THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF ARTICLE 7 OF EU REGULATION 596/2014

Westminster Group Plc

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

Interim Results for the six months to 30 June 2018

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 2018.

Operational Highlights:

·     Major long-term contract signed in May 2018 relating to one of 60 airports in Iran. Significant progress has been made in overcoming challenges posed by the US withdrawal from the Joint Comprehensive Plan of Action (JCPOA) Agreement and the Board is committed to the exchange of letters and commencement of the project as soon as possible.

·     $4.5m Middle Eastern advanced vehicle screening solutions contract awarded to the Technology Division in March 2018 which is currently underway and expected to be largely, if not wholly, completed by year end.

·     H1 2018 showed a 34% increase in Technology Division sales enquiries received at 1,008 (H1 2017: 753) resulting from refocussed sales activity.

·     H1 2018 sales order intake increased by 389% to £3.9m (H1 2017: £0.8m) including new contract awards for equipment, training and services to a number of airports around the world.

·     We still expect to be EBITDA positive for the full year.

·     West Africa airport operations performing broadly in line with expectations. The extended elections in Sierra Leone impacted airport passenger numbers in H1 2018, but a strong start to the year and recovery from June have largely balanced this. With new carriers such as Turkish Airlines commencing operations in 2018 we expect full year passenger numbers to be ahead of 2017.

·     New Managing Director appointed for Technology Division in February 2018.

·     Further PLC board changes in accordance with our ongoing strategic review. Sir Tony Baldry moved from Non-Executive to Executive Chairman in January. Patsy Baker appointed as a Non-Executive Director from 1 June 2018. Martin Boden will be leaving the Company as Chief Financial Officer on 31 October 2018 to pursue new opportunities. Mark Hughes BSc MBA FCA has been appointed to replace Martin and he joins the Company as Chief Financial Officer on 1 November 2018.

Financial Highlights:

·     Group revenues of £2.6m (H1 2017: £2.9m). These revenues exclude £0.7m (H1 2017 £0.1m) of unrecognised revenue from the Middle Eastern screening and other projects held in Work in Progress (WIP) that will be largely recognised along with the full ME screening project value in H2 2018.

·     Change in accounting classification on Gross Margin to classify direct project costs within Cost of Sales. Gross Margin unchanged at 36% (H1 2017: 36%).

·     Reduction of adjusted EBITDA loss to £0.4m (H1 2017: loss £0.6m).

·     Reduction in reported loss before tax to £1.2m including £0.3m relating to a non-cash financing charge associated with the CLN extension (H1 2017: loss of £1.4m).

·     Loss per share reduced to 1.0p (H1 2017: 1.4p).

·     £0.8m new equity before expenses raised in January 2018 and a further £0.7m raised since June 2018, including $250k (£191k) from convertible redeemable unsecured loan notes carrying a 5% coupon from a strategic investor.

·     Convertible loan notes extended in May 2018 to 30 June 2019 at a coupon of 12%; the Company has an option to extend to 31 December 2019 at a coupon of 15%.

·     Cash balance of £0.3m at 30 June 2018 and £0.8m at 14 September 2018 (30 June 2017: £0.8m).

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

"Both our Managed Services and Technology businesses have performed in line with expectations and our financial results for the period show an improved performance compared to the first half of 2017. This, together with around £0.7m of unrecognised revenue already in WIP and the balance of the $4.5m Middle Eastern vehicle screening contract, which we expect to deliver in H2 2018 of this year, producing a strong year on year revenue growth, keeps us on track to deliver an EBITDA positive result for the full year to 31 December 2018.

"The first six months of the financial year have been defined by our intense focus, efforts and achievements in developing our Managed Services business, which has the potential to deliver transformational growth. Not least in this respect was the signing of the large scale, long term contract for one of 60 airports in Iran and I am pleased to report that we continue to work with our Iranian customer and the EU Authorities in order to address the challenges created by the US unilateral withdrawal from the JCPOA and with a view to commencing the project at the earliest opportunity once the remaining issues have been resolved.

"Our West Africa airport operations performed broadly in line with expectations. The extended elections in Sierra Leone impacted airport passenger numbers for a few months in H1 2018 however a strong start to the year and recovery in latter months have largely balanced this. With new carriers such as Turkish Airlines commencing operations we expect full year passenger numbers to be ahead of 2017.

"Our Managed Services business has a growing portfolio of opportunities it is pursuing and has in the period secured a number of new contract awards for equipment, training and services to a number of airports around the world. We continue to work towards signing at least one further long term Managed Services contract this year although, as always, there is never certainty as to timing or outcome in these matters.

"Our Technology Division continues to win business from countries across the world and is developing a number of large scale opportunities in addition to the $4.5m Middle East contract secured earlier this year.

"We have identified complementary new potential business opportunities that will assist our growth into new markets which are being actively pursued.

"We expect to secure funding in Q4 2018 for our Iranian contract and to support the further growth of the business, for which planning is already in place.

"We have a strong board with diverse skills and expertise. Sir Tony Baldry moved from Non-Executive to Executive Chairman in January. In June I was delighted to welcome Patsy Baker to the Board, Patsy has enormous experience of companies growing their global business and brings considerable public relations experience to the Board. Martin Boden will be leaving the Company as Chief Financial Officer on 31 October 2018 to pursue new opportunities. Mark Hughes BSc MBA FCA has been appointed to replace Martin and he joins the Company as CFO on 1 November 2018. Mark's wide-ranging international experience, particularly in emerging markets together with his considerable experience in capital markets and in M&A work as CFO of listed (main market and AIM) venture capital, private and private equity owned companies, will be a great asset in assisting the Company achieve its growth potential. I would like to express my thanks to Martin Boden for his support during his time with the business and we wish him well for the future."

For further information please contact:

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.

Chief Executive Officer's Review

Overview

Both our Managed Services and Technology businesses have performed in line with expectations and our financial results for the period show an improved performance compared to the first half of 2017. This, together with around £0.7m of unrecognised revenue already in WIP and the balance of the $4.5m Middle Eastern vehicle screening contract, which we expect to deliver in H2 2018 of this year producing a strong year on year revenue growth, keeps us on track to deliver an EBITDA positive result for the full year to 31 December 2018.

Managed Services

The first six months of the financial year have been defined by our intense focus, efforts and achievements in developing our Managed Services business, which has the potential to deliver transformational growth. Not least in this respect was the signing in May of the large scale, long term contract for one of 60 airports in Iran.

Following the US unilateral withdrawal from the Joint Comprehensive Plan of Action (JCPOA) we had to put the project temporarily on hold whilst we worked with our Iranian customer and the EU Authorities in order to address a number of challenges created by the US action. Despite the fact that none of the proposed equipment or services related to this project are covered by existing or proposed, new primary or secondary sanctions, the US position has created some uncertainty in the business world. Westminster does not have any significant US business activities and the US is not a target market for us and so the US position is not a threat to our business. Unfortunately, some of the proposed equipment manufactures in the supply chain do have US exposure and so we have had to address this and in some cases source alternative suppliers.

Equally the restrictions on financing and banking being promoted by the US have created challenges and we have had to put various measures in place to deal with these which have included changes to our UK banking arrangements and ensuring we have robust payment and receipt processes in place that do not involve any funds coming from or going to Iran. The project is a Euro denominated contract and there will be no USD transactions.

Insurance is another area that has been affected by the US position however I am pleased to report we are making good progress in this respect.

We have been working closely with our Iranian client on addressing all these issues and are currently preparing an addendum to the contract covering proposed changes in equipment, order of the rollout programme and the financial and payment structures. Both parties remain committed to the project and are eager to exchange board letters to commence the project at the earliest opportunity.

On a wider front our Managed Services business has a growing portfolio of opportunities it is pursuing and has, in the period, secured a number of new contract awards for equipment, training and services to a number of airports around the world and we continue to work towards signing at least one further long term Managed Services contract this year although, as always, there is never certainty as to timing or outcome in these matters. These opportunities represent a major step in the transition of Westminster into a long-term managed services business.

Our West Africa airport operations performed broadly in line with expectations. The extended elections in Sierra Leone impacted airport passenger numbers for a few months in H1 2018 however a strong start to the year and recovery in latter months have largely balanced this. With new carriers such as Turkish Airlines commencing operations we expect full year passenger numbers to be ahead of 2017. The new government of Sierra Leone is also keen on encouraging new airlines and more passenger traffic to the country and we are exploring with them ideas on how this may be achieved.

Whilst airport security remains the key focus of our Managed Services Division, there are also other opportunities such as port security and other infrastructure security solutions that we are pursuing.

Technology Division

The Technology Division continues to secure orders for a wide range of products and services delivered to clients all over the world. We are not a manufacturer and are product agnostic, enabling us to deliver the best solution for any given application.

In February we appointed a new and experienced Managing Director, Stuart Gilbert, to head up the Technology business and we are already seeing the benefit of this appointment with increased sales activity and order intake significantly ahead of the same period last year.

In March the Technology Division secured a $4.5m advanced vehicle screening solutions contract for an important client in the Middle East which is currently underway and expected to be largely, if not wholly, completed by year end.

The expertise of the Technology Division underpins the proposals from our Managed Services Division where we can offer best in class equipment and solutions for our potential customers in emerging markets.

Ferry Operation

Having exited the ferry operations at the end of September 2017, we continue to operate and manage the ferry terminals in accordance with our 21-year agreement although revenues currently are not material. We still have the Sierra Queen and are seeking to sell her at the earliest opportunity. The book value was written down to nil at 31 December 2017.

Strategic Review & Board Changes

In our Annual Report issued in June we provided an update on our ongoing strategic review to ensure we are well positioned to maximise opportunities going forward and successfully take the business to a new level. As part of this review we have identified complimentary new potential business opportunities that will assist our growth into new markets which are being actively pursued.

As part of the review process we have made a number of changes and new appointments to our senior management and the Board. Sir Tony Baldry moved from Non-Executive to Executive Chairman in January. In June I was delighted to welcome Patsy Baker to the Board, Patsy has enormous experience of companies growing their global business and brings considerable public relations experience to the Board. Martin Boden will be leaving the Company as Chief Financial Officer on 31 October 2018 to pursue new opportunities. Mark Hughes BSc MBA FCA has been appointed to replace Martin and he joins the Company as CFO on 1 November 2018. Mark's wide-ranging international experience, particularly in emerging markets together with his considerable experience in capital markets and in M&A work as CFO of listed (main market and AIM) venture capital, private and private equity owned companies, will be a great asset in assisting the Company achieve its growth potential. I would like to express my thanks to Martin Boden for his support during his time with the business and we wish him well for the future.

Our business is set to benefit from unprecedented growth opportunities and it is essential we have the right strategies, people and processes in place to successfully deliver such growth. Accordingly, the changes we have made to date and intend to make over the coming months will, I believe, serve the Company well and greatly assist our planned growth.

Financial

Revenues for the first half year were in line with the Boards' expectations at £2.6m (H1 2017: £2.9m). Managed Services revenues were £1.7m (H1 2017: £1.8m). The Managed Services revenues were impacted by the elections in Sierra Leone earlier this year and, as expected, have picked up again from June onwards. Technology Division revenues, excluding £700k of unrecognised revenue held in WIP, were £0.9m (H1 2017: £1.0m). Around 16% (H1 2017: 10%) of the Technology Division revenues were from maintenance and service as we continue to build the recurring revenue base of the Technology Division. Technology Division revenues are lumpy and will be strongly ahead of last year in H2 2018 following delivery of the $4.5m Middle Eastern vehicle screening contract.

We have changed our accounting classification on gross margin in 2018 to classify direct project costs within cost of sales. This change in classification reduces gross margin but has no impact on operating loss or EBITDA. The Group generated a gross profit of £0.9m (H1 2017: £1.0m) which equates to a gross margin of 36% (H1 2017: 36% restated on a like for like basis).

Administrative expenses reduced by 26% to £1.6m (H1 2017: £2.2m).  Exceptional items amounted to £0.2m (H1 2017: £0.3m). In both H1 2018 and H1 2017 the exceptional items primarily related to the pre-contract costs of the new Iranian contract.

The loss from operations of £0.7m was £0.5m lower than the loss of £1.2m in H1 2017 and the EBITDA loss of £0.4m compares to an EBITDA loss of £0.6m in H1 2017.

Our underlying cash interest cost was £0.2m (H1 2017: £0.1m) reflecting primarily the interest on the convertible loan notes. A further £0.3m (H1 2017: £0.1m) of non-cash financing charges arose from the amortisation and extension of the convertible loan notes. In total, the financing costs amounted to £0.5m (H1 2017: £0.2m).

Earnings per share were a loss of 1.0 pence (H1 2017: loss of 1.4 pence). Although the number of shares in issue increased, the loss after tax decreased resulting in the reduced loss per share over H1 2017.

Statement of Financial Position and Cash Flow

The Group ended the period with a £0.3m cash balance, and at 14 September 2018 the cash balance was £0.8m. The net cash used in operating activities was £0.7m (H1 2017: £0.7m). No cash was used in investing activities (H1 2017: £0.1m) and £0.75m of cash was generated from financing activities being the £0.8m of new equity raised in January 2018 before expenses (H1 2017: £1.7m equity).

At the end of the period, the Group had a convertible loan note outstanding with a principal of £2.2m (H1 2017: £2.2m). The coupon is 12% payable quarterly in arrears, it has a conversion price of 25 pence and is repayable in June 2019. The Company has an option to extend repayment to 31 December 2019 with an increased coupon of 15% from July to December 2019.

We raised £0.8m of new equity in January and a further £0.7m raised since June 2018 including $250k from convertible redeemable unsecured loan notes carrying a 5% coupon from a strategic investor. These funds provide financing for the pre-contract costs of the Iranian project and for the other contracts we are working on. Plans are in place to raise further funds to support the Iranian contract and the other expected new Managed Services airport contract and we expect to complete this exercise in Q4.

Outlook

Our vision is to build a global business with strong brand recognition delivering niche security solutions and long-term managed services to high growth and emerging markets around the world.

Whilst operating in emerging markets does carry a higher risk of delays and disruption, is time consuming and involves a degree of frustration and bureaucracy, with perseverance and diligence the potential rewards are substantial.

The signing of the large scale long term Iranian airport contract and the $4.5m Middle Eastern vehicle screening contract together with numerous smaller contracts around the world so far this year demonstrate the Company's market reach and ability to pursue and close complex project opportunities. Over the next few months and years we have an opportunity to achieve unprecedented growth from the prospects we are pursuing around the world, and I believe we are closer now than we have ever been in delivering on our vision. The Board and I remain committed to delivering on this potential and we thank our shareholders and other stakeholders for their continued support. 

Peter Fowler

Chief Executive Officer