Westminster Group Plc

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

Interim Results for the six months to 30 June 2021

& Investor Presentation

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 2021.

Operational Highlights: 

·    Secured 20-year managed services contract - 5 airports in the DRC.

·    Secured 10-year managed services contract - port in West Africa.

·    Post-period, secured high profile contract to provide security services to the Tower of London.

·    5-year security contract for the Palace of Westminster (UK Parliament) underway.

·    Ghana port operations continue to perform well.

·    West African Airport operations recovering ahead of expectations.

·    Developed new Covid-19 testing programme initiative in partnership with Certific.

·    Aviation training business graded as 'Outstanding in all Areas' by UK Civil Aviation Authority.

·    Awarded Queen's Award for Enterprise in recognition of outstanding contribution to International Trade.

Financial Highlights:

·    Group revenues up 16% from H2 2020 to £3.5 million (H1 2020: £7.0 million, H2 2020: £3.0 million).

·    Gross margin increased to 45% (H1 & H2 2020: 40%). 

·    Operating Loss of £0.93 million (H1 2020: Profit £0.48 million, H2 2020 Loss £1.22 million).

·    Loss per share of 0.32p (H1 2020: Profit of 0.16p, H2 2020: Loss 0.59p).

·    Administration expenses slightly up at £2.5 million (H1 2020: £2.3 million, H2 2020: £2.4 million) as we increase selling capacity.

·    £2.5m equity raise completed in June 2021 for recently won and future projects.

·    Group debt free, excluding £0.05 million of imputed lease debt (30 June 2020: £3.37 million debt, 31 December 2020: £0.07 million lease debt).

·    Cash balance as at 30 June 2021: £3.1 million (30 June 2020: £1.6 million, 31 December 2020: £2.1 million).

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

"In our 2020 Annual Report we stated the outlook for 2021 was looking positive and this remains the case.

"Not only are we seeing recovery and growth in our existing operations, but we are developing new initiatives and revenue streams, such as the Covid-19 testing programme, and in recent weeks and months we have announced several significant new large-scale, long-term contract wins that will produce a several million-pound step change in our annual revenues, together all underpinning confidence in our business model and growth trajectory.

"Covid-19 has, of course, continued to create challenges during the first half of 2021 with the global uncertainty causing many businesses and organisations to be cautious on their spending plans and with travel restrictions still in place in many parts of the world, resulting, as previously announced, in further 'right-shifting' of certain expected contracts and revenues. Because of this our first half year revenues are therefore down on H1 2020, which had record revenues for the first three months before the Covid-19 pandemic had any real impact. However, at £3.5m, H1 revenues are 16% ahead of the second half of 2020 (£3.0m) demonstrating recovery is underway and we believe that, providing the expected easing of restrictions and the resultant recovery continues, together with the recently secured contracts and our strong pipeline we are on track to deliver a strong performance for 2021 and we are confident in our future forecasts.

"In the last few years, we have achieved a lot, despite the challenges, and it is rewarding to see the quality of our services and our many achievements being widely recognised. I am extremely proud therefore, that in April 2021, Westminster was granted the Queen's Award for Enterprise in recognition of outstanding achievement in international trade. The award ceremony and Westminster's open day will now take place at Westminster House on 3 September 2021. Shareholders who would like to attend may register their interest here www.wg-plc.com/queens-award-2021."

Investor Presentation

Westminster Group Plc is pleased to announce that Peter Fowler (CEO) and Mark Hughes (CFO) will provide a live presentation relating to Westminster Group PLC 2021 Half Year Results via the Investor Meet Company platform on 17th Aug 2021 at 11:00am BST.

The presentation is open to all existing and potential shareholders. Questions can be submitted pre-event via your Investor Meet Company dashboard up until 9am the day before the meeting or at any time during the live presentation.

Investors can sign up to Investor Meet Company for free and add to meet Westminster Group Plc via:

https://www.investormeetcompany.com/westminster-group-plc/register-investor

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

In our 2020 Annual Report we stated the outlook for 2021 was looking positive and this remains the case.

A key strength of our business is the multiple revenue stream business model we have developed which provides a degree of resilience to world events beyond our control and which has proved invaluable during the Covid-19 crisis.

In this respect, not only are we seeing recovery and growth in our existing operations, but we are developing new initiatives and revenue streams, such as the Covid-19 testing programme. Additionally, in recent weeks and months we have announced several significant new large-scale, long-term contract wins that will produce a several million-pound step change in our annual revenues, thereby underpinning confidence in our business model and growth trajectory.

Covid-19 has, of course, continued to create challenges during the first half of 2021 with the global uncertainty causing many businesses and organisations to be cautious on their spending plans and with travel restrictions still in place in many parts of the world, resulting, as previously announced, in further 'right-shifting' of certain expected contracts and revenues. Because of this our first half year revenues are therefore down on H1 2020, which had record revenues for the first three months before the Covid-19 pandemic had any real impact. However, at £3.5m H1 revenues are 16% ahead of the second half 2020 (£3.0m) demonstrating recovery is underway and we believe that, with the ongoing recovery in our existing business together with the recently secured contracts, anticipated new contracts and our strong pipeline and providing the expected easing of restrictions and delays and the resultant recovery continues, are on track to meet full year expectations and we are confident in our 2022 and future forecasts.

In the last few years, we have achieved a lot and it is rewarding to see the quality of our services and our many achievements being widely recognised. I am extremely proud that in April 2021, Westminster was granted the Queen's Award for Enterprise in recognition of outstanding achievement in international trade. The award ceremony and Westminster's open day will now take place at Westminster House on 3 September 2021. In November 2020 the London Stock Exchange selected Westminster as one of a 1,000 companies to inspire Britain and in May 2020, and again in April 2021, the UK Civil Aviation Authority (CAA) graded our aviation training business as 'Outstanding in all Areas'. These are all important accolades for our business and a testament to the skill and hard work of all our people.

Divisional Review

Services Division

Our Services Division has performed well and delivered some notable achievements in the period.

In our 2020 Annual Report we stated one of our key goals for 2021 was to secure at least one more long-term managed services contract and in that respect, I am delighted that, with an easing of restrictions, we have not only been able to secure one, but two, significant new long-term contract wins.

In December 2020 we announced we were in the advanced stages of securing a long-term contract for 5 airports in an African country. We had been pursuing this opportunity since our acquisition of our French business Euro Ops in 2019 and we expected to secure this contract in 2020 but due to the various lockdowns and travel restrictions in place progress was delayed. I was delighted therefore to be able to announce on 15 June 2021 that we had secured and signed a 20-year manged services contract to provide security services to 5 airports in the Democratic Republic of the Congo ('DRC'), Central Africa. This was a very significant achievement and not only means we will now have an established presence in a new region of Africa but also the project offers substantial growth opportunities. We are excited about this new contract and looking forward to commencing operations once formalities are finalised. I am pleased to report we have already commenced deployment of key personnel for the project, our 100% subsidiary, Westminster Aviation Security Services RDC, which will be employing the local personnel and other logistics, has now been formed, local professional advisors engaged and we are currently preparing the operational logistics ready for commencement.

In addition, on 16 June 2021, we further announced that we had signed another long-term managed service contract to provide port screening services in West Africa for the next 10+ years. We had been pursuing and developing this opportunity for several years and it is another important win for the Company that further extends our global footprint and profile in the port screening sector. Likewise, personnel deployment and company formation processes are underway. Our project team is working with the client to prepare the land for the port screening and inspection areas.

Furthermore, in early July, we announced we had been awarded yet another high-profile contract to supply security services to help protect the historic Royal Palace and Fortress of the Tower of London.‍ Security of such a landmark building, which is open to the public, is paramount and Westminster has been contracted to provide inter alia, professional security services to the pedestrian and vehicular entrances.

These important new contract wins not only demonstrate our global reach but, as we have stated on a number of occasions, that large-scale projects such as these do take time to develop and negotiate and equally demonstrate that we have the skills and resources required to successfully deliver on such opportunities. Together these new contracts alone will add, once fully operational, several million pounds to our annual revenues and together with our other managed services and recurring revenue contracts, underpin confidence in our future forecasts and growth.

In addition to these important new contracts, we are encouraged in the recovery and growth of our existing operations.

Our West African Airport managed services operation continues to be ahead of our expectations (currently, in June 2021, it was 70% of pre-Covid-19 levels) although we do not expect to see a full recovery to pre-Covid-19 levels until late 2022 although it is encouraging that this operation is recovering faster than the average African and European airport traffic and we may see full recovery earlier than forecast.

Our port managed services operations in Ghana have not been materially affected by Covid-19 and continue to perform well. With a 4th berth due to become operational later in 2021, we expect to see further growth with this important project.

Both our guarding and training businesses were heavily impacted by Covid-19 lockdowns and travel restrictions, but we are encouraged by the recovery we are beginning to see in both businesses, and we expect this to continue as hopefully travel restrictions ease.

Our guarding business has already secured important new business and we are pursuing a number of interesting new opportunities which could see revenues from this business increase dramatically.

We are also pleased to see our training business securing new contracts from governments and organisations and is now operating ahead of budget. The global pandemic has demonstrated the importance of distance and online training and the strategic decision we took some time ago to invest in building an online training capability, both in house and through strategic partnerships, will prove to be very beneficial and we expect this part of our business to continue to grow.

We continue to develop new opportunities and initiatives such as our partnership with Certific in their new Covid-19 testing programme for which Westminster is providing verification services. This new initiative has delivered six figure revenues in H1 as the programme began its roll out and, whilst it is uncertain how long Covid-19 testing will remain a requirement, our expectation is this will be some time yet. Indeed, there is a likelihood this could be a requirement for international travel for the foreseeable future and we therefore are looking at additional opportunities in this sector and expect revenues from such to continue to grow into 2022 and possibly beyond.   

Technology Division

We continue to experience healthy enquiry levels and during H1 2021 have secured orders for our products and services from over 40 countries around the world, although Covid-19 and travel restrictions have caused some delays in delivery.

The caution on spending by many companies during H2 2020, continued into H1 2021 and this has meant that purchasing decisions regarding some of our larger technology project opportunities have been deferred. We are encouraged however that discussions have now re-commenced on several of these opportunities and one or more of these could land at any time.

In this respect, and given budget constraints for many companies resulting from the global pandemic, we are exploring with debt funding providers means of moving large scale projects from a 'capital' purchase to a longer term, 5+ years, 'revenue' model which would also include maintenance and training, along with value-add services such as Big Data acquisition for applications such as border crossings. Given that some of these project opportunities can be multi-million dollars in value we believe this model brings added value which sets us apart from the competition and will be attractive to many potential clients; indeed, we are already in discussions with a few government bodies on this basis. With large scale projects such as these there is never certainty of outcome or timing, but we are very optimistic this initiative will lead to material and additional long-term revenues.

In the UK we are pleased to report that the Palace of Westminster contract which was secured in 2020 but could not be started until recently due to Covid-19 restrictions is well underway and we are already looking at possible extensions to this project.

As previously advised, we have established Westminster Arabia in the Kingdom of Saudi Arabia jointly with our partners Hazar International but have been delayed from finalising licences due to travel restrictions. I am pleased to report however that with some easing of restrictions we are preparing to re-enter the Kingdom to finalise matters which should be completed by Q4 2021. This will be an important step in enabling us to formally bid on and pursue the many medium and large-scale opportunities we have been investigating there.

Financial

Revenues at £3.5 million (H1 2020: £7.0 million) for the first half year were 16% ahead of the second half 2020 performance (H2 2020: £3.0 million).  H1 2020 benefited from record passenger numbers in our West African Airport operation in the first quarter.  When Covid-19 hit this, as well as our training and guarding revenues, it was more than counterbalanced by an increase in fever detection product sales.  However, this trend did not last as travel restrictions and shutdowns around the world worsened and business confidence declined, with growing uncertainty leading to companies conserving resources and reducing spending. H1 2021 represents recovery as the airport operations increased, to reach in June just over 70% of a normal year (better than many other airports, latest global traffic levels are reported as 38% of normal), plus training and guarding are both once again operational and new contracts are being secured.

The Group generated a gross profit of £1.6 million (H1 2020: £2.8 million, H2 2020: £1.2m) which equates to a gross margin of 45% (H1 & H2 2020: 40%).  The percentage increase is due to the increase in high margin managed services sales in H1 2021.

Administration expenses have increased by 8% (£0.2m) from H1 2020 to H1 2021.  Almost all of this represents an investment in an expanded sales team to drive revenues forward in future periods.

The operating loss was £0.93 million (H1 2020: profit of £0.48 million; H2 2020 loss of £1.20 million). This is primarily driven by the drop in sales due to Covid-19 effect offset by improving gross margin.

Our underlying cash interest cost was zero (H1 2020: £0.18 million) The 2020 figure was primarily the interest on the convertible loan notes which were redeemed in December 2020.  There were no non-cash financing charges arising from the amortisation and extension of the convertible loan notes (H1 2020: £0.06 million).  A small amount, £2,000 (H1 2020: £20,000), was booked in respect of operating leases in accordance with IFRS16.  In total, the financing costs have been effectively eliminated (H1 2020: £0.24 million).

Earnings per share were a loss of 0.32 pence (H1 2020: a profit of 0.16 pence, H2 2020: 0.59p loss).

Statement of Financial Position and Cash Flow 

The Group ended the period with a £3.1 million cash balance (2020: £1.6 million).  The net cash outflow from operating activities was £1.3m (H1 2020: inflow of £0.7 million). £0.1 million cash was used in investing activities (H1 2020: £0.2 million) and a movement of £2.5 million (before expenses) came from raising new equity (H1 2020: £1.85 million new equity).  The funds raised will be used in the new contracts which are starting in the second half of 2021, as well as to help secure the Company's prospective pipeline of future contracts.

At the end of the period, the Group had no borrowings other than a balance of £48,000 arising from the IFRS 16 treatment of operating leases (2020: £3,368,000 of which £92,000 was for operating leases).

Outlook

The business model and opportunities we have been developing over the years have created a foundation from which we can deliver significant growth and sustainable revenue streams and build shareholder value. The recent large-scale long-term contracts we have secured which will provide an upward step change in revenues, the recovery and growth in our existing operations and the numerous new opportunities we are developing underpin our confidence for the future growth of our business.

Whilst acknowledging that there is still global uncertainty and delays may still impact the delivery of certain projects in the short term, providing the expected easing of restrictions and delays and the resultant recovery continues we are on track to meet full year expectations. We are however confident in our 2022 and future forecasts. The Board and I remain committed to delivering on our significant growth potential.

Peter Fowler, 

Group Chief Executive  

13 August 2021