Interim Results

RNS Number : 1741T
Westminster Group PLC
23 September 2010
 



 

For Immediate Release                                                                                  23 September 2010

 

 

Westminster Group Plc

Interim Results for the six months ended 30 June 2010

 

Westminster Group Plc ('Westminster' or 'the Group'), the AIM listed supplier of system solutions and products to the security, defence, fire protection and safety markets worldwide, is pleased to announce its interim results for the six months ended 30 June 2010.

 

Westminster operates globally from its headquarters in Banbury, Oxfordshire, and regional offices in the UAE providing bespoke solutions for its clients through an international network of regionally appointed agents.  These agents commission local workforces for the installation and maintenance of each solution in their respective territories, giving unparalleled in-territory knowledge, maintenance support and after sales service.

 

Highlights

 

·     Acquisition of CTAC, a specialist integrated provider of 'high end' security solutions to a blue chip client base, in April 2010 for up to £1.8m extending the Group's security services and recurring revenue base within the UK and also bringing a major enhancement to the Group's services - a 24hour Alarm Receiving Centre (ARC) capable of providing remote monitoring and control facilities to thousands of customers worldwide;

·     Four year framework contract won with UK Ministry of Justice to support 139 prisons;

·     Longmoor close protection training courses oversubscribed;

·     Contract won with World Health Organisation to supply Fever Detection equipment;

·     £762,000 before expenses raised through issue of new equity in April;

·     Westminster provided the Key Note speaker on Pipeline Security at Oceantex, India's largest oil & gas conference and a major event in the sector; following which Westminster has been requested to provide proposals to protect several major pipelines in the region;

·     Directors remain very positive over outlook given the current strong quotation pipeline, much of which is in final contract negotiation, however the timing of final contracts, and therefore revenue recognition, is not certain and therefore may impact on 2010 forecasts.

 

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

 

"Despite the adverse global economic climate, Westminster continues to make progress which underpins the Group's strategy of providing a broad range of niche products and services to niche markets around the world.  As such we are not dependant on any one supplier, market or region.

 

"The enquiries and orders received this year are broadly based owing to our network of agents in over 45 countries, supported by one of the largest and most comprehensive websites in the security industry. Westminster's reputation continues to grow, as illustrated through the appearance at the Oceantex conference and the complex tenders that we are being consulted on.  We continue to secure contracts from governmental and blue chip clients around the world, particularly the Middle East and Africa.

 

"Whilst revenues for the first six months are in line with the previous year, enquiry activity has significantly increased both in quantity and quality and we are working hard to now convert these enquiries into firm orders and revenue."

 

 

Enquiries:

 

Peter Fowler                                                   01295 756 300

Chief Executive - Westminster Group Plc

 

Nicholas Mearing-Smith                                  01295 756 300

Finance Director - Westminster Group Plc

 

Alex Clarkson                                                  0161 831 1512

Nick Cowles

Zeus Capital Limited - Nominated Adviser

 

John Grant / Karen Kelly                                 020 7101 7070

XCAP Securities PLC - Broker

 

Tom Cooper / Paul Vann                                0117 985 8989

Winningtons Financial                                                0797 122 1972

                                                                        tom.cooper@winningtons.co.uk

 

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, risk assessments and close protection services. These can range from product only assignments, such as the supply of specialised scanners, to the design and implementation of an integrated system solution such as a border detection and surveillance system. The majority of its customer base, by value, comprises governments and government agencies, non governmental organisations and blue chip commercial organisations.

 



Chairman and Chief Executive's joint statement

 

Overview and strategic update

 

Our acquisition of CTAC, the specialist integrated provider of 'high end' security solutions to a blue chip client base, in April for up to £1.8m continues Westminster's expansion through the integration of complementary services. Synergistic benefits of the acquisition include:

 

·     Niche business in sector and good fit with Westminster's core business;

·     24 hour Control & Command facility and Alarm Receiving Centre is a major enhancement to the Group's service operations presenting cross selling opportunities to other Group companies and international clients operating across international time zones;

·     Opportunity to add new services such as 24 hour travel advice, emergency medical & hostile extraction services to overseas travellers and third party remote monitoring & call centre services; and

·     Ready built nationwide service team and infrastructure to serve Westminster's increasing UK customer base, including Westminster's recently announced contract with the Ministry of Justice covering 139 Prisons in England and Wales.

 

A strong balance sheet is vital to allow the business to continue to expand organically, owing to the increasing need to provide bank guaranteed bonds to customers for bids, advance payments and performance guarantees, as well as significant development expenditure to secure major new contracts. The issues of new shares in April and, since the period end in August, for a total new capital of £1.27 million has improved our ability to meet these increased demands.

 

We feel that the business is now well placed to convert some of its quotation pipeline into firm orders and revenues.  This will be our            primary focus in the coming months with an objective of providing updates to our shareholders as and when significant orders are secured. 

 

Financial and Operating review

 

The Group revenues for the period were £2.4m (2009: £2.4m).  Recognised income was 67% from overseas operations and 33% from the UK.  The Group continues to work for a variety of international clients including the United Nations and governments in Africa and the Middle East, as well as UK utilities, governmental clients and large lead contractors on a variety of significant projects.

 

Gross margins were higher for the first half of 2010 at 31% (2009: 25%). This is driven by the revenue mix between product sales and system solution sales in the period, where system solution sales carry a higher margin due to the bespoke nature of the sale.  We expect the margin for the second half of the year to be higher than for the first half.

 

Administrative expenses in the period increased to £1.79m (2009: £1.26m). In 2009 Longmoor was only included for part of the period and in 2010 CTAC is now included for the first time. These differences amount to £359,000 of the increase.  The other major item is a provision for £273,000 against an amount due from a client in the Middle East. Whilst the Board believes that there is a good chance that most, if not all, of the debt will be paid in due course, it was felt prudent to provide for half of the amount due at this stage. Foreign currency activity has generated gains in the period. Otherwise administrative expenses for the first half of 2010 are in line with the first half of 2009.

 

Financing costs totalled £360,000 in the period, of which £275,000 represented costs of transactions and financing that now have to be written off immediately under the revised provisions of IFRS.

 

The Group recorded a loss after tax for the period of £1,125,000 (2009: £493,000), representing a basic loss per share of 6.96p (2008: 3.36p loss), of which £492,000 is the net effect of costs related to the acquisition of CTAC and financings. Excluding these costs and the bad debt provision referred to above, the results were broadly in line with the previous year. The Group normally reports significantly higher revenues in the second half of the year and the Board expects this pattern to be repeated in 2010. At 30 June 2010 the Group had cash net of borrowings (excluding the Convertible Loan Notes) of £129,000 compared with £1.1m a year earlier.  The Company has received a request for redemption from one of the holders of the Convertible Loan Notes.  Although the Notes are not due until 2014, the Board is considering this request.

 

RMS, our UK based integrated solutions subsidiary, supplies and installs data & telephone systems, CCTV surveillance, satellite TV systems, door entry and access control systems for high-rise buildings throughout the UK. The downturn in the UK construction industry has severely affected RMS. We have now integrated the installation operations of RMS and CTAC to improve the efficiency of the overall business and to reduce costs.

 

Longmoor has had a good first half of the year with its training activities and has won a number of new as well as repeat clients for its close protection operations. Longmoor has also been selected to provide specialist training services to both the Australian Police service and Ghanaian Police force. In conjunction with our new 24hr Alarm Receiving Centre (ARC) Longmoor launched its 24hr travel advice service with daily security reports and alerts to business and corporate travellers and was awarded a contract for daily situational reports from the BBC during the World Cup.

 

The Group responded to 2,037 enquiries during the first half of 2010, an increase of 143% over the first half of 2009. Whilst many of these are long term in nature and not all will convert into orders, the Board believes that the increasing rate of enquiries and quote activity underpins its confidence in the Group's growth prospects.

 

Outlook

 

Historically, the business has shown a seasonal revenue pattern, with a bias towards the second half of the year and we expect that trend to continue, although the timing of contract wins and therefore revenue recognition in the final months of the year is less certain.

 

We entered the second half of the year with a healthy quotation pipeline which we are now working hard to convert into firm orders and revenue. Whilst the Board continues to be mindful of the current global economic uncertainty and the influence that this can have on the timing of contract awards, the Directors remain positive over the outlook and strategic direction of the business and look forward to providing updates on contract wins in the future.

 

Lt. Col Sir Malcolm Ross GCVO, OBE

Chairman

 

Peter Fowler

Chief Executive Officer



 

 

Westminster Group plc

 

Condensed consolidated statement of comprehensive income

 

for the six months ended 30 June 2010

 



6 months 

6 months 

Year



to 30 June

to 
30 June

to 31 Dec



2010

2009

2009


Note

Unaudited

Unaudited

Audited



£'000

£'000

£'000

Revenues


2,351

2,372

7,948

Cost of sales


(1,621)

(1,788)

(5,197)

Gross Profit


730

584

2,751

Administrative expenses


(1,794)

(1,257)

(2,602)

PROFIT/(LOSS) BEFORE INTEREST AND TAXES (EBIT)


(673)

149

Financing costs


(360)

-

(116)

Finance income


2

1

107

PROFIT/(LOSS) BEFORE TAX


(1,422)

(672)

140

Income tax

4

297

179

(19)

PROFIT/(LOSS)  ATTRIBUTABLE TO EQUITY SHAREHOLDERS


(1,125)

(493)

121

OTHER COMPREHENSIVE INCOME


-

-

-

TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO EQUITY SHAREHOLDERS


(1,125)

(493)

121






EARNINGS PER SHARE ON CONTINUING ACTIVITIES:





Basic in pence


(6.96)

(3.36)

0.82

Fully diluted in pence


(6.88)

(3.30)

0.81

All the activities of the Group are classed as continuing.





 

 

 


Westminster Group plc


Condensed consolidated statement of financial position


as at 30 June 2009



6 months 

6 months 

Year



to 30 June

to 30 June

to 31 Dec



2010

2009

2009



Unaudited

Unaudited

Audited


Note

£'000

£'000

£'000

Goodwill


1,392

391

578

Other intangible assets


37

46

41

Property, plant and equipment


1,219

1,120

1,137

Trade and other receivables


10


10

Deferred tax asset


797

538

350

TOTAL NON-CURRENT ASSETS


3,456

2,095

2,116

Inventories


118

74

232

Trade and other receivables


3,712

3,204

3,765

Cash and cash equivalents


633

1,079

475

TOTAL CURRENT ASSETS


4,464

4,357

4,472

TOTAL ASSETS


7,920

6,452

6,588






Share capital


1,773

1,492

1,492

Share premium


2,867

2,304

2,304

Merger relief reserve


545

299

299

Share based payment reserve


25

14

22

Revaluation reserve


116

116

116

Retained earnings


(1,541)

(1,028)

(416)

TOTAL SHAREHOLDERS' EQUITY


3,785

3,197

3,817

Trade and other payables


506

-

181

Borrowings


869

822

843

Embedded derivative


184

291

184

Deferred tax liabilities


101

101

104

TOTAL NON-CURRENT LIABILITIES


1,660

1,214

1,312

Borrowings


504

9

273

Trade and other payables


1,971

2,032

1,186

TOTAL CURRENT LIABILITIES


2,474

2,041

1,459

TOTAL LIABILITIES


4,134

3,255

2,771

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY


7,920

6,452

6,588



 

 

 

Westminster Group plc

Condensed consolidated statement of changes in equity

for the six months ended 30 June 2010

 


Share capital

Share premium

Merger relief reserve

Share based payment reserve

Revaluation reserve

Retained earnings

Total


£'000

£'000

£'000

£'000

£'000

£'000

£'000









AS OF 1 JANUARY 2010

1,492

2,304

299

22

116

(416)

3,817

Share based payment charge




3



3

Issue of shares for the acquisition of subsidiary

79


246

-

-

-

325

Issue of shares for exercise of share options

2






2

Issue of new shares

200

563





763

TRANSACTIONS WITH OWNERS

281

563

246

3

0

0

1,093









Loss for the period

-

-


-

-

(1,125)

(1,125)

TOTAL COMPREHENSIVE INCOME FOR THE PERIOD ATTRIBUTABLE TO SHAREHOLDERS

0

0

0

0

0

(1,125)

(1,125)

AS AT 30 JUNE 2010

1,773

2,867

545

25

116

(1,541)

3,785


















AS OF 1 JANUARY 2009

1,402

2,304


14

116

(537)

3,299

Issue of shares for the acquisition of subsidiary

90

-

299

-

-

-

389

TRANSACTIONS WITH OWNERS

90

0

299

0

0

0

389









Loss for the period

-

-


-

-

(493)

(493)

Prior year adjustment






2

2

TOTAL COMPREHENSIVE INCOME FOR THE PERIOD ATTRIBUTABLE TO SHAREHOLDERS

0

0

0

0

0

(491)

(491)

AS AT 30 JUNE 2009

1,492

2,304

299

14

116

(1,028)

3,197

 



 

 

Westminster Group plc

Condensed consolidated statement of changes in equity (cont)

for the six months ended 30 June 2010

 


Share capital

Share premium

Merger relief reserve

Share based payment reserve

Revaluation reserve

Retained earnings

Total


£'000

£'000

£'000

£'000

£'000

£'000

£'000









AS OF 1 JANUARY 2009

1,402

2,304

-

14

116

(537)

3,299

Share based payment charge

-

-


6

-

-

6

Deferred tax adjustments

-

-


2

-


2

Issue of shares for the acquisition of subsidiary

90

-

299




389

TRANSACTIONS WITH OWNERS

90

0

299

8

0

0

397









Profit for the period

-

-


-

-

121

121

TOTAL COMPREHENSIVE INCOME FOR THE YEAR ATTRIBUTABLE TO SHAREHOLDERS

0

0

0

0

0

121

121

AS AT 31 DECEMBER 2009

1,492

2,304

299

22

116

(416)

3,817



 

 

 

Westminster Group plc


Condensed consolidated statement of cash flows


for the six months ended 30 June 2010







 6 months

6 months 

Year


to 30 June

to 30 June

to 31 Dec


2010

2009

2009


Unaudited

Unaudited

Audited


£'000

£'000

£'000

PROFIT BEFORE TAX

(1,422)

(672)

140

Adjustments

431

55

130

Net changes in working capital

1,176

118

(1,474)

NET CASH (USED IN)/FROM OPERATING ACTIVITIES

185

(499)

(1,204)





INVESTING ACTIVITIES:




Purchase of property, plant and equipment

(17)

(54)

(126)

Purchase of intangible assets

(4)

(13)

(15)

Cash costs of acquisition of subsidiaries net of cash acquired

(669)

(49)

(44)

Interest received

2

-


NET CASH USED IN INVESTING ACTIVITIES

(688)

(116)

(185)





FINANCING ACTIVITIES:




Gross proceeds from the issue of Convertible Loan Notes


1,200

1,200

Gross proceeds from the issue of Ordinary Shares

765



Costs of Loan Note issue


(87)

(116)

Finance lease repayments


-


Financing costs paid

(334)


(65)

NET CASH FROM/(USED IN) FINANCING ACTIVITIES

431

1,113

1,019





Net change in cash and cash equivalents

(72)

498

(370)

CASH AND EQUIVALENTS AT BEGINNING OF PERIOD

202

572

572

CASH AND EQUIVALENTS AT END OF PERIOD

130

1,070

202



 

 

 

Notes to the condensed consolidated financial statements

for the period ended 30 June 2010

 

 

1.   General information

 

Westminster Group plc together with its subsidiaries (together the Group) design, supply and provide ongoing support for advanced technology security, safety, fire and defence solutions to a variety of government and related agencies, non-governmental organisations and mainly blue chip commercial organisations. The Group operates through a global network of agents.

 

 

2.   Basis of preparation

 

These condensed consolidated interim financial statements are for the six months ended 30 June 2010. The Group has not adopted the reporting requirements of International Accounting Standard (IAS) 34 'Interim Financial Reporting'. The statements do not include all of the information required for full annual financial statements and should be read in conjunction with the consolidated financial statements of the Group for the year ended 31 December 2009.

 

The statements have been prepared applying the accounting policies and presentation that were applied in the preparation of the 2009 financial statements.

 

This interim financial statement for the six months ended 30 June 2010 has neither been audited nor reviewed by the Group's auditors. The financial information for the year ended 31 December 2009 set out in this interim report does not constitute statutory accounts as defined in section 434 of the Companies Act 2006. The statutory accounts for the year ended 31 December 2009 have been reported on by the company's auditors and delivered to the Registrar of Companies. The report of the auditors was unqualified and did not contain a statement under section 498(2) or 498(5) of the Companies Act 2006.

 

 

Basis of consolidation

 

The Group financial statements consolidate those of the Group and its subsidiary undertakings drawn up to 30 June 2010. Subsidiaries are entities over which the Group has the power to control the financial and operating policies so as to obtain benefits from their activities. The Group obtains and exercises control through voting rights. Consolidation is conducted by eliminating the investment in the subsidiary together with the parent's share of the net equity of the subsidiary.



 

3.   Functional and presentational currency

 

The financial information has been presented in pounds sterling, which is the Group's presentational currency. All financial information presented has been rounded to the nearest thousand.

 

 

4.   Taxation

 

In accordance with the policy adopted by the Group at the year end, deferred tax benefit has been recognised in full in respect of losses at the corporation tax rate of 27% in those subsidiaries where there is a reasonable expectation of future profitability to utilise those losses. This policy has been extended to CTAC so that a deferred tax asset was recognised at the time of its acquisition, since recent trading performance gives confidence that those brought forward losses will be utilised.

 


 

5.   Loss per share

 

Earnings per share is calculated by dividing the earnings 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:

 



 6 months

6 months 

Year



to 30 June

to 30 June

to 31 Dec



2010

2009

2009



Unaudited

Unaudited

Audited



£'000

£'000

£'000

Issued ordinary shares





Start of period


14,972

14,022

14,022

Effect of shares issued during the period


1,193

760

Weighted average basic number of shares for period


16,165

14,022

14,782

Dilutive effect of options


191

241

190

Dilutive effect of Convertible Loan Notes


-

31







Weighted average diluted number of shares for period


16,356

14,274

14,972











Basic and fully diluted earnings/(loss) per share is calculated as follows:



 6 months

6 months 

Year



to 30 June

to 30 June

to 31 Dec



2010

2009

2009



Unaudited

Unaudited

Audited



£'000

£'000

£'000






Profit/(loss) for the year attributable to equity shareholders of the Company


(1,125)

(493)

121






Basic earnings/(loss) per share (pence)


(6.96)

(3.36)

0.82






Diluted earnings/(loss) per share (pence)


(6.88)

(3.30)

0.81

 



 

6.   Acquisition of CTAC Limited

 

On 15 April 2010 Westminster Group plc acquired 100% of the share capital of CTAC Limited. The initial consideration of £825,000 was satisfied by £500,000 in cash and the balance of £325,000 by the issue of 792,683 new ordinary shares of 10p each in Westminster ('Ordinary Shares') at 41p on the date of completion ("Consideration Shares").

 

Two further performance based payments will be made, calculated on 40% of net profit in each of the two years following completion, up to a maximum aggregate additional payment of £1 million. 

 

The total cost of the acquisition was £658,000 and includes the components stated below:

 


£'000



Purchase price, settled in shares and cash

825



Less: Claim on shortfall of net assets

(492)



Deferred contingent consideration

325




658












Pre-acquisition carrying amount

Adjustment to fair value

Recognised at acquisition date


£'000

£'000

£'000

Plant, property & equipment

127

-

127

Deferred tax asset


153

153

Total non-current assets

127

153

280

Trade & other receivables

560

0

560

Total current assets

560

0

560

Bank liabilities

(169)

0

(169)

Trade & other payables

(827)

0

(827)

Total current liabilities

(996)

0

(996)





Net identifiable assets and liabilities

(309)

153

(156)

Goodwill on acquisition



814

Total consideration



658





Cost of acquisition settled in cash



500

Bank liabilities acquired



169

Net cash outflow arising on acquisition



669

 

The goodwill is attributed to the synergies that are expected to arise in the post acquisition period, the reputation established by the business in its market and the expertise of the company's staff.

 

 

7.         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 profit before tax to arrive at operating cash flow:

 


 6 months

6 months 

Year


to 30 June

to 30 June

to 31 Dec


2010

2009

2009


Unaudited

Unaudited

Audited


£'000

£'000

£'000

Adjustments:




Depreciation, amortisation and impairment of non-financial assets

66

56

115

Interest income

(2)

(1)

(107)

Interest expenses

360

-

116

Loss on disposal of non-financial assets

4

-

-

Share-based payment expenses

3

-

6

Total adjustments

431

55

130





Net changes in working capital:




Decrease/(increase)in inventories

134

112

(46)

Decrease/(increase) in trade and other receivables

1,085

(385)

(964)

(Decrease)/increase in trade and other payables

(43)

391

(464)

Total changes in working capital

1,176

118

(1,474)

 

 

8.   Material post balance sheet events

 

It was announced on 24 August 2010, that the Group had successfully placed 2,525,000 new ordinary shares of 10p each in the ordinary share capital of Westminster at a placing price of 20p each to raise £505,000 before expenses.

 

9.   Approval of interim financial statements

 

The interim financial statements were approved by the board of directors on 22 September 2010


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