REG - Westminster Group - Final Results <Origin Href="QuoteRef">WSG.L</Origin> - Part 1
RNS Number : 6557AWestminster Group PLC09 June 20169 June 2016
Westminster Group Plc:
Final Results for the 12 months to 31 December 2015
Westminster Group Plc ('Westminster', the 'Company' or the 'Group'), the AIM listed supplier of managed services and technology based security solutions to governments and government agencies, non-governmental organisations (NGO's) and blue chip commercial organisations worldwide, is pleased to announce its Final Results for the 12 months ended 31 December 2015.
Key Points:
Operational
Three new large scale long term Memorandums of Understanding signed for airport security;
Prospect list of potential long term managed services projects significantly enhanced;
Maintained full operations and kept all staff safe during Ebola Crisis in West Africa;
Ebola crisis waning in H2 and airlines begin to return;
Flagship ferry vessel Sierra Queen arrives in country but suffers damage creating delays in ferry commencement;
Second vessel, Sierra Princess, a 70 seater vessel secured;
Technology Division sales increased by 42%;
New Technology Division website underway.
Financial
Revenues 3.4m (2014: 3.5m) with 1.7m from Technology Division (2014: 1.2m). Decrease in Managed Services revenues reflected worst period of Ebola crisis now over and making a strong recovery;
73% reduction in underlying EBITDA loss to 0.44m (2014: 1.59m)
Non depreciation operating cost reductions of 18% in the year, with a further 13% in 2016;
Debt of 3.32m (Gross) issued in the year to support capital investment in Ferry project and working capital needs; 0.9m converted into equity in the year;
Overall Loss 1.99m (2014: 2.43m);
Loss per share reduced by 29% to 3.49p (2014: 4.94p).
Post Period End
Three more signed MoU's making seven in total under discussion;
Letter of Intent received for long term airport project with potential for over 30m annual revenues;
Recovery in passenger numbers in West Africa enabling it to produce record financial performance; further cost reductions since January;
Group close to EBITDA break-even;
0.475m unsecured debt issued and a further 0.75m converted into equity;
1.3m new equity placed in June 2016 to provide additional working capital and to support growing airport security opportunity;
Group in a much stronger financial position than at the start of the year;
Full strategic review underway.
Commenting on the results and current trading Peter Fowler, Chief Executive of Westminster Group, said:
"Our 2015 results and achievements reflect not only the continuing challenges we faced, such as the ongoing Ebola crisis, ferry delays, and the oil price collapse, but also the measures we implemented to deal with them and move our business forward.
"Following two years of dealing with and overcoming a range of challenging issues, I believe we are now emerging leaner, stronger, and as a result of the strategic review we are undertaking, better structured to ensure maximum shareholder benefit is achieved from the numerous large scale, long term and high margin Managed Services opportunities we are developing. These Managed Services opportunities are now a key focus of our business and we remain excited about our future growth prospects."
For further information please contact:
Westminster Group plc.
Tel: 01295 756 300
Peter Fowler (Chief Executive Officer)
Ian Selby (Chief Financial Officer)
S. P. Angel Corporate Finance LLP (NOMAD + Broker)
Tel: 020 3470 0470
Stuart Gledhill
Walbrook PR (Financial PR)
Tel: 020 7933 8780
Tom Cooper/Paul Vann
0797 122 1972
tom.cooper@walbrookpr.com
Notes:
Westminster Group plc is a leader in the supply of system solutions and products to the security, defence, fire protection and safety markets worldwide.
Westminster's principal activity is the design, supply and ongoing support of advanced technology security solutions, 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 ferry services, 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. For further information please visit www.wsg-corporate.com
Chairman and Chief Executive Officer's Review
Business Review
We have now experienced two challenging and difficult years. 2014 saw the commencement of the Ebola crisis in West Africa which created operational and financial pressures as passenger volumes fell. At its worst point, passenger numbers reduced to around 30% of normal traffic with the corresponding reduction in revenues. 2015 was an equally, if not more, challenging period for our Group as not only did the Ebola crisis in West Africa last longer and become more widespread than anyone had expected, lasting throughout 2015, albeit with a growing recovery through the latter part of the year, but our flagship ferry vessel, the Sierra Queen, suffered damage shortly after arrival in Sierra Leone, resulting in extended delays to the commencement of our ferry project. Additionally, the worldwide collapse in oil prices has caused delays with several of our key project opportunities as governments cut back on capital expenditure.
Whilst the majority of these issues were beyond the Company's control they have had a material impact on the financial performance of the Company with approximately 1.1m attributed loss of passengers on Ebola and a further estimated 750,000 on loss of potential ferry revenue.
Despite these challenges, however, the Group continued to expand its international presence and large scale opportunities, particularly in our increasingly core focus airport security business. I remain proud of how our management and staff have dealt with and overcome the numerous challenges we have faced over this period.
Managed Services Division
Ferry Project:
A defining issue during 2015 has been the delays in commencing the 21 year ferry project we signed in November 2014 for the operation and management of ferry terminals and the provision of a professional ferry service in Sierra Leone across the estuary between the capital Freetown and the International Airport on the Lungi peninsula.
The background to this project is that the current ferry services are unreliable, unsuitable and unable to cope with large volumes of passengers and can take over an hour to transport passengers to and from the airport. This therefore creates a bottleneck which is a potential limitation on the numbers of passengers passing through the airport.
As Westminster is providing a respected and highly professional security operation at the airport with revenues directly related to passenger numbers, we were invited to provide a safe and reliable solution to this issue. Following the signing of the contract, we recruited ex Royal Navy personnel to run the operation and began working on building the required infrastructure around the service and, improving the terminals. We acquired a 200 seat flagship vessel named Sierra Queen, capable of transporting a full plane load of passengers across the estuary quickly, in style and comfort, which arrived in country at the end of April 2015.
Unfortunately shortly after arrival the vessel suffered some damage whilst on a temporary mooring. A local marine contractor was employed to undertake repairs and some hull strengthening works, which was to be completed before the official launch ceremony on 11 June 2015.
Despite a successful launch ceremony we discovered that the vessel was not fully operational and upon examination found one of the prop shafts had been damaged. The actual damage was a minor alignment issue but no facilities were available to correct this in country and we had to organise removal and shipment back to the UK for repair which due to its size and limited flights at the time presented a huge logistical challenge.
Consequently, repair works which should have taken a few weeks, turned into several months of delay, and despite the repair costs being largely covered by insurance, as the operation had not commenced loss of business revenue was not covered which, on a conservative estimate, would have amounted to over 750,000 between Jul 15 - Dec15.
Whilst many of the issues we faced were beyond our control with hindsight it is clear we could have done some things better or differently and that we had underestimated some of the challenges involved. We have learnt lessons from past issues and we have replaced much of the initial management team involved in the ferry project. We have also engaged an experienced marine and risk management specialist to undertake a commercial and operational review of the project and advise on any further improvements etc. and to assist with future deployment.
Notwithstanding the frustrations, delays and costs suffered during this process, the ferry project remains a potentially highly valuable long term project offering significant revenue potential once fully operational.
Airport Security Projects:
Whilst there has been an understandable focus on the ferry project by many shareholders and despite the significant revenue potential the ferry operations presents, our key focus and substantial growth prospects remain with our long term managed services projects particularly our airport security solutions under Build-Operate-Transfer (BOT) or Build-Maintain-Train (BMT) programmes.
Our revenues from our West African airport operations continued to be adversely affected throughout 2015 by the Ebola crisis although thankfully for all concerned, particularly the people of affected countries, the epidemic slowly abated and was brought under control in the latter half of 2015 with the country being finally declared Ebola Free on 17 March 2016. As the crisis waned we gradually saw a return of airlines and passenger numbers. Revenues for the year were 1.7m (2014: 2.2m) with the decrease being due to the worst ravages of the crisis which greatly affected the first part of the year slowly recovering in H2. I am pleased to report that 2016 is showing much stronger recovery and hopefully pre Ebola levels will be reached before the end of the year. I am also pleased that the division has produced positive contribution since February 2015.
I am also pleased to report that in February 2016 we announced that we had been instrumental in assisting the new cargo operations at Freetown International Airport achieve RA3 accreditation status necessary to be able to ship cargo to Europe. The WASS construction and technical teams have worked hard to implement all of the security features and equipment required and WASS has produced the protocols for accepting and screening cargo using the EU approved methods of X-Ray, hand search and Free Running Explosive Detection Dogs (FREDDs) for the movement of high risk cargo, mail, and dangerous and high value goods.
In addition, WASS's Cargo Security Manager, a Certified Instructor for all levels of air cargo, has trained over 150 personnel including security officers, K9 units, ground handling agents, ramp agents, airlines and cargo agents and compiled all of the required operational documentation required by regulations.
This achievement means that FNA is one of just a few airports in West and Central Africa with such accreditation. FNA is now able to provide cargo services destined for Europe, including transit and transfer cargo and this provides considerable opportunities for FNA to become a cargo hub serving neighbouring countries and opens up new revenue streams for Westminster through cargo screening.
I am pleased to report that we have been extremely active pursuing the ever growing interest in our airport BOT and BMT programmes from governments and airport authorities all over the world and have been very successful in developing this area of our business.
In February 2015 we announced the signing of a new MoU with a government in Asia for long term airport security services. As previously announced we had been waiting for a parliamentary process to enable foreign companies to enter into government Private Public Partnership and Build Operate Transfer contracts without going to tender and to pass its final reading. We have been informed the act passed its final reading in April 2016, and we are now able to progress discussions with the authorities.
On 12 October 2015 we announced the signing of a new MoU with a government owned airport authority in a new geographical location for the provision of airport security at several of the country's airports.
On 9 December 2015 we further announced yet another new MoU had been signed with a government owned airport authority for the provision of long term airport security services at a significant airport in East Africa serving several million passengers annually.
I am pleased to report that the other East African airport project which we have been in advanced discussions with for some time is still live. The process for this particular airport has frustratingly taken far longer than anticipated due to the government's own internal processes and was on standstill for most of 2015 due to political issues unrelated to our project. These issues have now been largely resolved and we are once again engaged in the negotiation process.
Airport security solutions and our experience in the sector represent a significant growth area for our Managed Services Division, however this is certainly not the only area of expansion and we are looking at provision of similar long term managed services solutions for both ports and national borders.
Technology Division
Despite project delays, the Technology Division produced an improved performance during 2015 with revenues of 1.7million (2014: 1.2m) an increase of some 42%.
During the year the Technology Division secured contracts for a wide range of products and services to a wide range of clients from around the world including: protection equipment for a nuclear facility in North America; advanced screening solutions in West Africa; security solutions for a North African postal service; a museum in Egypt; various UK prisons and a Southern African police service.
Unfortunately the world-wide slump in oil prices has caused some governments to cut back or delay capital spending. This has impacted some of our major projects such as the Americas $4.4m consultancy project announced last year which is now unlikely to be completed in 2016 and the pipeline security project, where we were appointed preferred suppliers for one of the world's largest government owned petrochemical companies. Our Mexican Franchise was also affected by such cutbacks however they continue to invest in the business and remain confident on delivering their revenue commitments in due course.
As the oil price is likely to be an issue for a while, we have already discussed alternative funding solutions such as support from UK Export Finance. We are also in discussions with a commodity trader and have agreed in principle a scheme by which the client/government can pay for our services in product (e.g. oil) and funds are held in escrow for drawdown as we undertake the works, this is attracting serious interest from our clients.
Last year we secured a contract for an Iconic Bridge in the USA. This project has commenced and initial revenues received, however, the main contractor has informed the Company that the project is facing delays and, at this time, there is no confirmation as to completion timescales.
We have a major web presence through our Westminster International website which is an important source of enquiry generation for our business. In our 2014 review I mentioned the effect that changes to search engine algorithms were having on our enquiry rates. There have been ongoing algorithm changes throughout 2015. This required major changes to our legacy websites and in 2015 we therefore decided to invest in a completely new website to meet the exacting and changing requirements of our business as we move forward. The new website is now optimised for tablet and mobile devices, it is built to cater for search engines from the ground up and addresses many other limitations of the old website. The new website took 9 months to complete and was launched in June 2016 (www.wi-ltd.com).
Strategic Review
In view of the various issues and challenges of the past two years together with our increasing focus on the significant growth opportunities being developed in our airport security business we are undertaking a wide ranging strategic review of our operations to ensure we are well positioned to maximise opportunities going forward and successfully take the business to the next level. We are taking a critical look at our business including our Board and management structures, our operations, our financing and our advisory structure. At Board level we will be making a number of changes which we hope to announce in due course.
Whilst we have been successful in many areas, particularly in growing our international presence, we need to take a critical look at our business, our strategies, our structure going forward and what, with the benefit of hindsight, we could have done better in the past.
As our business evolves so too must our business strategy and our core focus is now increasingly on our long term recurring revenue managed services business and the significant growth potential that brings. Our strategic review therefore is looking at our various business segments and how they fit and support this strategy. To those ends we have already streamlined some of our operations and have achieved non depreciation overhead savings of 18% in the year and a further 13% since the year end with further contingent cost savings identified. This is something we will naturally keep under regular review.
Despite the challenges of the past two years our business is facing unprecedented growth prospects, particularly with our airport security operations, and it is essential we have the right leadership, management and strategies in place to successfully deliver such growth. Accordingly the changes we are making and intend to make in the near future, to strengthen our management and broaden our range of experience and expertise together with the strategies we are putting in place, will, I believe, serve the Company well and greatly assist our growth.
Business Outlook
I am pleased to report an encouraging start to 2016 with the end of the Ebola crisis in West Africa, an ongoing recovery in revenues and increasing interest in our long term airport security operations.
The first four months of 2016 show a continuing improvement in the profitability and cash generation of the aviation division which was loss making in the same period in 2015 due to the Ebola crisis. Revenues in the Company's airport security operation have increased by over 85% as traffic has returned. When combined with streamlined resources and operational leverage, this has led to a very significant improvement in the EBITDA performance of the Group as compared to the same period in 2015.
Our Technology business is showing signs of recovery despite delays and setbacks and in February 2016 we announced the signing of a MoU for a 20 year border security project and so far in 2016 we have continued to secure contracts for a wide range of products and services to a wide range of clients around the world. By way of example, in recent months, the Technology Division has supplied various products and services to UK prisons; security equipment to various airports in the UK and overseas; explosive detection equipment to a UN entity in Somalia; supplied screening equipment to the South African Police; as well as securing contracts with numerous other clients as far afield as the USA, Afghanistan, Kenya, Nigeria, Romania, Indonesia, Tanzania and China.
We are looking forward to our flagship vessel, Sierra Queen, being ready for service and our second vessel, Sierra Princess, arriving in June so that finally our eagerly awaited and much needed professional ferry service can commence operations.
As previously mentioned, however, our core focus is now increasingly on our long term recurring revenue managed services business and in that respect I am pleased to report that we are seeing increasing interest and making good progress on numerous fronts.
We currently have seven signed MoU's, all still active and some now at contract discussion stages, with various governments and airport authorities around the world, serving around 10.6 million embarking passengers annually. Of these, three have been signed in the first four months of 2016, one in East Africa and two in the Middle East. This is against three signed in the whole of 2015, two of which were at the end of 2015. The increasing number and frequency of signed MoU's demonstrate the momentum we are building and I am pleased to report that in May 2016 we received a letter of intent relating to one of these MoU's with potential to generate revenues in excess of 30m per annum based on the current PAX throughput and the currently anticipated fee per passenger. In addition, the Company continues to pursue a number of similar prospects around the world.
We are also in dialogue with potential joint venture (JV) partners for certain large scale projects whereby the JV partner can bring added value through financing support and regional presence in new strategic locations as well as bringing to Westminster added language and cultural enhancements. Likewise the JV partner would benefit from Westminster's widespread international presence and agent network for their own complimentary services.
Following two years of dealing with and overcoming a range of challenging issues I believe we are now emerging leaner, stronger and as a result of the strategic review we are undertaking, better structured to ensure maximum shareholder benefit is achieved from the numerous large scale, long term and high margin opportunities we are developing and whilst there is never certainty as to timing or outcome of the various project opportunities we are pursuing we remain excited about our growth prospects.
P. D. Fowler
Chief Executive Officer
Lt. Col. Sir Malcolm Ross GCVO, OBE
Chairman
Chief Financial Officer's Report
Revenue
Revenues from our ongoing businesses were circa 3.4m (2014: 3.5m). The Technology Division recorded revenues of 1.7m (2014: 1.2m) and the Managed Services Division 1.7m (2014: 2.3m). Managed Services revenues were down on the prior year due to the full year of Ebola impacts in 2015 (crisis commenced July 2014) and these results clearly do not reflect the significant recovery in passenger numbers experienced in 2016 so far. Technology Division revenues reflected the run rate of smaller product sales as well as certain larger orders received in the first quarter. They do not include the delayed larger solution sales such as the Asian Scanner, Americas Consultancy and US Bridge, the vast majority of which remain unrecognised. The estimated impact of Ebola on Managed Services margins was approximately 1.12m (2014: 0.54m) reflecting the nature of the crisis which commenced in mid-2014 and affected all of 2015.
Gross Margin
Gross margin rose to 58% (2014: 56%) due to the mix of business and improving margins in both main divisions.
Operating Cost Base
Our total operating and administrative costs were reduced by 17% to 3.6m (2014: 4.4m). This was achieved as previously stated through headcount reductions in expatriate staff in West Africa as well as in staff based in the UK Banbury HQ. Cost reductions have continued since the year end and our overall non-depreciation cost base in the first four months of 2016 was approximately 0.25m, marking a further reduction of 13%. We continue to bear pressure on all costs, particularly those associated with the Technology Division and the Group HQ and as part of the strategic review. Within these results an increased share option expense of 0.07m (2014: 0.05m) was recorded as was a gain from the initial receipt of settlement monies from the vendors of CTAC limited (0.08m). As part of this a further $0.315m is due to be paid to Westminster in 2017 and whilst the Company has a debenture over this it will be recognised in the financial statements when received.
Operational EBITDA
Our loss from operations was 1.65m (2014: 2.40m). A very significant element of this was due to the impact of Ebola which began in mid-2014 and affected all of 2015. Estimated margin impacts of this were 1.12m (2014: 0.54m). When adjusted for the items in note 4 to these accounts and depreciation, the Group recorded an EBITDA loss of 0.44m (2014: 1.56m) marking a reduction of over 70%.
Financing Charges
Underlying financing charges of 0.34m (2014: 0.04m) were higher than the prior year due to an increased average debt compared to 2014. Senior Secured Convertible Notes (10% coupon) generated an underlying cash charge of 0.12m (annualised based on current debt outstanding 0.22m). The remaining 0.22m (2014: 0.06m credit) of finance charges were non-cash based and related to IFRS valuations of the convertible loan notes.
Result for the Year
Our loss before taxation was 1.99m (2014: 2.43m) and the loss per share was 3.5p (2014: 4.9p).
Statement of Financial Position
The Group made a significant investment in plant and equipment during the year in support of the Sovereign Ferries 21 year ferry opportunity in West Africa. Approximately 1.25m was spent on the vessel (Sierra Queen) and its shipment from Europe to West Africa. A further 1.02m was spent on higher than expected setup costs, vessel technical work and infrastructure investment on this delayed project. Overall our property, plant and equipment assets grew from 1.90m to 4.34m net book value.
Our debtor balance reduced from 2.04m to 0.48m with a significant part of this due to the adjustment for Americas Consultancy contract revenues which were fully deferred at December 2014 and only a small element recognised in 2015. Average days sales outstanding at the year-end were 48 (2014: 36) with the increase due to certain receivables which were mainly collected early in 2016. On average the bad debt record of the managed services airport business is less than 0.3% of revenue billed since commencement.
Trade payables were broadly similar to 2014 at 1.13m and average creditor days were 32 (2014: 36) There were certain amounts overdue to HMRC at the end of the year but these were subject to payment schemes which the Group adheres to.
Long Term Debt
At the reporting period date the Group had the following convertible loan notes outstanding. The amounts quoted are face value and exclude any adjustments made for IFRS.
Senior Secured 2018 notes ("CLN") 2.245m (2014: 0.575m). 0.67m was issued in April 2015, when the maturity date on the original loan note was varied from June 2016 to June 2018. This carries a coupon of 10% and has a conversion price of 35p. In October 2015 a further 1.0m of this loan note was issued to strategic investors. To attract these incoming strategic investors 1,142,856 new 10p ordinary shares were issued as a bonus to these incoming investors to reduce their average price to 25p from the 35p conversion price in the instrument. The average price of 25p was an approximate 105% premium to the then market price. At that point, certain consultancy fees of 60,000 due to strategic partners were also settled by the issue of a further 400,000 new 10p ordinary shares.
Convertible Unsecured Loan Notes ("CULN"). The Company issued 1,650,000 (gross) CULN to Darwin Strategic Limited ("Darwin") in April 2015. The Group received 90% of this in cash and was able to make repayment of any amount at any point without penalty. At the time of drawdown the Group was planning to use cash flows arising from the monetisation of signed Technology Division contracts and from the commencement of ferry operations in West Africa to reduce this debt and to consequently reduce potential shareholder dilution. Due to the delays in the contracts referred to in the CEO review, the Group's cash resources did not allow repayments to be made and consequently 0.9m of loan notes were converted in the year to 6,753,270 ordinary 10p shares. At the reporting period date 0.75m was outstanding. Darwin were also issued with warrants (vested immediately) to subscribe for 1,100,000 new Ordinary Shares at an exercise price of 39p per new Ordinary Share. The warrants can be exercised over a two year period from 22 April 2015.
Shareholders' funds stood at 1.69m (2014: 2.42m).
Cash Flow Statement
During the year the Group had an operating cash outflow of 1.13m (2014: 1.65m) which arose from trading losses. The Group had a large capital expenditure requirement which was in the majority due to set up costs of the Sovereign Ferries project in West Africa and this comprised the vast majority of the 2.64m (2014: 0.40m) spend on plant and equipment. This was largely financed by the issue of convertible loan notes. 1.67m (gross) of the 10% 2018 secured CLN (conversion price 35p) was issued during the year and a further 1.65m of unsecured variable conversion rate loan notes were issued to Darwin Strategic in April 2015. Cash balances at the year-end stood at 0.15m (2014: 1.18m). During the year the group at certain points was provided overdraft support by its bankers HSBC.
Events after the Reporting Period
In February 2016 the Group issued a further 0.475m Par Value of similar CULN to Darwin with proceeds net of expenses of circa 403,000. At that point they were issued with 589,330 detachable warrants over 10p ordinary shares. These warrants have a life of 3 years and a strike price of 20.15p. A further 0.775m of the total CULN was converted into equity between 1 January 2016 and 23 May 2016 resulting in the issue of 6,659,567 new ordinary 10p shares.
For the period until the end of April 2016 according to unaudited management accounts the Group recorded an average monthly EBITDA loss of circa 40,000, although it achieved break even in April 2016. This improving performance (which excluded any adjustment for still lower passenger volumes as a result of Ebola) was due to a recovery in passenger numbers in airport managed services and a lower cost base across the Group. The Airport managed services project has been recording record contribution and the model augers well for the future. The Ferry project in West Africa has continued to experience delays in monetisation and consequently pre commencement costs of 0.375m were incurred in the first four months of 2016. The Group has had overdraft support from its principal bankers HSBC.
On 3 June 2016 the Company announced the issue of 13,000,000 ordinary shares of 10p. 10,000,000 were issued to Hargreave Hale who also received 5,000,000 detachable and transferrable warrants over 10p ordinary shares. These have a life of 3 years from the date of issue and have an exercise price of 12p per share warrant ("Warrant") valid for 3 years from the date of issue, exercisable at 12p per share. The Warrants may not be exercised until the relevant authorities have been granted at the Company's AGM on 30 June 2016. The shares above are issued in 2 tranches;
A first tranche of 9,885,895 new Ordinary Shares (the "First Tranche Shares") will be issued immediately following settlement on or by 8 June 2016, raising 988,589 before expenses.
A second tranche of 3,114,105 new Ordinary Shares (the "Second Tranche Shares") will be issued on or around 1 July 2016, subject to, inter alia , the receipt of shareholder approval of the necessary resolutions at the Annual General Meeting. This will raise a further 311,411 before expenses.
Key Performance Indicators
The Group constantly monitors various key performance indicators for factors affecting the overall performance. At Group level the revenues and gross margin are monitored to give a constant view of the Group's operational performance. As employment costs are the single largest cost base for the Group the number of employees and employee costs are also monitored to ensure best use of resources.
The Managed Services Division derives its revenues and cash flows based on the number of passengers using a facility such as an airport; therefore the number of passengers served is monitored along with the future potential of the division with reference to the number of potential airports and PAX in the divisional pipeline.
The Technology Division measures its sales activity by reference to the value of quotes issued against sales enquiries and therefore monitors the average enquiries received per month and the potential value of those enquiries. Additionally the conversion rate by quantity is monitored to counter the effects of large scale enquiries which can distort value comparisons. Finally the number of countries and number of return customers are monitored to give a view on the performance of the division both pre and post sales.
Summary of Key Performance Indicators
Group
2015
2014
Revenue 'm
3.4
3.5
Gross Margin
58%
56%
# of Employees
218
213
Average Employee Cost Per Head
10,000
12,300
Managed Services
2015
2014
Passengers Served ('000)
63
94
Signed MoUs
4
1
Signed MoU's Potential Passengers (m)
5.1
0.3
Technology Division
2015
2014
Average Enquiries Per Month
99
118
Average Value of Monthly Enquiries
12,553
30,155
# Countries Supplied
33
38
# of Return Customers
142
129
Ian Selby
Chief Financial Officer
WESTMINSTER GROUP PLC
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 December 2015
2015
2014
Note
'000
'000
REVENUE
3,359
3,489
Cost of sales
(1,403)
(1,533)
GROSS PROFIT
1,956
1,956
Administrative expenses
(3,606)
(4,360)
LOSS FROM OPERATIONS
(1,650)
(2,404)
Analysis of operating loss
Loss from operations
(1,650)
(2,404)
Add back amortisation
4
4
Add back depreciation
167
163
Add back exceptional items
4
1,043
644
EBITDA Loss from underlying operations
(436)
(1,593)
Financing Charges
5
(338)
(37)
LOSS BEFORE TAX
(1,988)
(2,441)
Taxation
6
(7)
9
Loss for the year from operations
(1,995)
(2,432)
LOSS ATTRIBUTABLE TO EQUITY SHAREHOLDERS
(1,995)
(2,432)
TOTAL COMPREHENSIVE EXPENSE FOR THE YEAR ATTRIBUTABLE TO EQUITY SHAREHOLDERS
(1,995)
(2,432)
LOSS PER SHARE
7
(3.49p)
(4.94)
WESTMINSTER GROUP PLC
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 31 December 2015
2015
2014
Note
'000
'000
Goodwill
397
397
Other intangible assets
34
11
Property, plant and equipment
4,343
1,898
Investment in subsidiaries
-
-
TOTAL NON-CURRENT ASSETS
4,774
2,306
Inventories
57
72
Trade and other receivables
484
2,044
Cash and cash equivalents
150
1,180
TOTAL CURRENT ASSETS
691
3,296
TOTAL ASSETS
5,465
5,602
Share capital
6,345
5,515
Share premium
9,170
9,039
Merger relief reserve
299
299
Share based payment reserve
258
141
Equity reserve on convertible loan note
219
47
Revaluation reserve
134
134
Retained earnings
(14,739)
(12,757)
TOTAL SHAREHOLDERS' EQUITY
1,686
2,418
Borrowings
8
2,587
538
Deferred tax liabilities
53
53
TOTAL NON-CURRENT LIABILITIES
2,640
591
Deferred incomes
-
1,475
Trade and other payables
1,139
1,118
TOTAL CURRENT LIABILITIES
1,139
2,593
TOTAL LIABILITIES
3,779
3,184
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
5,465
5,602
WESTMINSTER GROUP PLC
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2015
Share capital
Share premium
Merger relief reserve
Share based payment reserve
Revaluation reserve
Equity Reserve on Convertible Loan Note
Retained earnings
Total
'000
'000
'000
'000
'000
'000
'000
'000
AS OF 1 JANUARY 2015
5,515
9,039
299
141
134
47
(12,757)
2,418
Shares issued for cash
40
20
-
-
-
-
-
60
Share based payment charge
-
-
-
76
-
-
-
76
Exercise of share options
1
-
-
(1)
-
-
-
-
Lapse of share options
-
-
-
(13)
-
-
13
-
Warrants issued with loan notes
-
-
-
55
-
-
-
55
Bonus Issue
114
(114)
-
-
-
-
-
-
CLN conversion
675
225
-
-
-
(39)
-
861
Loan notes issued
-
-
-
-
-
211
-
211
TRANSACTIONS WITH OWNERS
830
131
-
117
-
172
13
1,263
Total comprehensive expense for the year
-
-
-
-
-
-
(1,995)
(1,995)
AS AT 31 DECEMBER 2015
6,345
9,170
299
258
134
219
(14,739)
1,686
AS OF 1 JANUARY 2014
4,695
7,123
299
89
134
144
(10,325)
2,159
Share based payment charge
-
-
-
52
-
-
-
52
Other share issues
757
1,955
-
-
-
-
-
2,932
Cost of share issues
-
(196)
-
-
-
-
-
(196)
Arising in the year
63
157
-
-
-
(97)
-
(97)
TRANSACTIONS WITH OWNERS
820
1,916
-
52
-
(97)
-
2,691
Total comprehensive expense for the year
-
-
-
-
-
-
(2,432)
(2, 432)
AS AT 31 DECEMBER 2014
5,515
9,039
299
141
134
47
(12,757)
2,418
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2015
2015
2014
Note
'000
'000
LOSS BEFORE TAXATION
(1,988)
(2,441)
Adjustments
589
261
Net changes in working capital
9
209
535
Equity settlement payment
10
60
-
NET CASH USED IN OPERATING ACTIVITIES
(1,130)
(1,645)
INVESTING ACTIVITIES:
Purchase of property, plant and equipment
(2,642)
(399)
Purchase of intangible assets
(27)
(1)
Proceeds from disposal of fixed assets
25
11
CASH FLOW USED IN INVESTING ACTIVITIES
(2,644)
(389)
FINANCING ACTIVITIES:
Gross proceeds from the issues of ordinary shares
-
2,704
Costs of share issues
-
(128)
Gross proceeds from the issue of convertible loan notes
3,155
-
Costs associated with the above issue
(280)
Interest paid
(131)
(69)
CASH FLOW FROM FINANCING ACTIVITIES
2,744
2,507
Net change in cash and cash equivalents
(1,030)
473
CASH AND EQUIVALENTS AT BEGINNING OF YEAR
1,180
707
CASH AND EQUIVALENTS AT END OF YEAR
150
1,180
Notes to the Financial Statements
1. General information and nature of operations
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 2015 consolidate the individual financial statements of the Company and its subsidiaries. The Group designs, supplies and provides on-going advanced technology solutions and services to governmental and non-governmental organisations on a global basis.
2.Summary of significant accounting policies
Basis of preparation
The Group financial statements have been prepared and approved by the Directors in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union. The Company has elected to prepare its financial statements in accordance with IFRS.
The financial information is presented in the Company's functional currency, which is Great British Pounds ('GBP') since that is the currency in which the majority of the Group's transactions are denominated.
The accounts are prepared on a going concern basis. In assessing whether the going concern assumption is appropriate, management have taken into account all relevant available information about the future. As part of its assessment, management have taken into account the profit and cash forecasts, the continued support of the shareholders and bondholders and Directors and management ability to affect costs and revenues. Management regularly forecast results, financial position and cash flows for the Group. A worst case budget for 2016 and 2017 has been prepared which includes revenues from the run rate of smaller contracts, continuation of major existing contracts such as the West African airport contract and from the Sovereign Ferries operation, where a sensitivity of a go live date at the end of the third quarter of 2016 has been reflected although a commencement ahead of this is targeted. Should these revenue targets not be met the Group has a range of options which could include cost reductions and realisations of non-core assets which could reduce net debt. Incremental wins of large contracts including Managed Services have been excluded from this analysis as have any needs for incremental financing around setup costs, although it is envisaged that certain initial costs could be met from organic resources. The Directors believe that based on the strong financial dynamics of incremental Managed Services contracts that they should be able to secure financing and are already in discussions with various debt and equity providers. Based upon these projections the Group has adequate working capital for the 12 months following the date of signing these accounts. For this reason they continue to adopt the going concern basis in preparing the financial statements."
3. Segment reporting
Operating segments ongoing business
The Board considers the Group on a Business Unit basis. Reports by Business Unit are used by the chief decision-maker in the Group. The Business Units operating during the year are the four operating companies Westminster Aviation, Westminster International, Sovereign Ferries and Longmoor Security. This split of business segments is based on the products and services each offer.
Managed Services Aviation
Technology
Group and Central
Managed Services Sovereign Ferries
Managed Services Longmoor
Group Total
'000
'000
'000
'000
'000
'000
2015
Supply of products
-
795
-
-
-
795
Supply and installation contracts
-
1,546
-
-
96
1,642
Maintenance and Services
2,450
168
-
-
4
2,622
Training courses
11
1
-
-
-
12
Intragroup sales
(812)
(804)
-
-
(96)
(1,712)
Revenue
1,649
1,706
-
-
4
3,359
Segmental underlying EBITDA
1,264
(140)
(1,616)
37
19
(436)
Highlighted items (note 4)
(1,120)
-
77
-
-
(1,043)
Depreciation & amortisation
(94)
(10)
(22)
(37)
(8)
(171)
Apportionment of central overheads
(948)
(837)
1,878
-
(93)
-
Segment operating result
(898)
(987)
317
-
(82)
(1,650)
Finance cost
-
-
(339)
-
1
(338)
Taxation (charge)/benefit
(7)
-
-
-
-
(7)
Loss for the financial year
(905)
(987)
(22)
-
(81)
(1,995)
Segment assets
1,272
149
1,565
2,454
25
5,465
Segment liabilities
343
434
2,962
38
2
3,779
Capital expenditure
186
-
20
2,431
33
2,670
Managed Services Aviation
Technology
Group and Central
Managed Services Longmoor
Group Total
'000
'000
'000
'000
'000
2014
Supply of products
-
890
-
-
890
Supply and installation contracts
-
267
-
-
267
Maintenance and Services
2,180
275
-
44
2,499
Close protection services
-
-
-
-
-
Training courses
9
-
-
63
72
Intragroup sales
-
(239)
-
-
(239)
Revenue
2,189
1,193
-
107
3,489
Segmental underlying EBITDA
380
(429)
(1,558)
51
(1,556)
Operating Exceptionals (note 4)
(530)
(10)
(54)
(87)
(681)
Depreciation & Amortisation
(129)
(10)
(23)
(5)
(167)
Apportionment of central overheads
(1,063)
(498)
1,645
(84)
-
Segment Operating result
(1,342)
(947)
10
(125)
(2,404)
Finance cost
-
-
(37)
-
(37)
Income tax (charge)/benefit
9
-
-
-
9
Loss for the financial year
(1,333)
(947)
(27)
(125)
(2,432)
Segment assets
1,331
1,899
2,313
59
5,602
Segment liabilities
462
1,880
821
21
3,184
Capital expenditure
280
6
110
3
399
4. Operating exceptional items
2015
2014
'000
'000
Loss of margin arising from fall in passenger numbers due to Ebola crisis
1,120
537
Loss on disposal of property, plant and equipment
-
20
Restructure costs -- Longmoor. 2014 represents fixed costs eliminated in the year
-
87
Receipt from vendors of CTAC (dispute on acquisition consideration price)
(77)
-
1,043
644
5. Finance cost
2015
2014
'000
'000
Finance costs:
Interest payable on bank and other borrowings
(1)
(10)
Coupon Interest payable on convertible loan notes
(121)
(88)
(122)
(98)
Finance income:
Amortised finance cost on convertible loan notes
(216)
61
Finance costs and income, net
(338)
(37)
6. Taxation
Analysis of (credit)/charge in year
2015
2014
'000
'000
Reconciliation of effective tax rate
Loss on ordinary activities before tax
(1,988)
(2,441)
Loss on ordinary activities multiplied by the standard rate of corporation tax in the UK of 20.0%
(398)
(489)
Effects of:
Expenses not deductible for tax purposes
77
60
Capital allowances less than depreciation
(72)
85
Other short term timing differences
3
15
Recognised/unrecognised losses carried forward
390
329
Potential Charge in Overseas Subsidiary
7
(9)
Total tax charge/(credit)
7
(9)
Tax losses available for carry forward (subject to HMRC agreement) were 10.9m (2014: 8.9m).
7. Loss per share
Loss per share is calculated by dividing the loss 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:
2015
2014
'000
'000
Issued ordinary shares
Start of year
55,145
46,949
Effect of shares issued during the year
2,029
2,290
Weighted average basic and diluted number of shares for year
57,174
49,239
For the years ended 31 December 2015 and 2014, the issue of additional shares on exercise of outstanding share options would decrease the basic loss per share and there is therefore no dilutive effect. Loss per share excluding was 3.49p (2014: 4.94p).
8. Convertible Loan Notes
The Company had the following convertible loan notes outstanding during the year.
Secured Convertible Loan Notes ("CLN")
Senior Unsecured Zero Coupon Convertible Preference Notes ("CULN")
Amount
2.245m
1.65m drawn down 0.75m outstanding at 31 Dec 2015
Conversion Price
35p
Security
Secured fixed and floating subordinate to HSBC
Unsecured
Redemption Date
19 June 2018
Conversions allowed within certain market driven parameters
Management Fee
25,000 per annum
nil
Coupon
10%
nil
Conversion Detail
Company can force conversion if > 65p for 15 working days after 19 June 2014. Company can make repayment without penalty if > 42p for 15 working days after 19 June 2014
The conversion price for these loan notes is calculated as the lessor ofi) 39 pence and ii) 90% of the arithmetic average of the five lowest daily volume weighted average share price calculations per ordinary share out of the ten trading days prior to conversion.
Host Debt
2015
2014
'000
'000
At 1 January
538
651
Issued in the Year
2,609
-
Amortised Finance Cost
337
88
Interest Paid
(132)
(78)
Conversion
(860)
(123)
Host Debt At 31 December
2,492
538
Other Borrowings
95
-
Borrowings at 31 December
2,587
538
Reconciliation of Conversion
2015
2014
'000
'000
Amortised Loan Note Interest Cost Element
(40)
(97)
Principal Amount Converted
900
220
860
123
Analysis of movement in debt at principal value (excluding IFRS impacts), memorandum only
2015
2014
'000
'000
Opening Balance 1 January
575
795
Fresh Issue for Cash
3,320
-
Conversion into Equity
(900)
(220)
Closing Balance 31 December
2,995
575
9. Cash flow adjustments and changes in working capital
The following non-cash flow adjustments and adjustments for changes in working capital have been made to loss before tax to arrive at operating cash flow
2015
2014
'000
'000
Adjustments:
Depreciation, amortisation and impairment of non-financial assets
171
167
Financing costs
338
37
Loss /(Profit) on disposal of non-financial assets
4
5
Share-based payment expenses
76
52
Total adjustments
589
261
Net changes in working capital:
(Increase)/decrease in inventories
15
31
Decrease / (increase) in trade and other receivables
1,625
(628)
(Decrease) / increase in trade, other payables and deferred income
(1,431)
1,132
Total changes in working capital
209
535
10. Events after the reporting period
Since 1 January 2016 the Company issued the following ordinary shares of 10 pence each arising on conversions of CULN by Darwin
Date
Number of ordinary
10p shares issued
Amount of CULN
converted
Conversion Price
per Share (pence)
25 January 2016
966,978
150,000
15.5512
15 March 2016
1,590,836
200,000
12.5720
4 April 2016
1,601,753
175,000
10.9255
18 April 2016
2,000,000
200,000
10.0000
19 May 2016
500,000
50,000
10.0000
On 22 February the Company issued a further 475,000 of CULN to Darwin Strategic raising approximately 403,000 net of expenses and redemption premium. On that day a 589,330 detachable and fully vested warrants over 10p ordinary shares were issued to Darwin. They have a strike price of 20.15p and a life of 3 years from date of grant.
On 3 June 2016 the Company announced the issue of 13,000,000 ordinary shares of 10p to institutional investors. 10,000,000 were issued to Hargreave Hale who also received 5,000,000 detachable and transferrable warrants over 10p ordinary shares. These have a life of 3 years from the date of issue and have an exercise price of 12p per share warrant over 10p ordinary Shares ("Warrant") valid for 3 years from the date of issue, exercisable at 12p per share. The Warrants may not be exercised until the relevant authorities have been granted at the Company's AGM on 30 June 2016. The shares above are issued in 2 tranches:
A first tranche of 9,885,895 new Ordinary Shares (the "First Tranche Shares") will be issued immediately following settlement on or by 8 June 2016, raising 988,589 before expenses.
A second tranche of 3,114,105 new Ordinary Shares (the "Second Tranche Shares") will be issued on or around 1 July 2016, subject to, inter alia , the receipt of shareholder approval of the necessary resolutions at the Annual General Meeting. This will raise a further 311,411 before expenses.
The remaining 3,000,000 First Tranche Shares were issued to another institutional investor.
11. Publication of Non-Statutory Accounts
The financial information set out above does not constitute the Company's Annual Report and Financial Statements for the years ended 31 December 2015 or 2014. The Annual Report and Financial Statements for 2014 have been delivered to the Registrar of Companies and those for 2015 will be delivered following the Company's Annual General Meeting. The auditor's reports on both the 2015 and 2014 accounts were unqualified, did not draw attention to any matters by way of emphasis and did not contain statements under s498(2) or (3) of the Companies Act 2006. Whilst the financial information included in this preliminary announcement has been computed in accordance with International Financial Reporting Standards (IFRSs) this announcement does not itself contain sufficient information to comply with IFRSs.Copies of the Annual Report and Financial Statements for the year to 31 December 2015 will be posted to shareholders by 9 June 2016 and will be obtainable from the Company's registered offices or www.wg-plc.com when published. The information in this preliminary announcement was approved by the Board on 8 June 2016.
This information is provided by RNSThe company news service from the London Stock ExchangeENDFR FPMATMBJMBFF
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