Westminster Group Plc

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

Interim Results for the six months to 31 December 2023

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 31 December 2023 (the 'Period') ("H2 2023").

Highlights: 

·    Ratification process underway re 5 airports project in Democratic Republic of Congo (DRC).

·    Progress made with other managed services opportunities.

·    Delivered products and services to 33 countries around the world.

·    Guarding business expanded.

·    Group revenues of £2.9m (H1 2023: £3.5m; H2 2022: £5.6m).

·    Gross margin at 57% (H1 2023: 64%; H2 2022: 56%). 

·    Administrative expenses (continuing) are down to £1.7m (H1 2023: £2.5m; H2 2022: £2.7m).

·    Continuing business EBITDA profit of £44k (H1 2023: Loss £117k; H2 2022: Profit £340k).

·    Continuing business Operating Loss £79k (H1 2023: Loss £293k; H2 2022: Profit £222k).

·    Loss per share (with exceptional loss, and discontinued ops, included) of 0.58p (H1 2023: Loss 0.09p; H2 2022: Profit 0.23p).

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

"We continue to battle against probably one of the worst world economic and political backgrounds in recent times. I am pleased to report therefore that, despite the global uncertainty and economic challenges, our underlying business continues perform largely to expectations although revenues fell in this six-month period to £2.9m largely due to the economic climate delaying some capital-intensive orders.  However, due to a cost cutting programme and careful resource management we have delivered a near break-even result for ongoing operations with an EBITDA profit of £44k.

"Our business development activities made significant progress in the period which, whilst not benefitting the period in question, will have a material impact in the current year. A key development being progress on the long-awaited ratification process, currently being completed, being the final part of the formal procurement procedure for the 10+ year contract signed in June 2021 for security services to 5 airports in the Democratic Republic of the Congo ('DRC'), Central Africa.

"We started 2024 with an order book of £1.1m and recurring revenues of £3.7m which provide a healthy start for the year. With DRC expected to come on stream and other potential projects in the pipeline we believe the months and year ahead will be transformative for the Group."

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 continue to battle against probably one of the worst world economic and political backgrounds in recent times. I am pleased to report therefore that, despite the global uncertainty and economic challenges, our underlying business continues perform largely to expectations although revenues were down.  However, due to a cost cutting programme and careful resource management we have delivered a near break-even result for ongoing operations.

Traditionally our business is weighted towards the second half of the calendar year as we complete and deliver projects secured during the earlier part of the year. H2 2023 was an anomaly in this respect largely due to delayed orders for some of our larger technology projects because of the global economic situation and not helped by a delayed stage payment of $847k from the European Investment Bank for a large airport project in Southeast Africa, now received, which meant that project could not be completed in 2023 as planned.

In December we settled our dispute with Scanport, Ghana regarding the discontinued port project receiving $500k USD in settlement. Whilst the figure is less than the carrying figure of £1.1m in our accounts, we considered the terms of the settlement to be favourable and timely given the expected development of the Group's managed services business in early 2024 as mentioned below.

Consequently in H2 2023 we achieved revenues of £2.9m (H1 2023 £3.5m; H2 2022: £5.6m). Gross Margins at 57% were in line with expectations (H1 2023: 64% H2 2022: 56%) leading to a near break-even result for ongoing operations with an EBITDA profit of £44k (H1 2023: Loss £117k; H2 2022: Profit £340k) and Loss £79k (H1 2023: Loss £293k; H2 2022: Profit £222k).

Our aviation security business continues to perform ahead of budget. Our West African airport operation and collaboration with Summa is working well and have been a positive development. During the period we continued to provide post pandemic aviation security (AVSEC) training to staff at a major UK airport and have secured contracts for AVSEC training in other airports around the world, expanding our network of potential managed services opportunities for the future. Our $1.7 million project to upgrade security at two airports in Southeast Africa, funded by the European Investment Bank (EIB), was delayed due to an administrative issue between the EIB and the country concerned. This meant progress on the project had to be halted whilst the payment issue was resolved and so was not completed in 2023 as planned. I am pleased to report the $847k payment has now been received and the project is back underway and will be completed in 2024.

I am pleased to report we have made significant strides forward with several of the large-scale, long-term managed services airports and ports opportunities, each of which would, when secured, provide multi-million-pound step changes in annual revenues. Foremost amongst these is our project in the Democratic Republic of the Congo (DRC) for which I am delighted to announce that the long-awaited ratification process is currently being completed, being the final part of the formal procurement procedure for the now 10+ year contract signed in June 2021 for security services to 5 airports in the Democratic Republic of the Congo ('DRC'), Central Africa. Arrangements are now being made for a senior Westminster team to travel to the DRC with a UK Government Trade delegation in April to hopefully finalise matters and to prepare for commencement of the project. We expect to make a further announcement after that visit.

DRC will be a key addition to our international aviation security services, and we believe the country has exciting growth potential. With a surface area equivalent to that of Western Europe it is, by area, the largest country in sub-Saharan Africa, the second largest in all of Africa, and the 11th-largest in the world. It is also the most-populous Francophone country in the world. Air travel is therefore an important and a necessary requirement within this vast country. The country is extremely rich in natural resources and has the potential for sizeable economic growth. I look forward to Westminster having a long-term presence in the country and in playing our part in the successful growth and security of the country's numerous airports.

In our 2022 Annual Report published in June 2023 we stated we could potentially secure one or maybe two new large-scale manage services contracts in 2023. The outcome and timing of these complex projects are never certain, particularly in a challenging world environment, however, whilst we did not manage to finalise contracts in 2023, we have made important progress and from current activity and discussions underway we do expect secure these and potentially other such contracts in 2024.

Our guarding business continues to perform well.  The H2 2023 revenues are an increase over the first half of the year and new contracts have been secured.  We are continuing to develop a strategy which sees both the quantity and quality of our guarding clients improving.

Our focus has been and will continue to be on expanding our international operations, predominantly in emerging markets, as we believe that is where we will see significant growth opportunities, particularly with our managed services opportunities. However, the ongoing global economic situation of the past year has created some challenges, not just with increasing costs but significantly with some economies suffering substantial currency devaluation, in turn, leading to currency restrictions and in some places civil unrest. This has understandably led to some order delays, particularly with larger capital-intensive projects. Not-with-standing these challenges in H2 2023, we delivered products and services to 33 countries around the world and we fully expect some if not all of the delayed orders to eventually be secured. 

In addition to building our international operations and to provide some resilience against world events, we have been undertaking a strategy of developing a significant UK presence with an enviable blue-chip client base, such as the Palace or Westminster, Scottish Parliament, Tower of London, UK Border Force, UK Prisons, to name but a few, which provide resilient recurring revenue streams. We have previously reported on the opportunities for our business that we anticipate could arise from the long-expected Martyn's Law legislation and we were pleased to see that included in the Kings Speech on 7 November 2023 and expect it to become law this year. We have already assisted a number of key-customers and landmark buildings to become compliant ahead of the legislation and we are active in developing further opportunities and to be recognised as a leading provider of solutions under the legislation.

Financial

Revenues were at £2.9 million (H1 2023: £3.5 million; H2 2022: £5.6 million) for the first half year.  This decrease is represented primarily by the end of the Ghana port operation and lower Technology sales due to economic uncertainty in the world.  H2 2022 benefited from a large solutions sale.

The Group generated a continuing gross profit of £1.6 million (H1 2023: £2.2 million; H2 2022: £2.9 million) which equates to a gross margin of 57% (H1 2023: 64%; H2 2022 56%).  The increase in high margin services sales in H1 2023 changed the margin mix which reverted to a more normal mix in H2 2023.

Cost cutting and careful control over expenses reduced continuing administration from £2.7 million in H2 2022 and £2.5 million in H1 2023 to £1.7 million in H2 2023.

The continuing operating loss was £0.1 million (H1 2023: loss of £0.3 million; H2 2022: profit of £0.2 million). The reduction in the administration expenses was not enough to fully counter the drop in sales and change in the margin mix.

The RiverFort EPSA has been previously described in the 2020, 2021 and 2022 accounts. 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 and booked a sundry debt of £1.75m. The loan was to be repaid and the sundry debt settled by selling down the shares.  The mezzanine loan was fully repaid in December 2020.  As at the 31 December 2023 there remained 4,300,696 Westminster shares, held to the Company's order equally by RiverFort & YAII, the proceeds of which, when sold, will be for the benefit of Westminster. If those shares had been sold at 31 December 2023, due to the low share price at that time, the Company would have received proceeds of  £68,811.14  but would have incurred a book loss of £1.05m. Whilst the Company can choose to enact the sale of these shares at any time, it has not done so and there is no reason nor pressure to do so until the Company's share price has reached a target price of 26p. The Company believes that with imminent and expected new long-term contracts to be gained over the next 24 months the target price or higher can be achieved in due course at which time the shares can be sold for the benefit of the Company. In the meantime, for the sake of good governance it has been decided to mark to market the underlying shares as at 31 December 2023 and make a provision of £1.05m in Sundry Gains and Losses. This accounting treatment reflects the current fair value of the underlying shares. This provision will be assessed at each accounting reporting date against the market share price until such time as the shares are sold, should, as the board anticipates, the price be higher than the current market price with any profit from the reduction of the provision being recognised in future Profit & Loss statements.

Cash balance as at 31 December 2023 was: £0.2 million overdraft (30 June 2023: £0.1 million, 31 December 2022: £0.3 million).  The Group also has overdraft facilities of £0.385 million which were partially unutilised at 31 December 2023.  However, by 31 January 2024, the group had £0.85m in the bank.   Working capital remains strong with receivables at £3.0m (H1 2023: £4.8m H2 2022: £4.8m) vs creditors of £1.8m (H1 2023: £1.9m H2 2022: £2.3m).

Earnings per share was a loss of 0.58 pence (H1 2023: 0.09p loss; H2 2022 0.23p profit).

Outlook

We started 2024 with and order book of £1.1m and recurring revenues of £3.7m which provide a healthy start for the year. With DRC expected to come on stream and other potential projects in the pipeline we believe the months and year ahead will be transformative for the Group.

Peter Fowler, 

Group Chief Executive  

27 March 2024