Westminster Group Plc

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

Interim Results for the six months to 30 June 2022

Westminster Group Plc (AIM: WSG), a leading supplier of managed services and technology-based security solutions, announces its unaudited interim results for the six months ended 30 June 2022 (the 'Period').

Operational Highlights: 

·    Delivered products and services to 41 countries around the world.

·    Encouraging progress on DRC Ratification process and believed to be on track to finalise in Q4 2022.

·    West African airport operations recovered from the Covid impact and now operating at record levels.

·    Strong recovery in Training business with numerous new contracts including major UK airport.

·    Palace of Westminster and Tower of London projects successfully underway with extension of scope in progress.

·    KSA office now fully operational and new contracts being secured.

Financial Highlights:

·    Group revenues up 13% from H1 2021 to £3.9 million (H1 2021: £3.5 million, H2 2021: £3.6 million).

·    Gross margin increased to 51% (2021: 45%). 

·    Operating Loss of £0.78 million (H1 2021: Loss £0.93 million, H2 2021 Loss £0.99 million).

·    Loss per share of 0.24p (H1 2021: Loss 0.32p).

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

"As stated in our recent Annual Report, the outlook for 2022 is positive as the impact of the global pandemic recedes and with the worst of the disruption and travel challenges behind us. I am encouraged to see improvements in the various areas of our business that were heavily impacted during the past couple of years.

"Whilst we are seeing recovery and growth in various parts of the business, I am particularly pleased to see our West African airport operations operating at new record levels, ahead of pre-pandemic volumes. Our training business is also showing strong recovery with a number of important new contracts including a major UK airport.

"It is also encouraging to see some of the larger project opportunities we have been working on, which were delayed during the pandemic, once again looking promising.

"I am also delighted to be able to report that progress has been made on ratification process for the DRC airport security contract, which we announced in June 2021, and believe we are on track to finalise matters and commence operations in Q4 as previously stated.

"H1 2022 has performed largely to expectation, delivering an improvement on H1 2021 as our various business sectors recover from the pandemic.

"Whilst we remain mindful of global challenges, given the momentum and recovery we are seeing, together with our extensive quote bank and the number of sizeable near-term project opportunities we are working on, we remain optimistic we can meet 2022 financial year market expectations."

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 (including Fever 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 (NGOs) and blue-chip commercial organisations.

The Westminster Group Foundation is part of the Group's Corporate Social Responsibility activities. 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.

[THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION AS DEFINED IN ARTICLE 7 OF THE MARKET ABUSE REGULATION NO. 596/2014 ("MAR") WHICH IS PART OF UK LAW BY VIRTUE OF THE EUROPEAN UNION (WITHDRAWAL) ACT 2018. UPON THE PUBLICATION OF THIS ANNOUNCEMENT, THIS INSIDE INFORMATION IS NOW CONSIDERED TO BE IN THE PUBLIC DOMAIN]

Chief Executive Officer's Review

Overview

We stated in our recent Annual Report that the outlook for 2022 is positive as the impact of the global pandemic recedes, despite the first few months of the year being impacted. However, with the worst of the pandemic disruption and travel challenges behind us, global uncertainty remains with conflicts and the economic crisis, and we continue to monitor events and plan accordingly.

Against that backdrop I am encouraged therefore to see improvements in the various areas of our business that were heavily impacted during the past couple of years. It is also encouraging to see some of the larger project opportunities we have been pursuing, which were delayed during the pandemic, once again looking promising.

H1 2022 has performed largely to expectation, delivering an improvement on H1 2021 as our various business sectors recover from the pandemic. Revenues for H1 2022 (£3.9m) were a 13% improvement on H1 2021 (£3.5m) whilst gross profit improved by 27% to £2.0m (H1 2021: £1.6m), resulting in an EBITDA loss of £648k (H1 2021: loss £810k).

In the Period we have supplied products and services to 41 countries around the world, including some important new contract wins such as the US military and the Organization for Security and Co-operation in Europe (OSCE). We continue to have an active business development programme and continue to develop a number of large-scale project opportunities in both our Services and Technology Divisions. Whilst there is never certainty of timing or outcome, we expect to secure one or more such projects in the current year.

A key focus during the Period has been to work with the various stakeholders and authorities within the DRC to finalise the ratification process for the airport security contract, which we announced in June 2021. I am encouraged by the progress that has now been made on this long outstanding issue and believe we are on track to finalise matters and commence operations in Q4 2022 as previously stated.

Our West Africa airport operations have recovered to pre-pandemic levels earlier than expected. June passenger numbers were the highest June total ever recorded and are not only ahead of budget but also 1.2% above the previous highest ever H1, pre-pandemic in 2019, which is very encouraging and bodes well for future trading.

Our Ghana port operations continue to perform to expectations although the recent agreement between the port operator and MPS and Ghana Ports and Harbours Authority to move 20% of container traffic out of terminal 3 for a period of 2 years commencing on 1 August 2022, is likely to have an impact and limit growth for that period. 

Our other West Africa port project has yet to commence operations as we wait for our client to finalise the land allocation issues with the government, but we remain ready to start once access is granted.

I am pleased to report that our KSA office is now fully operational and starting to win business. As previously mentioned, we expect KSA will produce meaningful contribution to our future revenues.

In the UK our Palace of Westminster and Tower of London projects are running smoothly and we are already discussing additional security measures to be put in place under separate contracts.

Our Training business has also rebounded strongly and, in the Period, we have secured a number of new training contracts for clients around the world, including a sizeable contract for one of the UK's largest airports.

The forthcoming Protect Duty legislation, which is expected to come into force within the UK later this year, will set out standards to protect patrons and the general public from terrorist attacks when in crowded spaces. The Home Office estimates that 650,000 UK businesses could be affected. This could include settings such as pubs, shopping centres, music venues, parks, places of worship and any other place where gatherings of people occur. We have been extremely busy preparing for this, working in collaboration with a number of stakeholders, including public figures, magazines, industry experts and the police in readiness for the upcoming legislation. With Westminster's expertise and portfolio of products and services we are well placed to assist businesses and organisation improve their security in this respect we have already secured important new business and are in contract discussions with a number of potential customers. We believe this could be a sizeable business opportunity for the Group. For more information on protect duty see here https://www.wg-plc.com/protect-duty#

We continue to monitor the JCPOA talks and are maintaining discussions with stakeholders (including the UK Government). There is some optimism that an EU brokered deal may yet be reached to remove many of the current sanctions, including banking, and should this happen we are well placed to re-energise our airport security contract, which was signed but put on hold when the US unilaterally pulled out of the JCPOA in 2018.

Financial

Revenues at £3.9 million (H1 2021: £3.5 million) for the first half year were 13% ahead of last year.  This represented a strong recovery in the Services side of the business with our West African Airport and Training leading the way.

The Group generated a gross profit of £2.0 million (H1 2021: £1.6 million) which equates to a gross margin of 51% (H1 2021: 45%).  The percentage increase is due to the increase in high margin managed services sales in H1 2022 changing the margin mix.

The operating loss was £0.78 million (H1 2021: loss of £0.93 million). This is primarily driven by the drop in product sales due to market uncertainty offset by improving gross margin.

Cash balance as at 30 June 2022: £0.4 million (30 June 2021: £3.1 million, 31 December 2021: £0.9 million).  The group also has overdraft facilities which were unutilised at 30 June 2022.  We are pleased to have secured UKEF for projects and working capital continues to remain strong with debtor balances at £3.7m vs creditors of £2.1m.

Earnings per share were a loss of 0.24 pence (H1 2021: 0.32p loss).

Outlook

We continue to invest in our worldwide business development programmes in order to deliver on our growth potential, particularly in our long-term managed services projects and as previously advised we anticipate securing at least one, possibly more, additional large-scale projects this year.

In addition, with the recovery from the pandemic impact we are seeing in our existing revenue streams, together with new and expected contracts coming on stream, we remain confident of our future growth.

This year was always expected to be H2 weighted as we emerged for the global pandemic, and this remains the case. With our recurring revenues now running at circa £5m per annum and with over £3.5m in new orders secured so far this year, the majority, if not all of which, we expect to deliver in the year, we expect to secure and deliver further revenue in the remainder of H2 in line with current market expectations.

The Board is mindful of the current global situation with serious conflicts in Ukraine and potentially Taiwan, which may present both opportunities and challenges for our business, and the growing economic crisis around the world, which may yet impact our forecasts.  However, given the momentum and recovery we are seeing together with our extensive quote bank and the number of sizeable near-term project opportunities we are working on, we remain optimistic we can meet 2022 financial year market expectations.

Peter Fowler, 

Group Chief Executive  

18 August 2022