Interim Results

RNS Number : 2481P

Westminster Group PLC

30 September 2011

 



For Immediate Release                                                                                  30 September 2011

Westminster Group Plc

Interim Results for the six months ended 30 June 2011

Westminster Group Plc ('Westminster', the 'Company' or 'the Group'), the AIM listed supplier of system solutions and products to the security, defence, fire protection and safety markets worldwide, is pleased to announce its interim results for the six months ended 30 June 2011.

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

Key Points:

Financial

·     Revenue of £1.78m for 6 months ended 30 June 2011 (2010: £2.35m)

·     Order intake for the six month period up significantly to £12.40m (2010: £1.1m)

·     Underlying trading loss £1.31m (2010:loss £1.06m)

·     Provision against carrying value of certain assets charged against profits £0.60m (2010: nil)

·     Loss before tax in period of £2.01m (2010: £1.42m)

·     Financial management strengthened with appointment of new Chief Financial Officer (post period end)

·     Balance sheet strengthened through placing to raise £0.62m (net of expenses)  in July 2011 with new and existing shareholders, including board

·     £6m of invoices issued in the third 3^rd quarter of 2011 following delivery against order book

Operational

·     First half trading results reflect slow 2010 order intake and delays in revenue recognition on 2011 caused by factors outside of our control Strong order momentum into H2, with deployment and delivery of 2011 orders progressing well, together with improvements in cashflow from operating activities

·     Increasing enquiry levels and much improved conversion rates

·     Recruitment of Major Keith Wright (ex SAS) as Chief Operating Officer for Longmoor division (post period end)

·     Directors remain positive over outlook given the current strong order intake and increasing enquiry levels, much of which is in advanced stages of negotiation. However, as ever, the timing of revenue is not certain due to factors beyond the Group's control, given the nature of the contracts and customer base and therefore this may impact on the Director's expectations for the current year.

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

"We believe that the Group has now reached an important inflection point despite disappointing revenues for the first six months, with strong order book levels providing good visibility for the remainder of 2011 and into 2012. 

"Between July and September the Group invoiced in excess of £6m as we deliver against these contracts with significant further deliveries expected in the remainder of the financial year.

"Our pipeline continues to grow against a backdrop of global drivers and opportunities arising from our presence in high growth emerging economies.  This, combined with the contracts won in the year and the increasing enquiry levels mean that we remain optimistic about the future." 

Enquiries:

Peter Fowler                                                   01295 756 300

Chief Executive - Westminster Group Plc

Ian Selby                                                         01295 756 300

Chief Financial Officer  - Westminster Group Plc

Ross Andrews                                                0161 831 1512

Nick Cowles

Zeus Capital Limited - Nominated Adviser

John Grant                                                      020 7101 7070

XCAP Securities PLC - Broker

Tom Cooper                                                   020 3176 4722

Winningtons Financial                                                0797 122 1972

                                                                        [e-mail]

Notes:

Westminster Group Plc is a leader in the supply of system solutions and products to the security, defence, fire protection and safety markets worldwide.

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

Overview and Operational Update

The six month period to the 30 June 2011 represents a transition period for the Group.

Despite the disappointing revenues for the first six months of the year we believe the Group has reached an inflection point. 2011 so far has been a story of record order intake.  In the six months to the end of June 2011 we received orders with a sales value of £12.4m compared £2.4m for the whole of 2010. We are now starting to deliver against these orders, invoicing £6m between 1 July 2011 and 30 September 2011 and expect to continue to deliver against these orders for the remainder of the financial year and into 2012.

We have strengthened the Board and operational management teams in the period.  On 1 July 2011 Major Keith Wright joined our subsidiary, Longmoor International, as Chief Operating Officer.  This followed an illustrious service career including 34 years unbroken service with the Special Air Service where he was ultimately in charge of training. Since Keith's appointment we have seen a significant increase in enquiries and bookings, and with a much improved operational performance Longmoor has been profitable in July and August this year.  Furthermore Ian Selby joined as Chief Financial Officer on 1 July 2011, as referenced in our announcement of 28 June 2011.

Forward Strategy

Westminster will continue to expand its distribution channel and work with sales agents in its target geographic markets.  Its strong web presence and global international network is generating substantial enquiries and we continue to add complementary products to our distribution channel.  As well as large complex integration projects, the Company is increasing its pure product sales which, whilst at a lower gross margin, can have a shorter selling cycle and delivery path to profit generation.

A major opportunity for the Group is to improve its ability to generate a stable recurring revenue stream which underpins the large and sometimes volatile revenues from major product and project sales.  We are expanding the marketing of our Alarm Monitoring Centre (ARC) (which was acquired as part CTAC on 15 April 2010). This asset has unutilised capacity and presents the Group with an opportunity to generate significant long term recurring revenues with an associated high gross margin.

Peter Fowler

Chief Executive Officer

Financial and Operating review

As your new Chief Financial Officer I have reviewed the Company's financial position, policies and strategies in order to maximise value going forward.  This has resulted in a revision of certain previous estimates which are reflected in these results.

Revenues for the period were £1.78m (2010: £2.35m) with delays outside of our control in the rollout of certain orders, delaying recognition of certain revenues.  These results therefore do not reflect our improving sales performance, and are more representative of the weak order intake in 2010.  Whilst significant revenues from these new contracts were delayed by factors outside of our control, we received substantial advanced payments from some customers under these new contracts, which resulted in deferred incomes increasing to £1.58m (2010: £0.35m).This deferred revenue however, combined with the order book, improves our visibility into the rest of the year and 2012 as we commence deliveries.

Gross margins of (-1.7%) were impacted by a change in estimates relating to the carrying values of certain contracts, amounting to £0.28m and a provision against slow moving inventory of £0.04m. When adjusted for these items, gross margins improved to 16% compared to 10% for the year ended 31 December 2010. The comparative period in 2010 benefited from a greater proportion of higher margin installation contracts work, which was not the case in the period under review, as well as a delayed rollout against an Egyptian contract due to recent political instability in the region. This contract is now underway again. Furthermore, £0.24m of accrued revenue was recognised in the six months to 30 June 2010 but was not carried in the audited accounts for the year ended 31 December 2010.   We expect that margins will improve in the second half of this year as delivery commences on projects already signed to date.

In addition to the usual depreciation charge, an impairment provision of £0.07m was made against the carrying value of certain plant and equipment at a remote customer site, and a £0.04m amortisation charge was made against intangible assets acquired in 2010. £0.18m of consumer debt in our Longmoor subsidiary has been provided and we have commenced an aggressive collection program to recover this as well as more stringent controls to mitigate against this going forward. When these items are adjusted for our underlying administrative costs were reduced by 11% to £1.6m (2010: £1.79m). The taxation loss of £0.73m represents the reversal of the previously recognised deferred tax asset held at 31 December 2010. The Board will recognise these losses as taxable profits are expected to arise.

The result of the significant provisions and one off charges is that the Group recorded a loss before tax for the period of £2.01m (2010: £1.42m).

As at 30 June 2011 our cash resources were £0.32m (2010: £0.13m) and on 25 July 2011 the Company raised £645,000, prior to expenses of £28,000, by way of issue of 5,375,004 new ordinary shares at 12 pence per share. The Board believes that the Company has sufficient working capital for the12 months from the date of this report, and continues to carefully control its cost base and monitor its cash resources closely.

The Company is in the process of putting in place appropriate and extended trade financing facilities in order to fully maximise its opportunity and to enable it to rapidly deliver against customer projects and maximise our opportunity. On 25 July 2011 we referred to discussions with potential strategic investors who are interested in possible partnerships or strategic investments in the Company to assist with the Company's expansion plans.  The Company has several such discussions ongoing and will update further at the appropriate moment.

Ian Selby

Chief Financial Officer

Outlook

The strong order activity in the first half of the year has continued into the second half of the year, with cumulative orders now totalling more than £14.0m for the year to date. 

Our pipeline continues to grow against a backdrop of major global drivers. Between July and September the Group invoiced in excess of £6m as we deliver against these contracts with very significant further deliveries expected in the remainder of the financial year, although, as ever, timescales and ability to recognise revenues can be subject to change.  This, combined with the contracts won in the year and the ever increasing enquiry levels, mean that the Directors remain optimistic about the future.

Sir Malcolm Ross

Chairman

Westminster Group plc

Condensed consolidated statement of comprehensive income for the six months ended 30 June 2011
		6 months	6 months	Year
		to 30 June	to 30 June	to 31 Dec
		2011	2010	2010
	Note	Unaudited	Unaudited	Audited
		£'000	£'000	£'000
Revenues		1,788	2,351	3,797
Cost of sales		(1,818)	(1,621)	(3,398)
Gross (Loss) / Profit		(30)	730	399
Administrative expenses		(1,879)	(1,794)	(4,568)
LOSS BEFORE INTEREST AND TAXES		(1,910)	(1,064)	(4,169)
Analysis of Loss Before interest and Tax
Provision Against Carrying Value of debtors, work in progress and tangible fixed assets	8	(603)		(1,399)
Underlying Trading Loss		(1,307)	(1,064)	(2,770)
Financing costs	6	(145)	(360)	(190)
Finance income		(0)	2	136
PROFIT/(LOSS) BEFORE TAX		(2,055)	(1,422)	(4,223)
Income tax	4	(727)	297	383
PROFIT/(LOSS)  ATTRIBUTABLE TO EQUITY SHAREHOLDERS		(2,782)	(1,125)	(3,840)
OTHER COMPREHENSIVE INCOME		-	-
Revaluation of Non Current Assets		-	-	14
Deferred tax liability on revaluation of non-current assets				4
TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO EQUITY SHAREHOLDERS		(2,782)	(1,125)	(3,822)
EARNINGS PER SHARE ON CONTINUING ACTIVITIES:
Basic in pence	5	(11.47)	(6.96)	(20.54)
Fully diluted in pence	5	(11.47)	(6.88)	(20.54)

Condensed consolidated statement of financial position at 30 June 2011
		6 months	6 months	Year
		to 30 June	to 30 June	to 31 Dec
		2011	2010	2010
		Unaudited	Unaudited	Audited
	Note	£'000	£'000	£'000
Goodwill		397	1,392	397
Other intangible assets		253	37	323
Property, plant and equipment		1,070	1,219	1,164
Trade and other receivables		-	10	1
Deferred tax asset		-	797	727
TOTAL NON-CURRENT ASSETS		1,720	3,455	2,612
Inventories		181	118	229
Trade and other receivables		1,564	3,712	1,797
Cash and cash equivalents		322	633	261
TOTAL CURRENT ASSETS		2,067	4,463	2,287
TOTAL ASSETS		3,787	7,918	4,899
Share capital		2,425	1,773	2,425
Share premium		3,369	2,867	3,369
Merger relief reserve		299	545	299
Share based payment reserve		31	25	27
Revaluation reserve		134	116	134
Retained earnings		(6,792)	(1,541)	(4,010)
TOTAL SHAREHOLDERS' EQUITY		(534)	3,785	2,244
Trade and other payables		-	506	141
Borrowings		961	869	897
Embedded derivative		48	184	48
Deferred tax liabilities		97	101	97
TOTAL NON-CURRENT LIABILITIES		1,106	1,660	1,183
Borrowings		150	504	-
Trade and other payables		3,065	1,971	1,472
TOTAL CURRENT LIABILITIES		3,215	2,475	1,472
TOTAL LIABILITIES		4,321	4,135	2,655
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY		3,787	7,918	4,899

Condensed consolidated statement of changes in equity
for the six months ended 30 June 2011
	Share capital	Share premium	Merger relief reserve	Share based payment reserve	Revaluation reserve	Retained earnings	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000
AS OF 1 JANUARY 2011	2,425	3,369	299	27	134	(4,010)	2,244
Share based payment charge	-	-	-	4	-	-	4
TRANSACTIONS WITH OWNERS	-	-	-	4	-	-	4
Loss for the period	-	-		-	-	(2,782)	(2,782)
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD ATTRIBUTABLE TO SHAREHOLDERS	-	-	-	-	-	(2,782)	(2,782)
AS AT 30 JUNE 2010	2,425	3,369	299	31	134	(6,792)	(534)
AS OF 1 JANUARY 2010	1,492	2,304	299	22	116	(416)	3,817
Share based payment charge	-	-	-	3	-	-	3
Issue of shares for the acquisition of subsidiary	79	-	246	-	-	-	325
Issue of shares for exercise of share options	2	-	-	-	-	-	2
Issue of new shares	200	563	-	-	-	-	763
TRANSACTIONS WITH OWNERS	281	563	246	3	-	-	1,093
Loss for the period	-	-	-	-	-	(1,125)	(1,125)
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD ATTRIBUTABLE TO SHAREHOLDERS	-	-	-	-	-	(1,125)	(1,125)
AS AT 30 JUNE 2010	1,773	2,867	545	25	116	(1,541)	3,785

	Share capital	Share premium	Merger relief reserve	Share based payment reserve	Revaluation reserve	Retained earnings	Total
	£'000	£'000		£'000	£'000	£'000	£'000
AS OF 1 JANUARY 2010	1,492	2,304	299	22	116	(416)	3,817
Share based payment charge	-	-	-	8	-	-	8
Deferred tax adjustments	-	-	-	(3)	-	-	(3)
Issue of shares for the acquisition of subsidiary	79	-	246	-	-	-	325
Exercise of share options	2	-	-	-	-	-	2
Other share issues	852	1,415	-	-	-	-	2,267
Cost of  other share issues	-	(350)	-	-	-	-	(350)
Merger relief reserve utilised in respect of impairment of associated goodwill	-	-	(246)	-	-	246	-
TRANSACTIONS WITH OWNERS	933	1,065	-	5	-	246	2,249
Profit for the period	-	-	-	-	-	(3,840)	(3,840)
Other comprehensive income	-	-	-	-	-	-	-
Revaluation of non-current assets	-	-	-	-	14	-	14
Deferred tax liability on revaluation of non-current assets	-	-	-	-	4	-	4
TOTAL COMPREHENSIVE INCOME FOR THE YEAR ATTRIBUTABLE TO SHAREHOLDERS	-	-	-	-	-	(3,840)	(3,822)
AS AT 31 DECEMBER 2010	2,425	3,369	299	27	134	(4,010)	2,244

Westminster Group plc
Condensed consolidated statement of cash flows
for the six months ended 30 June 2011
	6 months	6 months	Year
	to 30 June	to 30 June	to 31 Dec
	2011	2010	2010
Note	Unaudited	Unaudited	Audited
	£'000	£'000	£'000
LOSS BEFORE TAX	(2,055)	(1,422)	(4,223)
Adjustments                                                          7	270	431	1,139
Net changes in working capital                                7	1,955	1,176	1,923
NET CASH (USED IN)/FROM OPERATING ACTIVITIES	170	185	(1,161)
INVESTING ACTIVITIES:
Purchase of property, plant and equipment	(10)	(17)	(187)
Purchase of intangible assets	-	(4)	(1)
Cash costs of acquisition of subsidiaries net of cash	-	(669)	(579)
Acquired
Interest received	-	2	-
Proceeds from disposal of fixed assets	-	-	12
NET CASH USED IN INVESTING ACTIVITIES	(10)	(688)	(755)
FINANCING ACTIVITIES:
Gross proceeds from the issue of Ordinary Shares	-	765	2,269
Costs of the share issue	-	-	(350)
Proceeds from Finance Leases	-	-	192
Interest Paid	(99)	(334)	(136)
NET CASH FROM/(USED IN) FINANCING ACTIVITIES	(99)	431	1,975
Net change in cash and cash equivalents	61	(72)	59
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD	261	202	202
CASH AND EQUIVALENTS AT END OF PERIOD	322	130	261

Notes to the condensed consolidated financial statements for the 6 month period ended 30 June 2011

1.   General information and nature of operations

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

2.   Basis of preparation

These unaudited condensed consolidated interim financial statements are for the six months ended 30 June 2011. The Group has not adopted the reporting requirements of International Accounting Standard (IAS) 34 'Interim Financial Reporting'. They have been prepared following the recognition and measurement of principles f IFRS as adopted by the European Union. The statements do not include all of the information required for full annual financial statements and should be read in conjunction with the consolidated financial statements of the Group for the year ended 31 December 2010.

The condensed consolidated interim financial statements have been prepared in accordance with the accounting policies adopted in the last annual financial statements which were for the year ended 31 December 2010.

This condensed consolidated interim financial statement for the six months ended 30 June 2011 has neither been audited nor reviewed by the Group's auditors. The financial information for the year ended 31 December 2010 set out in this interim report does not constitute statutory accounts as defined in section 434 of the Companies Act 2006. The statutory accounts for the year ended 31 December 2010 have been reported on by the company's auditors and delivered to the Registrar of Companies. The report of the auditors was unqualified and did not contain a statement under section 498(2) or 498(3) of the Companies Act 2006.

Going concern

The interim financial statements have been prepared on a going concern basis. Although the Group incurred trading losses in the 6 month period to 30 June 2011 and the previous year,  the directors believe that the record order levels achieved in 2011 to date, will materially improve the Group's financial performance in the second half of the current year and into the following year.  The £645,000 (before expenses) that the Company raised  in July through the issue of new shares, together with the improving operational cash flow anticipated in the remainder of 2011 is expected to enable the group to remain a going concern for the foreseeable future, and in particular for a period of 12 months from the date of approval of these interim financial statements. This has been supported by detailed profit, cash flow and financial position forecasts prepared by the directors.  In the event that the Directors are of the opinion that the cash flow forecasts might not be achieved then further measures will be taken.  These could include cost reductions and the raising of equity from existing or new shareholders.

Basis of consolidation

The Group financial statements consolidate those of the Group and its subsidiary undertakings drawn up to 30 June 2011. Subsidiaries are entities over which the Group has the power to control the financial and operating policies so as to obtain benefits from their activities. The Group obtains and exercises control through voting rights. Consolidation is conducted by eliminating the investment in the subsidiary together with the parent's share of the net equity of the subsidiary.

3.   Functional and presentational currency

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

4.   Taxation

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amount of assets and liabilities in the interim 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 the quantum and timing of taxable profits can be assessed with a high degree of certainty.  Given the group's recent history of trading losses and the volatility and timing of its margins and thus taxable profits the board has determined that it is not prudent at this point to carry a deferred tax asset and consequently that the £727,000 recorded in the 31 December 2010 balance sheet shall be reversed in this period.  

5.   Loss per share

Earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the year.

For diluted earnings per share the weighted average number of ordinary shares in issue is adjusted to assume conversion of all dilutive potential ordinary shares.  Only those outstanding options that have an exercise price below the average market share price in the year have been included.

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

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

	6 months to 30 June		6 months to 30 June	Year ended  31 Dec
	2011		2010	2010
	Unaudited		Unaudited	Audited
	£'000		£'000	£'000
Issued ordinary shares
Start of period	24,256		14,972	14,914
Effect of shares issued during the period	-		1,193	3,782
Weighted average basic number of shares for period	24,256		16,165	18,696
Dilutive effect of options	-		191	-
Weighted average diluted number of shares for period	24,256		16,356	18,696
Loss per share
Loss attributable to shareholders	(2,782)		(1,125)	(3,840)
Basic loss per share pence	(11.47)		(6.96)	(20.54)
Diluted loss per share pence	(11.47)		(6.88)	(20.54)

6.   Financing Costs

	6 months	6 months	Year
	to 30 June	to 30 June	to 31 Dec
	2011	2010	2010
	Unaudited	Unaudited	Audited
	£'000	£'000	£'000
Finance costs:
Interest payable on bank borrowings	(7)	(4)	(16)
Other interest	(15)	(15)	-
Interest payable on Convertible  Loan Notes	(92)	(78)	(120)
Other Financing Costs	-	(263)	-
Amortised finance cost on Convertible Loan Notes	(31)	-	(54)
	(145)	(360)	(190)
Finance income:
Fair value movement of embedded derivative in Convertible Loan Notes	-	-	136
	-	-	136
Finance costs and income, net	(145)	(360)	(54)

The Convertible Loan Notes carry an annual coupon of 10%.  Additionally under the terms of the variation agreement of 22 October 2010, Synergy Capital LLP charge the Company a further management fee of 2.5% of the capital amount, which increases by 2.5% each quarter to the end of the loan in June 2014. The average aggregate charge to the Company on this loan in the 6 months to 30 June 2011 was 16.25%.

7.         Cash flow adjustments and changes in working capital

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

	6 months	6 months	Year
	to 30 June	to 30 June	to 31 Dec
	2011	2010	2010
	Unaudited	Unaudited	Audited
	£'000	£'000	£'000
Impairment of Goodwill	-	-	763
Fair value movements embedded derivative	-	-	(136)
Acquisition Costs	-	-	38
Adjustments:
Depreciation, amortisation and impairment of non-financial assets	165	66	279
Interest income	-	(2)	-
Interest expenses	99	360	190
Loss on disposal of non-financial assets	2	4	(3)
Share-based payment expenses	4	3	8
Total adjustments	270	431	1,139
Net changes in working capital:
Decrease/(increase)in inventories	48	134	46
Decrease /(Increase) in trade and other receivables	233	1,085	2,592
(Decrease)/increase in trade and other payables	1,673	(43)	(714)
Total changes in working capital	1,955	1,176	1,924)

8.   Provisions against the carrying value of certain assets

Provisions against carrying values of debtors, work in progress and tangible fixed assets		6 months
		to 30 June
		2011
		Unaudited
		£'000
Juba contract revision of estimates against carrying value		53
Egypt contract revision of estimates against carrying value		229
Provision against slow moving inventory		40
	Impact on Gross Margin	322
Provision against consumer debt in Longmoor		175
Amortisation of CTAC intangible		39
Provision against onsite assets at remote location		66
	Impact on Administrative Costs	280
		602

9.   Material post balance sheet events

      On 25 July 2011 the company announced the issue of 5,375,004 new ordinary shares of 10 pence each at a price of 12 pence per share raising £645,000 (before expenses which were approximately £28,000).  The net proceeds are for additional working capital purposes.

10. Approval of interim financial statements

The interim financial statements were approved by the board of directors on 29 September 2011

11. Copies of Interim Financial Statements

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

 

END

 

 

IR DKCDQFBKDQCB