REG - Westminster Group - Final Results & Investor Presentation
01/06/2023 07:00
For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20230601:nRSA2457Ba&default-theme=true
RNS Number : 2457B Westminster Group PLC 01 June 2023
01 June 2023
Westminster Group Plc
('Westminster', the 'Group' or the 'Company')
Final Results for 12 months to 31 December 2022
& Investor Presentation
Westminster Group Plc (AIM: WSG), a leading supplier of managed services and
technology-based security solutions worldwide, announces Final Results for the
12 months ending 31 December 2022.
Highlights:
Operational:
· A strong recovery in airport operations exceeding pre-pandemic
levels by year end.
· Training business delivered record levels of revenues.
· A strong recovery in our guarding business with a near doubling
of revenues and return to profitability.
· Supplied products and solutions to 60 countries across the world.
· Secured £300,000 contract to protect a West African Parliament
building.
· Under Martyn's Law (amended Protect Duty) forthcoming
legislation, secured two important new mass screening contracts, an iconic
building in London and a theatre and exhibition complex in Northern England.
· Secured a $300,000 3-year contract to provide aviation support
services to the UN in Mali.
· $1.7m airport security contract in Southeast Africa confirmed and
underway.
· Westminster Arabia achieved HCIS certification required for
government regulated contracts.
Financial:
· 35% increase in revenues to £9.5m (2021: £7.1m)
· 65% increase in Technology Division revenues to £3.2m (2021:
£2.0m)
· 23% increase in Services Division revenues to £6.3m (2021:
£5.1m)
· 99% decrease in loss after tax to an effective break-even
position £0.0 (2021: loss of £1.9m).
Post period end:
· Q1 2023 trading ahead of internal budget.
· Commenced 2023 with £1.8m of work in hand.
· Commenced 2023 with more than £5m of annual recurring revenue
from existing contracts.
· West African airport operations currently running at record
levels and new terminal opened April 2023.
· Training & Guarding businesses performing well.
· Land issue resolved and construction works due to commence on
West African container port project.
Commenting on the results and prospects, Peter Fowler, Chief Executive said:
"I am pleased to report that, despite the challenges from the tail end of the
Covid pandemic, the impact of the Ukraine conflict and the ensuing global
economic turmoil, we still delivered a 35% increase in revenues to £9.5m
(2021: £7.1m) and achieved an effective break-even position with a 99%
improvement in losses to £0.0m (2021: loss £1.9m), demonstrating the
recovery underway and that we are heading back to a growth trajectory.
"I am also pleased to report that all areas of our business delivered growth
in the year. Our Technology Division delivered a 65% increase in revenues to
£3.2m (2021: £2.0m) showing strong recovery from the pandemic challenges,
whilst our Services Division delivered a 23% increase in revenues to £6.3m
(2021: £5.1m) underpinning our growing recurring revenue businesses.
"Not only did we significantly increase year on year revenues, but we secured
and delivered some notable and important accomplishments during the year such
as providing an extensive screening solution for the late Queen Elizabeth II's
funeral event in September 2022, which was a great honour. We secured
important new contracts in the year, significantly increased our returning
customers demonstrating brand loyalty, we continued to develop our pipeline of
new large-scale opportunities including some exciting, long-term prospects and
we continued to progress existing projects such as DRC and our West African
Port project.
"Building on our 2022 results, we believe a record year of revenues and
profitability are in sight for 2023. The key to achieving this, of course, is
to secure new contracts with enough time to recognise revenues in the year and
we are working hard to deliver that."
Investor Presentation: 3pm on Thursday 8 June 2023
Peter Fowler (CEO) and Mark Hughes (CFO) will provide a live presentation to
review the results and update on prospects at 3pm on Thursday 08 June 2023.
The presentation is open to all existing and potential shareholders. Questions
can be submitted pre-event via your Investor Meet Company dashboard or at any
time during the live presentation.
Investors can sign up to Investor Meet Company for free and add to meet
Westminster Group Plc via:
https://www.investormeetcompany.com/westminster-group-plc/register-investor
(https://www.investormeetcompany.com/westminster-group-plc/register-investor)
Annual Report and Accounts - The final results announcement can be downloaded
from the Company's website (www.wsg-corporate.com). The notice of the Annual
General Meeting to be held on 28 June 2023 was posted to shareholders on 31
May 2023 and copies of the Annual Report and Accounts will be sent to
shareholders on or before 16 June 2023 for approval at the Annual General
Meeting and will be available from the Company's website
(www.wsg-corporate.com (http://www.wsg-corporate.com) ) once posted.
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
Strand Hanson Limited (Financial & Nominated Adviser)
James Harris 020 7409 3494
Ritchie Balmer
Richard Johnson
Zeus Capital Limited (Broker) 020 3829 5000
Louisa Waddell
Simon Johnson
Walbrook (Investor Relations)
Tom Cooper 020 7933 8780
Paul Vann
Nick Rome Westminster@walbrookpr.com (mailto:Westminster@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.
The Westminster Group Foundation is part of the Group's Corporate Social
Responsibility activities. www.wg-foundation.org
(http://www.wg-foundation.org)
The Foundation's goal is to support the communities in which the Group
operates by working with local partners and other established charities to
provide goods or services for the relief of poverty and the advancement of
education and healthcare particularly in the developing world.
The Westminster Group Foundation is a Charitable Incorporated Organisation,
CIO, registered with the Charities Commission number 1158653.
Chairman's Statement
Overview
Following the challenges of the previous two years due to the global pandemic,
associated lockdowns and travel restrictions, we entered 2022 with optimism.
We could see that the impact of the pandemic was coming to an end and business
confidence was returning.
Sadly, the Russian invasion of Ukraine and the global economic turmoil that
followed has created a number of new challenges, although also some
opportunities.
Stock markets, particularly with small cap companies, have been impacted,
access to capital has become more challenging, rising prices, inflation and
global uncertainty all make for a more challenging business environment.
Governments and corporations are reviewing budgets and spending plans,
postponing capital expenditure and creating delays in some order placements,
as we experienced with a delayed multi-million-dollar Technology project we
were verbally awarded in early 2022 and was anticipated to be completed that
year. Due to the country's currency issues causing budget constraints the
project was delayed and will hopefully go forward in 2023.
Against that backdrop and despite the delayed Technology project mentioned
above we still achieved a 35% increase in our revenues to £9.5m (2021:
£7.1m) and a 99% reduction in losses to an effective break-even position
£0.0 (2021: loss of £1.9m), with many areas of the business trading at new
highs.
Despite other disappointments in the year, such as the continued delay in the
ratification of our DRC contract, which is covered in the Chief Executive
Officer (CEO) report, there were a number of notable successes and
achievements. Of these I was particularly proud that Westminster was chosen to
provide the security screening solution for our late Queen Elizabeth II's
lying in state. This was a complex project for which Westminster had been
identified and selected some time ago and we have been planning and rehearsing
for the event for some time. I was impressed by the speed and professionalism
with which we undertook the assignment and I wish to pay tribute to all our
staff involved in that sad but prestigious event.
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 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 important
that we maintain the highest standards of corporate conduct. The Corporate
Governance Report in this annual 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.
Corporate and Social Responsibility
As a Group, we take our corporate and social responsibilities very seriously,
particularly as we operate in emerging markets and in some cases in areas of
poverty and deprivation. As highlighted in the CEO Report we are building on
our environment, social and governance strategies. I am proud of the support
and assistance we as a business 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 donate please visit www.wg-foundation.org
(http://www.wg-foundation.org) .
Employees and Board
Our overriding priority however is and has been the safety and wellbeing of
our people around the world and to continue to provide a valuable service to
our customers. To those ends, we put in place various precautionary measures,
including cost reductions and are undertaking regular risk assessments for all
areas of our business. We have put in place processes and safe working
practices, with a number of employees working from home.
We have not made any changes to the Board this year. I do however congratulate
Lorraine Hellend on her promotion to Head of Sales as of 1 January 2023.
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 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 Land, Sea and Air solutions and services through
a number of operating companies that are currently structured into two
operating divisions, Services and Technology, both primarily focused on
international business as follows:
Services Division
Focusing on long term (typically 10 - 25 years) recurring revenue managed
services contracts such as the management and operation of security solutions
in airports, ports and other such facilities, together with the provision of
manpower, consultancy and training services.
Technology Division
Focusing 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 Services Division. This reduces both
supplier exposure and cost and provides us with increasing purchasing power.
Our Services Division provides a long-term business platform to deliver other
cost-effective incremental services from the Group.
We have a successful track record of delivering 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.
Overview
2022 has been a year of both challenges and achievements.
Challenges from the tail end of the global pandemic and associated travel
restrictions, the challenges from the impact of the Russian invasion of
Ukraine in February 2022, the resulting global economic turmoil and financial
uncertainty, has resulted in governments and businesses reviewing their
spending plans with the inevitable knock-on delays on contract awards.
I am pleased to report that, despite the challenges, we still delivered a 35%
increase in revenues to £9.5m (2021: £7.1m). This was however, circa £4.6m
short of full year expectations, set at the beginning of the year which, as
reported in our 1 November 2022 update, was predominantly due the slippage of
a multimillion-pound Technology project, verbally awarded in 2022 but delayed
due to the country's budget constraints as a result of the economic downturn
and now expects to be formally awarded and largely delivered in 2023. Despite
this however we still achieved an effective break-even position with a 99%
improvement in losses to £0.0m (2021: loss £1.9m), demonstrating the
recovery underway from the previous years' challenges.
I am also pleased to report that all areas of our business delivered growth in
the year. Our Technology Division delivered a 65% increase in revenues to
£3.2m (2021: £2.0m) showing strong recovery from the pandemic challenges,
whilst our Services Division delivered a 23% increase in revenues to £6.3m
(2021: £5.1m) underpinning our growing recurring revenue businesses.
In terms of achievements, not only did we significantly increase year on year
revenues, but we secured and delivered some notable and important
accomplishments during the year such as providing an extensive screening
solution for the late Queen Elizabeth II's funeral event in September 2022,
which was a great honour. We secured important new contracts in the year,
significantly increased our returning customers demonstrating brand loyalty,
we continued to develop our pipeline of new large-scale opportunities
including some exciting, long-term prospects and we continued to progress
existing projects such as DRC and our West African Port project as detailed in
our Divisional Review below.
Divisional Review
Services Division
Our Services Division and the growing recurring revenue base we are building
is a key element to our future growth and I am pleased to report therefore
that the Division has performed well with a 23% increase in turnover to £6.3m
for the period which is at a record level despite our airport business having
not fully recovered from the impact of Covid on the travel industry.
Our West African airport operations, which, like aviation across the world,
had been severely impacted by lockdowns and travel restrictions during the
Covid pandemic of the previous years, experienced a strong recovery from
around 84% of pre-pandemic passenger numbers at the start of the year to
achieving record monthly numbers by the end of the year and this trend has
continued into 2023 which augers well for the future.
In addition, Summa Airports, who took over the running of Freetown
International Airport in early 2023 completed the construction of an
impressive new terminal which opened in April 2023, further increasing
passenger experience and capacity. Westminster's contract with the government
for the airport security remains in force and Westminster will, under separate
contract with Summa, provide the aviation security services at the new
terminal for at least the duration of Westminster's existing contract with the
government, although this may be extended. Under its contract with Summa,
Westminster will no longer be responsible for the cost of new or replacement
security equipment and has reduced its fee accordingly, whilst SUMMA will be
responsible for the cost of all required equipment and the collection of the
security fees from airlines and will remit the funds based on passenger
numbers in the preceding month directly to Westminster's designated bank
account on a monthly basis, thereby reducing Westminster's costs and
accelerating receipts. These changes, which do not affect economics of the
project, are beneficial and we look forward to continuing growth from this
project.
Both our guarding and training businesses were heavily impacted during the
global pandemic over the previous couple of years and I am pleased to report
both have rebounded strongly in 2022. Our training business has not only
recovered to pre-pandemic levels but delivered record levels of revenues,
securing new contracts from governments and organisations including a sizeable
long-term contract for one of the UK's largest airports. The global pandemic
demonstrated the importance of distance and online training and, we believe,
the strategic decision we took some time ago to invest in building an online
training capability, both in house and through strategic partnerships, will
prove to be very beneficial and we expect this part of our business to
continue to grow.
Our guarding business equally produced a remarkable recovery, not only
securing important new business in the year but also a near doubling of
revenues over the previous year.
As previously announced, we expected to secure one more long-term, large-scale
managed services contract in 2022 and were close to achieving that. By year
end we were at the final stages of negotiating a sizeable long term airport
security project in West Africa. However, it is always difficult to accurately
predict timing for such projects, which are complex and can involve various
bodies in bureaucratic processes, but we still expect that contract to be
secured and delivering a material contribution to revenues in 2023.
Frustratingly, the long overdue ratification process of our DRC contract,
signed in June 2021, has still not been completed. This matter has taken far
longer than anticipated, largely due to the Governments' internal procedures.
However, an important step in the process was completed towards the end of
2022. We know that not only is the delay in finalising this matter a
frustration for us and our shareholders but has become a significant issue for
the government who recognise the importance of the project and the urgent need
to improve the security of the country's airports. I would like to pay tribute
not only to the tireless pursuit of this project by our staff involved but
also the tremendous support we have received from the British Ambassador and
Embassy staff in Kinshasa.
As previously reported, we have been waiting for our client to resolve the
land issues for the construction of the new container port storage and
inspection complex in West Africa, for which Westminster have been contracted
to provide the screening operations under a 10-year managed services
agreement, signed in June 2021. I am pleased to report that the land issue has
now been resolved and construction of the port is due to commence this year.
We announced in November 2022 that the relationship with our local partners,
Scanport, regarding our Ghana port project had become increasingly strained
and that we were looking to resolve matters through mediation to include
accelerated receipt in recompense for early termination, which would free up
resources for new large-scale projects expected in 2023.
The matter is still in process. We have not included any revenues from this
project in our 2023 internal projections although we anticipate reaching a
settlement in the year. We will update the market on these various
developments when appropriate.
Technology Division
We continue to experience healthy enquiry levels and during 2022 secured
orders for our products and services from 60 countries (2021: 60) around the
world.
The global economic turmoil and financial uncertainty created by the Russian
invasion of Ukraine has resulted in governments and businesses reviewing their
spending plans with the inevitable knock-on delays on contract awards. A case
in point being the multi-million USD Technology project we were verbally
awarded in 2022 and expected to be formally confirmed and completed by the end
of the year but due to the economic situation and currency issues within the
country concerned, the project keeps being delayed. This project is still a
high priority for the client, and we have been informed by them that they
expect to move forward in 2023. We also saw similar slippage with other large
capital-intensive potential projects.
Notwithstanding the above the Division did still achieve a 65% increase in
revenues to £3.2m (2021: £2.0m) and delivered some important successes.
In September 2022 we were honoured to have provided the extensive screening
requirements at the late Queen Elizabeth II's lying in state. Westminster had
been selected for this task some time ago and had been storing the required
equipment and undertaking secret rehearsals with the police and authorities
over the years in preparation. Within hours of the announcement of the Queen's
passing we had mobilised and began preparations for deployment. It was a
complex operation involving the deployment of a number of screening lanes and
a Westminster team to be on duty at the event 24 hours a day for the duration.
I am proud to say the everything ran smoothly, and credit is due to the
exceptional service provided by our dedicated team. The fact we were chosen
for this high profile, high security event is evidence of the reputation and
professionalism associated with Westminster.
In January 2022 we announced that the $1.7m airport security contract for two
airports in South-East Africa, provisionally awarded in 2021, had been
formally issued. The contract, funded by the European Investment Bank,
involved the upgrading of security equipment, including new x-ray screening
& metal detection equipment, an advanced CCTV surveillance system and new
control and command centres at both airports. Westminster is providing a full
turnkey solution including the design, supply and installation of the systems
and will be establishing an engineering presence in-country for future
maintenance and support services. This project is well underway and will be
completed in 2023. The client is extremely pleased with Westminster's
performance and has expressed interest in a long-term managed services
programme once the project has been completed.
Other important new contracts secured in the period include a £300,000
contract to supply and install an advanced people and baggage screening
solution within a West African parliament building. This project was
successfully delivered in the year, and we are now in discussions on a much
larger project to upgrade security at that parliament. We also supplied a wide
range of technology-based security products and solutions to clients around
the world.
In 2022 we reported on the initiative we have been pursuing regarding the
forthcoming new legislation in the UK, Martyn's Law (amended Protect Duty).
Martyn's Law is named after Martyn Hett, who at 29 years was killed in the
Manchester Arena terrorist attack in May 2017. Martyn's mother, Figen Murray,
has been a tireless campaigner and the force behind Martyn's Law legislation
that will require many businesses giving access to the general public, to
formally assess and take measures to address terrorism risks for the first
time. Martyn's Law is set to have a profound and lasting effect on security
provision in the UK - encompassing Publicly Accessible Locations (PALs) and
requiring them to actively protect visitors and staff with appropriate levels
of security. The Home Office estimates that 650,000 UK businesses could be
affected by Martyn's Law, and this offers substantial business opportunities
for Westminster's extensive portfolio of products and services.
Westminster has been supporting Figen and working on this opportunity for some
time, and like many government related issues, the enactment of this
legislation was delayed in 2022 it is now expected to become law in 2023.
However, many organisations are proactively making arrangements to be
compliant ahead of the legislation and in this respect, I am pleased that
Westminster secured important new contracts. During 2022 we secured a contract
to provide a 'Mass Screening' solution for an iconic building in London, and a
similar contract, also for 'Mass Screening' to an important theatre and
exhibition complex in the north of England. We are also in discussions with a
number of important venues and sites in the UK for effective and large-scale
security solutions ahead of the expected legislation. For more information
on Martyn's Law see here https://www.wg-plc.com/protect-duty# or to see the
latest news and video from Figen Murray see here
https://www.wg-plc.com/news/figen-murray-obe-martyns-law-amended-protect-duty
Our various high profile security projects, such as the Palace of Westminster
and the Tower of London, are performing well and we are discussing expanded
operations.
In September 2022 Westminster Arabia was, after a long process, finally
officially certified by the Saudi Arabian High Commission for Industrial
Security (HCIS) for the supply, installation and maintenance of security
devices. This certification is important and is required to bid for government
regulated and/or funded endeavours (such as Giga Projects, critical
infrastructure, transport etc.) and for the supply of products & services
to Government affiliated companies. Few (if any) Saudi companies which are
formed through joint ventures with foreign entities have achieved this status
and the award of the licence is an important step forward for our business.
Westminster Arabia remains an important component in our growth strategy.
Our German subsidiary, GLIS, situated to the Southeast of Munich, is focussed
on supplying security technology and solutions to the European market. Post
Brexit the business is particularly well positioned to serve the Group's EU
clients. The team continues to secure a number of important new clients
including US military bases and is developing substantial business
opportunities in the region. Through GLIS, we continue to monitor the Joint
Comprehensive Plan of Action JCPOA talks and are maintaining discussions with
stakeholders (including the UK and German governments) however, despite the
optimism of an EU brokered deal in September 2022, the fallout from the
Ukraine war and other issues have meant a deal in the short term is unlikely.
However, should circumstances change and the US and international sanctions,
including banking be lifted, there remains an opportunity for our German
office to revisit the substantial opportunities previously created.
Our French business, Euro Ops, continues to be a valuable strategic addition
to the Group. The company provides aviation focussed services such as
humanitarian flights and logistics, emergency flights, flight operations,
charter and storage management. The company has not only brought new skills,
services and revenues to the Group but provides greatly improved access to
Francophone countries for the wider Group services, with some interesting
project opportunities currently being pursued. One example a $300,000 3-year
contract, awarded in May 2022, to provide aviation support services and
logistics for Swiftair and the UN in Mali.
Summary
On a wider front, despite the challenges we have continued to progress various
existing and new large-scale managed services project opportunities around the
world which can and will provide step changes in growth should they be
secured. No two opportunities are the same and each can have their own
idiosyncrasies and challenges. As we have previously advised, project
opportunities of this size and nature, particularly in emerging markets, are
not only time-consuming and involve complex negotiations with numerous
commercial and political bodies, but 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.
Whilst there is never certainty as to timing or outcome of the many project
opportunities we are pursuing, we are making progress on a number of fronts,
however due to the nature of the projects and the numerous bodies involved it
is notoriously difficult to forecast timing of any contract award. I know this
can be frustrating at times but the upside of securing such contracts with
long-term, high margin recurring revenues is worth the efforts. We obviously
cannot provide regular updates or details on contract negotiations, but we
will provide market updates on material developments when appropriate and in
line with our regulatory responsibilities.
In summary, despite the various challenges and in some cases because of them,
2022 was a busy year and whilst our results for the year were impacted largely
by one multi-million USD Technology contract, delayed through budget
constraints, our business has recovered strongly from the Covid impact, with
some revenue streams now trading at record levels. We have continued to
develop and deliver on business opportunities and during the year supplied
goods and services to numerous countries around the world, including some
notable achievements. We have continued to invest in our worldwide business
development programmes in order to deliver on our growth potential,
particularly in our long-term major managed services projects. We believe the
benefits from these achievements will begin to be seen in 2023 and beyond and
the Board and I remain excited by our growth prospects.
Strategy
Our vision is to build a global business with strong brand recognition
delivering advanced security solutions and long-term managed services, on
Land, at Sea and in the Air, primarily to high growth and emerging markets
around the world, with a particular focus on building multiple revenue
streams, many of which involve long term recurring revenue business, from
diverse sources in varying parts of the world, providing a degree of
resilience to external events and enhancing shareholder value.
The Board considers strategy at each regular Board Meeting and has at least
one 'off-site' strategy day each year to review the Company's rolling
five-year Strategic Growth Plan and to consider new short-, medium- and
long-term strategies that could be implemented to achieve our goals and to
deal with changing global and economic issues.
As part of our strategy for growth, we will also continue to improve and
enhance our Board and senior management team broadening our range of
experience and expertise. If we are to maximise the substantial growth
opportunities we are developing, particularly with our managed services
operations, it is essential we have the right strategies, people, processes
and systems in place to successfully deliver such growth.
Whilst we still believe that the opportunities we have been developing,
primarily in emerging and high growth markets, are what will deliver
exponential growth over the next few years, these can and do take time to
develop and as we have seen, can be disproportionately impacted by global,
regional and local events. Accordingly, one of the strategies we are now
developing is to balance some of that risk by building more core business in
the UK and developed world areas. We have made a good start with important
contracts such as the Tower of London, Palace of Westminster, Scottish
Parliament, HM Prisons, and the UK Border force, and we will be looking to
materially increase such business through 2023 and beyond, not least by
developing and delivering on opportunities created by the forthcoming Martyn's
Law legislation, with two important mass screening contracts already delivered
in relation to this strategy.
Given budget constraints for many companies resulting from the global economic
situation another strategy we are exploring is with debt funding and leasing
providers to transition large scale projects from a 'capital' purchase to a
longer term, 5+ years, revenue model, which would also include maintenance and
training. Given that some of these project opportunities can be multi-million
dollars in value, we believe that this model brings added value which sets us
apart from the competition and will be attractive to many potential clients;
indeed, we are already in discussions with a few government bodies on this
basis. With large scale projects such as these, there is never certainty of
outcome or timing, but we are optimistic this initiative will lead to material
and additional long-term revenues.
We are also looking to expand our global footprint through the development of
our agent network and through strategic joint ventures (JVs) in key markets
and regions, and we believe that this strategy will enable the Company to
expand its sphere of operations in a controlled and cost-effective way.
Our risk strategies are developed from our Risk Committee who hold regular
meetings and report to the Audit Committee. Mitigation and risk strategies are
then developed to address potential risks, as we successfully did during the
Covid pandemic. Covid is of course not the first and will not be the last
external challenge for which we need to have strategies in place to deal with.
In 2014, the world experienced the West African Ebola outbreak which caused
huge problems for the region, and now the Russian invasion of Ukraine has
world-wide implications. I am confident the strategies we have now and will
further put in place, together with our diverse business model, will help us
not only manage the challenges but seek new opportunities from them.
The challenges of the last few years have impacted our performance against our
stated goals and accordingly, the Board has reset its key goals for 2023 as:
1. Improve ratio of enquiries received/quotations issued by number and
quotations issued/orders received by value;
2. Increase product portfolio and sales achieved;
3. Increase our global footprint with new offices, agents, and strategic
alliances;
4. Increase sales in the UK and other first world countries;
5. Secure at least one more long-term managed services contract;
6. Deliver another year of significant recurring revenue growth;
7. Deliver a material improvement in revenue and a move to profitability;
8. Deliver a sustained and material improvement in our share price;
9. Develop a more formal and structured Environment, Social, and
Governance (ESG) strategy;
10. Instigate an Investors in People programme.
Environment, Social, and Governance (ESG) Strategy
The Westminster Group takes its corporate and social responsibilities very
seriously and recognises that sustainability across our various business
sectors is important to us and our future growth, important to our
shareholders and wider stakeholders. In this respect, one of our key goals for
2023 is to develop our existing corporate social responsibility and governance
activities into a more formal and focussed ESG strategy.
Our people are our most valued asset, and we recognise that a happy and
motivated workforce is important. We are an equal opportunities employer and
endeavour to treat all our staff, equally, fairly and to assist them reach
their maximum potential. We do this by having structured systems to support
staff in their job roles and in providing training programmes to improve their
skills. We hold regular meetings and appraisals with staff and welcome input
and feedback suggestions.
We provide flexible working arrangements, including home working where
possible. We provide free refreshments, allow gym time to help keep our staff
healthy and provide medical support where appropriate. We organise team
building and social events across our business units.
We take our social responsibilities very seriously including supporting the
communities in which we operate and, in this respect, have our own registered
charity - the Westminster Group Foundation - see here www.wg-foundation.org
Equally, we take our environmental responsibilities seriously and look to
minimise our carbon footprint, for example by use of electric vehicles where
possible. As an international business, travel has always featured heavily in
our business activities. One thing the recent pandemic lockdowns have
demonstrated is that some of this travel can be replaced by remote meetings
and conference by systems such as Microsoft Teams and Zoom, which has now
become commonplace and far more accepted across the world. Accordingly, we
intend to focus, where possible, on reducing travel by continuing with remote
meetings. Where international travel is still necessary, we are investigating
carbon offset programmes. We are also working towards ISO 14001 Environmental
Management (EMS).
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. A key focus for the Group is in building its recurring revenue
base from contracted income relating to its managed services, maintenance and
guarding contracts, and this is a key metric being monitored. Employment is
the single largest cost base for the Group, the costs are strictly monitored
to ensure best use of resources. Days Sales Outstanding is used to measure the
cash conversion of revenue and identifies debtor aging issues this is low this
year which is good but 2021 represents more normal levels.
The Services Division measures its performance in the four key areas of its
deliverables - passengers served in its airport operations, vehicles and
containers served in its port and border operations, the number of days
training delivered by our training businesses and the number of guarding hours
delivered by our guarding businesses.
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 served and number of return customers are monitored to give a
view on the performance of the division. It is pleasing to see higher levels
of return customers, demonstrating brand loyalty. The material increases in
passengers served, training hours and guarding hours delivered are all
indicators of the strong recovery from different parts of our business in
2022.
Group 2022 2021
Revenue £9.5m £7.1m
Gross Margin 54% 46%
Recurring Revenues £5.6m £5.4m
Days Sales Outstanding 30 57
Number of Employees 256 241
Average Employee Cost Per Head £17,016 £18,129
Services Division 2022 2021
Passengers Served ('000) 124 77
Vehicles/Containers Served ('000) 958 1,090
Training Hours Delivered 5,906 1,136
Guarding Hours Delivered 38,508 29,677
Technology Division 2022 2021
Average Enquiries Per Month 168 293
Average Number of Orders Per Month 44 37
Number of Countries Supplied 60 60
Number of Return Customers 370 242
Current Trading & Business Outlook
We have commenced 2023 on a positive note with Q1 trading ahead of budget and,
whilst remaining mindful of the global uncertainty which could yet have
adverse impacts on trading, we expect 2023 to be a record year.
We commenced 2023 with £1.8m of work in hand which is a good start to the
year, and we are experiencing increasing levels of enquiries from around the
world for our products and services. Our business development teams are
working on a number of exciting opportunities, and already we are seeing new
contracts coming to fruition.
As mentioned in the Divisional Review above we believe the forthcoming
Martyn's Law legislation which is due to become law in 2023 and which The Home
Office estimates will affect circa 650,000 UK businesses, is a significant
opportunity for our business and we look to build on the work we have done
preparing for this and the successful contracts secured in 2022 and fully
expect to secure further important new contracts in 2023.
Our West African airport operations have continued the growth we saw in 2022
and are currently running at record levels.
Our guarding and training businesses performed well in 2022 and we expect that
to continue in 2023.
We traditionally secured one or two large-scale multi-million USD Technology
solution sales projects each year although this has proved more challenging
over the past couple of years due to customer spending constraints. However,
we do have several potential projects in the pipeline, including the postponed
project from 2022, which we expect to materialise in 2023.
We are focussed on building our recurring revenue base of contracted income,
particularly from long term contracts, which is, and will continue to be, a
key growing strength of our business. In this respect we commenced 2023 with
over £5m of annual recurring revenues, which we expect materially increase
through new contracts during the year.
As mentioned in the Divisional Review there are developments regarding the
long overdue ratification of our DRC contract and we are hopeful this
prolonged process will be finally concluded and the programme will move
forward this year.
We are also encouraged that the land issue regarding our West African port
project has been finalised and that construction on the new container storage
and inspection area can commence.
As previously mentioned, we have not included any revenues from the Ghana port
operation in our 2023 internal projections although we anticipate reaching a
settlement during the year.
We continue to invest in our worldwide business development programmes in
order to deliver on our growth potential, particularly in our long-term major
managed services projects. We believe that we will secure at least one,
possibly two, long-term managed services contract in 2023, each producing a
multi-million dollar step change in revenues.
The foregoing, outlining the recovery and growth we are seeing in our various
businesses, together with our business model and the opportunities we have
been developing over the years which, despite the challenges and setbacks we
have experienced in recent years, underpin our confidence for the future
growth of our business. Building on our 2022 results, we believe a record year
of revenues and profitability are in sight for 2023. The key to achieve this,
of course, is to secure new contracts with enough time to recognise revenues
in the year and we are working hard to deliver that.
Peter Fowler
Chief Executive Officer
Chief Financial Officer's Report
Revenue
2022 revenues of approximately £9.5m (2021: £7.1m) are up 35% with all areas
showing increases despite the Ukrainian war and general turmoil in the
world. However, large projects continued to be delayed awaiting confidence
that the world was returning back to more normal times.
Services revenues increased by 23% to £6.3m (2021: £5.1m). This was
because of the continuing strength of our West African Airport passenger
levels during the year, combined with Guarding revenues up 35% and training
hours over 5 times the number in 2021 as the world needs to train to recover
from staff lost in the pandemic.
Westminster's Technology Division revenues were up 65% to £3.2m (2021:
£2.0m). 2021 did not have any large solutions sales whereas in 2022 the
market was returning albeit a number of expected contract awards were delayed.
Gross Margin
Despite an increase in Technology Solution sales (typically at 15% to 20%),
which would normally bring down the average margin; better Technology margins
and the increase in higher margin Services Division sales was enough to
improve the Gross Margin Percent to 54% (2021: 46%).
Operating Cost Base
Group administrative costs increased by 7% to £5.5m (2021: £5.2m) in total.
A little over one third of the increase was because in 2021 we had £141,000
of support under the Covid furlough scheme whereas there was none in 2022.
Approximately another third is the full year effect of growth initiatives
started in 2021. The rest is because of the general inflationary background
despite strenuous efforts to control costs.
Effect of Covid-19
Whilst Westminster has mitigated certain effects of the Covid-19 pandemic due
to its multi revenue stream business model and early action taken by
management to plan for the crisis, there is no doubt that Covid-19 did have a
significant impact on the business and the performance in 2021. This has
continued into 2022 as the prevailing economic situation has not fully
returned to pre-covid levels in our sectors.
Operational EBITDA^ from underlying operations
The Group's loss from operations was £0.3m (2021: £1.9m). When adjusted for
the exceptional and non-cash items and depreciation and amortisation, as set
out below, the Group recorded an EBITDA^ loss from underlying operations of
£0.1m (2021: £1.7m loss).
Reconciliation to EBITDA^ from underlying operations 2022 2021
£'000 £'000
Loss from operations (325) (1,917)
Depreciation, amortisation and impairment charges 252 244
Reported EBITDA (73) (1,673)
Share based expense - -
Exceptional items - -
EBITDA^ from operations (73) (1,673)
^ This is an Alternative Performance Measure refer to Note 2 for further
details
Finance Costs
Total finance costs for 2022 £0.0m (2021: £0.0m), because the Group has very
low debts. There was an underlying cash charge of £0.0m (2021: £0.0m).
Earnings Results for the Year
The Group loss before taxation was £0.4m (2021: £1.9m). The Group loss
after tax was £0.0m (2021: £1.9m loss) and the loss per share was 0.00p
(2021: 0.62p).
Statement of Financial Position
The Group's gross assets amounted to £10.0m on 31 December 2022 compared with
£9.3m on 31 December 2021. The main movement was a reduction in cash
offsetting a £0.6m decrease in working capital and funding the losses.
The Group's current assets amounted to £5.6m on 31 December 2022 (2021:
£5.3m) for the same reasons as the change in total Group assets.
The Group's trade and other receivables balance as at 31 December 2022 was
£4.8m (2021: £3.7m). Average days sales outstanding at the year-end were 30
(2021: 57). This was improved by the large solution sale close to the year
end.
Cash and cash equivalents were £0.3m at 31 December 2022 compared with £0.9m
at 31 December 2021. The decrease is mainly due to losses and movement in
working capital.
Trade and other payables were £2.6m (2021: £1.8m) and average creditor days
were 51 (2021: 43).
A deferred tax asset of £1.3m (2021: £1.0m) was held at the year end the
movement related to the increase in expected tax rate.
Total equity on 31 December 2022 stood at a surplus of £7.4m (2021: £7.5m).
Again, the large solution sale close to the year-end has distorted the
figures.
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.
Equity Issues
There were no equity issues in 2022 (2021: Funds raised £2.51m).
Summary of Warrants
As at 31 December 2022 the warrants outstanding were:
Number Holder Strike Price (p) Issued Life Vesting Criteria
170,455 S P Angel 22.0 31 January 2018 5 At grant
3,499,222 RiverFort 5.2 21 January 2020 4 6 months after grant: - detachable
The S P Angel warrants have now lapsed.
For further details on warrants, refer to Note 21.
Cash Flow Statement
During the year, the Group had an operating cash outflow of £0.7m (2021:
outflow £3.3m) which arose from the loss and an adverse working capital
movement of £0.6m (2021: £1.6m adverse) which was a decrease in receivables,
investment in the new projects and an increase in payables.
During the year, the Group raised nothing from the issue of new equity (2021:
£2.51m gross).
Reconciliation from adjusted EBITDA^ to normalised operating cash flow 2022 2021
£'000 £'000
Adjusted EBITDA^ (73) (1,673)
Loss on asset disposal (4) -
Net changes in working capital (569) (1,632)
Movement on tax 354 (11)
Net Cash used in underlying operating activities (292) (3,316)
Net cash used in underlying operating activities is presented excluding
exceptional items, share options expense, and depreciation and amortisation.
Mark L W Hughes
Chief Financial Officer
^ This is an Alternative Performance Measure refer to Note 2 for further
details
Westminster Group PLC
Consolidated Statement of Comprehensive Income for the year ended 31 December
2022
Note 2022 2021
Total Total
£'000 £'000
REVENUE 3 9,528 7,051
Cost of sales (4,393) (3,789)
GROSS PROFIT 5,135 3,262
Administrative expenses (5,460) (5,179)
(LOSS) FROM OPERATIONS 5 (325) (1,917)
Analysis of operating loss
Profit from operations (325) (1,917)
Add back amortisation 10 56 78
Add back depreciation 11 196 166
EBITDA^ (Loss) from underlying operations (73) (1,673)
Finance costs 4 (40) (3)
LOSS BEFORE TAXATION (365) (1,920)
Taxation 6 354 (11)
LOSS AND TOTAL COMPREHENSIVE INCOME FOR THE YEAR (11) (1,931)
LOSS AND TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO:
OWNERS OF THE PARENT 121 (1,921)
NON-CONTROLLING INTEREST (132) (10)
LOSS AND TOTAL COMPREHENSIVE INCOME (11) (1,931)
BASIC AND DILUTED LOSS PER SHARE 8 (0.00p) (0.62p)
^ This is an Alternative Performance Measure refer to Note 2 for further
details
Westminster Group PLC
Consolidated and Company Statements of Financial Position
As at 31 December 2022
Group Group Company Company
2022 2021 2022 2021
Note £'000 £'000 £'000 £'000
Goodwill 9 615 614 - -
Other intangible assets 10 106 150 84 120
Property, plant and equipment 11 1,825 1,895 1,087 1,133
Investment in subsidiaries 13 - - - -
Deferred tax asset 16 1,308 953 - -
TOTAL NON-CURRENT ASSETS 3,854 3,612 1,171 1,253
Inventories 17 485 681 - -
Trade and other receivables 18 4,808 3,661 10,683 9,830
Cash and cash equivalents 19 289 944 (59) 380
TOTAL CURRENT ASSETS 5,582 5,286 10,624 10,210
Non-current receivable 18 593 424 - -
TOTAL ASSETS 10,029 9,322 11,795 11,463
Called up share capital 20 331 331 331 331
Share based payment reserve 964 1,043 964 1,043
Revaluation reserve 139 139 139 139
Retained earnings:
At 1 January 6,340 (24,409) 9,307 (20,957)
(Loss)/profit for the year 121 (1,921) (23) (2,389)
Other changes in retained earnings 42 32,670 78 32,653
At 31 December 6,503 6,340 9,362 9,307
(DEFICIT)/EQUITY ATTRIBUTABLE TO:
OWNERS OF THE COMPANY 7,937 7,853 10,796 10,820
NON-CONTROLLING INTEREST (522) (390) - -
TOTAL (DEFICIT)/EQUITY 7,415 7,463 10,796 10,820
Borrowings 22 27 12 - 5
TOTAL NON-CURRENT LIABILITIES 27 12 - 5
Contractual liabilities 23 80 87 - -
Trade and other payables 23 2,507 1,760 999 638
TOTAL CURRENT LIABILITIES 2,587 1,847 999 638
Liabilities of disposal group classified as held for sale - - - -
TOTAL LIABILITIES 2,614 1,859 999 643
TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES 10,029 9,322 11,795 11,463
Peter
Fowler
Mark L W Hughes
Director
Director
Westminster Group PLC
Consolidated Statement of Changes in Equity
For the year ended 31 December 2022
Called up share capital Share premium account Merger relief reserve Share based payment reserve Revaluation reserve Retained earnings Total Non-controlling interest Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
AS AT 1 JANUARY 2022 331 - - 1,043 139 6,340 7,853 (390) 7,463
Lapse of share options - - - (79) - 79 - - -
Other movements in equity - - - - - (37) (37) - (37)
TRANSACTIONS WITH OWNERS - - - (79) - 42 (37) - (37)
Total comprehensive expense for the year - - - - - 121 121 (132) (11)
AS AT 31 DECEMBER 2022 331 - - 964 139 6,503 7,937 (522) 7,415
Westminster Group PLC
Consolidated Statement of Changes in Equity
For the year ended 31 December 2021
Called up share capital Share premium account Merger relief reserve Share based payment reserve Revaluation reserve Retained earnings Total Non-controlling interest Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
AS AT 1 JANUARY 2021 as previously stated 16,278 14,069 300 1,050 139 (24,242) 7,594 (535) 7,059
Prior year adjustment - - - - (150) (150) 150 -
AS AT 1 JANUARY 2021 16,278 14,069 300 1,050 139 (24,392) 7,444 (385) 7,059
Shares issued for cash 44 2,456 - - - - 2,500 - 2,500
Cost of share issues - (179) - - - - (179) - (179)
Lapse of share options - - - (7) - 7 - - -
Exercise of warrants and share options - 9 - - - - 9 - 9
Capital Reduction (15,991) (16,355) (300) - - 32,646 - - -
TRANSACTIONS WITH OWNERS (15,947) (14,069) (300) (7) - 32,653 2,330 - 2,330
Total comprehensive expense for the year - - - - - (1,921) (1,921) (5) (1,926)
AS AT 31 DECEMBER 2021 331 - - 1,043 139 6,340 7,853 (390) 7,463
Westminster Group PLC
Company Statement of Changes in Equity
For the year ended 31 December 2022
Called up share capital Share premium account Merger relief reserve Share based payment reserve Revaluation reserve Retained earnings Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000
AS AT 1 JANUARY 2022 331 - - 1,043 139 9,307 10,820
Lapse of Share Options - - - (79) - 79 -
TRANSACTIONS WITH OWNERS - - - (79) - 79 -
Total comprehensive expense for the year (24) (24)
AS AT 31 DECEMBER 2022 331 - - 964 139 9,362 10,796
Called up share capital Share premium account Merger relief reserve Share based payment reserve Revaluation reserve Retained earnings Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000
AS AT 1 JANUARY 2021 16,278 14,069 300 1,050 139 (20,957) 10,879
Shares issued for cash 44 2,456 - - - - 2,500
Cost of share issues - (179) - - - - (179)
Lapse of Share Options - - - (7) - 7 -
Exercise of warrants and share options - 9 - - - - 9
Capital Reduction (15,991) (16,355) (300) - - 32,646 -
TRANSACTIONS WITH OWNERS (15,947) (14,069) (300) (7) - 32,653 2,330
Total comprehensive expense for the year - - - - - (2,389) (2,389)
AS AT 31 DECEMBER 2021 331 - - 1,043 139 9,307 10,820
Consolidated Cash Flow Statement
For the year ended 31 December 2022
2022 2021
Total Total
Note £'000 £'000
(LOSS) AFTER TAX (11) (1,931)
Taxation (354) 11
(LOSS) BEFORE TAX (365) (1,920)
Non-cash adjustments 24 252 244
Net changes in working capital 24 (569) (1,632)
NET CASH USED IN OPERATING ACTIVITIES (682) (3,308)
INVESTING ACTIVITIES:
Purchase of property, plant and equipment 11 (111) (160)
Purchase of intangible assets 10 (12) (41)
CASH OUTFLOW FROM INVESTING ACTIVITIES (123) (201)
CASHFLOWS FROM FINANCING ACTIVITIES:
Gross proceeds from the issues of ordinary shares - 2,509
Costs of share issues - (179)
Reduction in finance lease debt 15 (17)
Finance cost (40) (3)
Loan drawdown 185 -
Other loan repayments, including interest (10) -
CASH INFLOW FROM FINANCING ACTIVITIES 150 2,310
Net change in cash and cash equivalents (655) (1,199)
CASH AND EQUIVALENTS AT BEGINNING OF YEAR 944 2,143
CASH AND EQUIVALENTS AT END OF YEAR 19 289 944
Company Cash Flow Statement
For the year ended 31 December 2022
Company Company
2022 2021
Note £'000 £'000
(LOSS)/PROFIT AFTER TAX (23) (2,389)
Other Non-cash adjustments 24 121 140
Net changes in working capital 24 (493) (1,291)
NET CASH (USED IN) /FROM OPERATING ACTIVITIES (395) (3,540)
INVESTING ACTIVITIES:
Purchase of property, plant and equipment 11 (26) (111)
Purchase of intangible assets 10 (13) (6)
CASH OUTFLOW FROM INVESTING ACTIVITIES (39) (117)
CASHFLOWS FROM FINANCING ACTIVITIES:
Gross proceeds from the issues of ordinary shares - 2,509
Costs of share issues - (179)
Change in lease debt (5) (8)
Finance cost on lease liabilities - (1)
CASH INFLOW FROM FINANCING ACTIVITIES (5) 2,321
Net change in cash and cash equivalents (439) (1,336)
CASH AND EQUIVALENTS AT BEGINNING OF YEAR 380 1,716
CASH AND EQUIVALENTS AT END OF YEAR (59) 380
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 2022 consolidate
the individual financial statements of the Company and its subsidiaries. The
Group design, supply and provide 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 UK-adopted IAS. The Parent Company has elected to
prepare its financial statements in accordance with UK-adopted IAS. The
Company has taken advantage of the exemption under Section 408 of the
Companies Act 2006 from presenting its own profit and loss account.
The financial information is presented in the Company's functional currency,
which is British pounds sterling ('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 2022.
(ii) Subsidiaries
Where the company has control over an investee, it is classified as a
subsidiary. The company controls an investee if all three of the following
elements are present: power over the investee, exposure to variable returns
from the investee, and the ability of the investor to use its power to affect
those variable returns. Control is reassessed whenever facts and circumstances
indicate that there may be a change in any of these elements of control.
De-facto control exists in situations where the company has the practical
ability to direct the relevant activities of the investee without holding the
majority of the voting rights. In determining whether de-facto control exists
the company considers all relevant facts and circumstances, including:
· The size of the company's voting rights relative to both the size
and dispersion of other parties
· who hold voting rights
· Substantive potential voting rights held by the company and by
other parties
· Other contractual arrangements
· Historic patterns in voting attendance.
The consolidated financial statements present the results of the company and
its subsidiaries ("the Group") as if they formed a single entity.
Intercompany transactions and balances between group companies are therefore
eliminated in full.
The consolidated financial statements incorporate the results of business
combinations using the acquisition method. In the statement of financial
position, the acquiree's identifiable assets, liabilities and contingent
liabilities are initially recognised at their fair values at the acquisition
date. The results of acquired operations are included in the consolidated
statement of comprehensive income from the date on which control is obtained.
They are deconsolidated from the date on which control ceases.
(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 £0.0m (2021: £1.9m), The cash
outflow from operating activities during the year was £0.7m (2021: £3.3m).
The financial statements are prepared on a going concern basis. In assessing
whether the going concern assumption is appropriate, management have taken
into account all relevant available information about the current and future
position of the Group, including new long-term contracts. As part of its
assessment, management have taken into account the profit and cash forecasts,
the continued support of the shareholders and the Directors' and management's
ability to affect costs and revenues. Management regularly forecast results,
the financial position and cash flows for the Group.
The Directors have 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 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
Items included in the financial statements of the Company are measured using
the currency of the primary economic environment in which the entity operates
- 'the functional currency'. The functional and presentation currency in these
financial statements is the Great British Pounds (GBP).
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 5).
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 decision 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 represents income derived from contracts for the provision of goods
and services, over time or at a point in time, by the Group to customers in
exchange for consideration in the ordinary course of the Group's activities.
Performance Obligations
Upon approval by the parties to a contract, the contract is assessed to
identify each promise to transfer either a distinct good or service or a
series of distinct goods or services that are substantially the same and have
the same pattern of transfer to the customer. Goods and services are distinct
and accounted for as separate performance obligations in the contract if the
customer can benefit from them either on their own or together with other
resources that are readily available to the customer, and they are separately
identifiable in the contract.
Transaction price
At the start of the contract, the total transaction price is estimated as the
amount of consideration to which the Group expects to be entitled in exchange
for transferring the promised goods and services to the customer, excluding
sales taxes. Variable consideration, such as price escalation, is included
based on the expected value or most likely amount only to the extent that it
is highly probable that there will not be a reversal in the amount of the
cumulative revenue recognised. The transaction price does not include
estimates of consideration resulting from contract modifications, such as
change orders, until they have been approved by parties to the contract. The
total transaction price is allocated to the performance obligations identified
in the contract in proportion to their relative stand-alone selling prices.
Given the nature of many of the Group's products and services, which are
designed and/or manufactured under contract to customers' individual
specifications, there are typically no observable stand-alone selling prices.
Instead, stand-alone selling prices are typically estimated based on expected
costs plus contract margin consistent with the Group's pricing principles.
Whilst payment terms vary from contract to contract, an element of the
transaction price may be received in advance of delivery. The Group may
therefore have contract liabilities depending on the contracts in existence at
a period end. The Group's contracts are not considered to include significant
financing components on the basis that there is no difference between the
consideration and the cash selling price.
Revenue recognition
Revenue is recognised as performance obligations are satisfied as control of
the goods and services is transferred to the customer.
For each performance obligation within a contract the Group determines whether
it is satisfied over time or at a point in time. Performance obligations are
satisfied over time if one of the following criteria is satisfied:
· The customer simultaneously receives and consumes the benefits
provided by the Group's performance as it performs;
· The Group's performance creates or enhances an asset that the
customer controls as the asset is created or enhanced; or
· The Group's performance does not create an asset with an
alternative use to the Group and it has an enforceable right to payment for
performance completed to date.
The Group has determined that most of its contacts satisfy the overtime
criteria, either because the customer simultaneously receives and consumes the
benefits provided by the Group's performance as it performs, or the Group's
performance does not create an asset with an alternative use to the Group and
it has an enforceable right to payment for performance completed to date.
For each performance obligation recognised over time, the Group recognises
revenue using an input method, based on costs incurred in the period. Revenue
and attributable margin are calculated by reference to reliable estimates of
transaction price and total expected costs, after making suitable allowances
or technical and other risks. Revenue and associated margin are therefore
recognised progressively as costs are incurred, and as risks have been
mitigated or retired. The Group has determined that this method appropriately
depicts the Group's performance in transferring control of the goods and
services to the customer.
If the overtime criteria for revenue recognition is not met, revenue is
recognised at the point in time that control is transferred to the customer
which is usually when legal title passes to the customer and the business has
the right to payment.
When it is expected that total contract costs will exceed total contract
revenue, the expected loss is recognised immediately as an expense.
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, 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.
Property, plant and equipment
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%
Motor vehicles 20%
Freehold land is not depreciated.
Leases
All leases that fall under IFRS 16 will be recorded on the balance sheet as
liabilities, at the present value of the future lease payments, along with an
asset reflecting the right to use the asset over the lease term. Rentals
payable under operating leases exempt from IFRS 16 are charged to income on a
straight-line basis over the term of the relevant lease. At inception of a
contract, the Group assesses whether a contract is, or contains, a lease based
on whether the contract conveys the right to control the use of an identified
asset for a period of time in exchange for consideration.
The Group recognises a right-of-use asset and a corresponding lease liability
at the lease commencement date. The lease liability is initially measured at
the present value of the following lease payments:
- fixed payments;
- variable payments that are based on index or
rate;
- the exercise price of any extension or purchase
option if reasonably certain it can be exercised; and
- penalties for terminating the lease, if
relevant.
The lease payments are discounted using the interest rate implicit in the
lease or, if that rate cannot be readily determined, the Group's incremental
borrowing rate for that type of asset.
The right-of-use assets are initially measured based on initial amount of the
lease liability adjusted for any lease payments made at or before the
commencement date, plus any initial direct costs. The right-of-use assets are
depreciated over the period of the lease term using the straight-line method.
The lease term includes periods covered by the option to extend, if the Group
is reasonably certain to exercise that option. In addition, right-of-use
assets may during the lease term be reduced by any impairment losses, if any,
or adjusted for certain remeasurements of the lease liability.
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.
The RiverFort sundry debtor is classified at fair value through profit or loss
and is re-measured to fair value at the end of each reporting period. Gains
and losses arising from re-measurement are taken to profit or loss, as are
transaction costs incurred.
Management review at each reporting date the significant observable inputs and
valuation adjustments with respect to the fair value measurement of the
RiverFort debtor. The value of the Group's shares is observable in an active
market as quoted prices are available hence valuation is within level 1 of the
fair value hierarchy under IFRS 13, Fair value measurement. There were no
changes in either the inputs or the valuation technique in the year.
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 and loans in subsidiaries
Subsidiary fixed asset investments are valued at cost less provision for
impairment. The Group applies the IFRS 9 simplified approach to measuring
expected credit losses which uses a lifetime expected loss allowance for all
investment and loans in subsidiaries.
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.
The share-based payment reserve represents equity-settled share-based employee
remuneration until such share options are exercised or lapse. It also includes
the equity settled items such as warrants for services rendered accounted for
in accordance with IFRS 2.
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.
Pensions
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.
Share-based payments
The Group has two types of share-based payments other than employee
compensation.
Warrants issued for services rendered which are accounted for in accordance
with IFRS 2 recognising either the cost of the service if it can be reliably
measured or the fair value of the warrant (using Black-Scholes option pricing
models).
Warrants issued as part of Share Issues have been determined as equity
instruments under IAS 32. Since the fair value of the shares issued at the
same time is equal to the price paid, these warrants, by deduction, are
considered to have been issued at nil value.
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.
Items included in the financial statements of each of the Group's entities are
measured using the currency of the primary economic environment in which the
entity operates ('the functional currency'). The Board has judged that
because most of the Group's costs and a substantial part of its sales are
situated in the UK.
Goodwill
Goodwill (note 9) has been tested for impairment by considering its net
present value for the expected income stream in perpetuity at a discount rate
judged to be 5% based on the normal lending rate we are offered leases at,
which management consider is a good surrogate for cost of capital. It was also
established that 20% (2021: 34%) is the discount rate at which no impairment
still would be needed. The income is assumed to be flat and stable for the
purpose of this test. Goodwill which does not show a net present value
higher than its carrying cost will be impaired.
Deferred tax asset
Deferred tax assets (note 16) are recognised to the extent that it is probable
that taxable profits will be available against which deductible temporary
differences can be utilised. The Directors have prepared projections for the
next five years based on the best available evidence and have concluded that
this deferred tax asset will be utilised in the future.
Subsidiary intercompany balances
Intercompany balances are stated at full value if the subsidiary is continuing
to trade, and a reasonable projection indicates that the subsidiary will be
able to repay the balance at some time in the future. Dormant subsidiaries
owing money to the group are therefore fully impaired. The Group will
support subsidiaries to meet their obligations as and when they fall due.
Debtors and Accrued Income
The collectability of debtor balances, which include amounts due from various
projects including Ghana, have been reviewed in depth by management and the
collectability of each debt has been considered carefully. The outcome of
these reviews, as well as a more general exercise, is that the carrying value
of the debtors is stated at the amount owed less a realistic provision for
those debtors considered to be uncollectable or needing impairment. The
collectability of the debt in relation to Ghana revolves around agreement with
the counterparty over the quantum and the payment terms due under the contract
for services rendered and early termination. Management have taken a prudent
approach to ensure the carrying value of the amount owed is collectable. The
accrued income has been estimated based solely on the volume of containers
passing through the screening systems. Management believe the final income
figure could be in excess of the amount disclosed in the financial statements.
Sundry Debtors
The collectability of sundry debtor balances has been reviewed and considered
by the executive team. The carrying value of the sundry debtor in particular
RiverFort has been tested and it is considered to be fairly stated although
there is potential for a contingent liability as disclosed in Note 25.
The judgements involved in determining the appropriate classification of the
receivable being a financial asset held at fair value through profit or loss
include the asset not being held for trading investment in an equity
instrument that is designated at fair value through other comprehensive income
at initial recognition. The contractual terms of the sundry debt does not give
rise on specified dates to cash flows that are solely payments of principal
and interest on the principal amount outstanding. The RiverFort sundry debtor
balance is therefore measured at fair value and any gains and losses
recognised in the profit and loss as they arise.
Revalued freehold property
The freehold property is stated at fair value. A full revaluation exercise was
carried out in December 2020. 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. The Directors are of the
opinion that the 2020 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.
New standards, amendments and interpretations
The following new standards have been adopted as appropriate and where
required the prior year's figures have been restated.
Onerous Contracts - Cost of Fulfilling a Contract (Amendments to IAS 37)
The amendments specify that the 'cost of fulfilling' a contract comprises the
'costs that relate directly to the contract'. Costs that relate directly to a
contract can either be incremental costs of fulfilling that contract (examples
would be direct labour, materials) or an allocation of other costs that relate
directly to fulfilling contracts (an example would be the allocation of the
depreciation charge for an item of property, plant and equipment used in
fulfilling the contract). This applied for annual reporting periods beginning
on or after 1 January 2022.
Reference to the Conceptual Framework (Amendments to IFRS 3)
The amendments update an outdated reference to the Conceptual Framework in
IFRS 3 without significantly changing the requirements in the standard. This
applied for annual reporting periods beginning on or after 1 January 2022.
Amendment to IFRS 9 Financial Instruments
The amendment clarifies which fees an entity includes when it applies the '10
per cent' test in paragraph B3.3.6 of IFRS 9 in assessing whether to
derecognise a financial liability. An entity includes only fees paid or
received between the entity (the borrower) and the lender, including fees paid
or received by either the entity or the lender on the other's behalf. This
applied for annual reporting periods beginning on or after 1 January 2022.
Property, Plant and Equipment - Proceeds before Intended Use (Amendments to
IAS 16)
The amendments prohibit deducting from the cost of an item of property, plant
and equipment any proceeds from selling items produced while bringing that
asset to the location and condition necessary for it to be capable of
operating in the manner intended by management. Instead, an entity recognises
the proceeds from selling such items, and the cost of producing those items,
in profit or loss. This will apply for annual reporting periods beginning on
or after 1 January 2022.
New standards, amendments and interpretations adopted early
Income Taxes (Amendments to IAS 12)
This implements a so-called 'comprehensive balance sheet method' of accounting
for income taxes which recognizes both the current tax consequences of
transactions and events and the future tax consequences of the future recovery
or settlement of the carrying amount of an entity's assets and liabilities.
Differences between the carrying amount and tax base of assets and
liabilities, and carried forward tax losses and credits, are recognized, with
limited exceptions, as deferred tax liabilities or deferred tax assets, with
the latter also being subject to a 'probable profits' test. The amendments are
effective for annual reporting periods beginning on or after January 1, 2023
but have been adopted early.
Standards amendments and interpretations in issue not yet effective
IAS 1 Presentation of Financial Statements
IAS 1 "Presentation of Financial Statements" sets out the overall requirements
for financial statements, including how they should be structured, the minimum
requirements for their content and overriding concepts such as going concern,
the accrual basis of accounting and the current/non-current distinction. The
standard requires a complete set of financial statements to comprise a
statement of financial position, a statement of profit or loss and other
comprehensive income, a statement of changes in equity and a statement of cash
flows. The amendments are effective for annual periods beginning on or after
January 1, 2023.
IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors
This standard is applied in selecting and applying accounting policies,
accounting for changes in estimates and reflecting corrections of prior period
errors. The standard requires compliance with any specific IFRS applying to a
transaction, event or condition, and provides guidance on developing
accounting policies for other items that result in relevant and reliable
information. Changes in accounting policies and corrections of errors are
generally retrospectively accounted for, whereas changes in accounting
estimates are generally accounted for on a prospective basis. The amendments
are effective for annual periods beginning on or after January 1, 2023.
IFRS 17 Insurance Contracts
IFRS 17 requires insurance liabilities to be measured at a current fulfilment
value and provides a more uniform measurement and presentation approach for
all insurance contracts. These requirements are designed to achieve the goal
of a consistent, principle-based accounting for insurance contracts. IFRS 17
supersedes IFRS 4 Insurance Contracts as of 1 January 2023. This is not
applicable to the Group.
Classification of Liabilities as Current or Non-Current (Amendments to IAS 1)
IFRS 3 "Business Combinations" outlines the accounting when an acquirer
obtains control of a business (e.g. an acquisition or merger). Such business
combinations are accounted for using the 'acquisition method', which generally
requires assets acquired and liabilities assumed to be measured at their fair
values at the acquisition date. The amendments aim to promote consistency in
applying the requirements by helping companies determine whether, in the
statement of financial position, debt and other liabilities with an uncertain
settlement date should be classified as current (due or potentially due to be
settled within one year) or non-current. This will apply for annual reporting
periods beginning on or after 1 January 2023.
Deferred Tax Related to Assets and Liabilities Arising from a Single
Transaction - Amendments to IAS 12
Targeted amendments to IAS 12 Income Taxes clarify how companies should
account for deferred tax on certain transactions - e.g. leases and
decommissioning provisions. The amendments narrow the scope of the initial
recognition exemption (IRE) so that it does not apply to transactions that
give rise to equal and offsetting temporary differences. As a result,
companies will need to recognise a deferred tax asset and a deferred tax
liability for temporary differences arising on initial recognition of a lease
and a decommissioning provision. This will apply for annual reporting periods
beginning on or after 1 January 2023.
Alternative performance measures (APM)
In the reporting of financial information, the Directors have adopted the APM
'EBITDA profit from underlying continuing and discontinued operations (APMs
were previously termed 'Non-GAAP measures'), which is not defined or specified
under International Financial Reporting Standards (IFRS).
The Directors also look at recurring revenue as a key performance indicator.
This is revenue arising from multi-year contracts.
These measures are not defined by UK-adopted IAS 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, UK-adopted IAS measurements.
Purpose
The Directors believe that the EBITDA 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 UK-adopted IAS 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 continuing and discontinued 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 two operating divisions; Services and
Technology. This split of business segments is based on the products and
services each offer.
Managed Services Technology Group and Central Group Total
2022 £'000 £'000 £'000 £'000
Supply of products - 1,815 - 1,815
Supply and installation contracts - 1,080 - 1,080
Maintenance and services 5,854 338 - 6,192
Training courses 419 22 - 441
Revenue 6,273 3,255 - 9,528
Segmental underlying EBITDA^ 2,398 81 (2,552) (73)
Depreciation & amortisation (108) (22) (122) (252)
Segment operating result 2,290 59 (2,674) (325)
Finance cost - - (40) (40)
Profit/ (loss) before tax 2,290 59 (2,714) (365)
Income tax benefit / (charge) 40 - 314 354
Profit/(loss) for the financial year 2,330 59 (2,400) (11)
Segment assets 4,886 2,543 2,600 10,029
Segment liabilities 878 1,388 348 2,614
Capital expenditure 113 1 39 153
This is an Alternative Performance Measure refer to Note 2 for further
details
Managed Services Technology Group and Central Group Total
2021 £'000 £'000 £'000 £'000
Supply of products - 1,156 - 1,156
Supply and installation contracts - 329 - 329
Maintenance and services 4,981 395 - 5,376
Training courses 100 90 - 190
Revenue 5,081 1,970 - 7,051
Segmental underlying EBITDA 1,106 (365) (2,414) (1,673)
Depreciation & amortisation (97) (9) (138) (244)
Segment operating result 1,009 (374) (2,552) (1,917)
Finance cost - - (3) (3)
Profit/ (loss) before tax 1,009 (374) (2,555) (1,920)
Income tax benefit / (charge) (11) - - (11)
Profit/(loss) for the financial year 998 (374) (2,555) (1,931)
Segment assets 4,785 1,324 3,213 9,322
Segment liabilities 1,056 378 425 1,859
Capital expenditure 83 1 117 201
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.
2022 2021
£'000 £'000
UK and Europe 2,520 2,161
Africa 6,704 4,296
Middle East 68 122
Rest of World 236 472
Total 9,528 7,051
Some of the Group's assets are located outside the United Kingdom where they
are being put to operational use on specific contracts.
Information about major customers
No single customer contributed more than 10% of the Group revenue in 2022.
^ This is an Alternative Performance Measure refer to Note 2 for further
details
4. Finance costs
Group Group
2022 2021
£'000 £'000
Finance cost on lease liabilities (6) (3)
Interest payable on bank and other borrowings (34) -
Total finance costs (40) (3)
5. Loss from operations
The following items have been included in arriving at the loss for the
financial year
Group Group
2022 2021
£'000 £'000
Staff costs (see Note 8) 4,356 4,369
Depreciation of property, plant and equipment 196 166
Amortisation of intangible assets 56 78
Operating lease rentals payable
Short term Leases 158 89
Foreign exchange loss/(gain) 344 132
Auditor's remuneration
Amounts payable in 2022 relate to PKF in respect of audit and other services.
The local Audit in Sierra Leone is performed by Moore Sierra Leone (both
years). The local audit in Ghana was performed by PKF Ghana in 2021 only.
Audit services Group Group
2022 2021
£'000 £'000
Statutory audit of parent and consolidated financial statements 62 46
Review of Interim Results 2 2
- Statutory audit of subsidiaries of the company pursuant to 20 20
legislation
Taxation services including research and development tax credits - -
Total payable to PKF Littlejohn UK 84 68
Local audit in Sierra Leone - Moore Sierra Leone 19 18
Local audit in Ghana - PKF Ghana - 1
Total fees 103 87
6. Taxation
Analysis of tax charge / (credit) in year
The Finance Act 2020 set the Corporation Tax main rate at 19% for the
financial year beginning 1 April 2020. Deferred taxes at the balance sheet
date have been measured using a 25% tax rate and reflected in these financial
statements.
£'000 £'000
2022 2021
Current year £'000 £'000
UK Corporation tax on profits in the year - -
Potential foreign corporation tax on profits in the year - 8
Deferred Tax (Note 16)
Foreign entity deferred tax (40) 3
Review of expected utilisation of Losses (314) -
(354) 11
Group Group
2022 2021
£'000 £'000
Reconciliation of effective tax rate
Loss on ordinary activities before tax (365) (1,920)
Loss on ordinary activities multiplied by the standard rate of corporation tax (69) (365)
in the UK of 19% (2021: 19%)
Effects of:
Expenses not deductible for tax purposes 94 20
Deferred tax movement (Note 16) (355) 3
Release of losses (24) -
Unrecognised losses carried forward - 353
Total tax - credit (354) 11
For further details on Tax refer to Note 16.
7. Employee costs
Employee costs for the Group during the year
Group
2022 2021
£'000 £'000
Wages and salaries 3,822 4,083
Pension contributions 73 68
Social security costs 461 359
4,356 4,510
Share based payments - -
4,356 4,510
Job retention support - (141)
Net Cost 4,356 4,369
The Group operates a stakeholder pension scheme. The Group made pension
contributions totalling £73,000 during the year (2021: £68,000), and pension
contributions totalling £83,000 were outstanding at the year-end (2021:
£15,000).
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
£635,000 (2021: £656,000) and the highest paid director received
remuneration totalling £206,000 (2021: £196,000).
Average monthly number of people (including Executive Directors) employed
Group 2022 2021
By function:
Sales 8 10
Operations 212 197
Administration 24 24
Management 12 10
256 241
8. 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:
2022 2021
'000 '000
Issued ordinary shares
Start of year 330,515 286,528
Effect of shares issued during the year - 23,576
Weighted average basic and diluted number of shares for year 330,515 310,104
2022 2021
£'000 £'000
Earnings
Loss and total comprehensive expense (11) (1,931)
For the year ended 31 December 2022 and 2021 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 0.00p (2021: 0.62p).
9. Goodwill
Group 2022 2021
£'000 £'000
Gross carrying amount at 1 January 1,377 1,377
Exchange rate movement 1 -
Gross carrying amount at 31 December 1,378 1,377
Accumulated impairment at 1 January (763) (763)
Impairment charge for the year - -
Accumulated impairment at 31 December (763) (763)
Carrying amount at 1 January 614 614
Carrying amount at 31 December 615 614
The goodwill balance relates to the acquisition of Longmoor Security Limited,
Keyguard U.K Limited and Euro-Ops SARL. The movement is because of an
exchange rate movement on Euro Ops where the goodwill is in Euros.
The Group tests goodwill annually for impairment, or more frequently if there
are indications that goodwill may be impaired. The recoverable amounts of the
cash-generating unit are determined from value in use calculations. The key
assumptions are discount rate (5%) future revenues (assumed as flat) derived
from the most recent 2022 financial budgets approved by management. The
projection assumes that the companies are held in perpetuity. A discount
rate of 20% (2021: 34%) would not result in any impairment based on
management's latest forecast.
No reasonably possible change in any of the estimates and assumptions used in
the impairment test would give rise to a material impairment.
10. Other intangible assets
Group Website and Software Company Website and Software
2022
£'000 £'000
Cost
At 1 January 2022 400 364
Additions 12 13
At 31 December 2022 412 377
Accumulated amortisation and impairment
At 1 January 2022 250 244
Charge for the year 56 49
At 31 December 2022 306 293
Net book value at 31 December 2022 106 84
2021
£'000 £'000
Cost
At 1 January 2021 415 404
Additions 41 6
Disposals (56) (46)
At 31 December 2021 400 364
Accumulated amortisation and impairment
At 1 January 2021 228 217
Charge for the year 78 73
Disposals (56) (46)
At 31 December 2021 250 244
Net book value at 31 December 2021 150 120
11. Property, plant and equipment
Group Freehold property Plant and equipment Office equipment, fixtures and fittings Motor vehicles Right of use assets Total
2022 £'000 £'000 £'000 £'000 £'000 £'000
Cost or valuation
At 1 January 2022 1,126 768 1,058 109 173 3,234
Additions 5 15 20 - 101 141
Disposals - - - (37) (109) (146)
At 31 December 2022 1,131 783 1,078 72 165 3,229
Accumulated depreciation and impairment
At 1 January 2022 81 557 496 77 128 1,339
Charge for the year 24 49 59 11 53 196
Disposals - - - (38) (93) (131)
At 31 December 2022 105 606 555 50 88 1,404
Net book value at 31 December 2022 1,026 177 523 22 77 1,825
2021 £'000 £'000 £'000 £'000 £'000 £'000
Cost or valuation
At 1 January 2021 1,079 766 1,018 78 164 3,105
Additions 47 10 45 34 24 160
Disposals - (8) (5) (3) (15) (31)
Revaluation - - - - - -
At 31 December 2021 1,126 768 1,058 109 173 3,234
Accumulated depreciation and impairment
At 1 January 2021 59 519 451 75 100 1,204
Charge for the year 22 46 50 5 43 166
Disposals - (8) (5) (3) (15) (31)
At 31 December 2021 81 557 496 77 128 1,339
Net book value at 31 December 2021 1,045 211 562 32 45 1,895
Right of use assets (motor vehicles) above have been created in accordance
with IFRS 16. Motor vehicles are leased for certain employees for lease
terms ranging between 3-5 years with fixed payments. The Group does not
purchase or guarantee the future value of lease vehicles.
The freehold property was valued professionally by White Commercial, Chartered
Surveyors, as at 31 December 2020, which provided a valuation of £1,020,000.
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.
Company Freehold property Plant and equipment Office equipment, fixtures and fittings Right of use assets Total
2022 £'000 £'000 £'000 £'000 £'000
Cost or valuation
At 1 January 2022 1,126 23 237 100 1,486
Additions 4 - 22 - 26
Disposals - - - (76) (76)
At 31 December 2022 1,130 23 259 24 1,436
Accumulated depreciation and impairment
At 1 January 2022 81 18 184 70 353
Charge for the year 24 1 23 24 72
Disposals - - - (76) (76)
At 31 December 2022 105 19 207 18 349
Net book value at 31 December 2022 1,025 4 52 6 1,087
2021 £'000 £'000 £'000 £'000 £'000
Cost or valuation
At 1 January 2021 1,079 18 202 76 1,375
Additions 47 5 35 24 111
Disposals - - - - -
1,126 23 237 100 1,486
Accumulated depreciation and impairment
At 1 January 2021 59 16 167 45 287
Charge for the year 22 2 17 25 66
Disposals - - - - -
At 31 December 2021 81 18 184 70 353
Net book value at 31 December 2021 1,045 5 53 30 1,133
The freehold property was valued professionally by White Commercial, Chartered
Surveyors, as at 31 December 2020, which provided a valuation of £1,020,000.
The valuation was made on the basis of recent market transactions on arm's
length terms and on an alternative use basis. 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. The Revaluation Reserve is not
available for distribution to shareholders.
No depreciation has been charged on the freehold land only building additions
have been depreciated. The difference between the net book value of the total
freehold property if 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: This depreciation is charged on historical
cost only.
2022 2021
£'000 £'000
Historical cost 808 803
Accumulated depreciation
At 1 January 324 308
Charge for the year 16 16
At 31 December 340 324
Net book value as at 31 December 468 479
12. Lease commitments
The Group accounts for operating leases under IFRS 16. There are some leases
of small value or less than one-year duration which have been charged to
expenses as incurred, but the aggregate commitment of these leases is
immaterial.
Right to use assets
2022 2021
At 1 January 106 67
Additions 30 70
Expensed in the year (47) (31)
As at 31 December 89 106
Of which
Current Lease 62 42
Non-Current 27 64
89 106
13. Investment in subsidiaries
All loans relate to cash movements between Group companies and are repayable
on demand. Loans and other intercompany accounts are included in the Company's
respective current payables or receivables. This is because they are more in
the nature of current assets and current liabilities than longer term
investments.
Company 2022 2021
Investments Investments
Cost £'000 £'000
At 1 January 389 389
Movement in Year - -
At 31 December 389 389
Accumulated impairment
At 1 January (389) (389)
Movement in Year - -
At 31 December (389) (389)
Investment in subsidiaries - -
A sum of £9,244,000 (2021: £8,463,000) has been recognised in receivables as
intercompany; and £630,000 (2021: £219,000) has been recognised in payables
as intercompany.
14. Subsidiary undertakings
The subsidiary undertakings at 31 December 2022 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 Services Limited (formerly Longmoor Security Limited) England Close protection training and provision of security services (Managed 100
Services)
Westminster Aviation Security Services Limited England Managed services of airport security under long term contracts. (Managed 100
Services)
Sovereign Ferries Limited England Dormant 100
Westminster Operating Limited England Special purpose vehicle which exists solely for listing the 2013 CLN on the 100
CISX. Year end 31 October. Only transactions are intra group
Keyguard U.K Limited England Security and risk management including manned guarding, mobile patrols, risk 100
management and K9 services.
Longmoor (SL) Limited Sierra Leone Security and terminal guarding 100
Facilities Operations Management Limited Sierra Leone Infrastructure management 100
Westminster Sierra Leone Limited * Sierra Leone Local infrastructure for airport operations 49
Westminster Group GmbH Germany Dormant 100
GLIS Gesellschaft für Luftfahrt- und Infrastruktur-Sicherheit GmbH Germany Managed Services 85
Westminster Sicherheit GmbH Germany Dormant 85
Euro Ops SARL France Managed Services infrastructure 100
Westminster Maritime Services Limited # England Dormant 100
CTAC Limited England Dormant 100
Longmoor Security Services Limited (formerly Westminster Aviation Security England Dormant 100
Services (ME) Limited)
Westminster Aviation Security Services RDC SARLU DRC Managed services of airport security under long term contracts. (Managed 100
Services)
Westminster Liberia LLC Liberia Managed services of port security under long term contracts. (Managed 100
Services)
Subsidiary company registered addresses:
England Westminster House, Blacklocks Hill, Banbury,
Oxfordshire, OX17 2BS, United Kingdom.
Sierra Leone 60 Wellington Street, Freetown, Sierra Leone.
Germany Chiemseestrasse 25, 83233 Bernau am
Chiemsee, Germany.
France 17 Route de Sundhoffen, 68280
Andolsheim. France.
DRC Cabinet Lohayo Ngola Patrick,
Immeuble Mirlandsis. au No34 du Boulevard Sendwe, Kinshasa DRC.
Liberia Gbaintor Law Firm, Wroto Town.
Sinkor, Airfield, Monrovia, Liberia.
* Consolidated due to de facto control. These
results do not have a material effect on the financial statements.
# Westminster Maritime Services Limited was formerly
known as Westminster Facilities Management Limited & Westminster Managed
Services Limited.
15. Financial instruments
Categories of financial assets and liabilities.
The fair value of 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
2022 2021 2022 2021
£'000 £'000 £'000 £'000
Financial assets
Trade and other receivables (note 18) 5,354 3,606 10,672 9,774
Cash and cash equivalents (note 19) 289 944 (59) 380
5,643 4,550 10,613 10,154
Financial liabilities
Borrowings (note 22) 27 12 - 5
Trade and other payables (note 23) 2,507 1,760 999 638
2,534 1,772 999 643
See note 2 for a description of the accounting policies for each category of
financial instruments. The fair values are presented in this note and are
the same as the carrying value. A description of the Group's risk management
and objectives for financial instruments is given in note 26.
16. Deferred tax assets and liabilities
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. The Group's projections show the expectation of
future profits, hence in 2018 a deferred tax asset was recognised. Reviews
performed since then, including as at 31 December 2022, confirmed those
expectations.
The tax losses against which this deferred tax asset is being recognised are
in the group's holding company and its principal UK based subsidiaries.
Evidence, both positive and negative, primarily the Group's projections of
future profits have been considered. The critical judgement has been the
timing of new contracts. The deferred tax asset is expected to be used in the
period up to the end of 2023.
The Group believes it has a total potential deferred tax asset of £4,047,000
(2021: £3,396,000). It has recognised a deferred tax asset of £1,308,000
(2021: £953,000) due to budgeted future profits of the business beyond 2022
and the expected tax rate. There remains £2,739,000 (2021: £2,443,000) of
unrecognised deferred tax asset.
Deferred tax assets and liabilities have been calculated using the expected
future tax rate of 25% (2021: 19%). Any changes in the future would affect
these amounts proportionately.
2022 2021
£'000 £'000
Opening balance as at 1 January 953 956
Credit / (debit) to income statement 355 (3)
Deferred tax asset as at 31 December 1,308 953
17. Inventories
Group Group Company Company
2022 2021 2022 2021
£'000 £'000 £'000 £'000
Finished goods 485 681 - -
485 681 - -
The cost of inventories recognised as an expense within cost of sales amounted
to £2,153,000 (2021: £1,313,000). No reversal of previous write-downs was
recognised as a reduction of expense in 2022 or 2021.
18. Trade and other receivables
Group Group Company Company
2022 2021 2022 2021
£'000 £'000 £'000 £'000
Trade receivables, gross 1,827 1,193 - -
Allowance for credit losses (26) (56) - -
Trade receivables 1,801 1,137 - -
Amounts recoverable on contracts 750 136 - -
Intercompany receivables - - 9,244 8,643
Other receivables 2,211 1,909 1,428 1,131
Financial assets 4,762 3,182 10,672 9,774
Other taxes and social security 15 437 - 46
Prepayments 31 42 11 10
Non-financial assets 46 479 11 56
Trade and other receivables 4,808 3,661 10,683 9,830
Non-Current Receivable 593 424 - -
The average credit period taken on sale of goods in 2022 was 30 days (2021: 57
days). An allowance has been made for estimated credit losses of £26,000
(2021: £56,000). This allowance has been based on the knowledge of
receivables at the reporting date together with forecasts of future economic
impacts and their collectability. There are no expected credit losses on
amounts recoverable on contracts.
Expected credit losses on intercompany receivables assume that repayment of
the loan is demanded at the reporting date. If the subsidiary has sufficient
accessible highly liquid assets to repay the loan if demanded at the reporting
date, the expected credit loss is likely to be immaterial. If the subsidiary
could not repay the loan if demanded at the reporting date, the Group consider
the expected manner of recovery to measure expected credit losses. This is a
'repay over time' strategy (that allows the subsidiary time to pay),
non-trading subsidiaries will not be able to repay loans over time and are
therefore deemed to be impaired.
Other receivables include a sum of £1,118,000 (2021: £1,118,000) due from
the RiverFort Equity Placing and Sharing Agreement. It is expected that it
will be recovered from the sale of shares currently still held by RiverFort.
Refer to note 25 on Contingent Liabilities.
The following table provides an analysis of trade 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.
2022 2021
£'000 £'000
Current 410 619
Not more than 3 months 1,166 379
More than 3 months 251 195
1,827 1,193
Allowances for Credit Losses 2022 2021
£'000 £'000
Opening balance at 1 January 56 52
Amounts written off (37) -
Amounts provided 17 37
Currency movement 1 -
Written back (no longer required) (11) (33)
Closing balance at 31 December 26 56
There are no significant expected credit losses from financial assets that are
neither past due nor impaired.
At 31 December 2022 £1,313,000 (2021: £574,000) of receivables were
denominated in US dollars, £11,000 (2021: £63,000) of receivables were
denominated in Euros and £ 71,000 (2021: £269,000) were denominated in
Ghanaian Cedi. The Directors consider that the carrying amount of trade and
other receivables approximates to their fair value.
19. Cash and cash equivalents
Group Group Company Company
2022 2021 2022 2021
£'000 £'000 £'000 £'000
Cash at bank and in hand 289 944 (59) 380
Bank overdraft - - - -
Cash and cash equivalents 289 944 (59) 380
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.
20. Called up share capital
Group and Company
The total amount of issued and fully paid shares is as follows:
Ordinary Share Capital 2022 2021
Number £'000 Number £'000
At 1 January 330,514,660 331 286,527,511 287
Arising on exercise of share options and warrants - - 127,500 -
Other issue for cash - - 43,859,649 44
At 31 December 330,514,660 331 330,514,660 331
Deferred share capital 2022 2021
Number £'000 Number £'000
At 1 January - - 161,527,511 15,991
Capital Reduction - - (161,527,511) (15,991)
At 31 December - - - -
Total Share Capital 2022 2021
Number £'000 Number £'000
Ordinary Share Capital 330,514,660 331 330,514,660 331
Deferred share capital - - - -
330,514,660 331 330,514,660 331
There were no equity issues in the year.
21. Share options and Warrants
Options outstanding
Options outstanding as at 1 January 2022 9,477,500
Lapsed during the year (785,000)
Options outstanding as at 31 December 2022 8,692,500
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.
· 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".
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%, dividend of 0% and a life of 5
years.
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 17.6p (2021: 18.0p). The average life of the unexpired
share options was 4.5 years (2021: 5.4 years).
As At 31 December 2022 31 December 2021
Grant date Exercise price £ Number outstanding Average life outstanding (years) 2021 number outstanding 2021 average life outstanding (years)
28 June 2012 0.365 - - 225,000 0.5
01 July 2014 0.510 150,000 1.5 225,000 2.5
10 December 2014 0.285 2,187,500 1.9 2,187,500 2.9
09 October 2015 0.140 40,000 2.8 40,000 3.8
01 June 2018 0.130 5,565,000 5.4 6,050,000 6.4
01 November 2018 0.130 750,000 5.8 750,000 6.8
8,692,500 4.5 9,477,500 5.4
During the year, no employee options were granted (2021: Nil), none were
exercised (2021: none) and 785,000 lapsed (2021: 100,000). The weighted
average price of the options lapsed in the year was 23.4p (2021: 13.0p). The
weighted average exercise price of exercisable options at the end of 2022 was
17.6p (2021 18.0p).
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.
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.
Warrants
The Company has historically issued the following warrants, which are still in
force at the balance sheet date:
Date issued Reason for issue Number of warrants Exercise price pence per share Life in years
31 January 2018 Placing Commission 170,455 22.0 5
22 January 2020 RiverFort EPSA 3,499,222 5.2 4
The Warrants issued on 31 January 2018 are valued in accordance with IFRS 2
that is for equity‑settled share‑based payment transactions, the Company
measures the goods or services received, and the corresponding increase in
equity, directly, at the fair value of the goods or services received, unless
that fair value cannot be estimated reliably. Warrants are recorded at fair
value at inception and are not remeasured.
The Warrants issued with Share Issues on 22 December 2020 have been determined
as equity instruments under IAS 32. Since the fair value of the shares
issued at the same time is equal to the price paid, these warrants, by
deduction, are considered to have been issued at nil value.
Warrants
The fair value of £Nil (2021: Nil) for the issue of these warrants was
recognised in the year.
Movement in Warrants
As at 1/1/22 Lapsed Redeemed As at 31/12/22
Placing Commission 170,455 - - 170,455
RiverFort EPSA 3,499,222 - - 3,499,222
Share Issue 24,872,500 (24,872,500) - -
28,542,177 (24,872,500) - 3,669,677
22. Lease Liabilities
Group Group Company Company
2022 2021 2022 2021
£'000 £'000 £'000 £'000
Non-current
Non-current lease debt 27 12 - 5
Total non-current lease liabilities 27 12 - 5
Non-current lease debt
As described in Note 12, all leases that fall under IFRS 16 are recorded on
the balance sheet as liabilities, at the present value of the future lease
payments, along with an asset reflecting the right to use the asset over the
lease term. The non-current lease debt is the part of that debt which falls
due after 12 months.
23. Trade and other payables
Current Group Group Company Company
2022 2021 2022 2021
£'000 £'000 £'000 £'000
Trade payables 556 509 104 170
Accruals and other creditors 1,757 1,219 260 226
Intercompany payables - - 630 219
Other loans 132 - - -
Finance lease creditor (IFRS 16) 62 32 5 23
Financial liabilities 2,507 1,760 999 638
Other taxes and social security payable - - - -
Contractual liabilities 80 87 - -
Non-financial liabilities 80 87 - -
Total current trade and other payables 2,587 1,847 999 638
Shown on the balance sheet as:
Contractual liabilities 80 87 - -
Trade and other payables 2,507 1,760 999 638
2,587 1,847 999 638
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 2022 was 51
days (2021: 43 days). The Directors consider that the carrying value of trade
payables approximates to their fair value.
Contractual liabilities relate to amounts received from customers at year-end
but not yet earned.
At 31 December 2022 £194,000 (2021: £160,000) of payables were denominated
in US dollars, £85,000 (2021: £24,000) were denominated in Euros, £4,000
(2021: £21,000) were denominated in Ghanaian Cedi and £39,000 (2021:
£23,000) were denominated in Sierra Leone Leones.
24. 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 2022 2021
£'000 £'000
Adjustments:
Depreciation, amortisation and impairment of non-financial assets 252 244
Finance costs 40 (3)
Movement in right to use assets (30) -
(Profit) / loss on disposal of non-financial assets (4) -
Non-cash finance cost (6) -
Increase in Deferred Tax Asset - 3
Total adjustments 252 244
Net changes in working capital: 2022 2021
Total Total
£'000 £'000
Decrease in inventories 196 92
Increase in trade and other receivables (1,147) (1,223)
(Increase)/decrease in long term receivables (169) 60
Decrease in contract liabilities (7) (13)
Increase / (decrease) in trade and other payables 558 (548)
Total changes in working capital (569) (1,632)
Company Company Restated
Company
2022 2021
£'000 £'000
Adjustments:
Depreciation, amortisation and impairment of non-financial assets 121 139
Finance costs - 1
Total adjustments 121 140
Net changes in working capital:
Increase in trade and other receivables (853) (683)
Increase/(decrease) in trade and other payables 360 (608)
Total changes in working capital (493) (1,291)
25. Contingent assets and contingent liabilities
In 2020, the company received a £1.5m mezzanine loan under the RiverFort
EPSA. At the same time under the EPSA the company issued 14m shares at 12.5p
to RiverFort and booked a sundry debt of £1.75m. The loan was to be repaid
and the sundry debt settled by RiverFort selling down the shares, with share
sales taking place throughout 2020 at an average price of 9 pence per share.
The balance of the mezzanine loan was however fully repaid in cash by the
Company in December 2020. Following repayment of the loan the remaining shares
owned by RiverFort were held to Westminster's order. As at the 31 December
2022 there remained 4,300,696 shares still to be sold and a residual sundry
debt relating to those shares. Had the shares been sold at the end of 2022
there would have been a book loss of £1,041,000 (2021: £985,000) on this
debt. However, the shares are still held and there is no reason or expectation
they will be sold until the Company's share price is favourable. Management
expects the future prospects set out in the "Current Trading & Business
Outlook" section of the Chief Executive Officers report to create a share
price that would be sufficient to allow the Company to release the shares for
sale creating revenue and eradicating the sundry debt. In order to recover the
debt, the share price at sale would need to be 26p.
In February 2022, Clydesdale Bank PLC trading as Yorkshire Bank offered the
Group an overdraft and other banking facilities. As a condition of these
facilities the Company entered into a multilateral charge and guarantee in
respect of bank overdrafts and other facilities of all companies within the
Group.
26. 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
(EUR) and US dollar (USD) but also the Sierra Leone New Leone (SLE) and
Ghanaian Cedi (GHS). 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.
Group Short-term exposure USD Short-term exposure EUR Short-term exposure SLL Short-term exposure GHS
£'000 £'000 £'000 £'000
31 December 2022
Financial assets 1,313 11 - 71
Financial liabilities (194) (85) (39) (4)
Total exposure 1,119 (74) (39) 67
31 December 2021
Financial assets 574 63 - 269
Financial liabilities (160) (24) (23) (21)
Total exposure 414 39 (23) 248
If the US dollar were to depreciate by 10% relative to its year end rate, this
would cause a loss of profits in 2022 of £124,000 (2021: £46,000 Loss).
If the Euro were to depreciate by 10% relative to its year end rate, this
would cause gain 0f profits in 2022 of £8,000 (2021: £4,000 Loss).
If the Sierra Leonean Leone were to depreciate by 10% relative to its year end
rate, this would cause a gain of profits in 2022 of £4,000 (2021: £3,000
Gain).
If the Ghanaian Cedi were to depreciate by 10% relative to its year end rate,
this would cause a loss of profits in 2022 of £7,000 (2021: £28,000 Loss).
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
There were no material borrowings in 2022. Interest on the cash holdings of
the Group and lease debt noted in note 22 are both not material and also has
fixed interest rates. Therefore, no calculation of interest rate sensitivity
has 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 18 of
these financial statements.
The Company has investments in and amounts owing from subsidiary companies.
The amounts owing are held at fair value. For loans that are repayable on
demand, expected credit losses are based on the assumption that repayment of
the loan is demanded at the reporting date. If the subsidiary has sufficient
accessible highly liquid assets in order to repay the loan if demanded at the
reporting date, the expected credit loss is likely to be immaterial. If it
does not, then an impairment will be considered.
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 2022, the Group's financial liabilities have contractual
maturities (including interest payments, where
applicable) as summarised below:
2022 2021
Group Current (within 6 months) 6 to 12 months Non-current (1-5 years) Current (within 6 months) 6 to 12 months Non-current (1-5 years)
£'000 £'000 £'000 £'000 £'000 £'000
Trade and other payables 2,587 - - 1,760 - -
Total 2,587 - - 1,760 - -
Company Current (within 6 months) 6 to 12 months Non-current (1-5 years) Current (within 6 months) 6 to 12 months Non-current (1-5 years)
£'000 £'000 £'000 £'000 £'000 £'000
Trade and other payables 999 - - 638 - -
Total 999 - - 638 - -
27. Related Party Transactions
Balances and transactions between the Company and its subsidiaries, which are
related parties, are listed below:
Balance at 31 December Movement in Year Balance at 31 December Movement in Year Balance at 31 December
2020 2021 2021 2022 2022
Westminster International Limited 2,329 (2,202) 127 (713) (586)
Westminster Services Limited (formerly Longmoor Security Limited) - - - 62 62
Westminster Aviation Security Services Limited 3,979 783 4,762 (1,432) 3,330
Sovereign Ferries Limited 45 503 548 (2) 546
Westminster Operating Limited (2,398) 2,224 (174) 2,075 1,901
Keyguard U.K Limited - 332 332 (10) 322
Longmoor (SL) Limited - (24) (24) 2 (22)
Facilities Operations Management Limited 192 1,307 1,499 24 1,523
Westminster Sierra Leone Limited * - - - - -
Westminster Group GMBH 795 393 1,188 133 1,321
GLIS Gesellschaft für Luftfahrt- und Infrastruktur-Sicherheit GmbH - - - - -
Westminster Sicherheit GMBH - - - - -
Euro Ops SARL 187 187 51 238
Westminster Maritime Services Limited 1,310 (1,331) (21) - (21)
Longmoor Security Services Limited (formerly Westminster Aviation Security - - - - -
Services (ME) Limited)
Westminster International (Ghana) Limited - - - - -
6,252 2,172 8,424 190 8,614
In the year to 31 December 2022 fees and expenses of £2,640 (2021: £1,320)
plus VAT were accrued to Graham Binns Consulting Limited, a Limited Liability
Partnership under the control of Major General (Rtd) Graham Binns. On the 31
December 2022 Graham Binns Consulting Limited was owed £nil (2021: £1,584
including VAT).
Certain members of the Fowler family, other than directors, have been employed
by the Group on normal arms-length terms for between 13 and 25 years. Their
remuneration, in aggregate, for the year ended 31 December 2022 was £176,718
(2021: £183,448).
In July 2022 Westminster International (Ghana) Limited (WIG), was sold for £1
to Mawuli Ababio. WIG was surplus to requirements and had never actually
traded because the operations are dealt with direct to the UK. However,
having a company, which is wholly Ghanaian owned, as a subcontractor to
facilitate certain aspects of the operations in Ghana gave potential
logistical benefits. In the year to 31 December 2022 fees and expenses of £
nil (2021: £ Nil) plus VAT were accrued to Westminster International (Ghana)
Limited, a Limited Liability Company under the control of Mawuli Ababio. On
the 31 December 2022 Westminster International (Ghana) Limited was owed £ nil
(2021: £ Nil).
28. Events after the Reporting Period
On 13 January 2023 the Company granted a total of 16,700,000 share options
over ordinary shares of 0.1p each in the Company with an exercise price of
1.95p pence per Ordinary Share under the Company's 2017 Share Option Scheme.
The options ordinarily become exercisable on the second anniversary of grant,
subject to satisfaction of the vesting conditions and the grantee's continued
service with the Company and will be exercisable at any point up until the
tenth anniversary of the date of grant. Vesting is also subject to the
Company's share price being at 5p or above at close of business on any five
consecutive trading days after the date of grant.
The Share Options have been granted to Directors of the Company as follows:
Name Position Type of option award No. of Share Options awarded Exercise Price Date of vesting
Sir Tony Baldry Chairman Unapproved 1,500,000 1.95p 13 January 2025
Peter Fowler CEO EMI - Tax approved 3,500,000 1.95p 13 January 2025
Mark Hughes CFO EMI - Tax approved 1,500,000 1.95p 13 January 2025
Stuart Fowler COO EMI - Tax approved 1,500,000 1.95p 13 January 2025
Mawuli Ababio Non-executive director Unapproved 250,000 1.95p 13 January 2025
Simon Barrell Non-executive director Unapproved 250,000 1.95p 13 January 2025
Graham Binns Non-executive director Unapproved 250,000 1.95p 13 January 2025
Sir Tony Baldry, Peter Fowler, Mark Hughes, Stuart Fowler and Roger Worrall
have by mutual consent with the Company waived their rights to all outstanding
option awards granted in 2014 and 2018 totalling 6,781,250 options and these
share options are now treated as lapsed.
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 (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END FR FLFIDEFILVIVRecent news on Westminster
See all newsREG - Westminster Group - Signing of 10+ year 5 airport DRC contract
AnnouncementREG - Westminster Group - Interim Results
AnnouncementREG - Westminster Group - Change of ARD & Ghana Settlement Update
AnnouncementREG - Westminster Group - Half-year Report
AnnouncementREG - Westminster Group - Result of AGM
Announcement