Final Results

RNS Number : 0625A

Westminster Group PLC

24 May 2019

Westminster Group Plc

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

2018 Final Results and Notice of AGM

Westminster Group Plc (AIM: WSG), a leading supplier of managed services and technology-based security solutions worldwide is pleased to announce its Final Results for the 12 months ended 31 December 2018.

Highlights

Operational:

· Strong performance by both Managed Services and Technology Divisions

· Significant progress with several large-scale project opportunities

· Supplied numerous clients in around 53 countries across the world

· In March 2018 signed a $4.5million USD contract for advanced vehicle screening solutions within the Middle East.

· In May 2018 signed a 15-year contract, worth c €24million Euro per annum but placed on hold following US withdrawal from JCPOA

· West Africa airport operations performed well, strong H2 passenger growth

· Provided training throughout 2018 to various airports, including several major hubs, across the Middle East, Africa and Asia

· In November 2018 acquired UK security and risk management company, Keyguard U.K Ltd expected to deliver revenues of circa £1.5m per annum

· Recurring revenue from maintenance and service contracts increased by over 59% to £376k per annum (2017: £236k)

· New long-term airport project in Africa progressed to contract stage in December 2018, waiting for completion of client's internal reorganisation for counter signature

· Board strengthened in terms of skills and experience with the appointment of two new non-executive directors, Lady Patricia Lewis (Patsy Baker) in May 2018 and Charles Cattaneo in January 2019 and with the appointment of Mark Hughes as CFO in November 2018 replacing Martin Boden

Financial:

· Revenues up by 24% to £6.7m (2017: £5.4m) - despite revenues of £2.2m relating to the Middle East project slipping from Q4 2018 to Q1 2019

· Third consecutive year of growth double digit revenue growth

· EBITDA loss of £0.38m (2017: loss £1.23m)

· Total Equity / Net Assets grew from £0.1m in 2017 to £1.1m in 2018

Post period End:

· 2019 commenced on a strong and profitable note with Q1 orders and revenues ahead of budget

· Q1 2019 passenger numbers for our West Africa airport operations were at record levels

· Completed balance of $4.5 million USD Middle East screening contract secured in 2018

· In April 2019 announced a $3.4 million USD contract for the provision of advanced container screening solutions to two separate ports in Asia

· In May 2019 completed acquisition of Euro Ops providing the Group with a French base and better access to Francophone countries

Commenting on the Results and prospects, Peter Fowler, Chief Executive of Westminster, said:

"We have seen steady year on year revenue growth over the past few years and we expect this to continue. Based on our current order book, the improvement in our airport passenger numbers and our run rate business, including Keyguard and Euro Ops, we expect 2019 revenues to be significantly ahead of 2018 even without any further new major contract awards, which of course would materially improve the results.

"Over the next few months and years we have an opportunity to achieve unprecedented growth from the prospects we are pursuing, and the Board and I remain committed to delivering on this potential."

Notice of Annual General Meeting and form of Proxy:

The Notice of Annual General Meeting to be held at 11am on 18 June 2019 at the offices of BDO, 150 Aldersgate, London, EC1A 4AB, and the form of Proxy were posted to shareholders on 23 May 2019. Shareholders wishing to attend the AGM should bring a form of identity and proof of their shareholding.

Market Abuse Regulation (MAR) Disclosure:

This announcement contains inside information for the purposes of Article 7 of EU Regulation 596/2014.

For further information please contact:

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

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

SVS Securities PLC (Joint Broker)
Elliot Hance	020 3700 0100
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 via an extensive international network of agents and offices in over 50 countries.

Westminster's principal activity is the design, supply and ongoing support of advanced technology security solutions, encompassing a wide range of surveillance, detection, tracking and interception technologies and the provision of long-term managed services contracts such as the management and running of complete security services and solutions in airports, ports and other such facilities together with the provision of 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

2018 was a year of great progress for Westminster Group plc. I am therefore pleased to present the Final Results for the year ended 31 December 2018.

Following a particularly strong H2 performance in 2018 for the Group I am pleased to report a 24% year on year increase in revenues to £6.7m, an increase of £1.3m on the £5.4m reported for 2017. This increase in revenues is despite £2.2m from our Middle East screening project slipping from Q4 2018 to Q1 2019, due to shipping delays over the holiday period and despite having to put our Iranian contract signed in May 2018 and worth circa €24m Euros pa on hold whilst we deal with the challenges caused by the United States unilateral withdrawal from the Joint Comprehensive Plan of Action (JCPOA). Due to an unexpected turn of events an old and sizeable long-term debt we had provided for several years ago, referred to in our Trading Update on 29 January 2019, is now potentially recoverable and will be booked as and when cash is recovered.

Accordingly, we have delivered an improved financial position with an EBITDA loss of £0.38m (2017: loss £1.23m). Had the above issues not occurred, revenues would have been substantially higher, and we would have delivered a significantly positive EBITDA. This bodes well for our future trading and demonstrates what the Group is capable of. The year has already commenced on a strong footing with Q1 2019 ahead of budget.

Our operating divisions are performing well. Enquiry levels remain healthy and levels of interest in the Group's services are growing. Both divisions are developing and pursuing sizeable business opportunities and it is encouraging to see our Technology division securing important contracts such as the $4.5m USD contract announced in March 2018 and $3.4m USD contract announced in April 2019. 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 £1.34m gross from the issue of new equity to support the development of the Group. Since the year end, we have raised £0.5m gross for the development of the Group and preparation for the upcoming contracts as well as extending the convertible loan notes.

Corporate Conduct

As a company whose shares are traded on the AIM market of the London Stock Exchange, we recognise the importance of sound corporate governance throughout our organisation giving our shareholders and other stakeholders including employees, customers, suppliers and the wider community confidence in our business. We endeavour to deliver on our corporate Vision and Mission Statements in an ethical and sensitive manner irrespective of race, colour or creed. This is not only a requirement of a well-run public company but makes good commercial and business sense.

In my capacity as Executive Chairman, I have ultimate responsibility for ensuring the Board adopts and implements a recognised corporate governance code in accordance with our stock market status. Accordingly, the Board has adopted, and is working to, the Quoted Companies Alliance (QCA) Corporate Governance Code 2018. The Chief Executive Officer (CEO) has responsibility for the implementation of governance throughout our organisation, commensurate with our size of business and worldwide operations.

The QCA Corporate Governance Code 2018 has ten key principles and we set out on our website how we apply those principles to our business, and more detailed information is provided in these accounts.

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.

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

Mark Hughes replaced Martin Boden as Chief Financial Officer at the beginning of November 2018 and I believe Mark's wide-ranging international experience, particularly in emerging markets together with his considerable experience in capital markets and in M&A work, with close to 40 M&A transactions completed, and as CFO of listed, venture capital, private and private equity owned companies, will be a great asset in assisting the Company achieve its growth potential. Mark has helped grow shareholder value in groups of similar size to ours. He also has worked in Africa including Sierra Leone and the Middle East so brings significant experience in those geographical areas. We believe that his track record of growing groups both organically and through strategic acquisitions is the profile we need to take us to the next level.

I would like to express my thanks to Martin Boden for his support during his time with the business and we wish him well for the future.

There have also been changes within our non-executive directors (NEDs).

In May 2018 Lady Patricia Lewis (Patsy Baker) joined the Board. She is well-known and respected within the City and has considerable public relations and marketing experience, having spent over 20 years as the Group Business Development Director with Bell Pottinger. In November 2017 she joined Huntsworth PLC as Senior Group Advisor. Patsy's appointment brought a broader range of skills and diversity to the Board and is in line with the Company's strategic growth plans and board development.

In January 2019 Charles Cattaneo joined the board as a NED. Charles has been a director of a number of public and private companies and is currently the Chairman of the Midlands Regional Advisory Group of the London Stock Exchange. I am sure his wealth of City and corporate finance knowledge and experience gained from a variety of business sectors, in particular advising AIM companies and serving on boards of growing and successful companies, will be of great value to our business as we expand and deliver on our significant potential. As a Chartered Accountant he has taken over as Chair of the Audit Committee and Chair of the Risk Committee.

Also in January 2019, James Sutcliffe, by agreement, left the Westminster Group Plc board to take on the role as Chairman of the International Advisory Board, where the benefit of his extensive international experience and high-level Government contacts overseas can be of significant value to the Company's business development and expansion going forward.

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.

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.

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 DL

Chairman

Chief Executive Officer's Strategic Report

Business Description

The Westminster Group is a global integrated security services company 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.

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.

I am also pleased to report that during 2018 our German Subsidiary Westminster Sicherheit has expanded its activities to include business development in various other parts of the world and is expected to make a contribution to the Group from 2019.

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.

Business Review

As highlighted in the Chairman's Statement, the Group has made good progress during 2018. Revenues rose strongly in both our Managed Services and Technology divisions. Our Technology division, in particular, had a good year. This has resulted in significantly improved results and an EBITDA loss of £378,000 for the year (2017: Loss of £1,234,000).

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 business.

Enquiry levels remain healthy and levels of interest in the Group's services is growing across both operating divisions. However, whilst our Technology Division provides the technological resources and platform to expand our operations around the world and is capable of delivering large scale projects, 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 2018 the Managed Services division made substantial progress on several fronts.

Our aviation security business in West Africa has performed well during 2018. Whilst we experienced a reduction in passengers during Q1 2018 due to the prolonged presidential elections, this was more than offset by a strong H2 which resulted in c.113,000 embarking passengers during the year. The growth in passenger numbers experienced in H2 2018 has continued into 2019 with Q1 2019 passenger numbers being at record levels. This is encouraging given our revenues are driven by passenger numbers. The 15-year contract signed in 2012 has an 8 year break-clause as of 1 May 2020 and we have already commenced positive discussions regarding extending the agreement.

Our Group Chairman, Sir Tony Baldry, had meetings with President Julius Maada Bio of Sierra Leone in May 2019 on the subject and further investment in the country.

Westminster's international reputation and expertise in the field of aviation security continues to grow and in addition to providing equipment and services to various airports around the world we are increasingly being called on to provide specialist aviation security training to airports and airlines around the world. In 2018 we provided training services to various airports, including several major hubs, across the Middle East, Africa and Asia.

Building on the growing success of our aviation training business we have constructed a training facility at our UK Headquarters in Banbury so that we can conduct specialist technical and operational training courses for airline and airport delegates from around the world. The facility was completed and opened in early 2019 and has already conducted training for delegates from one of the largest airlines in Europe.

A defining aspect of 2018 was the signing of a long-term contract for security support services at a major airport in Iran on 7 May 2018. The 15-year contract, which is worth around EUR €24million pa, is for one of 60 airports in Iran and so the business potential is substantial. The contract was secured following over two years of intense activity involving wide ranging and complex negotiations with commercial and political bodies with meetings in various jurisdictions. 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 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. The signing of this contract was a significant achievement.

It is disappointing therefore that, despite the fact that none of Westminster's proposed equipment or services being covered by any sanctions, due to the US unilateral withdrawal from the Joint Comprehensive Plan of Action (JCPOA) we had to place the contract on hold whilst we evaluated the impact on the operation including banking, insurance and the supply chain. It is all the more frustrating given 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.

The decision to place the contract on hold, whilst frustrating for the Company and its shareholders, was however the right and sensible course of action whilst we continue to work with government bodies and the client to resolve the various challenges and monitor developments in the region. The contract is structured so that all that is required to commence the project is an exchange of Board letters and there is no time limit on this. Both parties remain committed to the project but need to be sure that once started the project is able to be safely delivered.

We continue to closely monitor the geopolitical situation of the region and to liaise with government bodies for guidance. On 31 January 2019, Germany, France and Britain (E3) announced the establishment of a special purpose vehicle aimed at facilitating legitimate trade with Iran. This involved the establishment of a new mechanism, called the Instrument in Support of Trade Exchanges (INSTEX). It is early days yet and how this will finally work has yet to be seen however the Company continues to investigate and evaluate this and other potential arrangements that could be put in place that could unlock the potential of this project without affecting the Group's other business or banking arrangements. We will provide further updates on developments in due course.

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 with which we are making good progress. In this respect we have a growing number of large-scale, long-term opportunities at various stages of development in our target market.

Contracts of this size and nature, particularly in emerging markets, are not only time-consuming but involve complex negotiations with numerous commercial and political bodies and discussions can ebb and flow over many months with periods of intense activity which can be followed by long periods of inactivity. It is however precisely because of such challenges that competition is limited and the opportunities offer transformational growth opportunities.

No two opportunities are the same and each can have their own idiosyncrasies and challenges. An example of this is the announcement we made in December 2018 that the Chairman, Sir Tony Baldry, and I, had recently returned from Africa having finalised discussions on a new long-term airport security project. The contract was negotiated and agreed and signed by us and we were informed it would be countersigned by the authorities in the New Year. Unfortunately, the process has been delayed due to a completely unrelated reorganisation being undertaken by the authorities concerned which means that, whilst the project remains fully active, we must wait for their process to be finalised. The contract has central government support, so we are confident that it will progress once the reorganisation is completed.

Due, in part to these challenges and the confidential nature of such projects together with commercial sensitivities involved, we are no longer announcing any individual MoU when signed or providing regular updates. Whilst there is never certainty as to timing or outcome in such matters, we remain encouraged by developments and will update the market on material developments or should we no longer be pursuing any announced opportunity, in accordance with our regulatory responsibilities.

In November 2018 we announced the acquisition of Keyguard U.K Ltd ("Keyguard"). Keyguard is a UK based security and risk management company providing security services to organisations and critical national infrastructure across the country. It is focused on infrastructure assets in the Construction, Renewable Energy and Transport sectors. Services include manned guarding, mobile patrols, risk management and K9 services. Keyguard operates in a strong and growing market and is completely allied to, and enhances, Westminster's existing market, opening new opportunities and broadening the scope of the Group's business portfolio.

The company has now been successfully integrated into the Group and is now operating from our corporate HQ in Oxfordshire. The acquisition is earnings enhancing and is expected to bring circa £1.5m pa of additional recurring revenue. The business is synergistic in that not only will this transaction allow the Group and Keyguard to be able to sell into each other's customer base but will enable a broader range of joint offerings where technology and manned guarding are both required, particularly within the aviation and critical infrastructure market. In this respect we already have joint marketing and sales activities underway.

Technology Division

In 2018 we supplied numerous clients in around 53 countries across the world, including the UK, Middle East, South, East and West Africa, Eastern Europe, Asia and Latin America. By way of example, we secured contracts for vehicle screening for an Air Force base in the Middle East, explosive ordnance disposal equipment to the Nepalese Army, narcotics detectors to a UK Health Organisation, explosive detection to UNICEF, specialist screening equipment to countries around the world and we continued to supply security equipment and services to Government facilities across the UK.

With our ever-growing population of sold systems that require regular maintenance, in 2018 we increased our recurring revenue base of maintenance and service contracts, both in the UK and overseas, by over 59% to £376k per annum (2017: £236k). These contracts help underpin the cost base of the Division and is an area of the business we expect to grow further.

In March 2018 we announced the award of a $4.5million USD contract for the provision of advanced vehicle screening solutions to an existing client within the Middle East. Under the contract Westminster would provide a number of advanced vehicle screening solutions to screen vehicles for security threats and contraband as they enter a high security facility. The contract was commenced, and part delivered in 2018 with the remainder being delivered, due to holiday period shipping delays, in February 2019.

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

In February 2018 we appointed Stuart Gilbert as Managing Director of the Technology division. 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.

Strategic Review

As part of our strategy for growth we continue to improve and enhance our board and senior management team and in 2018 made a number of appointments broadening our range of experience and expertise. If we are to maximise the substantial growth opportunities we are developing, particularly with our airport security operations, 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.

Whilst we continue to pursue our many organic growth opportunities we are also now entering a new phase on our expansion strategy which involves targeted acquisitions and strategic joint ventures (JVs) in key markets and regions, both of which enable the company to expand its sphere of operations in a controlled and effective way.

Following on from our strategic acquisition of Keyguard in November 2018 we completed the acquisition of Euro Ops in May 2019. Both of these acquisitions strategically enhance the Group. Keyguard providing a new and synergistic revenue stream whilst Euro Ops provides a French base and access to Francophone countries for Westminster's business activities. We continue to review other opportunities.

In addition, Westminster is in advanced discussions with potential JV partners in different parts of the world opening up some exciting and potentially substantial business opportunities. We will provide further updates in this respect in due course.

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	2018	2017
Revenue £'m	6.7	5.4
Gross Margin	55%	59%
Days Sales Outstanding	41	36
Number of Employees	233	283
Average Employee Cost Per Head	£14,738	£8,365

Managed Services	2018	2017
Passengers Served ('000)	113	111
Number of Training Projects Won	16	16
% of Training Project Won	46%	62%

Technology Division	2018	2017
Average Enquiries Per Month	174	128
Average Number of Orders Per Month	37	29
Number of Countries Supplied	53	41
Number of Return Customers	71	164

Financial Review

The Financial Review for the year ended 31 December 2018 is set out in the Chief Financial Officer's Report.

Current Trading & 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. Trading for 2019 has started on a strong note with both order intake and revenues ahead of budget and Q1 results showing a healthy EBITDA.

Q1 2019 passenger numbers for our West Africa airport operations were at record levels and both our Managed Services and Technology divisions continue to have a healthy and active enquiry bank and are delivering on expectations.

In April 2019, our Technology division announced the award of a $3.4m USD contract for the provision of advanced container screening solutions to two separate ports in an Asian country, which had been under negotiation for several months. Having recently delivered the remainder of the $4.5m USD vehicle screening contract in the Middle East, which the Company secured in 2018, this latest award for container screening in Asia is a testament to Westminster's expertise and global reach.

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 security needs, and this enhances our prospects for our large scale, long term airport opportunities.

Our training business continues to grow, and we are developing business opportunities both in the UK and overseas. Our recently opened training centre in the UK is proving popular and we have already delivered specialist training from delegates from one of the largest airlines in Europe and we expect this service to expand during 2019. We are also investigating developing an international training centre within the Middle East as part of our JV initiatives.

Keyguard is fully integrated into the Group and performing to expectations. Euro Ops will be fully integrated in the coming months.

Westminster Sicherheit, our German subsidiary, is now active on a number of fronts with several large-scale opportunities in progress.

We have seen steady year on year revenue growth over the past few years and we expect this to continue. Based on our current order book, the improvement in our airport passenger numbers and our run rate business, including Keyguard and Euro Ops, we expect 2019 revenues to be significantly ahead of 2018 even without any further new major contract awards, which of course would materially improve the results.

Over the next few months and years we have an opportunity to achieve unprecedented growth from the prospects we are pursuing, and the Board and I remain committed to delivering on this potential.

Peter Fowler

Chief Executive Officer

Chief Financial Officer's Report

Revenue

Revenues of £6.7m were 24% higher than the £5.4m reported in 2017.

Following a strong increase in 2017 Managed Services aviation revenues appear comparable in 2018 at £3.6m (2017: £3.6m). This however disguises the progress in the year. Passenger numbers at Freetown Airport climbed by 1.5% as revenues continued to recover following the end of the Ebola crisis in West Africa. However, this revenue is denominated in US Dollars and an equal and opposite decline in the dollar against the pound offsets the underlying move forward.

We have also reported Keyguard for the first time. Further information on this is contained in Note 30.

Technology revenues increased by 68% to £3.0m (2017: £1.8m). This followed a focus on and success at obtaining larger sized contracts. It would have been even higher had the £2.2m of revenue mentioned in the Chairman's Statement not slipped into 2019. However, this has given a great start to 2019.

Gross Margin

The increase in turnover was primarily from the increase in lower margin Technology Solutions sales; typically, at about 15%. Because of this mix effect the headline Gross Margin decreased to 55% (2017: 59%).

Operating Cost Base

The headline continuing group administrative costs reduced by 43% to £4.7m (2017: £8.3m) in total. However, with adjustment of provisions levels and the large Sovereign Ferry impairment in 2017 this is not directly comparable. Stripping out the impairment and share based payments shows an underlying reduction of about 3% in the cost base.

Operational EBITDA

The Group loss from operations was £1m (2017 Restated: £5.1m). When adjusted for the exceptional and non-cash items set out below and depreciation and amortisation, the Group recorded an adjusted EBITDA loss of £0.4m (2017: £1.2m loss).

Reconciliation to adjusted EBTIDA	2018 £'000	2017 Restated £'000
Loss from Operations	(1,038)	(5,090)
Depreciation, Amortisation and Impairment charges	148	2,805
Writeback of the impairment of the Sierra Queen	(170)	-
Reported EBITDA (loss)	(1,060)	(2,285)
Share Option expense	281	63
Iranian Middle East Airport opportunity costs	294	603
Ferry exit costs	21	335
Other exceptional items	86	50
Adjusted EBTIDA (loss)	(378)	(1,234)

This is a significant improvement on 2017.

Finance Costs

Total finance costs of £0.3m (2017: £0.6m) were consistent with the prior year as interest bearing debt levels Senior Secured Convertible Notes (10% - 12% coupon) generated an underlying cash charge of £0.4m (2017: £0.3m).

Result for the Year

The Group loss before taxation was £1.4m (2017 Restated: £5.7m) and the loss per share was 0.4p (2017 Restated: 5.2p). For continuing operations, the loss before taxation was £1.5m (2017 Restated: £2.1m) and the loss per share was 0.51p (2017 Restated: 1.88p).

Statement of Financial Position

Total Group assets amounted to £8.6m at 31 December 2018 compared with £3.6m (restated) at 31 December 2017.

Net Group current assets amounted to £0.1m at 31 December 2018 compared to Net Group current liabilities of £0.2m (restated) at 31 December 2017.

The Group trade and other receivables balance as at 31 December 2018 was £4.6m (2017: £0.7m). Average days sales outstanding at the year-end were 41 (2017: 36). The large year end increase, and corresponding deferred sales, relates to the Middle East Contract mentioned in the Chairman's Statement. This money was collected in Q1 2019.

Cash and cash equivalents of £0.3m at 31 December 2018 compared with £0.4m at 31 December 2017.

Trade and other payables were £2.5m (2017: £1.1m) and average creditor days were 27 (2017: 24). Again, the year end increase was influenced by the Middle East contract.

A deferred tax asset of £0.9m (2017: £ Nil) was recognised in the year.

Total equity at 31 December 2018 stood at a surplus of £1.1m (2017 restated: £0.1m).

Restatement of 2017 Results

When Longmoor was purchased, goodwill of £397K was recorded in the books. In 2017, this was impaired to zero because, mistakenly, only the actual performance and prospects of Longmoor Security Limited was reviewed when considering whether an impairment was needed; however, most of the activities purchased in the Longmoor acquisition have actually been transferred to other entities within the Westminster Group.

An exercise has been carried out to establish how much revenue within the Westminster Group as a whole is actually being generated from the activities purchased in the Longmoor acquisition. This has concluded that it was an error to impair the goodwill hence the 2017 accounts have been restated to correct this error (Note 10).

Key Performance Indicators

The Key Performance Indicators by which we measure performance of our business are set out in the Chief Executive Officer's Report.

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

Summary of movements in loan notes at principal value £'000	2018	2018	2018	2017	2017	2017
	CULN	CLN	Total	CULN	CLN	Total
At 1 January	-	2,245	2,245	1,200	2,245	3,445
New issue	171	-	171	-	-	-
Conversion	-	-	-	- (1,200)	-	- (1,200)
At 31 December	171	2,245	2,416	-	2,245	2,245

At 31 December 2018, the secured CLN carried a coupon of 12% payable quarterly in arrears, had a conversion price of 25p and matured on 30 June 2019. The Company has now extended the term to 30 June 2020 at a higher coupon of 15% from 1 April 2019 and a conversion price of 15p. (Refer also Note 32)

At 31 December 2018, the unsecured CLN carried a coupon of 5% payable quarterly in arrears, had a conversion price of 10p and matures on 31 July 2021.

Equity Issues

Equity Issues	Number of Shares	Price per share in Pence	Funds Raised £'000
Allotment 8 January 2018	875,000	10	88
Allotment 5 February 2018	3,409,091	22	750
Allotment 14 September 2018	5,000,000	10	500
	9,284,091		1,338

Summary of Warrants

Number	Holder and Description	Strike Price (p)	Life (years)	Vesting Criteria
589,330	Yaron Bull, February 2016	20.15	4	At grant:- detachable
1,100,000	Yaron Bull, November 2016	28	3	At grant:- detachable
5,000,000	Hargreave Hale, June 2016	12	3	At grant:- detachable

Cash Flow Statement

During the year the Group had an operating cash outflow of £1.2m (2017: outflow £1.5m) which arose primarily from an unfavourable working capital movement of £1.1m (2017: £0.6m) and the trading loss.

During the year the Group raised £1.3m gross from the issue of new equity with a further £0.2m of proceeds from the issue of convertible loan notes. In 2017, £2.4m was raised from new equity.

Reconciliation from adjusted EBITDA to normalised operating cash flow	2018 £'000	2017 £'000
Adjusted EBITDA	(378)	(1,234)
Loss on asset disposal	2	9
Net changes in working capital	(1,064)	641
Equity settlement payment	-	25
Net Cash used in underlying operating activities	(1,440)	(559)

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 8 February 2019, the Company raised £0.5m (gross) through a placing of 5,000,000 new Ordinary Shares of 10p each at 10 pence per Ordinary Share. The placing was undertaken by SVS Securities Plc who became joint broker to the group.

On 24 April 2019 the Company announced that its Technology Division has been awarded a $ 3.4m USD contract for the provision of advanced container screening solutions to two separate ports in an Asian country.

On 1 May 2019 the Company announced the acquisition of the entire issued share capital of French aviation security and support services company Euro Ops SRL ('Euro Ops') along with the business and assets of Euro Ops International SRL ('Euro Ops Int.') for €20,000 Euro.

On 21 May 2019 the Convertible Loan Notes were extended to 30 June 2020. Under the terms of the CLN extension the conversion price on any unredeemed or unconverted CLN will be 15p per share until 30 September 2019, 12.5p per share from 1 October 2019 until 31 December 2019 and thereafter 10p per share from 1 January 2020 until the new maturity date of 30 June 2020. The coupon payable on any unredeemed or unconverted CLN amount will be 15% pa from 1 April 2019 until 30 June 2020. The Company may redeem the whole or any part of the CLN holding at any time without restriction or penalty.

Whilst the Company plans to repay the CLN at the earliest opportunity, the extension until 30 June 2020 gives the Company the flexibility for a strategic and planned paydown of the CLN, at a time of its choosing, to avoid adversely affecting the Group's share price and business activities.

Mark L W Hughes

Chief Financial Officer

Westminster Group PLC

Consolidated Statement of Comprehensive Income

For the year ended 31 December 2018


	Note	2018 Continuing Operations	2018 Discontinued Operations	2018 Total	2017 Continuing Operations (Restated)	2017 Discontinued Operations	2017 Total
		£'000	£'000	£'000	£'000	£'000	£'000
REVENUE	3	6,668	-	6,668	5,330	66	5,396
Cost of sales		(3,020)	-	(3,020)	(2,015)	(182)	(2,197)
GROSS PROFIT / (LOSS)		3,648	-	3,648	3,315	(116)	3,199
Administrative expenses		(4,835)	149	(4,686)	(4,736)	(3,553)	(8,289)
(LOSS) /PROFIT FROM OPERATIONS	6	(1,187)	149	(1,038)	(1,421)	(3,669)	(5,090)

Analysis of operating loss
Loss from operations		(1,187)	149	(1,038)	(1,421)	(3,669)	(5,090)
Add back amortisation	11	33	-	33	31	-	31
Add back depreciation	12	115	-	115	139	144	283
(Reversal of Impairment) / impairment	29	-	(170)	(170)	-	2,491	2,491
Add back share option expense		281	-	281	63	-	63
Add back exceptional items[1]	4	380	21	401	653	335	988
EBITDA loss from underlying operations		(378)	-	(378)	(535)	(699)	(1,234)

Finance costs	5	(329)	-	(329)	(630)	-	(630)

(LOSS) /PROFIT BEFORE TAXATION		(1,516)	149	(1,367)	(2,051)	(3,669)	(5,720)
Taxation	7	872	-	872	-	-	-
(EXPENSE) / INCOME		(644)	149	(495)	(2,051)	(3,669)	(5,720)
TOTAL COMPREHENSIVE LOSS ATTRIBUTABLE TO: OWNERS OF THE PARENT NON-CONTROLLING INTEREST		(498) (146)	149 -	(349) (146)	(1,851) (200)	(3,669) -	(5,520) (200)
(LOSS) /PROFIT AND TOTAL COMPREHENSIVE LOSS		(644)	149	(495)	(2,051)	(3,669)	(5,720)

(LOSS) /PROFIT) PER SHARE	9	(0.51)p	0.11p	(0.40p)	(1.88p)	(3.36p)	(5.24p)

The accompanying notes form part of these financial statements.

Westminster Group PLC Consolidated and Company Statements of Financial Position As at 31 December 2018

			Group		Group Restated	Company		Company
				2018	2017	2018		2017
	Note	£'000			£'000		£'000		£'000

Goodwill	10	596			397		-		-
Other intangible assets	11	100			129		100		128
Property, plant and equipment	12	1,898			1,952		1,025		1,028
Investment in subsidiaries	14	-			-		6,906		7,116
Deferred tax asset	7 & 17	889			-		-		-
TOTAL NON-CURRENT ASSETS		3,483			2,478		8,031		8,272
Inventories	18	74			39		-		-
Trade and other receivables	19	4,616			693		27		42
Cash and cash equivalents	20	290			392		29		78
TOTAL CURRENT ASSETS		4,980			1,124		56		120
Assets of disposal groups classified as held for sale	29	170			-		-		-
TOTAL ASSETS		8,633			3,602		8,087		8,392
Called up share capital	21	13,003			12,074		13,003		12,074
Share premium account		9,568			9,226		9,568		9,226
Merger relief reserve		299			299		299		299
Share based payment reserve		858			621		858		621
Equity reserve on convertible loan note		222			186		21		-
Revaluation reserve		134			134		134		134
Retained earnings:
At 1 January		(22,256)			(16,772)		(14,227)		(6,135)
Loss for the year		(349)			(5,520)		(1,921)		(8,128)
Other changes in retained earnings		13			36		-		36
At 31 December		(22,592)			(22,256)		(16,148)		(14,227)
EQUITY /(DEFICIT) ATTRIBUTABLE TO: OWNERS OF THE COMPANY NON-CONTROLLING INTEREST		1,492 (346)			284 (200)		7,735 -		8,127 -
TOTAL EQUITY		1,146			84		7,735		8,127
Borrowings	23	2,387			2,184		171		-
TOTAL NON-CURRENT LIABILITIES		2,387			2,184		171		-
Deferred income	24	2,438			-		-		-
Trade and other payables	24	2,511			1,096		181		265
TOTAL CURRENT LIABILITIES		4,949			1,096		181		265
Liabilities of disposal group classified as held for sale	29	151			238		-		-
TOTAL LIABILITIES		7,487			3,518		352		265
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY		8,633			3,602		8,087		8,392

The accompanying notes form part of these financial statements. The Group and Company financial statements were approved by the Board and authorised for issue on 23 May 2019 and signed on its behalf by:

Peter Fowler Mark L W Hughes

Director Director

Westminster Group PLC

Consolidated Statement of Changes in Equity

For the year ended 31 December 2018

	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 2018	12,074	9,226	299	621	134	186	(22,256)	284	(200)	84
Shares issued for cash	841	409	-	-	-	-	-	1,250	-	1,250
Cost of share issues	-	(67)	-	-	-	-	-	(67)	-	(67)
Share based payment charge	-	-	-	237	-	-	-	237	-	237
Exercise of warrants and share options	88	-	-	-	-	-	-	88	-	88
Other movements in Equity	-	-	-	-	-	-	13	13		13
CLN conversion	-	-	-	-	-	36		36	-	36
TRANSACTIONS WITH OWNERS	929	342	-	237	-	36	13	1,557	-	1,557

Total comprehensive expense for the year	-	-	-	-	-	-	(349)	(349)	(146)	(495)

AS AT 31 DECEMBER 2018	13,003	9,568	299	858	134	222	(22,592)	1,492	(346)	1,146

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
Lapse of share options	5	-	-	(2)	-	-	2	5	-	5
Warrants issued with loan notes	-	-	-	(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							(5,520)	(5,520)	(200)	(5,720)
AS AT 31 DECEMBER 2017	12,074	9,226	299	621	134	186	(22,256)	284	(200)	84

Westminster Group PLC

Company Statement of Changes in Equity

For the year ended 31 December 2018

	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
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000

AS AT 1 JANUARY 2018	12,074	9,226	299	621	134	-	(14,227)	8,127
Shares issued for cash	841	409	-	-	-	-	-	1,250
Cost of share issues	-	(67)	-	-	-	-	-	(67)
Share based payment charge	-	-	-	237	-	-	-	237
Exercise of warrant	88	-	-	-	-	-	-	88
Recognition of Equity component of Convertible Loan Notes (CLN)	-	-	-	-	-	21	-	21
TRANSACTIONS WITH OWNERS	929	342	-	237	-	21	-	1,529

Total comprehensive expense for the year	-	-	-	-	-	-	(1,921)	(1,921)

AS AT 31 DECEMBER 2018	13,003	9,568	299	858	134	21	(16,148)	7,735

AS AT 1 JANUARY 2017	8,711	9,169	299	569	134	-	(6,135)	12,747
Shares issued for cash	2,291	-	-	-	-	-	-	2,291
Cost of share issues	-	(76)	-	-	-	-	-	(76)
Share based payment charge	-	-	-	88	-	-	-	88
Exercise of share options	5	-	-	(2)	-	-	2	5
Lapse of share options	-	-	-	(34)	-	-	34	-
CLN conversion	1,067	133	-	-	-	-	-	1,200
TRANSACTIONS WITH OWNERS	3,363	57	-	52	-	-	36	3,508

Total comprehensive income for the year	-	-	-	-	-	-	(8,128)	(8,128)
AS AT 31 DECEMBER 2017	12,074	9,226	299	621	134	-	(14,227)	8,127

Consolidated Cash Flow Statement

For the year ended 31 December 2018

		2018 Continuing Operations	2018 Discontinued Operations	2018 Total	2017 Continuing Operations	2017 Discontinued Operations	2017 Total
	Note	£'000	£'000	£'000	£'000	£'000	£'000
(LOSS) / PROFIT AFTER TAX		(644)	149	(495)	(2,051)	(3,669)	(5,720)
Taxation credit		(872)	-	(872)	-	-	-
LOSS BEFORE TAX		(1,516)	149	(1,367)	(2,051)	(3,669)	(5,720)
Non-cash adjustments	25	490	(170)	320	897	2,635	3,532
Net changes in working capital	25	(192)	-	(192)	435	206	641
NET CASH USED IN OPERATING ACTIVITIES		(1,218)	(21)	(1,239)	(719)	(828)	(1,547)
INVESTING ACTIVITIES:
Purchase of property, plant and equipment		(58)	-	(58)	(69)	(4)	(73)
Purchase of intangible assets		-	-	-	(56)	-	(56)
Proceeds from disposal of fixed assets		-	-	-	1	-	1
Cash inflow on Acquisition	30	104	-	104	-	-	-
CASH INFLOW / (OUTFLOW) FROM INVESTING ACTIVITIES		46	-	46	(124)	(4)	(128)
CASHFLOWS FROM FINANCING ACTIVITIES:
Gross proceeds from the issues of ordinary shares		1,338	-	1,338	2,376	-	2,376
Costs of share issues		(68)	-	(68)	(160)	-	(160)
Net proceeds from the issue of convertible loan notes		176	-	176	-	-	-
Interest paid		(355)	-	(355)	(265)	-	(265)
Other loan repayments, including interest		-	-	-	(36)	-	(36)
CASH INFLOW FROM FINANCING ACTIVITIES		1,091	-	1,091	1,915	-	1,915
Net change in cash and cash equivalents		(81)	(21)	(102)	1,072	(832)	240
CASH AND EQUIVALENTS AT BEGINNING OF YEAR				392			152
CASH AND EQUIVALENTS AT END OF YEAR				290			392

The only change in liabilities arising from financing activities is the movement in Convertible Loan Notes, as disclosed in Note 16.

Company Cash Flow Statement

For the year ended 31 December 2018

		Company	Company
		2018	2017
	Note	£'000	£'000
LOSS AFTER TAX		(1,921)	(8,128)
Non-cash adjustments	25	704	6,215
Net changes in working capital	25	99	120
NET CASH USED IN OPERATING ACTIVITIES		(1,118)	(1,793)
INVESTING ACTIVITIES:
Purchase of property, plant and equipment		(33)	(9)
Purchase of intangible assets		-	(56)
CASH OUTFLOW FROM INVESTING ACTIVITIES		(33)	(65)
CASHFLOWS FROM FINANCING ACTIVITIES:
Gross proceeds from the issues of ordinary shares		1,338	2,376
Costs of share issues		(68)	(160)
Net proceeds from the issue of convertible loan notes		177	-
Interest paid		(345)	(265)
Other loan repayments, including interest		-	(36)
CASH INFLOW FROM FINANCING ACTIVITIES		1,102	1,915
Net change in cash and cash equivalents		(49)	57
CASH AND EQUIVALENTS AT BEGINNING OF YEAR		78	21
CASH AND EQUIVALENTS AT END OF YEAR		29	78

The only change in liabilities arising from financing activities is the movement in Convertible Loan Notes, as disclosed in Note 16.

Notes to the Financial Statements

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 2018 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. Summary of significant accounting policies

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 2018.

(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 a loss during the period of £495,000 (2017: Loss of £5,720,000), of which £644,000 (2017: Loss of £2,051,000) related to continuing operations. The cash outflow from operating activities during the year was £1,218,000 (2017: £719,000), which was financed through raising new equity.

The Group's convertible secured loan notes have a principle value of £2.245m and the term has recently been extended from 31 December 2019 to 30 June 2020. Whilst not repayable in the 12 months from the date of these financial statements, the board believes that the pipeline of potential Managed Services contracts could either give the Company the capability of repayments from cash flow, or that the bondholders could covert to equity. As part of a routine planning process the Board has identified options for the repayment of the convertible secured loan notes from either cash generated from operations or as part of any financing to support new projects won.

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 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 (see Note 6).

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 recognition

Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for goods and services provided in the normal course of business, net of discounts, VAT and other sales-related taxes. Revenue is reduced for estimated customer returns, rebates and other similar allowance:

Supply of products

Revenue in respect of supply of product is recognised at a point in time when products are delivered and legal title is transfer to the customer.

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 is recognised over the time and 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 over time and is based on the volume of the passenger and freight.

Maintenance Income

The revenue in relation to supply of maintenance contract is recognised over time on a straight-line basis. The unrecognised portion of maintenance contract is included within trade and other payables as Deferred Revenue.

Training courses

The revenue on training course is recognised at a point in time after the course has been conducted i.e performance obligation in relation to the course are fulfilled.

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 exceeds 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.

	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 carrying 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.

The Group recognises a loss allowance for expected losses on financial assets that are measured at amortised cost including trade receivables and contract assets. The amount of expected credit losses is updated at each reporting date to reflect changes in credit risk since initial recognition.

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 include 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

Supply of products

Revenue in respect of supply of product is recognised at a point in time when products are delivered and legal title is transfer to the customer.

Supply and installation contracts and supply of services

Maintenance Income

Training courses

The revenue on training course is recognised at a point in time after the course has been conducted i.e performance obligation in relation to the course are fulfilled.

Recognition of income is in line with the policy above. 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.

Goodwill

Deferred tax asset

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.

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.

New standards, amendments and interpretations

No new standards, amendments or interpretations effective for the first time in the year ended 31 December 2018 have had a material impact on Group or parent Company. The following new standards have been adopted;

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

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

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. 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 1 January 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 has not resulted in material changes to the Group's operations.

Standards in issue not yet effective

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 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 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. The results are expected to be similar to the obligations shown in Note 13.

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. Segment reporting

Operating segments

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

	Managed Services Aviation	Technology	Group and Central	Managed Services Guarding	Managed Services Sovereign Ferries	Group Total
	£'000	£'000	£'000	£'000	£'000	£'000
2018
Supply of products	-	1,216	-	-	-	1,216
Supply and installation contracts	-	1,420	-	-	-	1,420
Maintenance and services	3,339	342	-	132	-	3,813
Training courses	219	-	-	-	-	219
Revenue	3,558	2,978	-	132	-	6,668

Segmental underlying EBITDA	791	(272)	(911)	14	-	(378)
Share option expense	-	-	(281)	-	-	(281)
Exceptional items (note 4)	(380)	-	-	-	(21)	(401)
Revision of impairments (Note 29)	-	-	-	-	170	170
Depreciation & amortisation	(132)	(11)	-	(5)	-	(148)
Segment operating result	279	(283)	(1,192)	9	149	(1,038)
Finance cost	-	1	(330)	-	-	(329)
Profit/(Loss) before tax for the financial year	279	(282)	(1,522)	9	149	(1,367)
Income tax credit	492	380	-	-	-	872
Profit/(Loss) after tax for the financial year	771	98	(1,522)	9	149	(495)

Segment assets	4,286	1,960	1,854	363	170	8,633
Segment liabilities	228	3,336	3,238	534	151	7,487
Capital expenditure	23	-	35	-	-	58

For the year ended 31 December 2018 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
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 (note 4)	(603)	-	(50)	(335)	(988)
Impairments	-	-	-	(2,491)	(2,491)
Depreciation & amortisation	(100)	(15)	(55)	(144)	(314)
Segment operating result	492	(59)	(1,882)	(3,641)	(5,090)
Finance cost	-	-	(630)	-	(630)
Profit/(Loss) for the financial year	492	(59)	(2,512)	(3,641)	(5,720)

Segment assets	1,429	360	1,811	2	3,602
Segment liabilities	368	359	2,553	238	3,518
Capital expenditure	23	3	96	4	126

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.


	2018	2017
	£'000	£'000

United Kingdom & Europe	171	919
Africa	3,884	3,779
Middle East	1,878	152
Rest of the World	735	546
	6,668	5,396

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 2018 fixed assets with a net book value of £3,635,000 (2017: £3,794,000) recorded in the appropriate subsidiary financial statements were located in Africa.

Information about major customers

Included in revenues arising from the Technology Solutions in the Middle East are revenues of approximately £1,414,000 (2017: £ Nil) which arose from a sale to the group's largest customer in 2018. Approximately 50% (2017: 60%) of the Group's revenues are derived from the contract with the Sierra Leone airport authority. This contract contains many individual customers. No other single customer contributed more than 10% of the Group revenue in either 2018 or 2017.

4. Exceptional Items

	2018	2017
	£'000	£'000

Middle East airport pre-contract costs	294	603
Ferry closure costs	21	335
Other	86	50
	401	988

5. Finance costs

	Group	Group
	2018	2017
	£'000	£'000

Interest received	1	-
Interest payable on bank and other borrowings	(37)	(44)
Interest expenses on convertible loan notes (Note 16)	(293)	(586)
Total finance costs	(329)	(630)

6. Loss from operations

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

	Group	Group
	2018	2017
	£'000	£'000

Staff costs (see Note 8)	3,434	2,367
Depreciation of property, plant and equipment	115	283
Amortisation of intangible assets	33	31
Operating lease rentals payable
Property	62	83
Plant and machinery	-	3
Other	4	26
Foreign exchange loss	3	102

Auditor's remuneration

Amounts payable in both years relate to BDO LLP in respect of audit and other services. The local Audit in Sierra Leone is performed by Moore Stephens Sierra Leone

Audit services
	Group	Group
	2018	2017
	£'000	£'000
Statutory audit of parent and consolidated financial statements	30	40
Review of interim results	2	-
Statutory audit of subsidiaries of the company pursuant to legislation	21	30
Taxation services including research and development tax credits	12	14
Other services not included in the above	-	8
Local audit in Sierra Leone	17	21
Total fees	82	113

7. Taxation

Analysis of charge in year

	Group	Group
	2018	2017
	£'000	£'000
Current year
UK Corporation tax on profits in the year	-	-
Foreign corporation tax on profits in the year	17	-
Deferred Tax
Utilisation of losses	(889)	-
	(872)	-

	Group	Group
	2018	2017
	£'000	£'000
Reconciliation of effective tax rate
Loss on ordinary activities before tax	(1,367)	(5,720)

Loss on ordinary activities multiplied by the standard rate of corporation tax in the UK of 19% (2017: 19.25%)	(260)	(1,101)
Effects of:
Expenses not deductible for tax purposes	20	973
Capital allowances less than depreciation	(199)	(105)
Other short-term timing differences	2	-
Release of losses	(889)	-
Unrecognised losses carried forward	437	233
Difference in deferred tax rates	17	-
Total tax - credit	(872)	-

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 2017) 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

Group

	2018	2017
	£'000	£'000

Wages and salaries	2,943	2,117
Social security costs	210	187
	3,153	2,304
Share based payments	281	63
	3,434	2,367

The Group operates a stakeholder pension scheme. The Group made pension contributions totalling £21,000 during the year (2017: £7,000), and pension contributions totalling £4,000 were outstanding at the year-end (2017: £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 £922,000 (2017: £623,000) and the highest paid director received remuneration totalling £310,000 (2017: £192,000).

Average monthly number of people (including Executive Directors) employed

Group
	2018				2017
	Number				Number
	Continuing Operations	Discontinued Operations	Total	Continuing Operations		Discontinued Operations	Total
By function:
Sales	3	-	3	3		-	3
Operations	199	3	202	220		32	252
Administration	23	-	23	23		-	23
Management	5	-	5	5		-	5
	230	3	233	251		32	283

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:

	2018	2017
	'000	'000
Issued ordinary shares
Start of year	120,743	87,107
Effect of shares issued during the year	5,409	22,087
Weighted average basic and diluted number of shares for year	126,152	109,194

	2018	2017
	£'000	£'000
Earnings
Loss and total Comprehensive Expense (Continuing)	(644)	(2,051)
Profit / (loss) and total Comprehensive Expense (Discontinued)	149	(3,669)
Loss and total Comprehensive Expense Total	(495)	(5,720)

For the year ended 31 December 2018 and 2017 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 0.40p (2017 Loss 5.60p Restated: Loss 5.24p).

10. Goodwill

Group		Restated	Original
	2018	2017	2017
	£'000	£'000	£'000

Gross carrying amount at 1 January	1,160	1,160	1,160
Acquisition in year (Note 30)	199	-	-
Gross carrying amount at 31 December	1,359	1,160	1,160

Accumulated impairment at 1 January	(763)	(763)	(763)
Impairment charge for the year	-	-	(397)
Accumulated impairment at 31 December	(763)	(763)	(1,160)

Carrying amount at 1 January	397	397	397

Carrying amount at 31 December	596	397	-

The entire goodwill balance relates to the acquisition of Longmoor Security Limited (Longmoor). Last year the directors reviewed the expected future cash flows from this asset and concluded that these cash flows no longer support the carrying value. However, the assessment last year looked solely at the company rather than considering the cash flows purchased in the Longmoor acquisition which now appear in the wider group. The directors have concluded that last year's write down was an error and that the carrying value of Longmoor at £397,000 is fairly stated. The goodwill CGU has been attributed to guarding CGU.

The Group tests goodwill annually for impairment, or more frequently if there are indications that goodwill may be impaired. The recoverable amounts of the CGU are determined from value in use calculations. The key assumptions are discount rate (5%) future revenues (assumed as flat, but evidence suggests strong growth) derived from the most recent financial budgets approved by management.

11. Other intangible assets

	Group Website and Software	Company Website and Software

2018
	£'000	£'000
Cost
At 1 January 2018	193	224
Disposals	(12)	(12)
Adjustment	40	(1)
Transfer	4	4
At 31 December 2018	225	215

Accumulated amortisation and impairment
At 1 January 2018	64	96
Charge for the year	33	33
Disposals	(12)	(12)
Adjustment	40	(2)
At 31 December 2018	125	115

Net book value at 31 December 2018	100	100

2017
	£'000	£'000
Cost
At 1 January 2017	212	168
Additions	56	56
Disposals	(43)	-
Transfers to assets held for sale	(32)	-
At 31 December 2017	193	224

Accumulated amortisation and impairment
At 1 January 2017	80	65
Charge for the year	31	31
Disposals	(40)	-
Impairment of ferry operation	25	-
Transfer to assets held for sale	(32)	-
At 31 December 2017	64	96

Net book value at 31 December 2017	129	128

The impairment charge recognised during 2017 related to the assets in the Ferry Operations in Sierra Leone which were

12. Property, plant and equipment

Group	Freehold property	Plant and equipment	Office equipment, fixtures and fittings	Motor vehicles	Total
Group	Freehold property	Plant and equipment	Office equipment, fixtures and fittings	Motor vehicles	Total
2018	£'000	£'000	£'000	£'000	£'000
Cost or valuation
At 1 January 2018	1,014	727	1,123	99	2,963
Additions	17	-	41	-	58
Disposals	-	(79)	(102)	(20)	(201)
On Acquisition	-	-	-	80	80
Transfer	-	(177)	132	-	(45)
At 31 December 2018	1,031	471	1,194	159	2,855
Accumulated depreciation and impairment
At 1 January 2018	-	434	488	89	1,011
Charge for the year	17	31	57	10	115
Disposals	-	(79)	(102)	(20)	(201)
Transfer	-	(150)	110	-	(40)
On Acquisition	-	-	-	72	72
At 31 December 2018	17	236	553	151	957
Net book value at 31 December 2018	1,014	235	641	8	1,898

2017	£'000	£'000	£'000	£'000	£'000
Cost or valuation
At 1 January 2017	1,014	3,407	1,424	99	5,944
Additions	-	4	69	-	73
Disposals	-	(8)	(226)	-	(234)
Transfers	-	42	(42)	-	-
Transfer to assets held for sale	-	(2,718)	(102)	-	(2,820)
At 31 December 2017	1,014	727	1,123	99	2,963
Accumulated depreciation and impairment

At 1 January 2017	-	579	667	63	1,309
Charge for the year	-	180	77	26	283
Disposals	-	(7)	(220)	-	(227)
Impairment	-	2,385	81	-	2,466
Transfers	-	15	(15)	-	-
Transfer to assets held for sale	-	(2,718)	(102)	-	(2,820)
At 31 December 2017	-	434	488	89	1,011

Net book value at 31 December 2017	1,014	293	635	10	1,952

The impairment charge in recognised during 2017 related to the assets in the Ferry Operations in Sierra Leone which were written down to nil at 30 September 2017 and transferred to assets held for sale.

Company	Freehold property	Plant and equipment	Office equipment fixtures and fittings	Total
2018	£'000	£'000	£'000	£'000

Cost or valuation
At 1 January 2018	1,014	14	216	1,244
Additions	17	1	15	33
Disposals	-	-	(38)	(38)
Adjustments	-	-	(8)	(8)
At 31 December 2018	1,031	15	185	1,231

Accumulated depreciation
At 1 January 2018	-	13	203	216
Charge for the year	17	1	6	24
Disposals	-	-	(38)	(38)
Adjustments	-	1	3	4
At 31 December 2018	17	15	174	206

Net book value at 31 December 2018	1,014	-	11	1,025

2017

Cost or valuation
At 1 January 2017	1,014	20	247	1,281
Additions	-	-	9	9
Disposals	-	(6)	(40)	(46)
At 31 December 2017	1,014	14	216	1,244

Accumulated depreciation
At 1 January 2017	-	17	233	250
Charge for the year	-	2	10	12
Disposals	-	(6)	(40)	(46)
At 31 December 2017	-	13	203	216

Net book value at 31 December 2017	1,014	1	13	1,028

The freehold property was valued professionally by Brown and Co, Chartered Surveyors, on 16 May 2017, which provided a valuation of £1,014,000. The valuation was made on the basis of recent market transactions on arm's length terms and on an alternative use basis. The Revaluation Reserve is not available for distribution to shareholders. The directors are of the opinion that the valuation has not moved materially since the last valuation was performed. The valuation was not materially different to the value the asset is recorded at the balance sheet date.

No depreciation has been charged on the freehold property only additions have been depreciated. The difference between the net book value of the freehold property if this depreciation, at 2%, had been charged as shown in the financial statements is not materially different to the value the asset is recorded at the balance sheet date.

The freehold property is stated at valuation, the comparable historic cost and depreciation values are as follows:

	2018 £'000	2017 £'000
Historical cost	714	697

Accumulated depreciation
At 1 January	265	251
Charge for the year	14	14
At 31 December	279	265

Net book value as at 31 December	435	432

13. Operating lease commitments

The Group and the Company lease various office equipment and motor vehicles under non-cancellable operating lease agreements. The total commitments under these leases can be analysed as follows:

	Group	Group		Group	Company
As at 31 December 2018	Property £'000	Other £'000		Total £'000	Other £'000
Within one year	61	22		83	6
In the second to fifth years inclusive	61		115	176	78
Total	122		137	259	84

As at 31 December 2017	Group Property £'000		Group Other £'000	Group Total £'000	Company Other £'000
Within one year	57		14	71	3
In the second to fifth years inclusive	42		15	57	1
Total	99		29	128	4

Remaining lease terms range from 4 months to 4 years.

Group

Company

2018

£'000

2017

£'000

2018

£'000

2017

£'000

Minimum lease payments under operating leases recognised as an expense in the year

113

14. Investment in subsidiaries

Company	2018	2017
Cost	£'000	£'000
At 1 January 2018	16,458	16,458
Movement in Year	(622)	-
At 31 December	15,836	16,458

Accumulated impairment
At 1 January	(9,342)	(3,406)
Movement in Year	412	(5,936)
At 31 December	(8,930)	(9,342)

	6,906	7,116

Investments in subsidiaries include long term loans advanced to subsidiaries, which have partially been settled in the year.

15. Subsidiary undertakings

The subsidiary undertakings at 31 December 2018 were as follows:

Name	Country of incorporation	Principal activity	% of nominal ordinary share capital and voting rights held
Westminster International Limited	England	Advanced security technology, (Technology division)	100
Westminster International Limited	England	Advanced security technology, (Technology division)	100
Longmoor Security Limited	England	Close protection training and provision of security services (Managed Services)	100


Westminster Aviation Security Services Limited	England	Managed services of airport security under long term contracts. Managed Services division	100


Sovereign Ferries Limited	England	Marine Transport West Africa	100

Westminster Operating Limited	England	Special purpose vehicle which exists solely for listing the 2013 CLN on the CISX. Year end 31 October. Only transactions are intra group	100
Westminster Operating Limited	England		100

Keyguard U.K Limited *	England	Security and risk management including manned guarding, mobile patrols, risk management and K9 services.	100

Longmoor (SL) Limited	Sierra Leone	Security and terminal guarding	100

Facilities Operations Management Limited	Sierra Leone	Ferry and other infrastructure management	90

Westminster Sierra Leone Limited	Sierra Leone	Local infrastructure for airport operations	49

Westminster Group GMBH	Germany	Dormant	100

Westminster Sicherheit GMBH	Germany	Managed Services infrastructure	85

Euro Ops SARL **	France	Managed Services infrastructure	100

Westminster Managed Services Limited (formerly Westminster Facilities Management Limited)	England	Dormant	100

CTAC Limited	England	Dormant	100

Westminster Aviation Security Services (ME) Limited	England	Dormant	100

Westminster JV Holdings Limited	England	Dormant (liquidated February 2018)	100

Travel Safety and Security Limited	England	Dormant (liquidated February 2018)	100

Subsidiary company registered addresses:

England Westminster House, Blacklocks Hill, Banbury, Oxfordshire, OX17 2BS, United Kingdom.

Sierra Leone ATU Building, Government Wharf, Freetown, Sierra Leone.

Germany Chiemseestrasse 25, 83233 Bernau am Chiemsee, Germany.

France 17 Route de Sundhoffen, 68280 Andolsheim. France.

* Keyguard U.K Limited refer Note 30.

* * Euro Ops SARL was acquired on 1 May 2019.

16. Financial instruments

Categories of financial assets and liabilities

The carrying amounts presented in the Consolidated and Company statement of financial position relate to the following categories of assets and liabilities:

	Group	Group	Company	Company
	2018	2017	2018	2017
	£'000	£'000	£'000	£'000
Financial assets
Trade and other receivables (note 19)	4,556	644	-	12
Cash and cash equivalents (note 20)	290	392	29	78
	4,846	1,036	29	90
Financial liabilities
Financial liabilities measured at amortised cost
Borrowings (note 23)	2,387	2,184	171	-
Trade and other payables (note 24)	2,382	1,040	166	231
Liabilities held for sale (note 29)	151	238	-	-
	4,920	3,462	337	231

See note 2 for a description of the accounting policies for each category of financial instruments. The fair values are presented in the related notes. A description of the Group's risk management and objectives for financial instruments is given in note 27.

Convertible Loan Notes

The Group had the following convertible loan notes outstanding during the year the key details of which are set out below:

	Secured Convertible Loan Notes ("CLN")
Amount	£2.245m
Conversion Price	25p until 22 May 2019 15p per share until 30 September 2019, 12.5p per share from 1 October 2019 until 31 December 2019 and thereafter 10p
Security	Secured fixed and floating
Redemption Date	30 June 2020
Management Fee	£25,000 per annum
Coupon	12 % until 31 March 2019 then15% paid quarterly in arrears. Listed on the CISX
Conversion Detail	Company can force conversion if the share price is > 65p for 15 working days after 19 June 2016. Company can make repayment without penalty if the share price > 42p for 15 working days after 19 June 2016. These conditions were not met in the year.

	2018	2018	2018	2017	2017	2017
£'000	CULN	CLN	Total	CULN	CLN	Total
At 1 January	-	2,184	2,184	952	2,071	3,023
Fair value of new loans issued	165	-	165	-	-	-
Amortised finance cost	8	351	359	248	338	586
Interest paid	(2)	(253)	(255)	-	(225)	(225)
Fair value adjustment on extension	-	(66)	(66)	-	-	-
Converted in the year	-	-	-	(1,200)	-	(1,200)
At 31 December	171	2,216	2,387	-	2,184	2,184

Analysis of movement in debt at principal value (excluding IFRS impacts), memorandum only

	2018	2018	2018	2017	2017	2017
£'000	CULN	CLN	Total	CULN	CLN	Total
At 1 January	-	2,245	2,245	1,200	2,245	3,445
New issue	171	-	171	-	-	-
Conversion	-	-	-	(1,200)	-	(1,200)
At 31 December	171	2,245	2,416	-	2,245	2,245

The Convertible Loan Notes have been separated into two components, the Host Debt Instrument and the Embedded Derivative on initial recognition. The value of the Host Debt Instrument will increase to the principal sum amount by the date of maturity. The effective interest cost of the Notes is the sum of that increasing value in the period and the interest paid to Noteholders. The Derivative element will vary in value according to the market price of the underlying Ordinary Shares and the period remaining for conversion amongst other factors. The value of the embedded derivative was not material at inception and at the end of the year and is included in the fair value of the overall instrument for disclosure.

Secured convertible loan notes (CLN) are compound financial instruments that can be converted to share capital at the option of the holder, and the number of shares to be issued does not vary with changes in fair value.

On 24 May 2018 the Company extended the term of the CLN resulting in an increase of coupon to 12% from 24 May 2018 and conversion price decreased from 35p to 25p.

Further information on the CLN extension in 2019 is included in Note 32.

Unlike convertible unsecured loan notes (CULN), this instrument is determined to have a liability and equity component. The liability component is initially recognised at fair value of a similar liability without a conversion option. The equity component is recognised initially as the difference between the fair value of the compound financial instrument as a whole and the fair value of the liability component. It is not subsequently remeasured. The liability component is measured at amortised cost using the effective interest method.

During the year, the Group raised $250,000 by way of issue of CULN with a maturity date of 31 Date 2021 and an annual coupon of 5%.

17. Deferred tax assets and liabilities

Deferred tax assets and liabilities have been calculated using the expected future tax rate of 17% (2017: 17%). Any changes in the future would affect these amounts proportionately.

The group has recognised a Deferred Tax Asset of £889,000 (2017: Nil) due to budgeted future profits of the business beyond 2019.

18. Inventories

	Group	Group	Company	Company
	2018	2017	2018	2017
	£'000	£'000	£'000	£'000

Finished goods	74	39	-	-
	74	39	-	-

The cost of inventories recognised as an expense within cost of sales amounted to £1,309,000 (2017: £1,182,000). No reversal of previous write-downs was recognised as a reduction of expense in 2018 or 2017.

19. Trade and other receivables

	Group	Group	Company	Company
	2018	2017	2018	2017
	£'000	£'000	£'000	£'000
Amounts falling due within one year:
Trade receivables, gross	701	557	2	-
Allowance for credit losses	(127)	(52)	(2)	-
Trade receivables	574	505	-	-
Amounts recoverable on short term contracts	1,909	116	-	-
Other receivables	2,073	23	-	12
Financial assets	4,556	644	-	12
Prepayments	60	49	27	30
Non-financial assets	60	49	27	30
Trade and other receivables	4,616	693	27	42

The average credit period taken on sale of goods in 2018 was 41 days (2017: 36 days). An allowance has been made for estimated credit losses of £127,000 (2017: £52,000). This allowance has been based on the knowledge of the financial circumstances of individual receivables at the reporting date.

The following table provides an analysis of trade and other receivables at 31 December. The Group believes that the balances are ultimately recoverable based upon a review of past payment history and the current financial status of the customers.

	2018	2017
	£'000	£'000
Current	306	346
Not more than 3 months	219	208
More than 3 months but less than 6 months	176	3
	701	557

Allowances for Credit Losses	2018	2017
	£'000	£'000
Opening balance at 1 January	52	75
Net amounts written off	75	(36)
Impairment loss	-	13
Closing balance at 31 December	127	52

There are no significant credit risks from financial assets that are neither past due nor impaired. At 31 December 2018 £3,708,000 (2017: £510,000) of trade receivables were denominated in US dollars, £nil (2017: £nil) in Euros, and £975,000 (2017: £47,000) in Sterling. The directors consider that the carrying amount of trade and other receivables approximates to their fair value.

20. Cash and cash equivalents

	Group	Group	Company	Company
	2018	2017	2018	2017
	£'000	£'000	£'000	£'000

Cash at bank and in hand	292	392	29	78
Bank overdraft	(2)	-	-	-
Cash and cash equivalents	290	392	29	78

All the bank accounts of the Group are set against each other where a right of offset exists in establishing the cash position of the Group. The bank overdrafts do not therefore represent bank borrowings, which is why they are presented as above for the purposes of the cash flow statement and the statement of financial position.

21. Called up share capital

Group and Company

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

Ordinary Share Capital	2018		2017
	Number	£'000	Number	£'000
At 1 January	120,743,420	12,074	87,107,903	8,711
Arising on conversion of Convertible Loan Notes	-	-	10,669,227	1,067
Arising on exercise of Share Options and Warrants	875,000	88	55,000	5
Shares issued to settle an annual broker fee	-	-	250,000	25
Other Issues for Cash	8,409,091	841	22,661,290	2,266

At 31 December	130,027,511	13,003	120,743,420	12,074

During the year the following equity issues took place

Date	Comment	Shares Issued	Issue price
8 January 2018	Exercise of Warrants	875,000	10.0p
5 February 2018	Equity placing	3,409,091	22.0p
14 September 2018	Equity placing	5,000,000	10.0p

22. Share options

The Company adopted the 2007 Share Option Scheme on 3 April 2007 that provides for the granting of both Enterprise Management Incentives and unapproved share options (Westminster Group Individual Share Option Agreements). The main terms of the option scheme are as follows:

· Although no special conditions apply to the options granted in 2007, the model form agreement allows the Company to adopt special conditions to tailor an option for any particular employee.

· The scheme is open to all full-time employees and Directors except those who have a material interest in the Company.

· For the purposes of this definition, a material interest is either beneficial ownership of, or the ability to control directly, or indirectly, more than 30% of the ordinary share capital of the Company.

· The Board determines the exercise price of options before they are granted. It is provided in the scheme rules that options must be granted at the prevailing market price in the case of EMI options and must not be granted at an exercise price that is less than the nominal value of a share.

· There is a limit that options over unissued shares granted under the scheme and any discretionary share option scheme or other option agreement adopted or entered into by the Company must not exceed 10% of the issued share capital.

· Options can be exercised on the second anniversary of the date of grant and may be exercised up to the 10th anniversary of granting. Options will remain exercisable for a period of 40 days if the participant is a "good leaver".

The Company adopted the 2017 Share Option Scheme on 21 September 2017 that provides for the granting of both Enterprise Management Incentives and unapproved share options (Westminster Group Individual Share Option Agreements). The main terms of the option scheme are as follows:

· Although no special conditions apply to the options granted in 2017, the model form agreement allows the Company to adopt special conditions to tailor an option for any particular employee.

· The scheme is open to all full-time employees and Directors except those who have a material interest in the Company.

Options have subsequently been granted on this basis.

These options are valued by the use of the Black-Scholes model using a volatility of 70%, interest free rate of 0.5% and a life of 5 years (being the point at which they lapse).

The company has the following share options outstanding to its employees (including those on good leaver terms). The weighted average exercise price at the reporting date was 18.2p (2017: 30.5p). The average life of the unexpired share options was 8.4 years (2017: 6.6 years).

		31 December 2018	31 December 2018	31 December 2017	31 December 2017
Grant Date	Exercise Price	Number Outstanding	Average Life Outstanding (Years)	Number Outstanding	Average Life Outstanding (Years)
21 April 2008	£0.525		n/a	15,000	0.3
25 September 2009	£0.345	56,000	0.7	58,000	1.7
28 June 2012	£0.365	295,000	3.5	295,000	4.5
1 July 2014	£0.510	245,000	5.5	250,000	6.5
10 December 2014	£0.285	2,281,250	5.9	3,000,000	6.9
9 October 2015	£0.140	40,000	6.8	40,000	7.3
1 June 2018	£0.130	6,500,000	9.4	-	-
1 November 2018	£0.130	750,000	9.8	-	-
		10,167,250	8.4	3,658,000	6.6

During the year, 8,250,000 (2017: Nil) employee options were granted, none (2017: 55,000) were exercised and 1,740,750 (2017: 373,862) lapsed. The weighted average price of the options lapsed in the year was 19.9p (2017: 35.8p).

The weighted average exercise price of exercisable options at the end of 2018 was 18.2p (2017:30.5p).

The Black-Scholes option-pricing model is used to determine the fair value of share options at grant date. The assumptions used to determine the fair values of share options at grant dates were as follows:

For share options granted post IPO the expected share price volatility was determined taking account of the historic daily share price movements. Since 2009, the standard deviation of the share price over the past 3 years has been used to calculate volatility. As the Company was not quoted at the dates of granting of the share options before the IPO on 21 June 2007, the calculation of the expected volatility of the shares was estimated by comparisons of the historic volatility of a sample of securities of companies of a similar size to the Company, quoted on AIM, as well as the volatility of other listed companies in similar industries.

The average expected term to exercise used in the models is based on management's best estimate for the effects of non- transferability, exercise restrictions and behavioural conditions, forfeiture and historical experience. The risk-free rate has been determined from market yields for government gilts with outstanding terms equal to the average expected term to exercise for each relevant grant.

The amount recognised in profit or loss in respect of employee share-based payments was £237,000 (2017: £63,000).

Warrants

The Company has historically issued the following warrants which are still in force at the balance sheet date:

The Company had issued the following warrants to Darwin Securities Limited alongside issues of convertible loan notes these were subsequently sold to Yaron Bull:

· On 22 February 2016 (£0.475m CULN) 589,330 warrants with a life of 3 years (extended to 4 years) and an exercise price of 20.15p per share

· On 22 November 2016 (£1.2m CULN) 1.1m warrants with an exercise price of 28.0p and a life of 3 years

On 3 June 2016 the Company announced a placing of 10,000,000 Ordinary Shares to Hargreave Hale. For every two shares one detachable warrant was issued to Hargreave, each warrant having a life of three years and an exercise price of 12p per share. Darwin and Hargreave warrants are valued by the use of the Black-Scholes model, using volatility based on the previous three years varying between 50-70% and a relevant risk-free rate as noted above. Warrants are recorded at fair value at inception and are not remeasured.

23. Borrowings

	Group	Group	Company	Company
	2018	2017	2018	2017
	£'000	£'000	£'000	£'000
Non-current
Convertible loan note (Note 16)	2,216	2,184	-	-
Convertible unsecured loan note (Note 16)	171	-	171	-
Total borrowings	2,387	2,184	171	-

24. Trade and other payables

Current	Group	Group	Company	Company
	2018	2017	2018	2017
	£'000	£'000	£'000	£'000

Trade payables	1,484	257	54	90
Accruals and other creditors	898	783	112	141
Financial liabilities	2,382	1,040	166	231
Other taxes and social security payable	129	56	15	34
Deferred income	2,438	-	-	-
Non-financial liabilities	2,567	56	15	34
Total current trade and other payables	4,949	1,096	181	265
Shown on the balance sheet as:
Deferred income	2,438	-	-	-
Trade and other payables	2,511	1,096	181	265
	4,949	1,096	181	265

Trade and other payables principally comprise amounts outstanding for trade purchases and ongoing costs, as well as payments received in advance on contracts. The average credit period taken for trade purchases in 2018 was 27 days (2017: 24 days). The directors consider that the carrying value of trade payables approximates to their fair value.

Deferred income relates to amounts received from customers at year-end but not yet earned.

At 31 December 2018 £1,393,000 (2017: £155,000) of payables were denominated in US dollars.

25. 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 taxation to arrive at operating cash flow:

Group		2018 Continuing Operations		2018 Discontinued Operations		2018 Total		2017 Continuing Operations		2017 Discontinued Operations		2017 Total
		£'000		£'000		£'000		£'000		£'000		£'000
Adjustments:
Depreciation, amortisation and impairment of non-financial assets	150		(170)		(20)		170		2,635		2,805
Effect of liabilities acquired	(303)		-		(303)		-		-		-
Finance costs	329		-		329		630		-		630
Loss on disposal of non-financial assets	2		-		2		9		-		9
Non-cash accounting for CLN	75		-		75		-		-		-
Share-based payment expenses	237		-		237		88		-		88
Total adjustments	490		(170)		320		897		2,635		3,532

	2018 Continuing Operations	2018 Discontinued Operations	2018 Total	2017 Continuing Operations	2017 Discontinued Operations	2017 Total
	£'000	£'000	£'000	£'000	£'000	£'000
Net changes in working capital:
(Increase) / Decrease in inventories	(35)	-	(35)	159	-	159
(Increase) / Decrease in trade and other receivables	(3,923)	-	(3,923)	162	39	201
Increase/ (Decrease) in deferred income	2,438	-	2,438	(27)	-	(27)
Increase/(decrease) in trade and other payables	1,328	-	1,328	141	167	308
Total changes in working capital	(192)	-	(192)	435	206	641

Company	Company	Company
	2018	2017
Adjustments:	£'000	£'000

Depreciation, amortisation and impairment of non-financial assets	67	5,611
Finance costs	296	516
Non-Cash Accounting for CLN	(31)	-
Share-based payment expenses	237	88
Total adjustments	569	6,215

Net changes in working capital:
Decrease in trade and other receivables	15	66
Increase in trade and other payables	84	54
Total changes in working capital	99	120

26. Contingent assets and contingent liabilities

In 2017 the Company was party to a multilateral guarantee in respect of bank overdrafts of all companies within the Group. At 31 December 2018, these borrowings amounted to £nil. The Charge was satisfied on 25 October 2018 so this no longer exists.

27. Financial risk management

The Group is exposed to various risks in relation to financial assets and liabilities. The main types of risk are foreign currency risk, interest rate risk, credit risk and liquidity risk.

The Group's risk management is closely controlled by the Board and focuses on actively securing the Group's short to medium term cash flows by minimising the exposure to financial markets. The Group does not actively trade in financial assets for speculative purposes nor does it write options. The most significant financial risks are currency risk and interest rate risk.

Foreign currency sensitivity

The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the Euro and US dollar. The Group's policy is to match the currency of the order with the principal currency of the supply of the equipment. Where it is not possible to match those foreign currencies, the Group might consider hedging exchange risk through a variety of hedging instruments such as forward rate agreements, although no such transactions have ever been entered into.

Foreign currency denominated financial assets and liabilities, translated into GBP at the closing rate, are as follows. Euro assets and liabilities are not material.

Group	Short-term exposure USD £'000
31 December 2018
Financial assets	3,708
Financial liabilities	(1,393)
Total exposure	2,315
31 December 2017
Financial assets	510
Financial liabilities	(155)
Total exposure	355

If the US dollar were to depreciate by 10% relative to its year end rate, this would cause a loss of profits in 2018 of £376,000 (2017: £194,000). Exposures to foreign exchange rates vary during the year depending on the volume of overseas transactions. Nonetheless, the analysis above is considered to be representative of the Group's exposure to currency risk. Foreign currency denominated financial assets and liabilities are immaterial for the Company.

Interest rate sensitivity

The main borrowings of the Group are the convertible loans and are detailed in note 16. All have fixed interest rates. Interest on the cash holdings of the Group and "other" loans noted in note 23 is not material and therefore no calculation of interest rate sensitivity have been undertaken.

Credit risk analysis

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. The Group has adopted a policy of only dealing with creditworthy counterparties and where possible working on a "cash with order".

The Group has a credit policy in place and the exposure to credit risk is monitored on an ongoing basis. Credit evaluations are performed on all customers requiring credit over a certain amount. In the case of material sales transactions, the Group usually demands an initial deposit from customers and generally seeks to ensure that the balance of funds is secured by way of a letter of credit or similar instruments.

None of the Group's financial assets are secured by collateral or other credit enhancements.

Details of allowance for credit losses are shown in note 19 of these financial statements

Liquidity risk analysis

Ultimate responsibility for liquidity risk management rests with the board of directors, which has established an appropriate liquidity risk management framework for the management of the Group's short, medium and long-term funding and liquidity management requirements. The Group manages its liquidity needs by monitoring scheduled debt repayments for long term financial liabilities as well as forecast cash flows due in day to day business. Net cash requirements are compared to borrowing facilities in order to determine headroom or any shortfalls. This analysis shows if available borrowing facilities are expected to be sufficient over the outlook period.

As at 31 December 2018, the Group's financial liabilities have contractual maturities (including interest payments where

applicable) as summarised below:

Group	Current (within 6 months)	6 to 12 months	Non Current (1-5 years)
As at 31 December 2018
Convertible loans	-	2,380	171
Trade and other payables	2,511	-	-
Total	2,511	2,380	171

Company	Current (within 6 months)	6 to 12 months	Non Current (1-5 years)
As at 31 December 2018
Convertible loans	-	-	171

Trade and other payables	181	-	-
Total	181	-	171

Group	Current (within 6 months)	6 to 12 months	Non Current (1-5 years)
As at 31 December 2017
Convertible loans	2,184	-	-
Trade and other payables	1,096	-	-
Total	3,280	-	-

Company	Current (within 6 months)	6 to 12 months	Non Current (1-5 years)
As at 31 December 2017
Trade and other payables	265	-	-
Total	265	-	-

28. Discontinued operations

A discontinued operation is a component of the Group's activities that is distinguishable by reference to geographical area or line of business that is held for sale, has been disposed of or discontinued, or is a subsidiary acquired exclusively with a view to resale. When an operation is classified as discontinued, the comparative statement of comprehensive income is re-presented as if the operation had been discontinued from the start of the comparative period.

Profit / (Loss) for the year from discontinued operations:
	2018	2017
	£'000	£'000
Revenue	-	66
Cost of sales	-	(182)
Gross Profit	-	(116)
Administration expenses	149	(3,553)
Operating profit / (loss) from discontinued activities before taxation	149	(3,669)

Income tax expense	-	-
Profit / (loss) from discontinued ordinary activities after taxation	149	(3,669)

Earnings per share relating to the discontinued operations	0.11p	(3.36p)


Cash flows relating to the discontinued operation are as follows:
Operating cash flows	149	(828)
Investing cash flows	-	(4)

29. Disposal groups held for sale

At 30 September 2017 the Group took the decision to dispose of its ferry operation in Sierra Leone, from this date the operation together with the related finance obligations was being actively marketed for sale, and therefore has been reclassified as a disposal group held for sale within the financial statements. On this date the Group impaired the assets of the disposal group to nil. Details of the assets and liabilities held for sale are as follows:

	2018	2017
Assets held for sale:	£'000	£'000
Tangible fixed assets at cost	2,820	2,820
Accumulated depreciation	(2,650)	(354)
Intangible assets at cost	32	32
Accumulated amortisation	(32)	(7)
Impairment charge	-	(2,491)
Assets held for sale	170	-
Related liabilities:
Accruals	(148)	(222)
Trade payables	(3)	(16)
Liabilities directly associated with assets classified as held for sale	(151)	(238)

The accounting estimates made at the end of 2017 proved to be too prudent, as the ferry has had offers in 2018 with net proceeds likely to be around £170,000 with the asset valued accordingly.

30. Acquisition of subsidiary

At 7 November 2018 the Group acquired 100 per cent of the issued share capital of Keyguard U.K Limited (Keyguard) obtaining control of Keyguard. Keyguard is a UK based security and risk management company providing security services to organisations and critical national infrastructure across the country. It is focused on infrastructure growth - Construction, Renewable Energy and Transport sectors. Services include manned guarding, mobile patrols, risk management and K9 services.

Keyguard operates in a strong and growing market and is completely allied to and enhances Westminster's existing market, opening new opportunities and broadening the scope of the Group's business portfolio. The acquisition is expected to be synergistic in that not only will this transaction allow the Group and Keyguard to be able to sell into each other's market; but will enable a broader range of joint offerings where technology and manned guarding are both required, particularly within the aviation and critical infrastructure market.

The amounts recognised in respect of the identifiable assets acquired and liabilities assumed

	£'000
Financial assets	337
Property, plant and equipment	8
Identifiable tangible assets	345
Financial liabilities	(495)
Contingent liability	(31)
Total Identifiable assets	(181)
Goodwill	199
Total consideration	18

Satisfied by:
Cash	18
Total consideration	18

Net cash inflow arising on acquisition
Cash consideration	(18)
Less: cash and cash equivalent balances acquired	122
Cash inflow on acquisition	104

The fair value of the financial assets includes receivables - Trade Debtors with a fair value of £214,000 and a gross contractual value of £220,000. The best estimate at acquisition date of the contractual cash flows not to be collected are £6,000.

A contingent liability of £31,000 has been recognised in respect of potential corporation tax. The majority of this expenditure will be incurred in 2019 and that all will be incurred by the end of 2020.

The goodwill of £199,000 arising from the acquisition is shown above and includes taking over the trading and trade name of Keyguard. None of the goodwill is expected to be deductible for income tax purposes.

Acquisition-related costs (including administrative expenses) amounted to £11,000.

Keyguard contributed £132,000 revenue and £ Nil to the Group's profit for the period between the date of acquisition and the balance sheet date.

If the acquisition of Keyguard had been completed on the first day of the financial year, group revenues for the year would have been £7,821,000 and the group loss would have been (£993,000).

31. Related party transactions

Balances and transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note.

In the year to 31 December 2018, Mr James Sutcliff received consultancy fees and expenses through his service company JSS Consultants Limited. A total of £23,119 (2017: £41,517) was paid to this company.

In the year to 31 December 2018, prior to his being appointed as a director, Mr Mark L W Hughes received consultancy fees and expenses through his service company MLWH Limited. A total of £17,901 (2017: £ Nil) was paid to this company.

32. Events after the reporting period

[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

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.

END

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