Final Results

RNS Number : 2678P

Westminster Group PLC

25 May 2018

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF ARTICLE 7 OF EU REGULATION 596/2014

Westminster Group Plc

('Westminster', the 'Group' or the 'Company')

Final Results for the year ended 31 December 2017

Westminster Group Plc (AIM: WSG), a leading supplier of managed services and technology-based security solutions worldwide, is pleased to announce its results for the year ended 31 December 2017.

Key Points:

Operational

· Transformational fifteen-year aviation security opportunity in the Middle East with annual initial revenues of €24m very well advanced in 2017. This is a large and complex opportunity with very significant effort and progress in setting up the appropriate supply chain and infrastructure

· Managed Services now the key focus of the Group and the pipeline of major long-term project opportunities continues to grow. Discussions in progress with governments and airport authorities in various parts of the world

· New contract awards for equipment and services to airports around the world including a six-month airport security training programme

· Strong recovery in West Africa passenger numbers continues, several new airlines commenced services with Turkish Airlines commencing in February 2018

· Sovereign Ferries operations transferred to Sea Coach Express end September 2017

· Board strengthened with the appointment of the Rt. Hon Sir Tony Baldry as Chairman and Martin Boden as Chief Financial Officer from 29 June 2017. Sir Malcolm Ross remains on the Board as Deputy Chairman

Financial

· Revenues up by 22% to £5.4m (2016: £4.4m) with £3.6m from Managed Services division (2016: £2.8m) marking the end of the Ebola period in West Africa and resumption of passenger volumes. Technology division revenues of £1.8m compared with £1.6m in 2016

· Gross margin decreased to 59% (2016: 71%) as a result of lower Technology margins (fewer large higher margin orders) and the impact of cost of sales being higher than revenues at Sovereign Ferries

· Adjusted EBITDA loss £1.2m (2016; Profit £25k) largely due to the discontinued ferry operation. For continuing operations, EBITDA loss of £0.5m (2016: Profit £0.1m)

· Equity of £2.4m issued in the year compared with £1.3m in 2016. No new debt finance raised in 2017 compared with £1.7m raised in 2016

· The last remaining £1.2m of Darwin unsecured loan notes were converted into equity in 2017

· Loss per share of 5.60p (2016: 2.46p). For continuing operations, loss per share of 2.24p (2016: 1.42p)

· Cash balance of £0.4m at 31 December 2017 and £0.7m at 1 May 2018 (31 December 2016: £0.2m)

Post Period End

· Middle East airport project confirmed as Iran, with initial annual revenues of €24m, signed but on hold awaiting clarification of the impact of the US withdrawal from the JCPOA and the implications for the Company's supply chain

· Second separate contract for equipment supply into Iran, worth €2.6m, also signed but on hold awaiting clarification of the impact of the US withdrawal from the JCPOA and the implications for the Company's supply chain

· Technology division contract worth $4.5m secured in March 2018, expected to be mostly delivered in 2018

· New Managing Director appointed for Technology division in February 2018

· £750k of new equity raised in January 2018

· £87k of Beaufort warrants exercised in January 2018, Beaufort no longer joint broker

· Convertible Secured Loan notes extended from 18 June 2018 to 30 June 2019, the Company has an option to extend for a further six months to 31 December 2019

· Group in a much stronger financial position than at the start of the year

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

"I am pleased to report the Group has made progress during 2017. Revenues rose strongly in both our Managed Services and Technology divisions and the loss making Sovereign Ferries operation was discontinued in September 2017.

"We continue to build on the progress made in 2017 and we have achieved some notable successes during the first half of 2018 such as the $4.5 million contract award for an advanced vehicle screening solution in the Middle East and the signing of two contracts in Iran including the long-term project opportunity worth an initial €24million per annum. Whilst it is frustrating having to put these two Iranian contracts on hold while we evaluate the impact of the US withdrawal from the JCPOA agreement, securing in particular the major managed services contract, being for one of sixty airports in the country, was a momentous achievement and we remain hopeful that measures being put in place to protect EU companies against US extraterritorial actions will allow these projects to proceed.

"Our business is both stronger financially and in a better position than it has been for some time in terms of management, structure, revenues and prospects. Our Managed Services division is making progress on several fronts and our Technology division continues to deliver a wide range of products and solutions around the world. Over the next few months and years we have an opportunity to achieve unprecedented growth from the prospects we are pursuing. The Iranian airport opportunity and other managed services contracts could be transformational for the Group and the Board remains committed to delivering on this potential."

For further information please contact:

Westminster Group Plc	Media enquiries via Walbrook PR
Rt. Hon. Sir Tony Baldry - Chairman
Peter Fowler - Chief Executive Officer
Martin Boden - Chief Financial Officer

S. P. Angel Corporate Finance LLP (NOMAD & Broker)
Stuart Gledhill	020 3470 0470
Lindsay Mair
Caroline Rowe

Walbrook (Investor Relations)
Tom Cooper	020 7933 8780
Paul Vann	0797 122 1972
	tom.cooper@walbrookpr.com

Notes:

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

Westminster's principal activity is the design, supply and on-going 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 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.

Chairman's Statement

Overview

I am pleased to present the Final Results for Westminster Group plc for the year ended 31 December 2017.

The Group has made progress during the year with revenues up by 22% to £5.4m (2016: £4.4m), although at EBITDA level the loss of £1.2m compares to a profit in 2016 of £25k. Whilst over half of the EBITDA loss in 2017 related to the discontinued Ferry operations in Sierra Leone, we also continued with the necessary investment in our business, people and operations to deliver the significant potential growth we are working towards.

As a result of this investment we started 2018 in a stronger position than we have been in for some time. Both our Managed Services and Technology divisions are performing well and the Group closed its ferry operations from late September 2017 to focus on its core business. Our prospects have increased and operationally we have made significant progress. More detail on the strategic developments, projects and opportunities we are undertaking is covered in the CEO's Strategic Report.

During the year the Group raised £2.35m gross from the issue of new equity to support working capital requirements and business development costs, and the last remaining Darwin convertible unsecured loan notes (£1.2m) were converted into equity. In May 2018 the remaining secured convertible loan notes were extended to 30 June 2019, with an option for the Company to extend for a further six months to 31 December 2019.

We continue to work closely with and receive excellent support from the Foreign Office and UK Diplomatic Missions around the world and I am very grateful for the support these and other governmental departments provide to our teams and our operations worldwide.

Corporate Conduct

We operate worldwide with a focus on emerging markets and in a sector where discretion, professionalism and confidentiality are essential. It is vitally important that we maintain the highest standards of corporate conduct. The Corporate Governance Report sets out the detailed steps that we undertake to ensure that our standards, and those of our agents, can stand any scrutiny by Government or other official bodies.

We are conscious of the new AIM Notice 50 which requires companies to review their corporate governance disclosures annually and to adopt a recognised corporate governance code from 28 September 2018. We take our corporate governance responsibilities very seriously and will be adopting and working to the Quoted Companies Alliance (QCA) Corporate Governance Code with appropriate disclosures to be set out on the Company's corporate website.

Social Responsibility

As a Group, we take our corporate social responsibilities very seriously, particularly as we operate in emerging markets and in some cases in areas of poverty and deprivation. I am proud of the support and assistance we as a company provide in many of the regions in which we operate, and I would like to pay tribute to our employees and other individuals and organisations for their generous support and contributions to our registered charity, the Westminster Group Foundation. We work with local partners and other established charities to provide goods or services for the relief of poverty or advancement of education or healthcare making a difference to the lives of the local communities in which we operate. For more information or to make a donation please visit www.wg-foundation.org

Employees and Board

I am delighted to have become Chairman of the Westminster Group from the end of June 2017, and to have become Executive Chairman with effect from the end of January 2018. Sir Malcolm Ross remains on the Board as a Non-Executive Director and Deputy Chairman.

Martin Boden replaced Ian Selby as Chief Financial Officer at the end of June 2017 and I believe Martin's experience of international transactions and financial management of high growth businesses brings additional strength to our Board.

As a service-based business, our employees are key to delivering success. I believe we have an exceptional workforce and I would like to take this opportunity to express my appreciation to all our employees, both in the UK and overseas, who have worked extremely hard during the year.

I would finally like to extend my appreciation to our investors for their continued support and to our strategic investors who are bringing their expertise to help deliver value for all.

Rt. Hon. Sir Tony Baldry

Chairman

Chief Executive Officer's Strategic Report

Business Description

Our vision remains to build a global business with strong brand recognition delivering niche security solutions and long term managed services to high growth and emerging markets around the world, with a particular focus on long term recurring revenue business.

Our target customer base is primarily governments and governmental agencies, critical infrastructure (such as airports, ports & harbours, borders and power plants), and large scale commercial organisations worldwide.

Our business has evolved from a traditional UK focused security business to what can be described today as a truly international business. Furthermore, our evolution continues as we expand our operations into new areas and new territories creating additional opportunities around the world in the provision of long term managed security services and security products.

We deliver our wide range of solutions and services through a number of operating companies that are currently structured into two operating divisions; Managed Services and Technology; both primarily focused on international business as follows:

Managed Services division:

Focusing on long term (typically 10 - 25 years) recurring revenue managed services contracts such as the management and operation of security solutions in airports, ports and other such facilities, together with the provision of manpower, consultancy and training services.

Technology division:

Focussing on providing advanced technology led security solutions encompassing a wide range of surveillance, detection, tracking, screening and interception technologies to governments and organisations worldwide.

In addition to providing our business with a broad range of opportunities, these two divisions offer cost effective dynamics and vertical integration with the Technology division providing vital infrastructure and complex technology solutions and expertise to the Managed Services division. This reduces both supplier exposure and cost and provides us with increasing purchasing power. Our Managed Services division provides a long-term business platform to deliver other cost effective incremental services from the Group.

We continue to deliver a wide range of solutions to governments and blue-chip organisations around the world. Our reputation grows with each new contract delivered - this in turn underpins our strong brand and provides a platform from which we can expand our Managed Services business. This remains a key focus for the Group with its growth prospects in Emerging Markets and the resulting significant recurring revenue stream potential.

Business Review

As highlighted in the Chairman's Statement the Group has made progress during 2017. Revenues rose strongly in both our Managed Services and Technology divisions and the loss making Sovereign Ferries operation was discontinued in September 2017.

Enquiry levels remain healthy and levels of interest in the Group's services remain high across both operating divisions. However, whilst our Technology division provides the technological resources and platform to expand our operations around the world it is our Managed Services division, with its potential for delivering large scale, long term, recurring revenue and transformational growth, which is increasingly our core focus, particularly within the aviation security sector.

Managed Services Division

Our Managed Services division and the significant growth opportunities it is progressing is the key focus of the Group. During 2017 the Managed Services division made progress on several fronts.

Our aviation security business in West Africa has performed well as the recovery from the West African Ebola outbreak continues. We have seen steady growth with flight schedules increasing in 2017 and passenger growth across all airlines apart from Air France where their flights are code-shared with KLM. For the full year we had c.111,000 embarking passengers, an increase of 14% on the c.97,000 embarking in 2016. The growth in the number of carriers is encouraging and we expect to see a continuation of passenger growth in 2018 as several new airlines commenced services towards the end of 2017 and in Q1 2018 Turkish Airlines also commenced services with a new route to Istanbul.

Westminster's international reputation and expertise in the field of aviation security continues to grow and in 2017 we secured contracts to assist airport authorities around the world with their equipment and training needs. We plan to expand our training team in 2018 to meet the demand for their services.

We have signed a number of Memorandums of Understanding (MoU) with governments and airport authorities in our target markets, several of which were added in 2017. Due, in part, to the confidential nature of such projects and commercial sensitivity, we are no longer announcing any individual MoU when signed and we will update the market on material developments as appropriate and in accordance with our regulatory responsibilities.

During 2017 we continued to spend considerable time, effort, and expense in progressing our large scale long term potential opportunities. In this respect a defining aspect of our activities during the year has been the progress made with our major Middle East airport project opportunity in Iran. Iran has a population of close to 80 million people and over 60 airports and as such could be one of the world's fastest growing aviation opportunities.

Following the relaxation of sanctions on the Joint Comprehensive Plan of Action (JCPOA) agreement, we commenced discussions with the Iranian Airport Authorities and signed a Memorandum of Understanding in March 2016 to assist with equipment, processes and support systems to help bring Iranian airport security up to international standards. Following preliminary consultations, we received a formal Letter of Intent in May 2016 relating, initially, to one of the country's main airports.

Over the past two years we have been involved in wide ranging and complex and ongoing negotiations with commercial and political bodies with meetings in various jurisdictions. To be in a position to undertake this transformational project we have had to put in place a complex supply chain and invest in our corporate infrastructure, including the establishment of operations in Germany. We also dealt with a constantly changing scope of works as the client prioritised its requirements. In addition, given the sensitivities around operating in Iran, we have had to overcome numerous challenges including banking, financing and strict compliance with international restrictions involving detailed due diligence and considerable professional advice from across Europe and the United States (US). Throughout the process we have received valuable support from the UK government at the highest levels.

On 22 December 2017 we announced we had finalised legal and commercial negotiations apart from a few minor commercial and contractual issues. On 28 March 2018 we announced that the outstanding commercial and contractual issues has been agreed and that we were awaiting the client's internal approval process to complete. On 7 May 2018 we signed a long term (15 year) contract with annual revenues in excess of €24 million Euros which will become effective on the exchange of formal board letters between us and the client. The purpose of the exchange of letters is to allow both parties time to ensure everything is in place before commencing operations. In addition, we also signed a secondary smaller equipment supply contract for €2.65 million Euros. Unfortunately, on 8 May President Trump made an announcement that the US were unilaterally and immediately withdrawing from the JCPOA agreement and re-imposing sanctions. This has created uncertainty both in Iran and the international business community.

None of Westminster's proposed equipment or services relates to any proposed sanctions. The other signatories to the JCPOA agreement, being China, Russia, Germany, France and the UK, have all stated their continued support for the agreement, as have the European Union (EU), the United Nations, the International Atomic Energy Agency and most other leading countries around the world. Germany, France and the United Kingdom have jointly vowed to uphold the JCPOA agreement and the EU is considering putting measures in place to protect European companies. However, given the initial uncertainty and following initial discussions with our customer and commercial partners, the Board made the decision to place both projects on hold whilst it seeks clarification on the impact of the US withdrawal from the JCPOA and the implications for the Company's supply chain including the potential replacement of some equipment suppliers.

Securing this major contract was a momentous achievement and we remain hopeful that non-sanctioned activities by non-US companies will be allowed to continue in Iran, and that the EU will put measures in place to protect EU companies against US extraterritorial actions allowing these projects, and others planned, to proceed.

Whilst the Iranian airport project has been a high priority and any delay in implementing the contract now signed is a frustration it is only one of a number of significant project opportunities we are pursuing around the world and we are well placed to sign at least one other long term Managed Services contract during 2018, although with projects of this scale and complexity there can never be certainty of outcome or timing.

Technology Division

During the year the Technology division secured contracts for a wide range of products and services to clients from around the world. By way of example of the diversity of our contracts we secured orders for Explosive Ordnance Disposal equipment for the Italian Army, Underwater Security systems for a Middle East Navy, Port security equipment to Bangladesh, screening equipment to Japan and Vietnam and we continued to provide security equipment and services to government facilities across the UK.

In 2017 we supplied numerous clients in around 60 countries across the world, especially in the UK, Middle East, both East and West Africa, Eastern Europe, Asia and Latin America.

With our ever-growing population of sold systems that require regular maintenance, in 2017 we increased our recurring revenue base of maintenance and service contracts, both in the UK and overseas, by over 30% to £236k per annum (2016: £180k). These contracts help underpin the cost base of the Division and is an area of the business we expect to grow further.

In addition, the Division has provided various equipment and technology support services to the Managed Services division.

In order to improve the management and potential of the Technology division in February 2018 we appointed Stuart Gilbert as Managing Director. Stuart has a strong background in international security solutions, previously holding senior positions in multinational security organisations and will lead the growth of this division.

Sovereign Ferries

Our ferry services in Sierra Leone, under the branding Sovereign Ferries, commenced formal services in January 2017. In June 2017, we announced that we had secured around 3% of the addressable ferry market, with the market as a whole estimated to be worth around £4 million per annum in revenues and that over the next 12 months we would be seeking to grow our market share to beyond a 14% share (the level at which we anticipated the operation would be providing a positive contribution). However, passenger growth and financial performance did not meet the Board's expectations, due in part to growing competition. Revenues in H1 2017 amounted to £51k (H1 2016: nil) and the EBITDA loss amounted to £0.4m (H1 2016: nil). With future passenger growth forecasts being downgraded, losses would be greater in quantum and duration than had been previously forecast. The Board took the decision in September 2017 to exit the ferry service in a manner that would not adversely affect airport passenger transfer to and from the mainland - this was one of the initial drivers for the ferry service.

We consequently entered into a formal agreement to transfer the operation to Sea Coach Express, the largest ferry operator in Sierra Leone, commencing on 25 September 2017. Under this Agreement, Sea Coach took over the Sovereign Ferries' operations and responsibility for management and operation of the ferry service. We transferred the Sierra Princess to Sea Coach as part of the transaction and cancelled the lease on our second vessel the Sierra Duchess without penalty.

By combining the ferry operations, the enlarged service is able to offer the travelling public a greatly enhanced service with increased choice, routes, vessels and landing stages.

We will continue to operate and manage the ferry terminals in accordance with our 21-year agreement and will receive a share of revenues on ticket sales made through our own operations, together with a payment for all passengers travelling to and from our terminals although we do not expect these revenues to be material.

We still own the Sierra Queen and given our exit from the ferry operations we are reviewing our options for disposal including a sale. As the vessel requires maintenance work and is not in service a sale may take time. The Board has made a full provision in the 2017 financial statements to write down the remaining Sovereign Ferries assets (not transferred to Sea Coach Express) to nil. The costs associated with the exit from the ferry operations have been treated as exceptional exit costs in the 2017 results.

Strategic Review

In 2016 I announced we were undertaking a wide ranging strategic review of our operations to ensure we are well positioned to maximise opportunities going forward and successfully take the business to a new level. This review is ongoing, and we continue to review our operations, structure, management and advisors. In 2017 we made a number of changes to our management structure and board of directors. This process continues with both senior management and new board appointments in 2018 broadening our range of experience and expertise.

Our business is set to benefit from unprecedented growth opportunities, particularly with our airport security operations, and it is essential we have the right strategies, people, processes and systems in place to successfully deliver such growth. Accordingly, the changes we have made to date and intend to make over the coming months will, I believe, serve the Company well and greatly assist our planned growth.

Business Outlook

Our business is now in a better position than it has been for some time in terms of management, structure, revenues and prospects.

It has been extremely frustrating to have finally signed the major Iranian airport contract we have been pursuing for the past two years, only to have to delay implementing it following the US unilateral withdrawal from the JCPOA and threat of renewed sanctions. Whilst none of our equipment and services come under existing or threatened sanctions we must be certain of our position and that of our suppliers, before proceeding.

Never-the-less securing this major contract was an important achievement and demonstrates our managed services model is attractive and deliverable to airports of varying sizes and in challenging markets world-wide. We remain hopeful that the EU, which exported €10.8 billion of goods and services to Iran in 2017, will put measures in place to protect EU companies doing business in Iran against US extraterritorial actions, allowing projects such as ours in Iran to proceed. As previously announced, the Iranian airport project in question, which is just one of over 60 airports in the country, would, if it proceeds, add over €24 million Euros annually to our revenue.

We continue to pursue the other project opportunities underway around the world and our Managed Services division is making progress on a number of fronts. We are also securing an increasing number of smaller contracts to assist airport authorities around the world with their equipment and training needs, and this enhances our prospects for our large scale, long term airport opportunities. We are working towards signing at least one other long term Managed Services contract during 2018 although with projects of this scale and complexity there can never be certainty of outcome or timing.

Our Technology division continues to deliver a wide range of products and solutions around the world. Our recent $4.5m order received in the Middle East that we have been pursuing for over three years demonstrates the time such large-scale projects can take to finalise. Being the first multi-million-pound order for this division for a while it also demonstrates the lumpy revenue nature of this division. There are however many such opportunities we are pursuing and to capitalise on these opportunities, we have strengthened the management of this division with the recent appointment of Stuart Gilbert as Managing Director.

Over the next few months and years we have an opportunity to achieve unprecedented growth from the prospects we are pursuing. The Iranian airport opportunity and other managed services contracts could be transformational for the Group. The Board and I remain committed to delivering on this potential.

Peter Fowler

Chief Executive Officer

Chief Financial Officer's Report

Discontinued Operations

On 25 September 2017 the Group entered into a sale agreement to transfer the operation of Sovereign Ferries in Sierra Leone to Sea Coach Express. As part of this agreement, title of the Sierra Princess has been transferred to Sea Coach Express and the local company Sovereign Ferries (SL) Limited was transferred with an effective date as at 1 January 2018 following completion of the local 2017 audit. The company is being transferred with no assets and no liabilities - the Sierra Princess was leased and not on the balance sheet and the Sierra Queen and other Sovereign Ferries assets have been written down to nil.

The results of the discontinued operations are shown separately in the Consolidated Statement of Comprehensive Income and this report refers to both the results for all Group operations and the results for continuing operations.

Revenue

Revenues of £5.4m were 22% higher than the £4.4m reported in 2016. The Managed Services division revenues increased by 28% to £3.6m (2016: £2.8m) and the Technology division revenues rose by 9% to £1.8m (2016: £1.6m). The. Managed Services revenues continued to recover following the end of the Ebola crisis in West Africa and the consequent growth in passenger volumes and security fees. The discontinued Sovereign Ferries revenues were immaterial in both 2017 and 2016.

Gross Margin

Gross margin fell to 59% (2016: 71%) as a result of lower margins on Technology division sales and cost of sales exceeding revenues on the discontinued operations. There were fewer high margin technology sales in 2017 than achieved in 2016.

Operating Cost Base

Total Group administrative expenses were £8.7m (2016: £4.5m). Within these expenses an IFRS share option expense of £0.1m (2016: £0.1m) was recorded, a depreciation and amortisation charge of £0.3m (2016: £0.2m), impairment charges of £2.9m (2016: £nil), costs associated with exiting the ferry operation of £0.3m and specific pre-contract costs related to progression of the Iranian Middle East Airport opportunity of £0.5m (2016: £0.2m).

Operational EBITDA

The Group loss from operations was £5.5m (2016: £1.4m). When adjusted for the exceptional and non-cash items set out below and depreciation and amortisation, the Group recorded an adjusted EBITDA loss of £1.2m compared to a small profit of £25k in the prior year.

Reconciliation to adjusted EBTIDA	2017 £'000	2016 £'000
Loss from Operations	(5,487)	(1,389)
Depreciation, Amortisation and Impairment charges	3,202	234
Reported EBITDA	(2,285)	(1,155)
Share Option expense	63	103
Impact of Ebola	-	272
Iranian Middle East Airport opportunity costs	603	220
Ferry exit costs	335	585
Other exceptional items	50	-
Adjusted EBTIDA (loss) / profit	(1,234)	25

The adjusted EBITDA loss for continuing operations in 2017 was £0.5m with a further £0.7m of losses from discontinued operations.

Finance Costs

Total finance costs of £0.6m (2016: £0.6m) were consistent with the prior year as interest bearing debt levels remained constant. Senior Secured Convertible Notes (10% coupon) generated an underlying cash charge of £0.2m (2016: £0.2m). The remaining £0.4m (2016: £0.4m) of finance charges were non-cash based and related to IFRS valuations of the convertible loan notes.

Result for the Year

The Group loss before taxation was £6.1m (2016: £2.0m) and the loss per share was 5.6p (2016: 2.5p). For continuing operations, the loss before taxation was £2.4m (2016: £1.1m) and the loss per share was 2.2p (2016: 1.4p).

Statement of Financial Position

Total Group assets amounted to £3.2m at 31 December 2017 compared with £6.4m at 31 December 2016.

Net Group current assets amounted to less than £0.1m at 31 December 2017 compared to £0.2m at 31 December 2016

The Group debtor balance as at 31 December 2017 was £0.7m (2016: £0.9m). Average days sales outstanding at the year-end were 36 (2016: 32).

Cash and cash equivalents of £0.4m at 31 December 2017 compared with £0.2m at 31 December 2016.

Trade payables were £1.1m (2016: £1.1m) and average creditor days were 24 (2016: 35).

Total equity at 31 December 2017 stood at a deficit of £0.3m (2016: surplus of £2.3m).

Convertible Loan Notes (CLN) and Convertible Unsecured Loan Notes (CULN)

The convertible unsecured loan notes issued to Darwin Capital Limited ("Darwin") were repaid in full in February and April 2017. Darwin held warrants attached to their loan notes and details are provided under Equity Issues below.

Summary of movements in loan notes at principal value	CULN £'000	CLN £'000	Total £'000
At 1 January 2017	1,200	2,245	3,445
Conversions in the year	(1,200)	-	(1,200)
At 31 December 2017 and 24^th May 2018	-	2,245	2,245

At 31 December 2017, the secured CLN carried a coupon of 10% payable quarterly in arrears, had a conversion price of 35p and matured on 18 June 2018. In May 2018, with maturity getting close, we have extended the term of the secured CLN to 30 June 2019 at a coupon of 12%. The Company has an option to extend the term to 31 December 2019 at a higher coupon of 15% for that last six months. The conversion price has been reduced to 25p per share.

Equity Issues

On 28 February 2017 the Company issued 5,161,290 ordinary shares of 10p at 11.625p per share, with a further 10 million ordinary shares issued at nominal value on 18 April 2017, and 7.5 million ordinary shares issued at nominal value on 26 September 2017.

A further 10,669,227 ordinary 10p shares were issued during the year at an average price of 11.24p per share on conversion of the remaining £1.2m CULN.

Summary of Warrants at 31 December 2017

Number	Holder and Description	Strike Price (p)	Life (years)	Vesting Criteria
589,330	Darwin, February 2016	20.15	3	At grant:- detachable
1,100,000	Darwin, November 2016	28	3	At grant:- detachable
5,000,000	Hargreave Hale, June 2016	12	3	At grant:- detachable

The November 2016 Warrants were sold by Darwin to a new holder in April 2018.

Cash Flow Statement

During the year the Group had an operating cash outflow of £1.5m (2016: £1.7m) which arose primarily from trading losses. Just under half of cash outflow (£0.7m) related to continuing operations with £0.8m relating to discontinued operations. In 2016, £1.0m of cash outflow related to continuing operations with £0.7m relating to discontinued operations.

The Group reported a favourable working capital movement of £0.6m (2016: £0.6m adverse movement).

During the year the Group raised £2.4m gross from the issue of new equity. In 2016, £1.3m was raised from new equity with a further £1.7m of proceeds from the issue of convertible loan notes.

During the year the Group was provided with overdraft support by its bankers HSBC and at present has a small but unused overdraft facility.

Reconciliation from adjusted EBITDA to normalised operating cash flow	2017 £'000	2016 £'000
Adjusted EBITDA	(1,234)	25
Loss on asset disposal	9	13
Net changes in working capital	641	(638)
Equity settlement payment	25	-
Net Cash used in underlying operating activities	(559)	(600)

Net Cash used in underlying operating activities is presented excluding exceptional items, share options expense, and depreciation and amortisation.

Events after the Reporting Period

· On 3 January 2018, Beaufort Securities exercised warrants over 875,000 new Ordinary Shares of 10 each at an exercise price of 10p per Ordinary Share. Accordingly, 875,000 new Ordinary Shares were issued in settlement of this exercise. Beaufort Securities Limited are no longer joint broker to the Company.

· On 31 January 2018, the Company raised £0.75m (gross) through a placing of 3,409,091 new Ordinary Shares of 10p each at 22 pence per Ordinary Share. The placing was undertaken by S P Angel Corporate Finance LLP who received 170,455 Warrants to subscribe for Ordinary Shares at an exercise price of 22 pence per share.

· On 28 March 2018, the Technology division secured a $4.5m contract for the provision of advanced vehicle screening solutions to an existing client in the Middle East

· On 10 May 2018, the Company announced that its major Middle East project opportunity is in Iran. The contract has been signed but the project is on hold as the Company investigates the impact of the US withdrawal from the JCPOA and the implications for the Company's supply chain

· On 24 May 2018, the Company extended the term of its Secured Convertible Loan Notes from 18 June 2018 to 30 June 2019, with an option to extend for a further six months to 31 December 2019. The coupon has been raised from 10% to 12% until June 2019 and increases to 15% for the six months to 31 December 2019 should the Company exercise its option. The conversion price has been reduced from 35p per share to 25p.

Key Performance Indicators

The Group constantly monitors various key performance indicators for factors affecting the overall performance. At Group level the revenues and gross margin are monitored to give a constant view of the Group's operational performance. As employment costs are the single largest cost base for the Group the number of employees and employee costs are also monitored to ensure best use of resources. Days Sales Outstanding is used to measure as to the cash conversion of revenue and identifies debtor aging issues.

The Managed Services division derives its revenues and cash flows based on the number of passengers using a facility such as an airport. The number of passengers served is monitored and with the growth in aviation training we have introduced KPI's for the number of contracts won.

The Technology division measures its sales activity by reference to the number of enquiries received per month and the number of orders received. The number of countries and number of return customers are monitored to give a view on the performance of the division.

Group	2017	2016
Revenue £'m	5.4	4.4
Gross Margin	59%	71%
Days Sales Outstanding	36	32
Number of Employees	283	240
Average Employee Cost Per Head	£8,365	£9,450

Managed Services	2017	2016
Passengers Served ('000)	111	97
Number of Training Projects Won	16	2
% of Training Project Won	61.50%	100%

Technology Division	2017	2016
Average Enquiries Per Month	128	117
Average Number of Orders Per Month	29	21
Number of Countries Supplied	41	39
Number of Return Customers	164	150

Martin Boden

Chief Financial Officer

Consolidated Statement of Comprehensive Income

for the year ended 31 December 2017

	Note	2017 Continuing Operations	2017 Discontinued Operations	2017 Total	2016 Continuing Operations	2016 Discontinued Operations	2016 Total
		£'000	£'000	£'000	£'000	£'000	£'000
REVENUE	3	5,330	66	5,396	4,397	9	4,406
Cost of sales		(2,015)	(182)	(2,197)	(1,217)	(79)	(1,296)
GROSS PROFIT		3,315	(116)	3,199	3,180	(70)	3,110
Administrative expenses		(5,133)	(3,553)	(8,686)	(3,757)	(742)	(4,499)
LOSS FROM OPERATIONS		(1,818)	(3,669)	(5,487)	(577)	(812)	(1,389)

Analysis of operating loss
Loss from operations		(1,818)	(3,669)	(5,487)	(577)	(812)	(1,389)
Add back amortisation		31	-	31	7	-	7
Add back depreciation		139	144	283	110	117	227
Add back impairment charges		397	2,491	2,888	-	-	-
Add back share option expense		63	-	63	103	-	103
Add back exceptional items^{^[1]}	4	653	335	988	492	585	1,077
EBITDA Profit/(loss) from underlying operations		(535)	(699)	(1,234)	135	(110)	25

Finance costs	5	(630)	-	(630)	(566)	-	(566)

LOSS BEFORE TAXATION		(2,448)	(3,669)	(6,117)	(1,143)	(812)	(1,955)
Taxation	7	-	-	-	46	-	46
LOSS ATTRIBUTABLE TO EQUITY SHAREHOLDERS		(2,448)	(3,669)	(6,117)	(1,097)	(812)	(1,909)

LOSS AND TOTAL COMPREHENSIVE LOSS ATTRIBUTABLE TO:
OWNERS OF THE PARENT		(2,248)	(3,669)	(5,917)	(1,097)	(812)	(1,909)
NON-CONTROLLING INTEREST		(200)	-	(200)	-	-	-

LOSS AND TOTAL COMPREHENSIVE LOSS		(2,448)	(3,669)	(6,117)	(1,097)	(812)	(1,909)
LOSS PER SHARE	9	(2.24p)	(3.36p)	(5.60p)	(1.42p)	(1.04p)	(2.46p)

[1] Exceptional items relate to certain costs or incomes that derive from events or transactions that fall within the normal activities of the Group but which, individually or, if of a similar type, in aggregate, are excluded by virtue of their size and nature in order to reflect management's view of the performance of the Group

Consolidated Statement of Financial Position

As at 31 December 2017

		Group	Group
		2017	2016
	Note	£'000	£'000

Goodwill		-	397
Other intangible assets		129	132
Property, plant and equipment		1,952	4,635
Investment in subsidiaries		-	-
TOTAL NON-CURRENT ASSETS		2,081	5,164
Inventories		39	198
Trade and other receivables		693	894
Cash and cash equivalents		392	152
TOTAL CURRENT ASSETS		1,124	1,244
Assets of disposal groups classified as held for sale		-	-
TOTAL ASSETS		3,205	6,408
Called up share capital	11	12,074	8,711
Share premium account		9,226	9,169
Merger relief reserve		299	299
Share based payment reserve		621	569
Equity reserve on convertible loan note		186	186
Revaluation reserve		134	134
Retained earnings:
At 1 January		(16,772)	(14,739)
Loss for the year		(5,917)	(1,909)
Other changes in retained earnings		36	(124)
At 31 December		(22,653)	(16,772)
(DEFICIT)/EQUITY ATTRIBUTABLE TO: OWNERS OF THE COMPANY NON-CONTROLLING INTEREST		(113) (200)	2,296 -
TOTAL DEFICIT(EQUITY)		(313)	2,296
Borrowings	12	2,184	3,059
Deferred tax liabilities		-	-
TOTAL NON-CURRENT LIABILITIES		2,184	3,059
Deferred income		-	27
Trade and other payables		1,096	1,026
TOTAL CURRENT LIABILITIES		1,096	1,053
Liabilities of disposal group classified as held for sale		238	-
TOTAL LIABILITIES		3,518	4,112
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY		3,205	6,408

Consolidated Statement of Changes in Equity

for the year ended 31 December 2017

	Called up share capital	Share premium account	Merger relief reserve	Share based payment reserve	Revaluation reserve	Equity reserve on convertible loan note	Retained earnings	Total	Non controlling interest	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000

AS AT 1 JANUARY 2017	8,711	9,169	299	569	134	186	(16,772)	2,296	-	2,296
Shares issued for cash	2,291	-	-	-	-	-	-	2,291	-	2,291
Cost of share issues	-	(76)	-	-	-	-	-	(76)	-	(76)
Share based payment charge	-	-	-	88	-	-	-	88	-	88
Exercise of share options	5	-	-	(2)	-	-	2	5	-	5
Lapse of share options	-	-	-	(34)	-	-	34	-	-	-
CLN conversion	1,067	133	-	-	-	-	-	1,200	-	1,200
TRANSACTIONS WITH OWNERS	3,363	57	-	52	-	-	36	3,508	-	3,508

Total comprehensive expense for the year	-	-	-	-	-	-	(5,917)	(5,917)	(200)	(6,117)

AS AT 31 DECEMBER 2017	12,074	9,226	299	621	134	186	(22,653)	(113)	(200)	(313)

	Called up share capital	Share premium account	Merger relief reserve	Share based payment reserve	Revaluation reserve	Equity reserve on convertible loan note	Retained earnings	Total	Non controlling interest	Total
AS AT 1 JANUARY 2016	6,345	9,170	299	258	134	219	(14,739)	1,686	-	1,686
Shares issued for cash	1,300	-	-	-	-	-	-	1,300	-	1,300
Share based payment charge	-	-	-	103	-	-	-	103	-	103
Lapse of share options	-	-	-	(37)	-	-	37	-	-	-
Warrants issued with loan notes	-	-	-	245	-	-	(150)	95	-	95
CLN conversion	1,066	-	-	-	-	(33)	(11)	1,022	-	1,022
Loan notes issued	-	(1)	-	-	-	-	-	(1)	-	(1)
TRANSACTIONS WITH OWNERS	2,366	(1)	-	311	-	(33)	(124)	2,519	-	2,519
Total comprehensive expense for the year	-	-	-	-	-	-	(1,909)	(1,909)	-	(1,909)

AS AT 31 DECEMBER 2016	8,711	9,169	299	569	134	186	(16,772)	2,296	-	2,296

Consolidated Cash Flow Statement

for the year ended 31 December 2017

		2017 Continuing Operations	2017 Discontinued Operations	2017 Total	2016 Continuing Operations	2016 Discontinued Operations	2016 Total
	Note	£'000	£'000	£'000	£'000	£'000	£'000
LOSS AFTER TAX		(2,448)	(3,669)	(6,117)	(1,097)	(812)	(1,909)
Taxation credit		-	-	-	(46)	-	(46)
LOSS BEFORE TAX		(2,448)	(3,669)	(6,117)	(1,143)	(812)	(1,955)
Non-cash adjustments	10	1,294	2,635	3,929	809	107	916
Net changes in working capital	10	435	206	641	(691)	53	(638)
NET CASH USED IN OPERATING ACTIVITIES		(719)	(828)	(1,547)	(1,025)	(652)	(1,677)
INVESTING ACTIVITIES:
Purchase of property, plant and equipment		(69)	(4)	(73)	(123)	(408)	(531)
Purchase of intangible assets		(56)	-	(56)	(105)	-	(105)
Proceeds from disposal of fixed assets		1	-	1	-	-	-
CASH OUTFLOW FROM INVESTING ACTIVITIES		(124)	(4)	(128)	(228)	(408)	(636)
CASHFLOWS FROM FINANCING ACTIVITIES:
Gross proceeds from the issues of ordinary shares		2,376	-	2,376	1,300	-	1,300
Costs of share issues		(160)	-	(160)	(45)	-	(45)
Net proceeds from the issue of convertible loan notes		-	-	-	1,675	-	1,675
Costs associated with the issue of convertible loan notes		-	-	-	(272)	-	(272)
Interest paid		(265)	-	(265)	(247)	-	(247)
Other loan repayments, including interest		(36)	-	(36)	(96)	-	(96)
CASH INFLOW FROM FINANCING ACTIVITIES		1,915	-	1,915	2,315	-	2,315
Net change in cash and cash equivalents		1,072	(832)	240	1,062	(1,060)	2
CASH AND EQUIVALENTS AT BEGINNING OF YEAR				152			150
CASH AND EQUIVALENTS AT END OF YEAR				392			152

Notes to the consolidated financial statements

for the year ended 31 December 2017

1. General information and nature of operations

Westminster Group plc ("the Company") was incorporated on 7 April 2000 and is domiciled and incorporated in the United Kingdom and quoted on AIM. The Group's financial statements for the year ended 31 December 2017 consolidate the individual financial statements of the Company and its subsidiaries. The Group designs, supply and provides on-going advanced technology solutions and services to governmental and non-governmental organisations on a global basis.

2. Basis of preparation

Basis of preparation

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

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

Basis of measurement

The financial statements have been prepared under the historical cost convention with the exception of certain items which are measured at fair value as disclosed in the accounting policies below.

Consolidation

(i) Basis of consolidation

The consolidated financial statements comprise the financial statements of the Company and its subsidiaries for the year ended 31 December 2017.

(ii) Subsidiaries

Subsidiaries are entities controlled by the Company. Control exists when the Company has the power, directly or indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that presently are exercisable or convertible are taken into account. Subsidiaries are fully consolidated using the purchase method of accounting from the date that control commences until the date that control ceases. Accounting policies of subsidiaries have been adjusted where necessary to ensure consistency with the policies adopted by the Group.

(iii) Transactions eliminated on consolidation

Intragroup balances and any unrealised gains and losses or income and expenses arising from intragroup transactions are eliminated in preparing the consolidated financial statements.

(iv) Company financial statements

Investments in subsidiaries are carried at cost less provision for any impairment. Dividend income is recognised when the right to receive payment is established.

Going concern

The Group made losses during the period of £6,117,000 (2016: £1,909,000), of which £2,448,000 (2016: £1,097,000) related to continuing operations. The cash outflow from operating activities during the year was £719,000 (2016: £1,025,000), which was financed through raising new equity. On 24 May 2018, the Company extended the term of its Secured Convertible Loan Notes from 18 June 2018 to 30 June 2019, with an option to extend for a further six months to 31 December 2019.

The directors have therefore reviewed the Group's resources at the date of approving the financial statements, and their projections for future trading, which due to discontinuing the Sierra Leone Ferry Operation and winning incremental new business give a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future, which for the avoidance of doubt is at least 12 months from the date of signing the financial statements. Thus they continue to adopt the going concern basis of accounting in the preparing the financial statements.

Business combinations

The consideration transferred by the group to obtain control of a subsidiary is calculated as the sum of the acquisition date fair values of assets transferred, liabilities incurred and the equity interests issued by the Group, which includes the fair value of any asset or liability arising from a contingent consideration arrangement. Acquisition costs are expensed as incurred.

The Group recognises identifiable assets acquired and liabilities assumed in a business combination regardless of whether they have been previously recognised in the acquiree's financial statements prior to the acquisition. Assets acquired and liabilities assumed are generally measured at their acquisition date fair values.

Foreign currency

Transactions in foreign currencies are translated at the foreign exchange rate ruling at the date of the transaction (spot exchange rate). Foreign exchange gains and losses resulting from the settlement of such transactions and from the re-measurement of monetary items at year-end exchange rates are recognised in profit or loss. Non-monetary items measured at historical cost are translated using the exchange rates at the date of the transaction and not subsequently retranslated.

Foreign exchange gains and losses are recognised in arriving at profit before interest and taxation.

Segmental reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief decision-maker. The chief decision-maker has been identified as the Executive Board, at which level strategic decisions are made.

An operating segment is a component of the Group

· That engages in business activities from which it may earn revenues and incur expenses,

· Whose operating results are regularly reviewed by the entity's chief operating decisions maker to make decisions about resources to be allocated to the segment and assess its performance, and

· For which discrete financial information is available.

Revenue

Revenue comprises the fair value of the consideration received or receivable for the sale of products and services, net of value added tax, rebates and discounts and after eliminating sales within the Group. Revenue is recognised as follows:

(i) Supply of products

Revenue in respect of the supply of products is recognised when title effectively passes to the customer.

(ii) Supply and installation contracts and supply of services

Where the outcome can be estimated reliably in respect of long-term contracts and contracts for on-going services, revenue represents the value of work done in the period, including estimates of amounts not invoiced. Revenue in respect of long-term contracts and contracts for on-going services is recognised by reference to the stage of completion, where the stage of completion can be assessed with reasonable accuracy. This is assessed by reference to the estimated project costs incurred to date compared to the total estimated project costs. Revenue is calculated to reflect the substance of the contract, and is reviewed on a contract-by-contract basis, with revenues and costs at each divisible stage reflecting known inequalities of profitability. Where a contract is loss making, the full loss is recognised immediately. Managed Services income is recognised on the basis of the volume of passengers and freight.

(iii) Maintenance income

Revenues in respect of the supply of maintenance contracts are recognised on a straight line basis over the life of the contract. The unrecognised portion of maintenance income is included within trade and other payables as deferred income.

(iv) Training courses

Revenues in respect of training courses are recognised when the trainees attend the courses.

Operating expenses

Operating expenses are recognised in profit or loss upon utilisation of the service or at the date of their origin. Expenditure for warranties is recognised and charged against the associated provision when the related revenue is recognised. Certain items have been disclosed as operating exceptional due to their size and nature and their separate disclosure should enable better understanding of the financial dynamics.

Interest income and expenses

Interest income and expenses are reported on an accruals basis using the effective interest method.

Goodwill

Goodwill is stated after separate recognition of identifiable intangible assets. It is calculated as the excess of the sum of a) fair value of consideration transferred, and b) the recognised amount of any non-controlling interest in the acquiree and c) acquisition date fair value of any existing equity interest in the acquiree, over the acquisition date fair value of identifiable net assets. If the fair value of identifiable net assets exceed the sum calculated above, the excess amount (i.e. gain on a bargain purchase) is recognised in profit or loss immediately. Goodwill is carried at cost less accumulated impairment losses.

Other intangible assets

Acquired intangibles that are as a result of a business combination are recorded at fair value and are amortised on a straight line over the expected useful lives.

Other intangible assets comprise website costs and licences. Website costs are capitalised and amortised on a straight line basis over 5 years, the expected economic life of the asset. This amortisation is charged to administrative expenses.

Property, plant and equipment

Land and buildings held for use are held at their revalued amounts, being the fair value on the date of revaluation, less any subsequent accumulated depreciation. Revaluations are performed with sufficient regularity such that the carrying amount does not differ materially from that which would be determined using fair values at the balance sheet date.

Any revaluation increase arising on the revaluation of such land and buildings is recognised in other comprehensive income, except to the extent that it reverses a revaluation decrease for the same asset previously recognised as an expense, in which case the increase is credited to the profit or loss to the extent of the decrease previously charged. A decrease in carrying amount arising on the revaluation of land and buildings is charged as an expense to the extent that it exceeds the balance, if any, held in the revaluation reserve relating to a previous revaluation of that asset.

Depreciation on revalued buildings is charged to the statement of comprehensive income.

Plant and equipment, office equipment, fixtures and fittings and motor vehicles are stated at cost less accumulated depreciation and any recognised impairment loss.

Depreciation is charged so as to write off the cost or valuation of assets to their residual value over their estimated useful lives, using the straight-line method, typically at the following rates. Where certain assets are specific for a long term contract and the customer has an obligation to purchase the asset at the end of the contract they are depreciated in accordance with the expected disposal / residual value.

Category	Rate
Freehold buildings	2%
Plant and equipment	7% to 25%
Office equipment, fixtures & fittings	20% to 33%
Ferries	Depreciated over 21 years.
Motor vehicles	20%

Leases

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.

Assets held under finance leases are recognised as assets of the Group at their fair value or, if lower, at the present value of the minimum lease payments, each determined at the inception of the lease. The corresponding liability to the lessor is included in the balance sheet as a finance lease obligation. Lease payments are apportioned between finance charges and reduction of lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged directly against income, unless they are directly attributable to qualifying assets, in which case they are capitalised.

Rentals payable under operating leases are charged to income on a straight-line basis over the term of the relevant lease.

Impairment on non-financial assets

At each reporting date, the Group reviews the carrying amounts of its non-current assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). The recoverable amount is the higher of

fair value less costs to sell and value in use. If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease. Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in prior years.

Financial instruments

Financial assets

The Group's financial assets include cash and cash equivalents and loans and other receivables. All financial assets are recognised when the Group becomes party to the contractual provisions of the instrument. All financial assets are initially recognised at fair value, plus transaction costs. They are subsequently measured at amortised cost using the effective interest method, less any impairment losses. Any changes in value are recognised in the Statement of Comprehensive Income. Interest and other cash flows resulting from holding financial assets are recognised in the Statement of Cash Flows when received, regardless of how the related carrying amount of financial assets is measured.

Loans and other receivables are provided against when objective evidence is received that the Group will not be able to collect all amounts due to it in accordance with the original terms of the receivables. The amount of the write-down is determined as the difference between the asset's carrying amount and the present value of estimated future cash flows.

Cash and cash equivalents comprise cash at bank and deposits and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities unless a legally enforceable right to offset exists.

Financial liabilities

The Group's financial liabilities comprise trade and other payables and borrowings. All financial liabilities are recognised initially at their fair value and subsequently measured at amortised cost using the effective interest method. Financial liabilities are derecognised when they are extinguished, discharged, cancelled or expire.

Convertible loan notes with an option that leads to a potentially variable number of shares, have been accounted for as a host debt with an embedded derivative. The embedded derivative is accounted for at fair value through profit and loss at each reporting date. The host debt is recognised initially at fair value, and subsequently measured at amortised cost using the effective interest method.

Convertible loan notes which can be converted to share capital at the option of the holder, and where the number of shares to be issued does not vary with changes in fair value, are considered to be a compound instrument.

The liability component of a compound instrument is recognised initially at the fair value of a similar liability that does not have an equity conversion option. The equity component is recognised initially at the difference between the fair value of the compound instrument and fair value of the liability component. Any directly attributable transaction costs are allocated to the liability and equity components.

Financial liabilities and equity instruments issued by the Group are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability and an equity instrument. An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities.

Investments in subsidiaries

Subsidiary fixed asset investments are valued at cost less provision for impairment.

Inventories

Inventories are stated at the lower of cost and net realisable value. Costs of ordinarily interchangeable items are assigned using the first in, first out cost formula. Costs principally comprise of materials and bringing them to their present location.

Net realisable value represents the estimated selling price less all estimated costs to completion and costs to be incurred in marketing, selling and distribution.

Taxation

The tax expense represents the sum of the tax currently payable and deferred tax. Current and deferred tax are recognised as an expense or income in profit or loss, except in respect of items dealt with through equity, in which case the tax is also dealt with through equity.

The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the Statement of Comprehensive Income because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group's liability for current tax is calculated by using tax rates that have been enacted or substantively enacted by the balance sheet date.

Deferred tax is the tax expected to be payable or recoverable on material differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from the initial recognition of goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction which affects neither the tax profit not the accounting profit.

Cash and cash equivalents

Cash and cash equivalents includes cash in hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities unless a legally enforceable right to offset exists.

Equity, reserves and dividend payments

Share capital represents the nominal value of shares that have been issued.

Share premium includes any premiums received on issue of share capital. Any transaction costs associated with the issuing of shares are deducted from share premium, net of any related income tax benefits.

Merger relief reserve includes any premiums on issue of share capital as part or all of the consideration in a business combination.

The share based payment reserve represents equity-settled share-based employee remuneration until such share options are exercised or lapse.

The revaluation reserve within equity comprises gains and losses due to the revaluation of property, plant and equipment.

Retained earnings include all current and prior period retained profits and losses.

Dividend distributions payable to equity shareholders are included in liabilities when the dividends have been approved in a general meeting prior to the reporting date.

Defined contribution pension scheme

The Group operates a defined contribution pension scheme for employees in the UK and is operating under auto enrolment. Local labour in Africa benefit from a termination payment on leaving employment. The expected value of this is accrued on a monthly basis.

Share-based compensation (Employee Based Benefits)

The Group operates an equity-settled share-based compensation plan. The fair value of the employee services received in exchange for the grant of options is recognised as an expense over the vesting period, based on the Group's estimate of awards that will eventually vest, with a corresponding increase in equity as a share based payment reserve. For plans that include market based vesting conditions, the fair value at the date of grant reflects these conditions and are not subsequently revisited.

Fair value is determined using Black-Scholes option pricing models. Non-market based vesting conditions are included in assumptions about the number of options that are expected to vest. At each reporting date, the number of options that are expected to vest is estimated. The impact of any revision of original estimates, if any, is recognised in profit or loss, with a corresponding adjustment to equity, over the remaining vesting period.

The proceeds received when vested options are exercised, net of any directly attributable transaction costs, are credited to share capital (nominal value) and share premium.

Provisions

Provisions are recognised when the Group has a present legal or constructive obligation as a result of a past event which it is probable will result in an outflow of economic benefits that can be reliably estimated.

SIGNIFICANT MANAGEMENT JUDGEMENTS IN APPLYING ACCOUNTING POLICIES

The following are significant management judgements in applying the accounting policies of the Group that have the most significant effect on the financial statements.

Revenue recognition

Recognition of income is considered appropriate when all significant risks and rewards of ownership are transferred to third parties. In respect of long-term contracts and contracts for on-going services, turnover represents the value of work done in the year, including estimates of amounts not invoiced. Turnover in respect of long-term contracts and contracts for on-going services is recognised by reference to the stage of completion, where the stage of completion can be assessed with reasonable accuracy. In this process management make significant judgements about milestones, actual work performed and the estimated costs to complete the work. Revenue is calculated to reflect the substance of the contract, and is reviewed on a contract-by-contract basis, with revenues and costs at each divisible stage reflecting known inequalities of profitability.

Consolidation of entities in which the Group holds less than 50% of the voting rights.

Management considers that the Group has de facto control of Westminster Sierra Leone Limited even though it has less than 50% of the voting rights.

SIGNIFICANT MANAGEMENT ESTIMATES IN APPLYING ACCOUNTING POLICIES

The following are significant management estimates in applying the accounting policies of the Group that have the most significant effect on the financial statements.

Revalued freehold property

The freehold property is stated at fair value. A full revaluation exercise was carried out in May 2017. The fair value is based on market value, being the estimated amount for which a property could be exchanged on the date of valuation between a willing buyer and a willing seller in an arm's length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion.

Standards in issue not yet effective

New standards, amendments and interpretations

No new standards, amendments or interpretations effective for the first time in the year ended 31 December 2017 have had a material impact on Group or parent Company.

At the date of authorisation of these financial statements, the following amendments and interpretations to existing accounting standards have been published but are not yet effective.

· IFRS 9 Financial Instruments (effective date 1 January 2018)

· IFRS 15 Revenue from Contracts with Customers (effective date1 January 2018)

· IFRS 16 Leases (effective date 1 January 2019)

Management anticipate that the above pronouncements will be adopted in the Group's accounting policies for the first period after the effective date but will have no material impact on the Group.

IFRS 9 'Financial instruments' effective for periods beginning on or after 1 January 2018. The standard removed multiple classification and measurement models for financial assets requirement by IAS 39 and introduces a model that has only three classification categories: fair value through other comprehensive income, fair value through the income statement and amortised cost. Classification is driven by the business model for managing the financial assets and the contractual cash flow characteristics of the financial assets. The accounting and presentation for financial liabilities and for derecognising financial instruments is relocated from IAS 39 without any significant changes. IFRS 9 introduces additional changes relating to financial liabilities. IFRS 9 adds new requirements to address the impairment of financial assets and hedge accounting.

IFRS 15 'Revenue from contracts with customers'; effective for periods beginning on or after January 1, 2018. The standard establishes a new five-step model that will apply to revenue arising from contacts with customers. Revenue is recognised at an amount that reflects the consideration to which an entity expects to be entitled in exchange for those goods or services. This is a converged standard on revenue recognition which replaces IAS 18 'Revenue', IAS 11 'Construction contracts' and related interpretations. The Group has assessed the impact of the new standard which is not material to the Group's operations.

IFRS 16 'Leases'; effective for periods beginning on or after January 1, 2019. Under IFRS 16, a contract is, or contains a lease if the contact conveys the right to control the use of an identified asset for a period of time in exchange for consideration. The new standard eliminates the classification of leases by lessees as either finance leases or operating leases and instead introduces an integrated lessee accounting model. Applying this model, lessees are required to recognise a lease liability reflecting the obligation to make future lease payments and a 'right-of-use' asset for virtually all lease contracts.

IFRS 16 includes an optional exemption for certain short-term leases and leases of low-value assets. The Group has assessed the impact of the new standard which is not material to the Group's operations.

Alternative performance measures (APM)

In the reporting of financial information, the Directors have adopted the APM 'EBITDA profit from underlying operations' (APMs were previously termed 'Non-GAAP measures'), which is not defined or specified under International Financial Reporting Standards (IFRS).

This measure is not defined by IFRS and therefore may not be directly comparable with other companies' APMs, including those in the Group's industry.

APMs should be considered in addition to, and are not intended to be a substitute for, or superior to, IFRS measurements.

Purpose

The Directors believe that this APM assists in providing additional useful information on the underlying trends, performance and position of the Group. This APM is also used to enhance the comparability of information between reporting periods and business units, by adjusting for non-recurring or uncontrollable factors which affect IFRS measures, to aid the user in understanding the Group's performance.

Consequently, APMs are used by the Directors and management for performance analysis, planning, reporting and incentive setting purposes and this remains consistent with the prior year.

The key APM that the Group has focused on is as follows:

EBITDA profit from underlying operations': This is the headline measure used by management to measure the Group's performance, and is based on operating profit before the impact of financing costs, share based payment charges, depreciation, amortisation, impairment charges and exceptional items. Exceptional items relate to certain costs that derive from events or transactions that fall within the normal activities of the Group but which, individually or, if of a similar type, in aggregate, are excluded by virtue of their size and nature in order to reflect management's view of the performance of the Group.

3. Segmental reporting

Operating segments

The Board considers the Group on a Business Unit basis. Reports by Business Unit are used by the chief decision-maker in the Group. The Business Units operating during the year are the three operating divisions; Managed Services Aviation, Technology and Managed Services Sovereign Ferries. This split of business segments is based on the products and services each offer.

	Managed Services Aviation	Technology	Group and Central	Managed Services Sovereign Ferries	Group Total
	£'000	£'000	£'000	£'000	£'000
2017
Supply of products	-	1,470	-	-	1,470
Supply and installation contracts	-	36	-	-	36
Maintenance and services	3,386	264	-	-	3,650
Training courses	174	-	-	-	174
Ferry ticket sales	-	-	-	66	66
Revenue	3,560	1,770	-	66	5,396

Segmental underlying EBITDA	1,195	(44)	(1,714)	(671)	(1,234)
Share option expense	-	-	(63)	-	(63)
Exceptional items	(603)	-	(50)	(335)	(988)
Impairments	-	-	(397)	(2,491)	(2,888)
Depreciation & amortisation	(100)	(15)	(55)	(144)	(314)
Segment operating result	492	(59)	(2,279)	(3,641)	(5,487)
Finance cost	-	-	(630)	-	(630)
Profit/(Loss) for the financial year	492	(59)	(2,909)	(3,641)	(6,117)

Segment assets	1,429	360	1,414	2	3,205
Segment liabilities	368	359	2,553	238	3,518
Capital expenditure	23	3	96	4	126

For the year ended 31 December 2017 the decision has been taken to no longer apportion central overheads in the segmental reporting.

	Managed Services Aviation	Technology	Group and Central	Managed Services Sovereign Ferries	Group Total
	£'000	£'000	£'000	£'000	£'000
2016
Supply of products	-	1,286	-	-	1,286
Supply and installation contracts	-	177	-	-	177
Maintenance and services	2,758	160	-	3	2,921
Training courses	16	-	-	-	16
Ferry ticket sales	-	-	-	6	6
Revenue	2,774	1,623	-	9	4,406

Segmental underlying EBITDA	1,280	273	(1,418)	(110)	25
Share option expense	-	-	(103)	-	(103)
Exceptional items	(492)	-	-	(585)	(1,077)
Depreciation & amortisation	(79)	(16)	(22)	(117)	(234)
Apportionment of central overheads	(1,140)	(946)	2,116	(30)	-
Segment operating result	(431)	(689)	573	(842)	(1,389)
Finance cost	-	-	(566)	-	(566)
Income tax charge	(7)	-	53	-	46
Profit/(Loss) for the financial year	(438)	(689)	60	(842)	(1,909)

Segment assets	1,593	641	1,523	2,651	6,408
Segment liabilities	311	448	3,268	85	4,112
Capital expenditure	79	42	107	408	636

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 geographical market, irrespective of the origin of the goods/services.

	2017	2016
	£'000	£'000

United Kingdom & Europe	919	369
Africa	3,779	3,458
Middle East	152	104
Rest of the World	546	475
	5,396	4,406

Some of the Group's assets are located outside the United Kingdom where they are being put to operational use on specific contracts. At 31 December, 2017 fixed assets with a net book value of £895,000 (2016: £3,591,000) were located in Africa.

Major customers who contributed greater than 10% of total Group revenue

In 2017 no single customer contributed more than 10% of the Group revenue (in 2016 no customers contributed 10% of the Group's revenue). Approximately 60% (2016: 60%) of the Group's revenues are derived from the contract with the Sierra Leone airport authority. This contract contains many individual customers.

4. Exceptional items

	2017	2016
	£'000	£'000

Middle East airport pre-contract costs	603	220
Ferry closure costs	335	-
Ferry pre-launch costs	-	585
Loss of margin arising from fall in passenger numbers due to Ebola crisis	-	272
Other	50	-

	988	1,077

5. Finance costs

	Group	Group
	2017	2016
	£'000	£'000

Interest payable on bank and other borrowings	(44)	(30)
Interest expenses on convertible loan notes	(586)	(536)
Total finance costs	(630)	(566)

6. Loss from operations

The following items have been included in arriving at the loss for the financial year

	Group	Group
	2017	2016
	£'000	£'000

Staff costs (see Note 8)	2,367	2,267
Depreciation of property, plant and equipment	283	227
Amortisation of intangible assets	31	7
Operating lease rentals payable
Property	83	112
Plant and machinery	3	3
Other	26	42
Foreign exchange loss/(gain)	102	(22)

7. Taxation

Analysis of charge in year:

	Group	Group
	2017	2016
	£'000	£'000
Current year
UK Corporation tax on profits in the year	-	-
Potential foreign corporation tax on profits in the year	-	7
	-	7

	Group	Group
	2017	2016
	£'000	£'000
Reconciliation of effective tax rate
Loss on ordinary activities before tax	(6,117)	(1,955)

Loss on ordinary activities multiplied by the standard rate of corporation tax in the UK of 19.25% (2016: 20.0%)	(1,178)	(391)
Effects of:
(Income)/expenses not deductible for tax purposes	973	88
Capital allowances less than depreciation	(105)	(203)
Other short term timing differences		1
Recognised/unrecognised losses carried forward	310	512
Adjustment in respect of prior years	-	(53)

Total tax - (credit)/charge	-	(46)

Tax losses available for carry forward (subject to HMRC agreement) were £12.6m (2016: £11.0m).

Changes to the UK corporation tax rates were substantively enacted as part of the Finance Bill 2015 (on 26 October 2015) and Finance Bill 2016 (on 7 September 2016) to 17% from 1 April 2020. Deferred taxes at the balance sheet date have been measured using these enacted tax rates and reflected in these financial statements.

8. Employee costs

Employee costs for the Group during the year

	2017	2016
	£'000	£'000

Wages and salaries	2,117	2,007
Social security costs	187	157
	2,304	2,164
Share based payments	63	103
	2,367	2,267

The Group operates a stakeholder pension scheme. The Group made pension contributions totalling £7,000 during the year (2016: £10,000), and pension contributions totalling £1,000 were outstanding at the year-end (2016: £1,000).

Details of the Directors' remuneration are included in the Remuneration Committee Report. Key management within the business are considered to be the Board of Directors. The total Directors' remuneration during the year was £623,000 (2016: £541,000) and the highest paid director received remuneration totalling £192,000 (2016: £192,000).

Average monthly number of people (including Executive Directors) employed

Group
	2017			2016
	Number			Number
	Continuing Operations	Discontinued Operations	Total	Continuing Operations	Discontinued Operations	Total
By function:
Sales	3	-	3	3	-	3
Operations	220	32	252	195	14	209
Administration	23	-	23	22	-	22
Management	5	-	5	6	-	6
	251	32	283	226	14	240

9. 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.

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

	2017	2016
	'000	'000
Issued ordinary shares
Start of year	87,107	63,455
Effect of shares issued during the year	22,087	14,261
Weighted average basic and diluted number of shares for year	109,194	77,716

For the year ended 31 December 2017 and 2016 the issue of additional shares on exercise of outstanding share options, convertible loans and warrants would decrease the basic loss per share and there is therefore no dilutive effect. Loss per share was 5.60p (2016: 2.46p).

10. Cash flow adjustments and changes in working capital

The following non-cash items and adjustments for changes in working capital have been made to loss before tax to arrive at operating cash flow:

Group	2017 Continuing Operations	2017 Discontinued Operations	2017 Total	2016 Continuing Operations	2016 Discontinued Operations	2016 Total
	£'000	£'000	£'000	£'000	£'000	£'000
Adjustments:
Depreciation, amortisation and impairment of non-financial assets	567	2,635	3,202	127	107	234
Finance costs	630	-	630	566	-	566
Loss on disposal of non-financial assets	9	-	9	13	-	13
Share-based payment expenses	88	-	88	103	-	103
Total adjustments	1,294	2,635	3,929	809	107	916

Net changes in working capital:
Decrease/(increase) in inventories	159	-	159	(141)	-	(141)
Decrease/(increase) in trade and other receivables	162	39	201	(431)	21	(410)
Decrease in deferred income	(27)	-	(27)	-	-	-
Increase/(decrease) in trade and other payables	141	167	308	(119)	32	(87)
Total changes in working capital	435	206	641	(691)	53	(638)

11. Called up share capital

The total amount of issued and fully paid shares is as follows:

Ordinary Share Capital	2017		2016
	Number	£'000	Number	£'000
At 1 January	87,107,903	8,711	63,454,538	6,345
Arising on conversion of Convertible Loan Notes	10,669,227	1,067	10,653,365	1,066
Arising on exercise of Share Options and Warrants	55,000	5	-	-
Shares issued to settle an annual broker fee	250,000	25	-	-
Other Issues for Cash	22,661,290	2,266	13,000,000	1,300

At 31 December	120,743,420	12,074	87,107,903	8,711

During the year the following equity issues took place

Date	Comment	Shares Issued	Issue price
1 February 2017	CULN conversion	2,228,367	13.463p
28 February 2017	Equity placing	5,161,290	11.625p
28 February 2017	CULN conversion	3,440,860	11.625p
4 April 2017	Employee share options exercised	55,000	10.0p
18 April 2017	Equity placing	10,000,000	10.0p
18 April 2017	Share based payment	250,000	10.0p
18 April 2017	CULN conversion	5,000,000	10.0p
26 September 2017	Equity Placing	7,500,000	10.0p

12. Borrowings

	Group	Group
	2017	2016
	£'000	£'000
Non-current
Convertible loan note	2,184	2,071

Convertible unsecured loan note	-	952
Other	-	36
Total borrowings	2,184	3,059

13. Events after the Reporting Period

· On 28 March 2018, the Technology Division secured a $4.5m contract for the provision of advanced vehicle screening solutions to an existing client in the Middle East

· On 24 May 2018, the Company extended the term of its Secured Convertible Loan Notes from 18 June 2018 to 30 June 2019, with an option to extend for a further six months to 31 December 2019. The coupon increases from 10% to 12% until June 2019 and increases to 15% for the six months to 31 December 2019 should the Company exercise its option. The conversion price has been reduced from 35p per share to 25p.

14. Publication of Non-Statutory Financial Statements

The financial information set out above does not constitute the Company's Annual Report and Financial Statements for the years ended 31 December 2017 or 2016. The Annual Report and Financial Statements for 2016 have been delivered to the Registrar of Companies and those for 2017 will be delivered following the Company's Annual General Meeting on 26 June 2018. The auditor's reports on both the 2017 and 2016 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 2017 will be posted to shareholders by 5 June 2018 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 24 May 2018.

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

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