		44	136
		44	136
Net finance costs		(356)	(54)

6.     Income tax expense

Analysis of charge/(credit) in year:

						2011		2010
						£'000		£'000
Current year tax expense						-		-
Movement in deferred tax						727		(403)
Adjustment to prior year charge						-		8
Change in rate						-		12
Tax charge/(credit)						727		(383)
Reconciliation of tax expense
Loss on ordinary activities before tax						(1,984)		(4,223)
Loss on ordinary activities multiplied by the standard rate of corporation tax in the UK of 26.5% (2010: 28%)						(526)		(1,182)
Effects of:
Expenses not deductible for tax purposes						61		337
Capital allowances less than depreciation						25		32
Other short term timing differences						15		15
Reversal of deferred tax asset no longer deemed probable						727		43
Unrecognised losses carried forward						425		352
Adjustment of tax rate						-		12
Adjustment to prior year charge						-		8
Total tax charge/(credit)						727		(383)

Tax losses available for carry forward (subject to HMRC agreement) were approximately £5.0m (2010:£4.0m)

7.     Loss per share

Loss 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.

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

		2011		2010
		'000		'000
Issued ordinary shares
Start of period		24,256		14,917
Effect of shares issued during the period		2,341		3,782
Weighted average basic number of shares for period		26,597		18,699
Dilutive effect of options		-		-
Weighted average diluted number of shares for period		26,597		18,699

Basic and diluted earnings per share is calculated as follows:

	2011	2010
Loss for the year attributable to equity shareholders of the Company (£'000)	(2,771)	(3,840)
Basic and fully diluted loss per share (pence)	(10.19)	(20.54)

For the year ended 31 December 2011 and 31 December 2010 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.

8.   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:

	2011	2010
	£'000	£'000
Adjustments:
Depreciation, amortisation and impairment of non-financial assets	170	279
Financing costs	400	190
Fair value movement of embedded derivative in Convertible Loan Notes	(44)	(136)
Impairment of goodwill	-	763
(Loss)/profit on disposal of non-financial assets	72	(3)
Share-based payment expenses	8	8
Acquisition costs included in investing activities		38
Total adjustments	606	1,139
Net changes in working capital:
Decrease/(Increase) in inventories	117	46
Decrease/(Increase) in trade and other receivables	525	2,592
(Decrease)/increase in trade and other payables	542	(715)
Total changes in working capital	1,184	1,923

9.     Post balance sheet events

Fundraising

On 30 April 2012 Westminster Group plc issued and allotted 2,941,176 new ordinary shares of 10p each representing approximately 9 per cent of the enlarged issued share capital of the Company at a price of 17p per share, to a new strategic investor who has significant interests in West Africa, raising £500,000 (the "Placing").

African Airport contract    

On 17 February 2012 the Group signed a contract, which has a potential revenue value in excess of $150million USD over the 15 year term of the contract, to provide comprehensive ground security operations at the main international airport of a West African nation. The contract involves the provision of a wide range of detection and surveillance technologies as well as the deployment of security personnel within the terminals, the airside zone and the airfield perimeter.

Following a two month pre-deployment transition period, operations commenced on 1 May 2012. Revenue is generated by a per passenger fee denominated in USD, payable directly to the Group by airlines using the airport and is expected to generate fees of $4.5m in the first twelve months of operation. Our initial revenue forecast for the West African airport contract was calculated and based on only 100,000 passengers during 2011, with modest passenger growth over the term of the contract.

It did not allow for revenues from cargo scanning, additional services or fare increases throughout the entire contract period, all of which could be significant. Westminster has the contractual right to make such charges, as well as to provide services at all airports in the country. Recent data indicates that passenger numbers are now expected to be ahead of forecast and forward growth rates may be significantly ahead of previous estimates as the country of operations is forecasted to have one of the

fastest GDP growth rates in the world, and has discovered large natural resource deposits including oil and iron ore. A new and enlarged terminal capable of accommodating up to 900,000 passengers per year is due to open later in 2012. Given all of the above, our initial aggregate $150m revenue forecast could be achieved by the contract's 8 year 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 substantial

Services are delivered through Westminster Aviation Security Services Limited ("WASS") (a wholly owned subsidiary of the Group), and its local trading associate company. The latter was incorporated on 20 April 2012 and Westminster Aviation Security Services Limited which in turn will have a significant investment in and management control of this local legal entity which will deliver the services in the country.

Operating Lease

In May 2012 the Group entered into an operating lease for the rental of premises for use by Longmoor Security Services Limited in connection with the delivery of training courses. This has a monthly cost of c£15,000 and the lease is renewable at the end of 1 year. 

10.  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 2011 or 2010.  The Annual Report and Financial Statements for 2010 have been delivered to the Registrar of Companies and those for 2011 will be delivered following the Company's annual general meeting.  The auditor's reports on both the 2011 and 2010 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 2011 will be posted to shareholders shortly 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 30 May 2012.

 

END

 

 

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