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Annual Report & Accounts 2015
Worldwide World Class Protection
Security Technology | Managed Services
Westminster Group plc
Westminster House
Blacklocks Hill
Banbury
Oxfordshire
OX17 2BS
United Kingdom
www.wsg-corporate.com
The Westminster Group is a specialist security and services
group operating worldwide via an extensive international
network of agents and offices in over 50 countries.
The Group’s operating companies are structured into two vertically
integrated operating divisions, Managed Services and Technology and
the Group’s principal activity is the design, supply and ongoing support
of advanced technology security solutions and the provision of long
term managed services, consultancy and training services;
primarily to
Governments & Governmental Agencies,
Non Governmental Organisations
& Blue Chip Commercial Organisations Worldwide
with a focus on Africa, Asia, the Middle East & the Americas
HIGHLIGHTS
OPERATIONAL
• Three new large scale long term Memorandums of
Understanding signed for airport security;
investment in Ferry project and working capital needs,
£0.9m converted into equity in the year;
• Overall Loss £1.99m (2014: £2.43m);
• Prospect list of potential long term managed services
• Loss per share reduced by 29% to 3.49p (2014: 4.94p).
projects significantly enhanced;
• Maintained full operations and kept all staff safe during
Ebola Crisis in West Africa;
• Ebola crisis waning in H2 and airlines begin to return;
• Flagship ferry vessel Sierra Queen arrives in country but
suffers damage creating delays in ferry commencement;
• Second vessel, Sierra Princess, a 70 seater vessel secured;
• Technology Division sales increased by 43%;
• New Technology Division website underway.
FINANCIAL
• Revenues £3.4m (2014 : £3.5m) with £1.7m from Technology
Division (£1.2m). Decrease in Managed Services revenues
reflected worst period of the Ebola crisis, which is now over
and making a strong recovery;
POST BALANCE SHEET
• Three more signed MoU’s making seven in total under
discussion;
• Letter of Intent received for long term airport project with
potential for over £30m annual revenues;
• Recovery in passenger numbers in West Africa enabling
it to produce record financial performance, further cost
reductions since January;
• Group close to EBITDA break even;
• £0.475m unsecured debt issued and a further £0.75m
converted into equity;
• £1.3m new equity placed in June 2016 to provide additional
working capital and to support growing airport security
opportunity;
• Underlying EBITDA loss reduced by 72% to £0.44m (2014:
• Group now in a much stronger financial position than at the
£1.59m);
start of the year;
• Operating cost reductions of 8% continued into 2016;
• Full strategic review underway.
• Debt of £3.32m (gross) issued in the year to support capital
Westminster Group PLC | Annual Report & Accounts 2015
57
“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 with a particular focus on
long term recurring revenues business.”
Peter Fowler
Chief Executive Officer
Contents
02 Company Overview
05 Chairman’s Report
06 Chief Executive Officer’s Strategic Report
10 Chief Financial Officer’s Report
12 Board of Directors
13 Directors’ Report
16 Remuneration Committee Report
19 Corporate Governance Report
21 Statement of Directors’ Responsibilities
22 Independent Auditor’s Report
24 Consolidated Statement of Comprehensive Income
25 Consolidated and Company Statements of Financial Position
26 Consolidated Statement of Changes in Equity
27 Company Statement of Changes in Equity
28 Consolidated and Company Cash Flow Statements
29 Notes to the Financial Statements
56 Company Information
Westminster Group PLC | Annual Report & Accounts 2015
01
Managed Services Division
Managed services contracts and the provision of manned services
that for an airport a security fee would be
added to the passenger ticket via the IATA
(International Air Transport Association)
mechanism and this fee is then settled
with Westminster directly providing strong
cash dynamics. Once a contract is signed
and is in place then the data rich nature
of the aviation industry (with visibility as
to schedules, load factors etc.) and the
long term nature of the contract provides
strong forward revenue visibility.
Westminster may pay a concession fee
(based on cash collections from fees) to
the port or airport authority, and this, in
conjunction with our absorption of their
capital and operating cost obligations,
provides a strong customer advantage
turning cash outflow into cash inflow.
Services Division
is
The Managed
generating considerable
interest from
governments around the world particularly
regarding airport security solutions and is
experiencing a rapidly expanding prospect
pipeline (potential projects which are in
active discussions and which are at various
stages of development). The division is
currently at various stage discussions with
a growing number of airports in a wide
range of countries a number of which have
now advanced to signed Memorandum of
Understanding (MoU) stage. A measure
of the
increasing momentum of the
opportunities can be seen in the table
below. The relevance of these numbers is
the fact that the division will receive long
term revenues directly proportional to the
number of embarking passengers.
Whilst not all the opportunities under
discussion will result in final contracts,
with each contract being potentially
worth several hundred million USD of sales
value over the life of the contract and
further expansion of the prospect pipeline
expected, the potential for substantial
growth from this division over the next
few years is obvious.
The division is also actively pursuing other
managed services opportunities such as
ferry services, port security and other
infrastructure security solutions and is
developing expanded service offerings at
airports.
Prospect Passenger Growth
under Signed MoU
10.6m
5.1m
0.3m
Dec ‘14
Dec ‘15
Jun ‘16
PORT I AIRPORT I UTILITIES I INFRASTRUCTURE
Our Managed Services Division is focussed
on providing long term recurring revenue,
managed services contracts and the
provision of manned services, consultancy,
training and other similar supporting
services. The division comprises primarily
of Westminster Aviation Security Services
Ltd., Westminster Facilities Management
Ltd., Sovereign Ferries Ltd. and Longmoor
Security Ltd.
to
typically
We believe that this division represents
a very significant growth opportunity
for Westminster. We provide long term
services
governmental
bodies in our target markets under Build
Operate Transfer and/or
concession
arrangements. Under these contracts
we use our expertise in the provision of
personnel and technology solutions to
take over, invest and operate the service
and/or infrastructure at key sites such
as an airport or a port, and bring the
operation up to internationally acceptable
standards. In addition our expertise in the
sector enables us to advise on the correct
processes, procedures and documentation
required by international bodies and our
comprehensive in-house training services
means all local staff involved in these
operations remain properly trained and
certificated.
We enter into these contracts on a long
term basis (typically 15-25 years) and are
remunerated by a per user fee which is
paid directly by the user of the facility to
Westminster. For example this would mean
02
Example Worldwide Projects
A sample of completed projects worldwide
03
Westminster Group PLC | Annual Report & Accounts 2015 Technology Division
Providing advanced technology led security solutions
The Technology Division is focussed on
providing advanced technology led security
solutions encompassing a wide range of
surveillance, detection,
tracking and
interception technologies to governments
and private organisations across the
world. It has an in-depth knowledge of
the security technologies available which
allows it to design innovative solutions
using niche technologies. The division
comprises primarily of Westminster
International Ltd and has a long track
record of providing security services and
technology to a broad range of blue chip
clients worldwide.
We are not a manufacturer and are product
agnostic, able to promote and deliver the
best solution for any given application.
Indeed a key strength of Westminster’s
Technology division
its extensive
knowledge of the security market place
is
and manufacturers of effective but often
niche security equipment together with its
ability to identify and design solutions for
clients’ diverse requirements. In fact, due
to Westminster’s extensive international
network and market
reach, niche
security manufacturers regularly contact
Westminster as a means of promoting their
technologies to the market.
Sales are driven by growth in international
security markets and the company has a
large and healthy enquiry bank many of
which arise from its agent network and
(Westminster
comprehensive website
International has one of the largest security
equipment and services websites in the
world). The division has a large prospect
pipeline (potential projects which are in
active discussions and which are at various
stages of development). The division is
currently at various stage discussions with
Vertical Integration Model
Technology Customers
Managed Services Projects
Products & Services
Airports / Ports etc
a growing number of project opportunities
in a wide range of countries. A number of
these potential projects are multimillion
USD in value with several valued in the
tens of million USD although such projects
can take a long time, in some cases years,
to negotiate and as always timing and
outcome remain uncertain.
is successfully securing
The division
contracts for equipment and services
creating a regular monthly run rate of
business from clients worldwide with the
added and increasing potential of large
multimillion contracts being secured from
time to time creating significant peaks in
revenue.
There is a key vertical integration synergy
with this division’s expertise in consultancy
and equipment being used to underpin
the major growth opportunity in our
managed services division as its worldwide
reputation and market reach provides a
platform from which the managed services
division can deliver opportunities and
in addition it reduces capital spend by
eliminating 3rd party margins which would
otherwise incur further cash spend.
The “in house” Technology Division expertise provides the vital infrastructure
for the provision of complex technology solutions for both its own sales and the
delivery of managed services long term contracts. Having it in house reduces
supplier exposure and cost and increases purchasing power.
04
Chairman’s Report
“I would like to extend our appreciation to all our investors for
their continued support during these challenging times and also
to our strategic investors who are bringing their expertise to
help deliver value for all.”
Lt. Col Sir Malcolm Ross GCVO, OBE
Chairman
Overview
l am pleased to present the Final Results
for Westminster Group plc for the year
ended 31 December 2015.
In my 2014 Statement I stated that we had
faced the challenges in dealing with the
Ebola crisis in West Africa and the severe
impact that had on our business. 2015 has
been equally if not more challenging as
not only did the Ebola crisis last longer
and become more destructive than anyone
had anticipated but we also suffered
delays with the commencement of our
ferry project in Sierra Leone whilst the
significant drop in oil prices had a knock
on delaying factor with several of our key
project opportunities.
resolute
However I am pleased to say that the
Westminster
in
team were
dealing with these issues and continued
to show their true professionalism in the
face of adversity. Not only did we keep
our airport operations open and still
deliver a world class security service but
we kept all of our staff and their families
safe and mercifully none succumbed to
the disease or related issues. Despite the
significant drop in passenger traffic and
loss of revenues we also maintained full
employment of all our local staff which
was not only morally but operationally
the right thing to do. In addition we dealt
with significant challenges involved in the
repair of our flagship vessel the Sierra
Queen and continued to develop the
infrastructure and terminals preparing for
service.
This crisis response inevitably, and rightly,
absorbed management time, and whilst
this has naturally affected 2015’s revenue
performance the measures we put in place
to significantly reduce our operating cost
base has greatly mitigated losses.
Despite these challenges I am pleased
to report that the Group continued to
expand
its operations and presence
around the world particularly in terms
of its Managed Services business which is
now a key focus for the business. Interest
in the Group’s long term airport security
model continues to grow, evidenced by
the increasing number and frequency of
signed Memorandum’s of Understanding
the Group have secured from governments
and airport authorities in different regions
of the world.
the projects and
More detail on
opportunities we are undertaking
is
covered under the CEO’s Strategic Report.
I am pleased to report we continue to work
closely with and receive excellent support
from the Foreign Office and UK Diplomatic
Missions in the various countries in which
we operate and I am very grateful to
the magnificent support these and UKTI
provide our teams and operations around
the world.
Corporate Conduct
In our industry it is vitally important
that we maintain the highest standards
of corporate conduct. You will see in the
Directors’ Corporate Governance Report
all the detailed measures we take to
ensure that our standards, and those
of our agents, can stand any scrutiny by
Government or other official bodies. This
is an area we will be investing in as the
business expands.
Staff and Board
Sir Michael Pakenham, who has been a
Non-Executive Director of the Company
since January 2008, will be stepping down
from the main board at the AGM in June to
concentrate on other duties.
Sir Michael has been a great asset and
wise counsel to the company during his
time with us and he has made a positive
contribution to our operations both in the
UK and across the globe. On behalf of the
Company and the Board I wish to publically
thank him for all his efforts. I am pleased
to say, however, that Sir Michael will
remain an advisor to the Company.
As covered in the CEO’s Strategic Report
we are undertaking a strategic review
of our business and we will be making
further changes to our Board in the near
future with new appointments providing
us with wider experience and expertise
together with a restructuring of the Board
and responsibilities to better serve the
significant growth potential of our Group.
I would
As ever, our staff are key to delivering
like to take the
success.
opportunity to express my appreciation to
all our employees, both in the UK and our
ever expanding overseas workforce, who
have worked extremely hard during the
year.
In my last review I mentioned that a true
measure of the quality of any organisation
(be it civil or military) is how well it
responds under adverse circumstances.
I am happy to repeat that and in this
respect Westminster has not been found
wanting during this challenging period
and I am proud to be the Chairman of
such a company. I would therefore like
to pay tribute to our management and
staff, especially those in West Africa, both
expatriate and local, who maintained
our operations, overcame the various
challenges and kept all our staff safe so
that we can now benefit from the recovery
and the significant opportunities we have
developed. I am particularly proud and
delighted to report that all our expatriate
staff who maintained operations in West
Africa during the Ebola crisis are each
being awarded the UK Government Ebola
Medal.
like to extend our
I would finally
appreciation to all our
investors for
their continued support during these
challenging times and also to our strategic
investors who are bringing their expertise
to help deliver value for all.
Lt. Col. Sir Malcolm Ross GCVO, OBE
Chairman
08 June 2016
05
Westminster Group PLC | Annual Report & Accounts 2015 Chief Executive Officer’s Strategic Report
“Despite challenges the Group continued to expand its
international presence and large scale opportunities,
particularly in our increasingly core focus airport security
business.”
Peter Fowler
Chief Executive Officer
Business Description
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 with
a particular focus on long term recurring
revenues business.
Our target customer base is primarily
governments and governmental agencies,
critical infrastructure (airports, ports &
harbours, borders, power plants etc.)
and large scale commercial organisations
worldwide.
As depicted in the figure below our
business has evolved from a traditional UK
focused security business to what can be
described today as a truly international
business and our evolution continues as we
expand our operations into new areas and
new territories creating new opportunities
around the world in the provision of long
term security and managed services.
We deliver our wide range of solutions and
services through a number of operating
companies which are currently structured
into two operating divisions, Managed
Services and Technology, both primarily
international business as
focused on
follows:
Managed Services Division:
Focusing on long term (typically 10 – 25
years) recurring revenue managed services
contracts such as the management and
running of complete security solutions in
airports, ports and other such facilities,
together with the provision of ferry
services, manpower, consultancy and
training services.
Technology Division:
Focusing on providing advanced technology
led security solutions encompassing a wide
range of surveillance, detection, tracking,
screening and interception technologies to
governments and organisations worldwide.
In addition to providing our business with
a broad range of opportunities these two
divisions offer cost effective dynamics and
vertical integration with the Technology
Division providing the vital infrastructure
and complex technology solutions and
expertise to the Managed Services Division
thereby reducing supplier exposure and
cost and increasing purchasing power.
Whilst our Managed Services Division
provides a long term business platform to
deliver other cost effective incremental
services from the Group.
We have a track record of successfully
delivering a wide range of complex
security solutions to governments and blue
chip organisations around the world as can
be seen from page 3 and our reputation
grows with each new contract delivered.
This in turn underpins our strong brand
and provides a platform from which we
can expand our Managed Services Division
which is now becoming the key focus
for the Group with its dramatic growth
prospects and the significant recurring
revenue stream potential.
saw
Business Review
We have now experienced two challenging
the
and difficult years. 2014
commencement of the Ebola crisis in
West Africa which created operational
and financial pressures as passenger
volumes fell. At its worst point, passenger
numbers reduced to around 30% of normal
traffic with the corresponding reduction
in revenues. 2015 was an equally, if not
more, challenging period for our Group
as not only did the Ebola crisis in West
Africa last longer and become more
widespread than anyone had expected,
lasting throughout 2015, albeit with a
growing recovery through the latter part
of the year, but our flagship ferry vessel,
The Journey
Our Business Evolution
6
the Sierra Queen, suffered damage shortly
after arrival in Sierra Leone, resulting in
extended delays to the commencement
of our ferry project. Additionally, the
worldwide collapse in oil prices has caused
delays with several of our key project
opportunities as governments cut back on
capital expenditure.
Whilst the majority of these
issues
were beyond the Company’s control
they have had a material impact on the
financial performance of the Company
with approximately £1.1m attributed
loss of passengers on Ebola and a further
estimated £750,000 on loss of potential
ferry revenue.
Despite these challenges, however, the
Group continued to expand its international
presence and large scale opportunities,
particularly in our increasingly core focus
airport security business. I remain proud
of how our management and staff have
dealt with and overcome the numerous
challenges we have faced over this period.
Managed Services Division
Ferry Project:
A defining issue during 2015 has been
the delays in commencing the 21 year
ferry project we signed in November
2014 for the operation and management
of ferry terminals and the provision of a
professional ferry service in Sierra Leone
across the estuary between the capital
Freetown and the International Airport on
the Lungi peninsula.
The background to this project is that
the current ferry services are unreliable,
unsuitable and unable to cope with large
volumes of passengers and can take over
an hour to transport passengers to and
from the airport. This therefore creates a
bottleneck which is a potential limitation
on the numbers of passengers passing
through the airport.
As Westminster is providing a respected
and highly professional security operation
at the airport with revenues directly
related to passenger numbers, we were
invited to provide a safe and reliable
solution to this issue. Following the signing
of the contract, we recruited ex Royal
Navy personnel to run the operation and
began working on building the required
infrastructure around the service and,
improving the terminals. We acquired a 200
seat flagship vessel named Sierra Queen,
capable of transporting a full plane load
of passengers across the estuary quickly,
in style and comfort, which arrived in
country at the end of April 2015.
Unfortunately shortly after arrival the
vessel suffered some damage whilst on
a temporary mooring. A local marine
contractor was employed to undertake
repairs and some hull strengthening works,
which was to be completed before the
official launch ceremony on 11 June 2015.
Despite a successful launch ceremony we
discovered that the vessel was not fully
operational and upon examination found
one of the prop shafts had been damaged.
The actual damage was a minor alignment
issue but no facilities were available to
correct this in country and we had to
organise removal and shipment back to
the UK for repair which due to its size and
limited flights at the time presented a
huge logistical challenge.
Consequently, repair works which should
have taken a few weeks, turned into
several months of delay, and despite
the repair costs being largely covered
by insurance, as the operation had not
commenced loss of business revenue was
not covered which, on a conservative
estimate, would have amounted to over
£750,000 between Jul 15 – Dec15.
Whilst many of the issues we faced were
beyond our control with hindsight it is
clear we could have done some things
better or differently and that we had
underestimated some of the challenges
involved. We have learnt lessons from past
issues and we have replaced much of the
initial management team involved in the
ferry project. We have also engaged an
experienced marine and risk management
specialist to undertake a commercial and
operational review of the project and
advise on any further improvements etc.
and to assist with future deployment.
Notwithstanding the frustrations, delays
and costs suffered during this process,
the ferry project remains a potentially
highly valuable long term project offering
significant revenue potential once fully
operational.
Airport Security Projects:
Whilst there has been an understandable
focus on the ferry project by many
shareholders and despite the significant
revenue potential the ferry operations
presents, our key focus and substantial
growth prospects
remain with our
long term managed services projects
particularly our airport security solutions
under Build-Operate-Transfer (BOT) or
Build-Maintain-Train (BMT) programmes.
Our revenues from our West African
to be
airport operations continued
adversely affected throughout 2015 by
the Ebola crisis although thankfully for
all concerned, particularly the people of
affected countries, the epidemic slowly
abated and was brought under control in
the latter half of 2015 with the country
being finally declared Ebola Free on
17 March 2016. As the crisis waned we
gradually saw a return of airlines and
passenger numbers. Revenues for the
year were £1.7m (2014: £2.2m) with the
decrease being due to the worst ravages of
the crisis which greatly affected the first
part of the year slowly recovering in H2. I
am pleased to report that 2016 is showing
much stronger recovery and hopefully pre
Ebola levels will be reached before the
end of the year. I am also pleased that the
division has produced positive contribution
since February 2015.
I am also pleased to report that in February
2016 we announced that we had been
instrumental in assisting the new cargo
operations at Freetown
International
Airport achieve RA3 accreditation status
necessary to be able to ship cargo to
Europe. The WASS construction and
technical teams have worked hard to
implement all of the security features
and equipment required and WASS has
produced the protocols for accepting and
screening cargo using the EU approved
methods of X-Ray, hand search and Free
Running Explosive Detection Dogs (FREDDs)
for the movement of high risk cargo, mail,
and dangerous and high value goods.
In addition, WASS’s Cargo Security
Manager, a Certified Instructor for all
levels of air cargo, has trained over 150
personnel
security officers,
K9 units, ground handling agents, ramp
agents, airlines and cargo agents and
compiled all of the required operational
documentation required by regulations.
including
This achievement means that FNA is one
of just a few airports in West and Central
Africa with such accreditation. FNA is now
able to provide cargo services destined
for Europe, including transit and transfer
cargo and this provides considerable
opportunities for FNA to become a cargo
hub
countries
and opens up new revenue streams for
Westminster through cargo screening.
neighbouring
serving
I am pleased to report that we have
been extremely active pursuing the ever
growing interest in our airport BOT and
BMT programmes from governments and
airport authorities all over the world and
have been very successful in developing
this area of our business.
7
Westminster Group PLC | Annual Report & Accounts 2015
Chief Executive Officer’s Strategic Report continued
In February 2015 we announced the
signing of a new MoU with a government
in Asia for long term airport security
services. As previously announced we had
been waiting for a parliamentary process
to enable foreign companies to enter into
government Private Public Partnership and
Build Operate Transfer contracts without
going to tender and to pass its final
reading. We have been informed the act
passed its final reading in April 2016, and
we are now able to progress discussions
with the authorities.
On 12 October 2015 we announced the
signing of a new MoU with a government
owned airport authority
in a new
geographical location for the provision of
airport security at several of the country’s
airports.
On 9 December 2015 we further announced
yet another new MoU had been signed with
a government owned airport authority for
the provision of long term airport security
services at a significant airport in East
Africa serving several million passengers
annually.
I am pleased to report that the other East
African airport project which we have
been in advanced discussions with for
some time is still live. The process for this
particular airport has frustratingly taken
far longer than anticipated due to the
government’s own internal processes and
was on standstill for most of 2015 due to
political issues unrelated to our project.
These
largely
issues have now been
resolved and we are once again engaged in
the negotiation process.
security
solutions and our
Airport
experience in the sector represent a
significant growth area for our Managed
Services Division, however this is certainly
not the only area of expansion and we are
looking at provision of similar long term
managed services solutions for both ports
and national borders.
Technology Division
Despite project delays, the Technology
improved
Division
produced
an
performance during 2015 with revenues of
£1.7million (2014: £1.2m) an increase of
some 42%.
During the year the Technology Division
secured contracts for a wide range of
products and services to a wide range of
clients from around the world including:
protection equipment for a nuclear facility
in North America; advanced screening
solutions in West Africa; security solutions
for a North African postal service; a
museum in Egypt; various UK prisons and a
Southern African police service.
Unfortunately the world-wide slump in oil
prices has caused some governments to
cut back or delay capital spending. This
has impacted some of our major projects
such as the Americas $4.4m consultancy
project announced last year which is now
unlikely to be completed in 2016 and the
pipeline security project, where we were
appointed preferred suppliers for one of
the world’s largest government owned
petrochemical companies. Our Mexican
Franchise was also affected by such
cutbacks however they continue to invest
in the business and remain confident on
delivering their revenue commitments in
due course.
As the oil price is likely to be an issue
for a while, we have already discussed
alternative funding solutions such as
support from UK Export Finance. We are
also in discussions with a commodity trader
and have agreed in principle a scheme
by which the client/government can pay
for our services in product (e.g. oil) and
funds are held in escrow for drawdown as
we undertake the works, this is attracting
serious interest from our clients.
Last year we secured a contract for an
Iconic Bridge in the USA. This project has
commenced and initial revenues received,
the main contractor has
however,
informed the Company that the project is
facing delays and, at this time, there is no
confirmation as to completion timescales.
We have a major web presence through
our Westminster International website
which is an important source of enquiry
generation for our business. In our 2014
review I mentioned the effect that changes
to search engine algorithms were having
on our enquiry rates. There have been
ongoing algorithm changes throughout
2015. This required major changes to our
legacy websites and in 2015 we therefore
decided to invest in a completely new
website to meet the exacting and changing
requirements of our business as we move
forward. The new website is now optimised
for tablet and mobile devices, it is built to
cater for search engines from the ground
up and addresses many other limitations
of the old website. The new website took
9 months to complete and was launched in
June 2016 (www.wi-ltd.com).
Strategic Review
In view of the various
issues and
challenges of the past two years together
with our increasing focus on the significant
growth opportunities being developed
in our airport security business we are
undertaking a wide ranging strategic
review of our operations to ensure we are
well positioned to maximise opportunities
going forward and successfully take the
business to the next level. We are taking
a critical look at our business including
our Board and management structures,
our operations, our financing and our
advisory structure. At Board level we will
be making a number of changes which we
hope to announce in due course.
in
Whilst we have been successful
many areas, particularly
in growing
our international presence, we need to
take a critical look at our business, our
strategies, our structure going forward
and what, with the benefit of hindsight,
we could have done better in the past.
As our business evolves so too must our
business strategy and our core focus is now
increasingly on our long term recurring
revenue managed services business and
the significant growth potential that
brings. Our strategic review therefore is
looking at our various business segments
and how they fit and support this strategy.
UK & Europe
13%
6%
Middle East
Africa
70%
11%
Rest of World
2015 Geographical
Revenue Analysis
The Group’s international
business is conducted on a
global scale.
8
To those ends we have already streamlined
some of our operations and have achieved
non depreciation overhead savings of
18% in the year and a further 13% since
the year end with further contingent cost
savings identified. This is something we
will naturally keep under regular review.
airport security operation have increased
by over 85% as traffic has returned. When
combined with streamlined resources and
operational leverage, this has led to a very
significant improvement in the EBITDA
performance of the Group as compared to
the same period in 2015.
Despite the challenges of the past two
years our business is facing unprecedented
growth prospects, particularly with our
airport security operations, and it is
essential we have the right leadership,
in place
management and strategies
to successfully deliver such growth.
Accordingly the changes we are making
and intend to make in the near future, to
strengthen our management and broaden
our range of experience and expertise
together with the strategies we are
putting in place, will, I believe, serve
the Company well and greatly assist our
growth.
Performance Indicators
The Key Performance Indicators by which
we measure performance of our business
is set out in the Chief Financial Officer’s
Report on page 11.
Financial Review
The financial review for the year ended
December 2015 is set out in the Chief
Financial Officer’s Report on pages 10 and
11.
Principal Risks and Uncertainties
These are referenced along with key
mitigation strategies on pages 13 and 14.
Business Outlook
I am pleased to report an encouraging
start to 2016 with the end of the Ebola
crisis in West Africa, an ongoing recovery
in revenues and increasing interest in our
long term airport security operations.
continuing
improvement
The first four months of 2016 show
a
the
profitability and cash generation of the
aviation division which was loss making
in the same period in 2015 due to the
Ebola crisis. Revenues in the Company’s
in
Our Technology business is showing signs
of recovery despite delays and setbacks
and in February 2016 we announced the
signing of a MoU for a 20 year border
security project and so far in 2016 we
have continued to secure contracts for a
wide range of products and services to a
wide range of clients around the world.
By way of example, in recent months, the
Technology Division has supplied various
products and services to UK prisons;
security equipment to various airports in
the UK and overseas; explosive detection
equipment to a UN entity in Somalia;
supplied screening equipment to the
South African Police; as well as securing
contracts with numerous other clients as
far afield as the USA, Afghanistan, Kenya,
Nigeria, Romania, Indonesia, Tanzania and
China.
We are looking forward to our flagship
vessel, Sierra Queen, being ready for
service and our second vessel, Sierra
Princess, arriving in June so that finally
our eagerly awaited and much needed
professional ferry service can commence
operations.
As previously mentioned, however, our
core focus is now increasingly on our long
term recurring revenue managed services
business and in that respect I am pleased
to report that we are seeing increasing
interest and making good progress on
numerous fronts.
seven
currently
We
signed
have
MoU’s, all still active and some now at
contract discussion stages, with various
governments and airport authorities
around the world, serving around 10.6
million embarking passengers annually.
Of these, three have been signed in the
first four months of 2016, one in East
Africa and two in the Middle East. This is
against three signed in the whole of 2015,
two of which were at the end of 2015.
The increasing number and frequency of
signed MoU’s demonstrate the momentum
we are building and I am pleased to report
that in May 2016 we received a letter
of intent relating to one of these MoU’s
with potential to generate revenues in
excess of £30m per annum based on the
current PAX throughput and the currently
anticipated fee per passenger. In addition,
the Company continues to pursue a number
of similar prospects around the world.
We are also in dialogue with potential
joint venture (JV) partners for certain
large scale projects whereby the JV
partner can bring added value through
financing support and regional presence
in new strategic locations as well as
bringing to Westminster added language
and cultural enhancements. Likewise
the JV partner would benefit from
Westminster’s widespread
international
presence and agent network for their own
complimentary services.
Following two years of dealing with
and overcoming a range of challenging
issues I believe we are now emerging
leaner, stronger and as a result of the
strategic review we are undertaking,
better structured to ensure maximum
shareholder benefit is achieved from the
numerous large scale, long term and high
margin opportunities we are developing
and whilst there is never certainty as to
timing or outcome of the various project
opportunities we are pursuing we remain
excited about our growth prospects.
Peter Fowler
Chief Executive Officer
08 June 2016
Approved by the Board
FIRE I SAFETY I SECURITY I DEFENCE
9
Westminster Group PLC | Annual Report & Accounts 2015
Chief Financial Officer’s Strategic Report
“Operating EBITDA loss fell by circa 70% and we are moving
towards underlying breakeven”
Ian Selby
Chief Financial Officer
Revenue
Revenues from our ongoing businesses
were circa £3.4m (2014: £3.5m). The
Technology Division recorded revenues
of £1.7m (2014: £1.2m) and the Managed
Services Division £1.7m (2014: £2.2m).
Managed Services revenues were down
on the prior year due to the full year of
Ebola impacts in 2015 (crisis commenced
July 2014) and these results clearly do
not reflect the significant recovery in
passenger numbers experienced in 2016 so
far. Technology Division revenues reflected
the run rate of smaller product sales as
well as certain larger orders received in
the first quarter. They do not include the
delayed larger solution sales such as the
Asian Scanner, Americas Consultancy and
US Bridge, the vast majority of which
remain unrecognised. The estimated
impact of Ebola on Managed Services
margins was approximately £1.12m (2014:
£0.54m) reflecting the nature of the
crisis which commenced in mid-2014 and
affected all of 2015.
Gross Margin
Gross margin rose to 58% (2014: 56%)
due to the mix of business and improving
margins in both main divsions.
Operating Cost base
Our total operating and administrative
costs were reduced by 17% to £3.6m (2014:
£4.4m). This was achieved as previously
stated through headcount reductions in
expatriate staff in West Africa as well as
in staff based in the UK Banbury HQ. Cost
reductions have continued since the year
end and our overall non-depreciation cost
base in the first four months of 2016 was
approximately £0.25m, marking a further
reduction of 13%. We continue to bear
pressure on all costs, particularly those
associated with the Technology Division
and the Group HQ and as part of the
strategic review. Within these results an
increased share option expense of £0.07m
(2014: £0.05m) was recorded as was a
gain from the initial receipt of settlement
monies from the vendors of CTAC limited
(£0.08m). As part of this a further $0.315m
is due to be paid to Westminster in 2017
and whilst the Company has a debenture
over this it will be recognised in the
financial statements when received.
Operational EBITDA
Our loss from operations was £1.65m
(2014: £2.40m). A very significant element
of this was due to the impact of Ebola
which began in mid-2014 and affected
all of 2015. Estimated margin impacts of
this were £1.12m (2014: £0.54m). When
adjusted for the items in note 4 to these
accounts and depreciation, the Group
recorded an EBITDA loss of £0.44m (2014:
£1.56m) marking a reduction of over 70%.
Financing Charges
Underlying financing charges of £0.34m
(2014: £0.04m) were higher than the
prior year due to an increased average
debt compared to 2014. Senior Secured
Convertible Notes (10% coupon) generated
an underlying cash charge of £0.12m
(annualised based on current debt
outstanding £0.22m). The
remaining
£0.22m (2014: £0.06m credit) of finance
charges were non-cash based and related
to IFRS valuations of the convertible loan
notes.
Result for the Year
Our loss before taxation was £1.99m
(2014: £2.43m) and the loss per share was
3.5p (2014: 4.9p).
Statement of Financial Position
The Group made a significant investment
in plant and equipment during the year
in support of the Sovereign Ferries 21
year ferry opportunity in West Africa.
Approximately £1.25m was spent on the
vessel (Sierra Queen) and its shipment
from Europe to West Africa. A further
£1.02m was spent on higher than expected
setup costs, vessel technical work and
infrastructure investment on this delayed
project. Overall our property, plant and
equipment assets grew from £1.90m to
£4.34m net book value.
Our debtor balance reduced from £2.04m
to £0.48m with a significant part of this
due to the adjustment for Americas
Consultancy contract revenues which
were fully deferred at December 2014 and
only a small element recognised in 2015.
Average days sales outstanding were 48
(2014: 36) with the increase due to certain
receivables which were mainly collected
early in 2016. On average the bad debt
record of the managed services airport
business is less than 0.3% of revenue billed
since commencement.
Trade payables were broadly similar to
2014 at £1.13m and average creditor days
were 32 (2014: 36) There were certain
amounts overdue to HMRC at the end of the
year but these were subject to payment
schemes which the Group adheres to.
Long Term Debt
At the reporting period date the Group
had the following convertible loan notes
outstanding. The amounts quoted are face
value and exclude any adjustments made
for IFRS.
Senior Secured 2018 notes
(“CLN”)
£2.245m (2014: £0.575m). £0.67m was
issued in April 2015, when the maturity
date on the original loan note was varied
from June 2016 to June 2018. This carries
a coupon of 10% and has a conversion price
of 35p. In October 2015 a further £1.0m
of this loan note was issued to strategic
investors. To attract these
incoming
strategic investors 1,142,856 new 10p
ordinary shares were issued as a bonus
to these incoming investors to reduce
their average price to 25p from the 35p
conversion price in the instrument. The
average price of 25p was an approximate
105% premium to the then market price.
At that point, certain consultancy fees of
£60,000 due to strategic partners were
also settled by the issue of a further
400,000 new 10p ordinary shares.
Convertible Unsecured
Loan Notes
(“CULN”). The Company issued £1,650,000
(gross) CULN to Darwin Strategic Limited
(“Darwin”) in April 2015. The Group
received 90% of this in cash and was able
to make repayment of any amount at any
point without penalty. At the time of
drawdown the Group was planning to use
cash flows arising from the monetisation
of signed Technology Division contracts
and from the commencement of ferry
operations in West Africa to reduce this
debt and to consequently reduce potential
shareholder dilution. Due to the delays
in the contracts referred to in the CEO
review, the Group’s cash resources did
not allow repayments to be made and
consequently £0.9m of loan notes were
converted in the year to 6,753,270 ordinary
10p shares. At the reporting period date
£0.75m was outstanding. Darwin were also
issued with warrants (vested immediately)
to subscribe for 1,100,000 new Ordinary
Shares at an exercise price of 39p per
10
2015 Divisional Analysis
Technology
51%
49%
Managed Services
The divisions through
which the group operates
are represented as
follows.
new Ordinary Share. The warrants can be
exercised over a two year period from 22
April 2015.
1 January 2016 and 23 May 2016 resulting
in the issue of 6,659,567 new ordinary 10p
shares.
Shareholders’ funds stood at £1.69m
(2014: £2.42m).
Cash Flow Statement
During the year the Group had an
operating cash outflow of £1.13m (2014:
£1.65m) which arose from trading losses.
The Group had a large capital expenditure
requirement which was in the majority
due to set up costs of the Sovereign Ferries
project in West Africa and this comprised
the vast majority of the £2.64m (2014:
£0.40m) spend on plant and equipment.
This was largely financed by the issue of
convertible loan notes. £1.67m (gross)
of the 10% 2018 secured CLN (conversion
price 35p) was issued during the year and
a further £1.65m of unsecured variable
conversion rate loan notes were issued
to Darwin Strategic in April 2015. Cash
balances at the year end stood at £0.15m
(2014: £1.18m). During the year the group
at certain points was provided overdraft
support by its bankers HSBC.
Events after the Reporting Period
In February 2016 the Group issued a
further £0.475m Par Value of similar CULN
to Darwin with proceeds net of expenses
of circa £403,000. At that point they were
issued with 589,330 detachable warrants
over 10p ordinary shares. These warrants
have a life of 3 years and a strike price
of 20.15p A further £0.775m of the total
CULN was converted into equity between
For the period until the end of April 2016
according
to unaudited management
accounts the Group recorded an average
monthly EBITDA loss of circa £40,000,
although it achieved break even in April
2016. This improving performance (which
excluded any adjustment for still lower
passenger volumes as a result of Ebola)
was due to a recovery in passenger
numbers in airport managed services and
a lower cost base across the Group. The
Airport managed services project has
been recording record contribution and
the model augers well for the future. The
Ferry project in West Africa has continued
to experience delays
in monetisation
and consequently pre commencement
costs of £0.375m were incurred in the
first four months of 2016. The Group has
had overdraft support from it’s principal
bankers HSBC.
On 3 June 2016 the Company announced
the issue of 13,000,000 ordinary shares of
10p. 10,000,000 were issued to Hargreave
Hale who also
received 5,000,000
detachable and transferrable warrants
over 10p ordinary shares. These have a life
of 3 years from the date of issue and have
an exercise price of 12p per share warrant
(“Warrant”) valid for 3 years from the date
of issue, exercisable at 12p per share. The
Warrants may not be exercised until the
relevant authorities have been granted at
the Company’s AGM on 30 June 2016. The
Group
Revenue (£’m)
Gross Margin
# of Employees
Average Employee Cost per annum
Managed Services
Passengers Served (‘000)
Signed MoUs
Signed MoUs Potential Passengers (m)
Technology
Average Enquiries Per Month
Average Value of Monthly Enquiries
Conversion Rate by Volume
# of Countries Supplied
# of Return Customers
2015
3.4
58%
218
£10,000
63
4
5.1
99
£12,553
23.7%
33
142
2014
3.5
56%
213
£12,300
94
1
0.3
118
£ 30,155
20.9%
38
129
shares above are issued in 2 tranches
A first tranche of 9,885,895 new Ordinary
Shares (the “First Tranche Shares”) will be
issued immediately following settlement
on or by 8 June 2016, raising £988,589
before expenses.
A second tranche of 3,114,105 new
Ordinary Shares (the “Second Tranche
Shares”) will be issued on or around 1 July
2016, subject to, inter alia , the receipt
of shareholder approval of the necessary
resolutions at the Annual General Meeting.
This will raise a further £311,411 before
expenses.
Key Performance Indicators
The Group constantly monitors various
key performance indicators for factors
affecting the overall performance. At
Group level the revenues and gross margin
are monitored to give a constant view of
the Group’s operational performance. As
employment costs are the single largest
cost base for the Group the number of
employees and employee costs are also
monitored to ensure best use of resources.
The Managed Services Division derives
its revenues and cash flows based on the
number of passengers using a facility
such as an airport; therefore the number
of passengers served is monitored along
with the future potential of the division
with reference to the number of potential
airports and PAX in the divisional pipeline.
The Technology Division measures
its
sales activity by reference to the value of
quotes issued against sales enquiries and
therefore monitors the average enquiries
received per month and the potential
value of those enquiries. Additionally the
conversion rate by quantity is monitored to
counter the effects of large scale enquiries
which can distort value comparisons.
Finally the number of countries and
number of return customers are monitored
to give a view on the performance of the
division both pre and post sales.
Ian Selby
Chief Financial Officer
08 June 2016
Approved by the Board
11
Westminster Group PLC | Annual Report & Accounts 2015
Lieutenant Colonel Sir Malcolm Ross GCVO, OBE - Non-Executive Chairman
Lieutenant-Colonel Sir Malcolm Ross GCVO, OBE, was a member of the Royal Household of the Sovereign of the United
Kingdom and from 2006 to 2008, of the Prince of Wales. Sir Malcolm was educated at Eton and Sandhurst. He served
in the Scots Guards, holding the posts of Adjutant at the Royal Military Academy Sandhurst, and reached the rank of
Lieutenant-Colonel in 1982.
Sir Malcolm joined the Royal Household in 1987 as Assistant Comptroller of the Lord Chamberlain’s Office and
Management Auditor. From 1989 to 1990 he was Secretary of the Central Chancery of the Orders of Knighthood. He was
Comptroller of the Lord Chamberlain’s Office 1991-2005 and became Master of the Household to the Prince of Wales in
2006. Since 1988 he has been an Extra Equerry to The Queen.
Peter Fowler - Chief Executive Officer
Peter has over 40 years’ experience operating within the security industry, with particular reference to the electronic
protection sector. Peter started his career in the security industry in 1970, quickly progressing into senior management
roles and has a long history of running successful companies having built and sold two security businesses, successfully
carried out acquisitions and disposals and has held several senior positions in listed companies.
Peter joined Westminster as Managing Director in 1996, carried out an MBO of the business in 1998 and led the IPO
on AIM in 2007. He is widely travelled and has developed an extensive network of contacts around the world, having
met numerous senior governmental and military personnel in many of the countries in which Westminster operate.
Ian Selby - Chief Financial Officer
Ian is a Chartered Accountant with significant board level experience working with private and listed SME’s. He was
previously Group Finance Director of Zenith Hygiene Group plc, where he was instrumental in executing a successful
trade sale. Previously, he was the CFO of Corero plc, a software company. He has extensive experience including M&A,
fundraising, working capital improvements, debt renegotiation and operational finance management.
Earlier in his career he held international finance roles, including emerging markets in Halliburton Inc, Sybase Inc and
Micro Focus plc. He qualified as a Chartered Accountant with Coopers & Lybrand Deloitte and holds a degree in Physics
from the University of Birmingham.
Roger Worrall - Commercial Director
Roger has over 40 years’ experience in the electrical and electronic installation and manufacturing industries.
Roger began his career in the Royal Navy before joining an electrical company specialising in large scale electrical
contracting. In 1975 Roger joined Menvier (Electronic Engineers) Limited, a forerunner to Menvier-Swain Group Plc, an
international supplier of fire and safety system and was appointed a director in 1987. Menvier-Swain Group Plc grew to
a global group of 18 companies. Roger was involved with the integration and the subsequent rationalisation of many of
these companies. Roger remained with the Menvier-Swain Group until 1999, when he joined Westminster as a Director.
Stuart Fowler BEng (Hons) - Operations Director
Stuart has many years experience of the security industry and has been particularly involved in many of the more
complex integrated security systems.
Stuart studied computing and business studies at university obtaining a Bachelor of Engineering Honours degree in
1996. After university Stuart successfully implemented several software development projects for listed companies
before joining Westminster in 1998. Since that time Stuart has been instrumental in the design and implementation of
many larger complex systems installed by Westminster and is now responsible for the Group’s operations and technical
implementation worldwide.
Sir Michael Pakenham KBE, CMG - Non-Executive Director
Sir Michael Pakenham had a distinguished career in the British Diplomatic Service lasting nearly 40 years, during
which time he held posts in Poland, Paris, Washington, New Delhi, Nairobi, Brussels, Luxembourg and London. Whilst
in the Cabinet Office in Whitehall he served for three years as Cabinet Secretary for Defence and Overseas Affairs, as
Chairman of the Joint Intelligence Committee and as intelligence Coordinator. He retired from the Service in 2003 at
which point he was British Ambassador to Poland.
Sir Michael is a member of the Council of Kings College, London University and Trustee of the Chevening Estate.
Sir Michael stands down from the board on 30 June 2016 but will remain on the Group’s advisory board.
Board of Directors
12
Directors’ Report (including Strategic Risk Report)
The Directors present their annual report and the audited financial statements for the year ended 31 December 2015.
Principal activities
Westminster Group plc (“Westminster” or the “Company”) and 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 network of 100 agents located in over 50 countries at 31 December 2015. These agents typically
generate sales leads and work with the Group in preparing tender documentation. The majority of the agents are based in the Middle
East, the Far East and Africa.
Review of business, future developments and key performance indicators
A full review of the business and future development, incorporating key performance indicators, is set out in the Chief Executive
Officer’s Strategic Report and the Chief Financial Officer’s statement on pages 6 to 11.
The Directors who held office during the year were as follows
Executive Directors
Non-Executive Directors
Peter Fowler
Stuart Fowler
Roger Worrall
Ian Selby
Lt Col Sir Malcolm Ross GCVO OBE
The Hon Sir Michael Pakenham KBE CMG
Matthew Wood BSC ACA (resigned 31 August 2015)
Risk management objectives and strategy
The Group’s corporate governance objective is to build a risk management framework across the Group. Local operations prepare
relevant local risk registers which are then reviewed by a committee of executive Group management who then in turn report to
the main Board. Clear channels of communication exist to ensure that risk management objectives are communicated across the
company and that risks are reported up to the Board and relevant management. External auditors are used where necessary and the
Group will consider the need to establish an internal audit process as the Group expands. This may include operational reviews (such
as compliance with aviation security standards) as well as the traditional financial and compliance aspects.
Risk Description
Mitigation Strategies
Westminster provides complex security solutions to
organisations worldwide. Failure to successfully deliver
these projects could cause financial loss or reputational
damage.
The Group has a marine transport business in West Africa
which involves the transportation of passengers on a
ferry. There is inherent risk in any transport operation of
loss of life, injury or damage to vessel or infrastructure.
The vessel being out of service will mean that passengers
cannot be carried and therefore there is no income to
support the operation leading to increased financial
pressure on the Group.
Detailed scoping exercises are carried out ahead of a contract to
ensure risks are identified at the outset. This is carried out by experts
with specialist knowledge and is subject to peer review. Financial
modelling is used to understand the cash dynamics across a range of
possible scenarios. We ensure that there is a client obligation where
appropriate to help make the project succeed and we have regular
bilateral meetings with them. We seek manufacturer warranties from
equipment suppliers where appropriate.
We use qualified staff and also are retaining an independent
marine expert to audit our operation from a safety and compliance
perspective.
The Group maintains insurances including passenger, crew and
hull cover. We have an in country engineering team for ongoing
maintenance work. The deployment of 2 vessels in country in mid-2016
to provide resilience. The vessels are guarded by Westminster staff at
their berths.
13
Westminster Group PLC | Annual Report & Accounts 2015 Directors’ Report continued
Territories in which Westminster operates can have an
environment of inappropriate business ethics including
bribery. Westminster’s agent network allows it to extend
its reach through local partners, who could have non-
compatible business ethics. Such issues could cause loss of
contracts, reputational damage and legal action (civil and/
or criminal) to be taken against Westminster.
Westminster maintains a strict anti-bribery policy. Agents (as well as
staff) are given training on this through a series of Webinars. Agency
and business development agreements have explicit terms regarding
the need to comply with Westminster’s policies and that the need to
comply with local and UK law is mandatory. Westminster carries out
detailed checks on partners ahead of signing major agreements.
The Group has traditionally had a cash flow profile which
is highly dependent on large individual cash flows from
individual projects, the timing of which can be difficult
to determine. The Group’s international customers can
be in territories with a history of difficult payments and
potential bad debt. This could stress the Group’s liquidity.
Occasionally the Group is required to issue performance
bonds, the unfair calling of which could cause financial
loss.
The Group is increasing the proportion of its business with its managed
services division which has strong cash collection dynamics and
recurring revenues and this gives greater visibility as to cash flow.
Letters of Credit (which are confirmed where necessary) are used to
protect debt. As the Group expands the Managed Services division
then its exposure to debts of individual airlines will increase, and we
are actively reviewing direct payment by IATA which would remove
credit risk. The Company is reviewing the use of insurance to cover
unfair calling of such bonds.
The Group operates in multiple territories and is exposed
to exchange rate movements.
Westminster has projects in locations which are
challenging due to political, economic, climatic and health
issues. This can impact on the local operation and its
employees.
Legal structures and governmental attitudes to contract
law can be perceived in certain geographies to be
somewhat different to those in the UK. This could lead to
arbitrary termination of contracts without cause, seizure
of assets and imposition of penalties.
Westminster is a service business and this can by definition
be perceived to have a lower barrier to entry. This could
increase the risk of competition.
Natural hedging is used where possible. The Group is reviewing moving
to USD reporting as it believes the majority of its revenues will be
USD denominated. It is reviewing suitable hedging polices for GBP
exposure (such as UK salaries).
The protection of our staff is key. Where necessary close protection
is provided, comprehensive healthcare is in place as well as
insurances such as medical evacuation. Briefings are given to
staff pre deployment. Disaster recovery plans are in place for key
infrastructure. The Group’s risk management processes were active
during the 2014/5 Ebola outbreak in West Africa where screening and
protective measures were introduced to help protect the airport users
as well as staff.
Westminster believes that many territories which have historically
been perceived to have a weak legal environment are now beginning
to improve this as their economies develop. Westminster uses local
professional advisors to ensure compliance with local law and our
local partners provide a means of dealing with local issues. We believe
our strong reputation with the airlines and industry bodies such as
ICAO would mean that the disruption to our security operations would
concern the airline industry and the users of the airport.
The Group believes that its strategy of being vertically integrated
provides a strong differentiator. Furthermore the Group has built a
strong brand and a global network of agents which has taken some
considerable time and investment. Furthermore Westminster has many
successful project deliveries across its divisions.
Results and dividends
The Group’s results for the financial year are set out in the consolidated statement of comprehensive income.
The Directors do not recommend the payment of a dividend (2014: £nil).
Directors’ interests in share capital and share options
Details of the Directors’ interests in share capital and share options are contained in the Remuneration Committee report.
Other significant interests in the Company
At 8 June 2016, those shareholders, other than Directors, who had disclosed to the Company an interest of more than 3 per cent of
the issued share capital, are set out as follows.
14
Name of shareholder or nominee
Northcote IOM
Mr Hamed Al Jamal
Hargreave Hale
Easthope IOM Ltd
No of shares
2,389,602
4,000,000
10,019,228
2,941,176
Holding %
3.0
5.0
12.5
3.7
Share price
During 2015 the Company’s share price ranged from 12p to 31p and the share price at 31 December 2015 was 25.9p (2014: 28p).
Directors’ and officers’ liability insurance
The Company, as permitted by sections 234 and 235 of the Companies Act 2006, maintains insurance cover on behalf of the Directors
and Company secretary indemnifying them against certain liabilities which may be incurred by them in relation to the Company.
Events after the reporting period
These are detailed in note 28 to the accounts.
Going concern
The accounts are prepared on a going concern basis. In assessing whether the going concern assumption is appropriate, management
have taken into account all relevant available information about the future. As part of its assessment, management have taken into
account the profit and cash forecasts, the continued support of the shareholders and bondholders and Directors and management
ability to affect costs and revenues. Management regularly forecast results, financial position and cash flows for the Group. A worst
case budget for 2016 and 2017 has been prepared which includes revenues from the run rate of smaller contracts, continuation of
major existing contracts such as the West African airport contract and from the Sovereign Ferries operation, where a sensitivity of a
go live date at the end of the third quarter of 2016 has been reflected although a commencement ahead of this is targeted. Should
these revenue targets not be met the Group has a range of options which could include cost reductions and realisations of non-core
assets which could reduce net debt. Incremental wins of large contracts including Managed Services have been excluded from
this analysis as have any needs for incremental financing around setup costs, although it is envisaged that certain initial costs could
be met from organic resources. The Directors believe that based on the strong financial dynamics of incremental Managed Services
contracts that they should be able to secure financing and are already in discussions with various debt and equity providers. Based
upon these projections the Group has adequate working capital for the 12 months following the date of signing these accounts. For
this reason they continue to adopt the going concern basis in preparing the financial statements.
Auditor
A resolution to reappoint Moore Stephens LLP as auditor will be proposed at the Annual General Meeting to be held on 30 June 2016.
In so far as each of the directors is aware:
• There is no relevant audit information which the Group’s auditor is unaware, and
• The Directors have taken all steps that they ought to have taken to make themselves aware of any relevant audit information
and to establish that the auditor is aware of that information.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Group’s
website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from
legislation in other jurisdictions.
On behalf of the Board
Peter Fowler
Director
08 June 2016
Ian Selby
Director
Registered number 3967650
15
Westminster Group PLC | Annual Report & Accounts 2015
Remuneration Committee Report
Introduction
As an AIM quoted company, the preparation of a Remuneration Committee report is not an obligation. The Group has, however,
sought to provide information that is appropriate to its size and organisation.
Unaudited
The Remuneration Committee of the Board was established on admission of the Company to AIM in June 2007 and consists solely of
the following Executive and Non-Executive Directors:
• Lt. Col. Sir Malcolm Ross (Chairman)
• Peter Fowler
• Sir Michael Pakenham
The Remuneration Committee is responsible for establishing a formal and transparent procedure for developing policy on executive
remuneration and to set the remuneration packages of individual Directors. This includes agreeing with the Board the framework
for remuneration of the Chief Executive, all other Executive Directors and such other members of the executive management of the
Company as it is designated to consider. It is furthermore responsible for determining the total individual remuneration packages of
each Director, including, where appropriate, bonuses, incentive payments and share options.
The Committee’s policy is to provide a remuneration package which will attract and retain Directors and management with the
ability and experience required to manage the Group and to provide superior long-term performance. It is the aim of the Committee
to reward Directors competitively and on the broad principle that their remuneration should be in line with the remuneration paid to
senior management of comparable companies. There are four main elements of the remuneration package for Executive Directors:
base salary, share options, benefits and annual bonus. Notice periods for Executive Directors are 12 months;
• Base salary is reviewed annually and in setting salary levels the Remuneration Committee considers the experience and
responsibilities of the Executive Directors and their personal performance during the previous year. The Committee also takes
account of external market data, as well as the rates of increases for other employees within the Group.
• Share options are granted having regard to an individual’s seniority within the business and are designed to give Directors an
interest in the increase in the value of the Group.
• Benefits primarily comprise the provision of company cars, health insurance and participation in the Group life assurance scheme
• All Executive Directors and executive management participate in the Group’s annual bonus scheme, which is based upon the
assessment of individual performance, subject to the Group achieving profitability commensurate with its revenues and capital
employed.
Meetings
The Remuneration Committee did not meet during the year.
Options
The Group considers it important to incentivise employees and Directors through share incentive arrangements. The Group adopted
the Share Option Scheme on 3 April 2007, under which it granted EMI options and unapproved options to certain employees and
Directors over its ordinary shares. An option grant was made to the Directors in December 2014, the details of which are set out
on page 51 of these accounts. In order for the Directors to benefit from this scheme a demanding share price target of 60p before
vesting must be achieved. In context this threshold represents a premium of 140 percent to the placing price of the GBP1 million
fundraising announced on 10 December 2014 and a premium of 66 percent to the average equity issue price between July 2011
and December 2014 The Group believes that such schemes (as well as Long Term Incentive Plans) align executives with long term
shareholder value.
Non-Executive Directors’ remuneration
Non-Executive Directors’ remuneration is determined by the Board as a whole, each refraining from determining his own
remuneration. The fees paid to Non-Executive Directors are set at a level intended to attract individuals with the necessary
experience and ability to make a significant contribution to the Group. The service contracts of the Non-Executive Directors specify
the following:
Non-Executive Directors
Lt. Col. Sir Malcolm Ross
Sir Michael Pakenham
*Reduced by 50% since late 2014.
Severance
None
None
Notice
3 months
3 months
Contractual fees £
35,000*
24,000*
Matthew Wood is a director of One Advisory Limited which provided corporate advisory services to the Company. Matthew Wood
stepped down from the board on 31 August 2015.
Executive and Non-Executive Directors’ remuneration package and interest in share capital
Details of the Executive and Non-Executive Directors’ remuneration and interest in share capital for the year ended 31 December
16
2015 are as follows:
Audited
2015
Basic salary/fee
£’000
Benefits in kind
£’000
Group national
insurance cost
£’000
Share Based
Payment cost
£’000
Total cost of
employment
£’000
Total
2014
£’000
Executive Directors
Peter Fowler
Stuart Fowler
Roger Worrall
Ian Selby
Total Executive
Remuneration
Non-Executive Directors
Lt. Col. Sir
Malcolm Ross
Sir Michael
Pakenham
Matthew Wood
(left 31 Aug 15)
Non-Executive
Remuneration
Total Board
Remuneration
158
104
82
88
432
18
12
15
45
-
5
2
6
13
-
-
-
-
21
13
10
11
55
-
-
-
-
13
10
10
10
43
2
2
2
6
192
132
104
115
543
20
14
17
51
187
130
122
125
564
41
24
16
81
477
13
55
49
594
645
During the final quarter of 2014 the Directors reduced their remuneration as part of a cost cutting process in response to the reduced
margins coming from the West African airport contract as a result of the Ebola crisis. Share options were granted to the Directors in
December 2014 and the ensuing option expense was recognised for the first time in 2015. No options were exercised during the year
and no cash benefit was therefore received by the directors.
Mr Wood is a director of CMS Corporate Consulting Limited which provided advisory services to the company during the year ended 31
December 2015 £7,710 (2014: £24,178).
The Executive and Non-Executive Directors who held office during the year had no interests in the shares in, or debentures or loan
stock of, the Company or any of its subsidiaries except for the following holdings of ordinary shares in the Company:
Executive Directors and Non-Executive Directors
Interest at start and end of year
Lt. Col. Sir Malcolm Ross
Peter Fowler and Mrs P Fowler
Stuart Fowler
Roger Worrall
Sir Michael Pakenham
Ian Selby
140,884
6,361,794
541,618
2,200,522
103,334
166,667
17
Westminster Group PLC | Annual Report & Accounts 2015 Remuneration Committee Report continued
In addition to the interests disclosed above, certain Executive and Non-Executive Directors have options to acquire ordinary shares in
the Company granted under the Share Option Plan. Full details are as follows:
Number of options over ordinary shares of 10p each in the Company:
Directors
Lt. Col. Sir Malcolm Ross
Stuart Fowler
Stuart Fowler
Roger Worrall
Sir Michael Pakenham
Sir Michael Pakenham
Sir Michael Pakenham
Sir Malcolm Ross
Matthew Wood
Peter Fowler
Ian Selby
Roger Worrall
Stuart Fowler
At 1 January 2015
and 31 December 2015
Grant price
Market price
at date of grant
Date from
which exercisable
67,862
48,000
15,000
5,000
15,000
2,000
93,750
93,750
93,750
781,250
625,000
625,000
625,000
67.5p
10.0p
34.5p
34.5p
52.5p
34.5p
28.5p
28.5p
28.5p
28.5p
28.5p
28.5p
28.5p
67.5p
5.7p
34.5p
34.5p
52.5p
34.5p
25.5p
25.5p
25.5p
25.5p
25.5p
25.5p
25.5p
21 Jun 2009
5 Apr 2009
25 Sep 2011
25 Sep 2011
21 Apr 2010
25 Sep 2011
10 June 2016*
10 June 2016*
10 June 2016*
10 June 2016*
10 June 2016*
10 June 2016*
10 June 2016*
The market price of the shares at 31 December 2015 was 25p and the range during the year was 12p to 31p.
(*) These options were granted to the Directors at a price of 28.5 pence under the existing EMI Scheme. Executive Directors are
issued share options under the EMI Scheme and Non-Executive Directors under an unapproved scheme, which has the same rules
as the EMI Scheme but without the relevant tax concessions. The EMI Scheme has been amended from a straight forward time
based vesting model to a performance based vesting model. Save for a change of control in the Company, Share Options granted
to Directors will only vest if the Company’s share price has reached 60 pence at any time but will not be exercisable until after 18
months from the date of grant. All share options have an exercise period of 10 years from grant under the rules of the EMI Scheme.
The vesting price threshold of 60p represented a 140% premium to the price of the equity issued on the same day.
No directors exercised options during the year and no further options were granted.
On behalf of the Board
Lt Col Sir Malcolm Ross
Chairman of the Remuneration Committee
08 June 2016
18
Corporate Governance Report
The Directors are committed to delivering high standards of corporate governance to the Group’s shareholders and other
stakeholders including employees, suppliers and the wider community. As an AIM quoted company, full compliance with the UK
Corporate Governance Code 2014 (“the Code”) is not a formal obligation , therefore the Group has not complied in full. The Group
has, however, sought to adopt the provisions of the Code that are appropriate to its size and organisation and establish frameworks
for the achievement of this objective. The Board of Directors operates within the framework described below.
The Board
The Board sets the Group’s strategic aims and ensures that necessary resources are in place in order for the Group to meet its
objectives. All members of the Board take collective responsibility for the performance of the Group and all decisions are taken
in the interests of the Group. Whilst the Board has delegated the normal operational management of the Group to the Executive
Directors and other senior management, there are detailed specific matters subject to decision by the Board of Directors. These
include acquisitions and disposals, joint ventures and investments, projects of a capital nature and all significant contracts. The Non-
Executive Directors have a particular responsibility to challenge constructively the strategy proposed by the Executive Directors; to
scrutinise and challenge performance; to ensure appropriate remuneration and that succession planning arrangements are in place in
relation to Executive Directors and other senior members of the management team. The senior executives enjoy open access to the
Non-Executive Directors.
The Chairman is responsible for leadership of the Board and ensuring its effectiveness on all aspects of its role. The Chairman sets
the Board’s agenda and ensures that adequate time is available for discussion of all agenda items, in particular strategic issues.
The Chairman promotes a culture of openness and debate by facilitating the effective contribution of Non-Executive Directors in
particular and ensuring constructive relations between Executive and Non-Executive Directors. The Chairman is also responsible for
ensuring that the Directors receive accurate, timely and clear information. The Chairman ensures effective communication with
shareholders.
All Directors are able to allocate sufficient time to the Group to discharge their duties. There is a formal, rigorous and transparent
procedure for the appointment of new Directors to the Board. The search for Board candidates is conducted, and appointments
made, on merit, against objective criteria and with due regard for the benefits of diversity on the Board.
The Board is responsible for ensuring that a sound system of internal control exists to safeguard shareholders’ interests and the
Group’s assets. It is responsible for the regular review of the effectiveness of the systems of internal control. Internal controls are
designed to manage rather than eliminate risk and therefore even the most effective system cannot provide assurance that each
and every risk, present and future, has been addressed. The key features of the system that operated during the year are described
below.
Organisational structure and control environment
The Board of Directors meets at least six times a year to review the performance of the Group. It seeks to foster a strong ethical
culture across the Group. There are clearly defined lines of responsibility and delegation of authority from the Board to the operating
subsidiaries. The Directors of each trading subsidiary meet on a regular basis with normally at least two members of the Group Board
in attendance.
Internal control
The key procedures which the Directors have established with a view to providing effective internal control are as follows:
• Regular Board meetings to consider the schedule of matters reserved for Directors’ consideration;
• A risk management process;
• An established organisational structure with clearly defined lines of responsibility and delegation of authority;
• Appointment of staff of the necessary calibre to fulfil their allotted responsibilities; comprehensive budgets, forecasts and
business plans approved by the Board, reviewed on a regular basis, with performance monitored against them and explanations
obtained for material variances; and
• An Audit Committee of the Board, comprising Non-Executive Directors, which considers significant financial control matters as
appropriate.
There is currently no internal audit function in view of the size of the Group, although this is kept under annual review.
Risk management
The Board has the primary responsibility for identifying the major risks facing the Group. The Board has adopted a schedule of
matters which are required to be brought to it for decision, thus ensuring that it maintains full and effective control over appropriate
strategic, financial, organisational and compliance issues. The Board has identified a number of key areas which are subject to
regular reporting to the Board. The policies include defined procedures for seeking and obtaining approval for major transactions and
organisational changes.
Risk reviews are carried out by each subsidiary and reviewed annually as part of an ongoing risk assessment process. The focus of
the reviews is to identify the circumstances, both internally and externally, where risks might affect the Group’s ability to achieve
its business objectives. The management of each subsidiary periodically reports to the Board any new risks. In addition to risk
assessment, the Board believes that the management structure within the Group facilitates free and rapid communication across
the subsidiaries and between the Group Board and those subsidiaries and consequently allows a consistent approach to managing
19
Westminster Group PLC | Annual Report & Accounts 2015 Corporate Governance Report continued
risks. Certain key functions are centralised, enabling the Group to address risks to the business present in those functions quickly and
efficiently.
Corporate responsibility
The Board is very aware of the importance of its corporate responsibilities, particularly in terms of ensuring that high standards of
behaviour are maintained wherever the Group is operating. The following principles and processes have been established for that
purpose:
• Only supply goods and services that improve people’s safety and security – no offensive activities;
•
•
ISO 9001:2008 certified;
ISO 14001:2004 environmental management system certification;
• Members of ADS Aerospace, Defence & Security Association;
• Operate a strict ethical policy with both staff and agents within the principles of CIS (Common Industry Standard) produced by
the Aerospace and Defence Organisation of Europe;
• Comply with UK and International Export Controls criteria – key staff have attended required courses;
• Providing valuable employment and investment opportunities in third world areas;
• Promoting environmental solutions – e.g. solar street lighting, oil leak detection etc;
• Providing speakers at conferences & seminars, referenced by press & media;
• Supporting and assisting local and international charities; and
• The Group maintains a stringent anti-bribery policy and complies with both UK and local statutes
Financial planning, budgeting and monitoring
The Group operates a planning and budgeting system with an annual budget approved by the Board. There is a financial reporting
system which compares results with the budget and the previous year on a monthly basis to identify any variances from approved
plans. Frequent rolling cash flow forecasts form part of the reporting system. The Group remains alert to react to other business
opportunities as they arise.
Capital management policies and procedures
The Group’s capital management objectives are:
• To ensure the Group’s ability to continue as a going concern; and
• To provide an adequate return to shareholders.
The Group monitors capital on the basis of the carrying amount of equity plus its convertible loan, less cash and cash equivalents as
presented on the face of the statement of financial position.
The Group sets the amount of capital in proportion to its overall financing structure, i.e. equity and financial liabilities other than
its convertible loan. The Group manages the capital structure and makes adjustments to it in the light of changes in economic
conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, the Group may
adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares, or sell assets to reduce debt.
There is no requirement for the Group to maintain a strong capital base for each of its UK subsidiaries and therefore each subsidiary
is financed by inter-company debt from the Company. These policies have not changed in the year. The Directors believe that they
have been able to meet their objectives in managing the capital of the Group.
Non-Executive Directors
The Non-Executive Directors are considered by the Board to be independent in character and judgement and there are not
considered to be any circumstances that are likely to affect their judgement as Directors of the Group. The all hold shares in
the Company and have been awarded share options in the Company. These interests in the share capital of the Company are not
considered to be likely to affect their judgement as Directors of the Group. The Group is engaged in a strategic review and is looking
to bring on board Non-Executive directors with governmental and financial background.
Annual report
The Directors consider the annual report and accounts, taken as a whole, is fair, balanced and understandable and provides the
information necessary for shareholders to assess the Company’s performance, business model and strategy
20
Statement of Directors’ Responsibilities
Directors’ responsibilities statement
The Directors are responsible for preparing the Strategic Report, the Directors’ Report and the financial statements in accordance
with applicable law and regulations.
Company law requires the Directors to prepare Group and parent Company financial statements for each financial year. Under that
law the Directors have prepared the financial statements in accordance with International Financial Reporting Standards as adopted
by the European Union (IFRS). Under company law the Directors must not approve the financial statements unless they are satisfied
that they give a true and fair view of the state of affairs and profit or loss of the Company and Group for that period. In preparing
these financial statements, the Directors are required to:
• Select suitable accounting policies and then apply the consistently
• Make judgements and accounting estimates that are reasonable and prudent
• State whether applicable IFRS have been followed, subject to any material departures disclosed and explained in the financial
statements
• Prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue
in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company’s
transactions and disclose with reasonable accuracy at any time the financial position of the Company and the Group and enable them
to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets
of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities
On behalf of the Board
Peter Fowler
Director
08 June 2016
Ian Selby
Director
21
Westminster Group PLC | Annual Report & Accounts 2015
Independent Auditor’s Report to the
Members of Westminster Group Plc
We have audited the financial statements of Westminster Group Plc for the year ended 31 December 2015 which comprise the
consolidated statement of comprehensive income, the consolidated and company statements of changes in equity, the consolidated
and company balance sheets, the consolidated and company cash flow statements and the related notes. The financial reporting
framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRS)
as adopted by the European Union and as regards the Parent Company financial statements, as applied in accordance with the
provisions of the Companies Act 2006.
This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act
2006. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to
state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Company and the Company’s members as a body, for our audit work, for this report, or for
the opinions we have formed.
Respective responsibilities of directors and auditor
As explained more fully in the Directors’ Responsibility Statement on page 21, the directors are responsible for the preparation of the
financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion
on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those
standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors.
Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable
assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an
assessment of whether the accounting policies are appropriate to the Group’s and the Parent Company’s circumstances and have
been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the directors;
and the overall presentation of the financial statements.
In addition, we read all the financial and non-financial information in the Report and Financial Statements to identify material
inconsistencies with the audited financial statements and to identify any information that is apparently materially incorrect based
on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any
apparent material misstatements or inconsistencies we consider the implications for our report.
Opinion on financial statements
In our opinion:
•
•
•
the financial statements give a true and fair view of the state of the Group’s and of the Parent Company’s affairs as at 31
December 2015 and of the Group’s loss for the year then ended;
the Group financial statements have been properly prepared in accordance with IFRS as adopted by the European Union;
the Parent Company financial statements have been properly prepared in accordance with IFRS as adopted by the European
Union and as applied in accordance with the provisions of the Companies Act 2006; and
•
the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
22
Opinion on other matters prescribed by the Companies Act 2006
In our opinion the information given in the strategic report and the directors’ report for the financial year for which the financial
statements are prepared is consistent with the financial statements.
Matters on which we are required to report by exception
We have nothing to report in respect of the following where under the Companies Act 2006 we are required to report to you if, in
our opinion:
• adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have not been
received from branches not visited by us; or
•
the Parent Company financial statements are not in agreement with the accounting records and returns; or
• certain disclosures of directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
Paul Fenner
Senior Statutory Auditor
for and on behalf of MOORE STEPHENS LLP
Chartered Accountants and Statutory Auditor
London
08 June 2016
23
Westminster Group PLC | Annual Report & Accounts 2015
Westminster Group PLC
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2015
REVENUE
Cost of sales
GROSS PROFIT
Administrative expenses
LOSS FROM OPERATIONS
Analysis of operating loss
Loss from operations
Add back amortisation
Add back depreciation
Add back exceptional Items
EBITDA loss from underlying operations
Financing Charges
LOSS BEFORE TAXATION
Taxation
Note
2015
£’000
2014
£’000
3
3,359
3,489
(1,403)
(1,533)
1,956
1,956
(3,606)
(1,650)
(4,360)
(2,404)
(1,650)
(2,404)
4
167
1,043
(436)
4
163
644
(1,593)
(338)
(37)
(1,988)
(2,441)
(7)
9
6
11
12
4
5
7
LOSS ATTRIBUTABLE TO EQUITY SHAREHOLDERS
(1,995)
(2,432)
TOTAL COMPREHENSIVE EXPENSE FOR THE YEAR ATTRIBUTABLE TO EQUITY
SHAREHOLDERS
(1,995)
(2,432)
LOSS PER SHARE
9
(3.49p)
(4.94p)
The accompanying notes form part of these financial statements.
All activities are derived from continuing activities.
24
Westminster Group PLC
Consolidated and Company Statements of Financial Position
As at 31 December 2015
Group
Company
Goodwill
Other intangible assets
Property, plant and equipment
Investment in subsidiaries
TOTAL NON-CURRENT ASSETS
Inventories
Trade and other receivables
Cash and cash equivalents
TOTAL CURRENT ASSETS
TOTAL ASSETS
Share capital
Share premium
Merger relief reserve
Share based payment reserve
Equity reserve on convertible loan note
Revaluation reserve
Retained earnings
TOTAL SHAREHOLDERS’ EQUITY
Borrowings
Deferred tax liabilities
TOTAL NON-CURRENT LIABILITIES
Deferred income
Trade and other payables
TOTAL CURRENT LIABILITIES
TOTAL LIABILITIES
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
Note
10
11
12
14
18
19
20
21
23
17
24
24
2015
£’000
397
34
4,343
-
4,774
57
484
150
691
5,465
6,345
9,170
299
258
219
134
2014
£’000
397
11
1,898
-
2,306
72
2,044
1,180
3,296
5,602
5,515
9,039
299
141
47
134
(14,739)
(12,757)
1,686
2,418
2,587
53
2,640
-
1,139
1,139
3,779
5,465
538
53
591
1,475
1,118
2,593
3,184
5,602
2015
£’000
-
2
1,046
9,979
11,027
-
126
2
128
2014
£’000
-
3
1,049
7,391
8,443
-
105
798
903
11,155
9,346
6,345
9,170
299
258
33
134
(6,071)
10,168
615
53
668
-
319
319
987
5,515
9,039
299
141
-
134
(6,062)
9,066
-
53
53
-
227
227
280
11,155
9,346
The accompanying notes form part of these financial statements. The Group and Company financial statements were approved by the
Board and authorised for issue on 08 June 2016 and signed on its behalf by:
Peter Fowler
Director
Ian Selby
Director
Registered number
3967650
25
Westminster Group PLC | Annual Report & Accounts 2015
Westminster Group Plc
Consolidated Statement of Changes in Equity
For the year ended 31 December 2015
Share
capital
£’000
Share
premium
£’000
Merger
relief
reserve
Revaluation
reserve
£’000
Share
based
payment
reserve
£’000
Equity
reserve on
convertible
loan note
£’000
Retained
earnings
£’000
Total
£’000
AS OF 1 JANUARY 2015
5,515
9,039
299
Shares issued for cash
40
20
Share based payment
charge
Exercise of share options
Lapse of share options
Warrants issued with
loan notes
Bonus Issue
CLN conversion
Loan notes issued
TRANSACTIONS WITH
OWNERS
-
1
-
-
114
675
-
830
-
-
-
-
(114)
225
-
131
Total comprehensive
expense for the year
-
-
-
-
-
-
-
-
-
-
-
-
141
-
76
(1)
(13)
55
-
-
-
117
-
134
47
(12,757)
2,418
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(39)
211
172
-
-
-
13
-
-
-
-
60
76
-
-
55
-
861
211
13
1,263
-
(1,995)
(1,995)
AS AT 31 DECEMBER 2015
6,345
9,170
299
258
134
219
(14,739)
1,686
AS OF 1 JANUARY 2014
4,695
7,123
299
Share based payment
charge
-
-
Share issues
757
1,955
Cost of other share
issues
Arising in the year
TRANSACTIONS WITH
OWNERS
-
63
(196)
157
820
1,916
Total comprehensive
expense for the year
-
-
-
-
-
-
-
-
89
52
-
-
-
52
-
134
144
(10,325)
2,159
-
-
-
-
-
-
-
-
-
(97)
(97)
-
-
-
-
-
52
2,932
(196)
(97)
2,691
-
(2,432)
(2, 432)
AS AT 31 DECEMBER 2014
5,515
9,039
299
141
134
47
(12,757)
2,418
26
Westminster Group Plc
Company Statement of Changes in Equity
For the year ended 31 December 2015
Share
capital
£’000
Share
premium
£’000
Merger
relief
reserve
Revaluation
reserve
£’000
Share
based
payment
reserve
£’000
Equity
reserve on
convertible
loan note
£’000
Retained
earnings
£’000
Total
£’000
AS OF 1 JANUARY 2015
5,515
9,039
299
Shares issued for cash
40
20
Share based payment
charge
Exercise of share options
Lapse of share options
Warrants issued with
loan notes
Bonus Issue
CLN conversion
Loan notes issued
TRANSACTIONS WITH
OWNERS
-
1
-
-
114
675
-
830
-
-
-
-
(114)
225
-
131
Total comprehensive
expense for the period
-
-
-
-
-
-
-
-
-
-
-
-
AS AT 31 DECEMBER 2015
6,345
9,170
299
AS OF 1 JANUARY 2014
4,695
7,123
299
Share based payment
charge
Share issues
Cost of share issues
CLN conversion
TRANSACTIONS WITH
OWNERS
-
757
-
63
820
-
1,955
(196)
157
1,916
Total comprehensive
expense for the period
-
-
-
-
-
-
-
-
141
-
76
(1)
(13)
55
-
-
-
117
-
258
89
52
-
-
-
52
-
AS AT 31 DECEMBER 2014
5,515
9,039
299
141
134
134
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
33
33
(6,062)
9,066
-
-
-
13
-
-
-
-
60
76
-
-
55
-
900
33
13
1,124
-
(22)
(22)
134
33
(6,071)
10,168
134
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(6,035)
6,305
-
-
-
-
-
52
2,712
(196)
220
2,788
(27)
(27)
(6,062)
9,066
27
Westminster Group PLC | Annual Report & Accounts 2015
Consolidated and Company Cash Flow Statements
For the year ended 31 December 2015
LOSS BEFORE TAXATION
Adjustments
Net changes in working capital
Equity settlement payment
Note
25
25
Group
2015
£’000
2014
£’000
(1,988)
(2,441)
589
209
60
261
535
-
NET CASH (USED IN) /FROM OPERATING ACTIVITIES
(1,130)
(1,645)
Company
2015
£’000
(22)
261
166
60
465
2014
£’000
(26)
73
(23)
-
24
INVESTING ACTIVITIES:
Purchase of property, plant and equipment
(2,642)
(399)
(20)
(110)
Purchase of intangible assets
Proceeds from disposal of fixed assets
Advances to subsidiaries
(27)
25
-
(1)
11
-
CASH FLOW USED IN INVESTING ACTIVITIES
(2,644)
(389)
FINANCING ACTIVITIES:
Gross proceeds from the issues of Ordinary shares
Costs of share issues
Net proceeds from the issue of convertible loan notes
Costs associated with the above issue
Interest paid
-
-
3,155
(280)
(131)
CASH FLOW FROM FINANCING ACTIVITIES
2,744
Net change in cash and cash equivalents
CASH AND EQUIVALENTS AT BEGINNING OF YEAR
CASH AND EQUIVALENTS AT END OF YEAR
(1,030)
1,180
150
The accompanying notes form part of these financial statements.
2,704
(128)
-
-
(69)
2,507
473
707
1,180
-
-
(2,587)
(2,607)
-
-
1,346
-
-
1,346
(796)
798
2
(1)
-
(2,104)
(2,215)
2,704
(128)
-
-
(69)
2,507
316
482
798
28
Notes to the Financial Statements
1. General information and nature of operations
Westminster Group plc (“The Company”) was incorporated on 7 April 2000 and is domiciled and incorporated in the United
Kingdom and quoted on AIM. The Group’s financial statements for the year ended 31 December 2015 consolidate the individual
financial statements of the Company and its subsidiaries. The Group designs, supplies and provide on-going advanced technology
solutions and services to governmental and non-governmental organisations on a global basis.
2. Summary of significant accounting policies
Basis of preparation
The Group financial statements have been prepared and approved by the Directors in accordance with International Financial
Reporting Standards (“IFRS”) as adopted by the European Union. The Parent Company has elected to prepare its financial
statements in accordance with IFRS.
The financial information is presented in the Company’s functional currency, which is Great British Pounds (‘GBP’) since that is
the currency in which the majority of the Group’s transactions are denominated.
As permitted by the Companies Act 2006 s408, a separate profit and loss account for the Parent Company has not been included
in these financial statements. The loss presented in the financial statements of the Parent Company is £22,000 (2014 £27,000).
Basis of measurement
The financial statements have been prepared under the historical cost convention with the exception of certain items which are
measured at fair value as disclosed in the accounting policies below.
Consolidation
(i) Basis of consolidation
The consolidated financial statements comprise the financial statements of the Company and its subsidiaries for the year ended
31 December 2015.
(ii) Subsidiaries
Subsidiaries are entities controlled by the Company. Control exists when the Company has the power, directly or indirectly, to
govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential
voting rights that presently are exercisable or convertible are taken into account. Subsidiaries are fully consolidated using the
purchase method of accounting from the date that control commences until the date that control ceases. Accounting policies
of subsidiaries have been adjusted where necessary to ensure consistency with the policies adopted by the Group.
(iii) Transactions eliminated on consolidation
Intragroup balances and any unrealised gains and losses or income and expenses arising from intragroup transactions are
eliminated in preparing the consolidated financial statements.
(iv) Company financial statements
Investments in subsidiaries are carried at cost less provision for any impairment. Dividend income is recognised when the right
to receive payment is established.
Business combinations
The consideration transferred by the Group to obtain control of a subsidiary is calculated as the sum of the acquisition date fair
values of assets transferred, liabilities incurred and the equity interests issued by the Group, which includes the fair value of
any asset or liability arising from a contingent consideration arrangement. Acquisition costs are expensed as incurred.
The Group recognises identifiable assets acquired and liabilities assumed in a business combination regardless of whether they
have been previously recognised in the acquiree’s financial statements prior to the acquisition. Assets acquired and liabilities
assumed are generally measured at their acquisition date fair values.
Foreign currency
Transactions in foreign currencies are translated at the foreign exchange rate ruling at the date of the transaction (spot
exchange rate). Foreign exchange gains and losses resulting from the settlement of such transactions and from the re-
measurement of monetary items at year-end exchange rates are recognised in profit or loss. Non-monetary items measured at
historical cost are translated using the exchange rates at the date of the transaction and not subsequently retranslated.
Foreign exchange gains and losses are recognised in arriving at profit before interest and taxation (see Note 6).
29
Westminster Group PLC | Annual Report & Accounts 2015 Segmental reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief decision-maker. The
chief decision-maker has been identified as the Executive Board, at which level strategic decisions are made.
An operating segment is a component of the Group
• That engages in business activities from which it may earn revenues and incur expenses,
• Whose operating results are regularly reviewed by the entity’s chief operating decisions maker to make decisions about
resources to be allocated to the segment and assess its performance, and
• For which discrete financial information is available.
Revenue
Revenue comprises the fair value of the consideration received or receivable for the sale of products and services, net of value
added tax, rebates and discounts and after eliminating sales within the Group. Revenue is recognised as follows:
(i) Supply of products
Revenue in respect of the supply of products is recognised when title effectively passes to the customer.
(ii) Supply and installation contracts and supply of services
Where the outcome can be estimated reliably in respect of long-term contracts and contracts for on-going services, revenue
represents the value of work done in the period, including estimates of amounts not invoiced. Revenue in respect of long-
term contracts and contracts for on-going services is recognised by reference to the stage of completion, where the stage of
completion can be assessed with reasonable accuracy. This is assessed by reference to the estimated project costs incurred
to date compared to the total estimated project costs. Revenue is calculated to reflect the substance of the contract, and
is reviewed on a contract-by-contract basis, with revenues and costs at each divisible stage reflecting known inequalities of
profitability. Where a contract is loss making, the full loss is recognised immediately. Managed Services income is recognised on
the basis of the volume of passengers and freight.
(iii) Maintenance income
Revenues in respect of the supply of maintenance contracts are recognised on a straight line basis over the life of the contract.
The unrecognised portion of maintenance income is included within trade and other payables as deferred income.
(iv) Close protection services
Revenues in respect of close protection services are recognised when the service is provided to the client.
(v) Training courses
Revenues in respect of training courses are recognised when the trainees attend the courses.
Operating expenses
Operating expenses are recognised in profit or loss upon utilisation of the service or at the date of their origin. Expenditure for
warranties is recognised and charged against the associated provision when the related revenue is recognised. Certain items
have been disclosed as operating exceptional due to their size and their separate disclosure should enable better understanding
of the financial dynamics.
Interest income and expenses
Interest income and expenses are reported on an accrual basis using the effective interest method.
Goodwill
Goodwill is stated after separate recognition of identifiable intangible assets. It is calculated as the excess of the sum of a) fair
value of consideration transferred, b) the recognised amount of any non-controlling interest in the acquiree and c) acquisition
date fair value of any existing equity interest in the acquiree, over the acquisition date fair value of identifiable net assets. If
the fair values of identifiable net assets exceed the sum calculated above, the excess amount (i.e. gain on a bargain purchase) is
recognised in profit or loss immediately. Goodwill is carried at cost less accumulated impairment losses.
30
Notes to the Financial Statements continued Other intangible assets
Acquired intangibles that are as a result of a business combination are recorded at fair value and, are amortised on a straight
line over the expected useful lives.
Other intangible assets comprise website costs and licences. Website costs are capitalised and amortised on a straight line basis
over 5 years, the expected economic life of the asset. This amortisation is charged to administrative expenses.
Property, plant and equipment
Land and buildings held for use are held at their revalued amounts, being the fair value on the date of revaluation, less any
subsequent accumulated depreciation. Revaluations are performed with sufficient regularity such that the carrying amount does
not differ materially from that which would be determined using fair values at the reporting date.
Any revaluation increase arising on the revaluation of such land and buildings is recognised in other comprehensive income,
except to the extent that it reverses a revaluation decrease for the same asset previously recognised as an expense, in which
case the increase is credited to the profit or loss to the extent of the decrease previously charged. A decrease in carrying
amount arising on the revaluation of land and buildings is charged as an expense to the extent that it exceeds the balance, if
any, held in the revaluation reserve relating to a previous revaluation of that asset.
Depreciation on revalued buildings is charged to the statement of comprehensive income.
Plant and equipment, office equipment, fixtures and fittings and motor vehicles are stated at cost less accumulated depreciation
and any recognised impairment loss.
Depreciation is charged so as to write off the cost or valuation of assets to their residual value over their estimated useful lives,
using the straight-line method, typically at the following rates. Where certain assets are specific for a long term contract and
the customer has an obligation to purchase the asset at the end of the contract they are depreciated in accordance with the
expected disposal / residual value.
Freehold buildings
Plant and equipment
Office equipment, fixtures & fittings
Boat
Motor vehicles
Leases
Rate
2%
7% to 25%
20% to 33%
Depreciated over 21 years.
20%
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of
ownership to the lessee. All other leases are classified as operating leases.
Assets held under finance leases are recognised as assets of the Group at their fair value or, if lower, at the present value of the
minimum lease payments, each determined at the inception of the lease. The corresponding liability to the lessor is included
in the balance sheet as a finance lease obligation. Lease payments are apportioned between finance charges and reduction
of lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are
charged directly against income, unless they are directly attributable to qualifying assets, in which case they are capitalised.
Rentals payable under operating leases are charged to income on a straight-line basis over the term of the relevant lease.
Impairment on non-financial assets
At each reporting date, the Group reviews the carrying amounts of its non-current assets to determine whether there is any
indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset
is estimated in order to determine the extent of the impairment loss (if any). Recoverable amount is the higher of fair value
less costs to sell and value in use. If the recoverable amount of an asset is estimated to be less than its carrying amount, the
carrying amount of the asset is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately,
unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation
decrease. Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised
estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would
have been determined had no impairment loss been recognised for the asset in prior years.
31
Westminster Group PLC | Annual Report & Accounts 2015 Notes to the Financial Statements continued
Financial instruments
Financial assets
The Group’s financial assets include cash and cash equivalents and loans and other receivables. All financial assets are
recognised when the Group becomes party to the contractual provisions of the instrument. All financial assets are initially
recognised at fair value, plus transactions costs. They are subsequently measured at amortised cost using the effective interest
method, less any impairment losses. Any changes in value are recognised in the Statement of Comprehensive Income. Interest
and other cash flows resulting from holding financial assets are recognised in the Statement of Comprehensive Income when
received, regardless of how the related carrying amount of financial assets is measured.
Loans and other receivables are provided against when objective evidence is received that the Group will not be able to collect
all amounts due to it in accordance with the original terms of the receivables. The amount of the write-down is determined as
the difference between the asset’s carrying amount and the present value of estimated future cash flows.
Cash and cash equivalents comprise cash at bank and deposits and bank overdrafts. Bank overdrafts are shown within
borrowings in current liabilities.
Financial liabilities
The Group’s financial liabilities comprise trade and other payables and borrowings. All financial liabilities are recognised
initially at their fair value and subsequently measured at amortised cost using the effective interest method. Financial liabilities
are derecognised when they are extinguished, discharged, cancelled or expire.
The convertible loan option leads to a potentially variable number of shares, therefore it has been accounted for as a host debt
with an embedded derivative. The embedded derivative is accounted for at fair value through profit and loss at each reporting
date.
Financial liabilities and equity instruments issued by the Group are classified according to the substance of the contractual
arrangements entered into and the definitions of a financial liability and an equity instrument. An equity instrument is any
contract that evidences a residual interest it the assets of the Group after deducting all of its liabilities. The accounting policies
adopted in respect of financial liabilities are set out below.
Other financial liabilities
Other financial liabilities include other payables and bank loans and are recognised initially at fair value and subsequently
measured at amortised cost, using the effective interest method.
Financial liabilities are recognised when the Group becomes a party to the contractual agreements of the instrument. All
interest related charges are recognised as an expense in “finance cost” in the Statement of Comprehensive Income. Trade
and other payables are recognised initially at their fair value and subsequently measured at amortised cost using the effective
interest method.
Inventories
Inventories are stated at the lower of cost and net realisable value. Costs of ordinarily interchangeable items are assigned
using the first in, first out cost formula. Costs principally comprise of materials and bringing them to their present location.
Net realisable value represents the estimated selling price less all estimated costs to completion and costs to be incurred in
marketing, selling and distribution.
Taxation
The tax expenses represent the sum of the tax currently payable and deferred tax. Current and deferred tax are recognised as
an expense or income in profit or loss, except in respect of items dealt with through equity, in which case the tax is also dealt
with through equity.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the
Statement of Comprehensive Income because it excludes items of income or expense that are taxable or deductible in other
years and it further excludes items that are never taxable or deductible. The Group’s liability for current tax is calculated by
using tax rates that have been enacted or substantively enacted by the reporting date.
Deferred tax is the tax expected to be payable or recoverable on material differences between the carrying amount of assets
and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and
is accounted for using the balance sheet liability method. Deferred tax liabilities are recognised for all taxable temporary
differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available
against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary
32
difference arises from the initial recognition of goodwill or from the initial recognition (other than in a business combination) of
other assets and liabilities in a transaction which affects neither the tax profit not the accounting profit.
Cash and cash equivalents
Cash and cash equivalents includes cash in hand, deposits held at call with banks, other short-term highly liquid investments
with original maturities of three months or less, and bank overdrafts. Bank overdrafts are offset against cash balances and a net
cash balance is presented.
Equity, reserves and dividend payments
Share capital represents the nominal value of shares that have been issued.
Share premium includes any premiums received on issue of share capital. Any transaction costs associated with the issuing of
shares are deducted from share premium, net of any related income tax benefits.
Merger relief reserve includes any premiums on issue of share capital as part or all of the consideration in a business
combination.
The share based payment reserve represents equity-settled share-based employee remuneration until such share options are
exercised or lapse.
The revaluation reserve within equity comprises gains and losses due to the revaluation of property, plant and equipment.
Retained earnings include all current and prior period retained profits and losses.
Dividend distributions payable to equity shareholders are included in liabilities when the dividends have been approved in a
general meeting prior to the reporting date.
Defined contribution pension scheme
The Group operates a defined contribution pension scheme for employees. However, no contributions have yet been made to
the scheme. If contributions were made, then the assets of the scheme would be held separately from those of the Group, the
pension cost would be charged against profits to represent the amounts payable by the Group or Parent Company and would
be expensed as it becomes payable. The Group is subject to pension auto-enrolment from 2015 onwards. Local labour in Africa
benefit from a termination payment on leaving employment. The expected value of this is accrued on a monthly basis
Shared-based compensation (Employee Based Benefits)
The Group operates an equity-settled share-based compensation plan. The fair value of the employee services received in
exchange for the grant of options is recognised as an expense over the vesting period, based on the Group’s estimate of awards
that will eventually vest, with a corresponding increase in equity as a share based payment reserve. For plans that include
market based vesting conditions, the fair value at the date of grant reflects these conditions and are not subsequently revisited.
Fair value is determined using Black-Scholes option pricing models. Non-market based vesting conditions are included in
assumptions about the number of options that are expected to vest. At each reporting date, the number of options that are
expected to vest is estimated. The impact of any revision of original estimates, if any, is recognised in profit or loss, with a
corresponding adjustment to equity, over the remaining vesting period.
The proceeds received when vested options are exercised, net of any directly attributable transaction costs, are credited to
share capital (nominal value) and share premium.
Provisions
Provisions are recognised when the Group has a present legal or constructive obligation as a result of a past event which it is
probable will result in an outflow of economic benefits that can be reliably estimated.
SIGNIFICANT MANAGEMENT JUDGEMENTS IN APPLYING ACCOUNTING POLICIES
The following are significant management judgements in applying the accounting policies of the Group that have the most
significant effect on the financial statements.
Revenue recognition
Recognition of income is considered appropriate when all significant risks and rewards of ownership are transferred to third
parties. In respect of long-term contracts and contracts for on-going services, turnover represents the value of work done in
the year, including estimates of amounts not invoiced. Turnover in respect of long-term contracts and contracts for on-going
services is recognised by reference to the stage of completion, where the stage of completion can be assessed with reasonable
accuracy. In this process management make significant judgements about milestones, actual work performed and the estimated
33
Westminster Group PLC | Annual Report & Accounts 2015 costs to complete the work. Revenue is calculated to reflect the substance of the contract, and is reviewed on a contract-by-
contract basis, with revenues and costs at each divisible stage reflecting known inequalities of profitability.
Estimation uncertainty
When preparing the financial statements management undertakes a number of judgements, estimates and assumptions about
recognition and measurement of assets, liabilities, income and expenses. The actual results are likely to differ from the
judgements, estimates and assumptions made by management, and will seldom equal the estimated results. Information about
the significant judgements, estimates and assumptions that have the most significant effect on the recognition and measurement
of assets, liabilities, income and expenses are discussed below.
Impairment
An impairment loss is recognised for the amount by which an asset’s or cash generating unit’s carrying amount exceeds its
recoverable amount. To determine the recoverable amount, management estimates expected future cash flows from each asset
or cash-generating unit and determines a suitable discount rate in order to calculate the present value of those cash flows.
In the process of measuring expected future cash flows management makes assumptions about future gross profits. These
assumptions relate to future events and circumstances. The actual results may vary, and may cause significant adjustments to
the Group’s assets within the next financial year in most cases, determining the applicable discount rate involves estimating the
appropriate adjustment to market risk and the appropriate adjustment to asset-specific risk factors.
Revalued freehold property
The freehold property is stated at fair value. An external, independent valuer, having an appropriate professional qualification
and recent experience in the location of the property being valued, valued the property at 31 December 2010. A valuation
exercise was carried out by the Group’s principal bankers and was of a broadly similar value. A full revaluation exercise will
be carried out in 2016. The fair value is based on market value, being the estimated amount for which a property could be
exchanged on the date of valuation between a willing buyer and a willing seller in an arm’s length transaction after proper
marketing wherein the parties had each acted knowledgeably, prudently and without compulsion.
Standards in issue not yet effective
At the date of authorisation of these financial statements, the following amendments and interpretations to existing accounting
standards have been published but are not yet effective.
• IFRS 9
Financial Instruments (effective date 1 January 2018)
• IFRS 16 Regulatory Deferral Accounts (effective date 1 January 2016)
• IFRS 15 Revenue from Contracts with Customers (effective date 1 January 2018)
Management anticipate that the above pronouncements will be adopted in the Group’s accounting policies for the first period
after the effective date, but will have no material impact on the Group.
The following proposed IFRS standards have been proposed but have not yet been endorsed by the European Union.
IFRS 9 ‘Financial instruments’ effective for periods beginning on or after January 1, 2018. The standard removed multiple
classification and measurement models for financial assets requirement by IAS 39 and introduces a model that has only two
classification categories: fair value and amortised cost. Classification is driven by the business model for managing the financial
assets and the contractual cash flow characteristics of the financial assets. The accounting and presentation for financial
liabilities and for derecognising financial instruments is relocated from IAS 39 without any significant changes. IFRS 9 (2010)
introduces additional changes relating to financial liabilities. IFRS 9 adds new requirements to address the impairment of
financial assets and hedge accounting. The Group is currently assessing the impact of the new standard.
IFRS 15 ‘Revenue from contracts with customers’ ; effective for periods beginning on or after January 1, 2018. The standard
establishes a new five-step model that will apply to revenue arising from contacts with customers. Revenue is recognised at an
amount that reflects the consideration to which an entity expects to be entitled in exchange for those goods or services. This
is converged standard on revenue recognition which replaces IAS 18 ‘Revenue’, IAS 11 ‘Construction contracts’ and related
interpretations. The Group is currently assessing the impact of the new standard. The principles in IFRS 15 provide a more
structured approach to measuring and recognising revenue.
IFRS 16 ‘Leases’; effective for periods beginning on or after January 1, 2019. Under IFRS 16, a contract is, or contains a lease
if the contact conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
The new standard eliminates the classification of leases as either finance leases or operating leases and instead introduces
an integrated lessee accounting model. Applying this model, lessees are required to recognise a lease liability reflecting the
obligation to make future lease payments and a ‘right-of-use’ asset for virtually all lease contracts. IFRS 16 includes an optional
exemption for certain short-term leases and leases of low-value assets. The Group is currently assessing the impact of the new
standard.
34
Notes to the Financial Statements continued 3.
Segment reporting
Operating segments
The Board considers the Group on a Business Unit basis. Reports by Business Unit are used by the chief decision-maker in the
Group. The Business Units operating during the year are the four operating companies Westminster Aviation, Westminster
International, Sovereign Ferries and Longmoor Security. This split of business segments is based on the products and services
Managed
Services
Aviation
£’000
Technology
£’000
Group and
Central
£’000
Managed
Services
Ferry
£’000
Managed
Services
Longmoor
£’000
each offer.
2015
Supply of products
Supply and installation contracts
Maintenance and services
Training courses
Intragroup sales
Revenue
Segmental underlying EBITDA
Exceptional Items (note 4)
Depreciation & amortisation
Apportionment of central
overheads
Segment operating result
Finance cost
Taxation charge
-
-
2,450
11
(812)
1,649
1,264
(1,120)
(94)
(948)
(898)
-
(7)
Loss for the financial year
(905)
(987)
Segment assets
Segment liabilities
Capital expenditure
1,272
343
186
149
434
-
795
1,546
168
1
(804)
1,706
-
-
-
-
-
-
(140)
(1,616)
-
(10)
(837)
(987)
-
-
77
(22)
1,878
317
(339)
-
(22)
1,565
2,962
20
-
-
-
-
-
-
37
-
(37)
-
-
-
-
-
2,454
38
2,430
Group
Total
£’000
795
1,642
2,622
12
(1,712)
3,359
(436)
(1,043)
(171)
-
(1,650)
(338)
(7)
-
96
4
-
(96)
4
19
-
(8)
(93)
(82)
1
-
(81)
(1,995)
25
2
33
5,465
3,779
2,669
35
Westminster Group PLC | Annual Report & Accounts 2015 Managed
Services
Aviation
£’000
Technology
£’000
Group and
Central
£’000
Managed
Services
Longmoor
£’000
2014
Supply of products
Supply and installation contracts
Maintenance and services
Training courses
Intragroup sales
Revenue
Segmental underlying EBITDA
Exceptional Items (note 4)
Depreciation & Amortisation
Apportionment of central
overheads
Segment operating result
Finance cost
Taxation benefit
-
-
2,180
9
-
2,189
380
(530)
(129)
(1,063)
(1,342)
-
9
890
267
275
-
(239)
1,193
(429)
(10)
(10)
(498)
(947)
-
-
Loss for the financial year
(1,333)
(947)
Segment assets
Segment liabilities
Capital expenditure
Geographical areas
1,331
462
280
1,899
1,880
6
-
-
-
-
-
-
(1,558)
(54)
(23)
1,645
10
(37)
-
(27)
2,313
821
110
Group
Total
£’000
890
267
2,499
72
(239)
3,489
(1,556)
(681)
(167)
-
-
-
44
63
-
107
51
(87)
(5)
(84)
(125)
(2,404)
-
-
(37)
9
(125)
(2,432)
59
21
3
5,602
3,184
399
The Group’s international business is conducted on a global scale, with agents present in all major continents. The following
table provides an analysis of the Group’s sales by geographical market, irrespective of the origin of the goods/services.
Group
United Kingdom & Europe
Africa
Middle East
Rest of the World
2015
£’000
439
2,341
204
375
3,359
2014
£’000
376
2,463
287
363
3,489
Some of the Group’s assets are located outside the United Kingdom where they are being put to operational use on specific
contracts. At 31 December 2015 fixed assets with a net book value of £2,992,000 (2014: £1,544,000) were located in Africa.
Major customers who contributed greater than 10% of total Group revenue
In 2015 no single customer contributed more than 10% of the Group revenue (in 2014 no customers contributed 10% of the
Groups revenue).
4.
Exceptional Items
36
Notes to the Financial Statements continued Loss of margin arising from fall in passenger numbers due to Ebola crisis
Loss on disposal of property, plant and equipment
Restructure costs - Longmoor. 2014 represents fixed costs eliminated in the year
Receipt from vendors of CTAC (dispute on acquisition consideration price)
5.
Finance cost
Group
Finance costs:
Interest payable on bank and other borrowings
Coupon interest payable on convertible loan notes
Finance income:
Amortised finance cost on convertible loan notes (see note 16)
Finance costs and income, net
6. Loss from operations
The following items have been included in arriving at the loss for the financial year
Group
Staff costs (see Note 8)
Depreciation of property, plant and equipment
Amortisation of intangible assets
Operating lease rentals payable
Property
Plant and machinery
Other
Foreign exchange gain
2015
£’000
1,120
-
-
(77)
1,043
2015
£’000
(1)
(121)
(122)
(216)
(338)
2015
£’000
2,236
167
4
101
3
60
(89)
2014
£’000
537
20
87
-
644
2014
£’000
(10)
(88)
(98)
61
(37)
2014
£’000
2,636
163
4
70
3
42
(15)
37
Westminster Group PLC | Annual Report & Accounts 2015 Auditor’s remuneration
Amounts payable in both years relate to Moore Stephens LLP (formerly Chantrey Vellacott DFK LLP) in respect of audit and other
services.
Audit Services
Statutory audit of parent and consolidated accounts and review of interims
Statutory audit of subsidiaries of the Company pursuant to legislation
Taxation services including R&D tax credits
Total fees
7. Taxation
Analysis of charge/(credit) in year
Group
Current year
Corporation tax
Group
2015
£’000
23
21
7
51
2015
£’000
-
-
2015
£’000
2014
£’000
17
17
7
41
2014
£’000
-
-
2014
£’000
Reconciliation of effective tax rate
Loss on ordinary activities before tax
(1,988)
(2,441)
Loss on ordinary activities multiplied by the standard rate of corporation tax in
the UK of 20.0% (2014: 20.0%)
(398)
(489)
Effects of:
Expenses not deductible for tax purposes
Capital allowances less than depreciation
Other short term timing differences
Recognised/unrecognised losses carried forward
Potential Charge in Overseas Subsidiary
Total tax charge/(credit)
77
(72)
3
390
7
7
60
85
15
329
(9)
(9)
Tax losses available for carry forward (subject to HMRC agreement) were £10.9m (2014: £8.9m).
38
Notes to the Financial Statements continued 8. Staff costs
Staff costs for the Group during the year
Group
Wages and salaries
Social security costs
Share based payments
2015
£’000
1,999
165
2,164
72
2,236
2014
£’000
2,378
205
2,583
53
2,636
Approximately £250,000 of these costs were capitalised as part of the setup costs of the Sierra Leonean ferry project.
The Group operates a stakeholder pension scheme. The Group made pension contributions totalling £7,000 during the year and
pension contributions totalling £1,000 were outstanding at the year-end (2014: £Nil)
Details of the Directors’ remuneration are included in the Remuneration Committee Report. Key management within the
business are considered to be the Board of Directors.
Average monthly number of people (including Executive Directors) employed
By function
Sales
Production
Administration
Management
9. Loss per share
2015
Number
3
189
20
6
218
Group
2014
Number
5
178
23
7
213
Loss per share is calculated by dividing the loss 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:
Issued ordinary shares
Start of year
Effect of shares issued during the year
Weighted average basic and diluted number of shares for year
2015
’000
55,145
2,029
57,174
2014
’000
46,949
2,290
49,239
For the year ended 31 December 2015 and 2014 the issue of additional shares on exercise of outstanding share options would
decrease the basic loss per share and there is therefore no dilutive effect. Loss per share was 3.49p (2014: 4.94p).
39
Westminster Group PLC | Annual Report & Accounts 2015 10. Goodwill
Group
Gross carrying amount at 1 January and 31 December
Accumulated impairment at 1 January and 31 December
Carrying amount at 31 December
2015
£’000
1,160
(763)
397
2014
£’000
1,160
(763)
397
Goodwill arose on the acquisition of Longmoor and is reviewed at the end of each financial period for impairment. The entire
balance relates to Longmoor Security Limited. Longmoor no longer has a fixed cost base and provides services to customers
principally overseas for manned guarding. The asset has not been impaired on the basis that the expected net present value of
its cash flows, when evaluated with a discount rate of 20%, are in excess of the current carrying value.
11. Other intangible assets
2015
Cost
At 1 January 2015
Additions
At 31 December 2015
Accumulated amortisation
At 1 January 2015
Charge for the year
At 31 December 2015
Net book value at 31 December 2015
2014
Cost
At 1 January 2014
Additions
Disposals
At 31 December 2014
Accumulated amortisation
At 1 January 2014
Charge for the year
Disposals
At 31 December 2014
Net book value at 31 December 2014
40
Group Website and Software
Company Website and Software
£’000
£’000
80
27
107
69
4
73
34
63
-
63
60
1
61
2
Group Website and Software
Company Website and Software
£’000
£’000
106
1
(27)
80
92
4
(27)
69
11
62
1
-
63
59
1
-
60
3
Notes to the Financial Statements continued Net book value at 31 December 2015
1,014
2,594
12. Property, plant and equipment
Group
2015
Cost or valuation
At 1 January 2015
Additions
Disposals
At 31 December 2015
Accumulated depreciation
At 1 January 2015
Charge for the year
Disposals
At 31 December 2015
Group
2014
Cost or valuation
At 1 January 2014
Additions
Disposals
At 31 December 2014
Accumulated depreciation
At 1 January 2014
Charge for the year
Disposals
At 31 December 2014
Freehold
property
Plant and
equipment
Office
equipment,
fixtures and
fittings
Motor
vehicles
Total
£’000
£’000
£’000
£’000
£’000
1,003
11
-
1,014
-
-
-
-
605
2,436
(9)
3,032
334
104
-
438
1,181
93
(4)
1,270
569
45
(4)
610
660
43
102
(27)
118
31
18
(6)
43
75
2,832
2,642
(40)
5,434
934
167
(10)
1,091
4,343
Total
Freehold
property
Plant and
equipment
Office
equipment,
fixtures and
fittings
Motor
vehicles
£’000
£’000
£’000
£’000
£’000
907
96
-
1,003
-
-
-
-
505
106
(6)
605
268
72
(6)
334
271
1,014
197
(30)
1,181
506
77
(14)
569
612
109
-
(66)
43
74
14
(57)
31
12
2,535
399
(102)
2,832
848
163
(77)
934
1,898
Net book value at 31 December 2014
1,003
Included within Plant and Equipment are ferry setup costs of £1.02m. Depreciation on this will commence at the point the ferry
service becomes operational in 2016.
41
Westminster Group PLC | Annual Report & Accounts 2015 Company
2015
Cost or valuation
At 1 January 2015
Additions
Disposals
At 31 December 2015
Accumulated depreciation
At 1 January 2015
Charge for the year
Disposals
At 31 December 2015
Company
2014
Cost or valuation
At 1 January 2014
Additions
Disposals
At 31 December 2014
Accumulated depreciation
At 1 January 2014
Charge for the year
Disposals
At 31 December 2014
Freehold property
Plant and
equipment
Office equipment
fixtures and fittings
£’000
£’000
£’000
1,003
11
-
1,014
-
-
-
-
907
96
-
1,003
-
-
-
-
20
-
-
20
12
3
-
15
5
238
9
(2)
245
200
19
(1)
218
27
21
4
(5)
20
15
2
(5)
12
8
246
10
(18)
238
198
19
(17)
200
38
Total
£’000
1,261
20
(2)
1,279
212
22
(1)
233
1,046
Total
£’000
1,174
110
(23)
1,261
213
21
(22)
212
1,049
Net book value at 31 December 2015
1,014
Freehold property
Plant and
equipment
Office equipment
fixtures and fittings
£’000
£’000
£’000
Net book value At 31 December 2014
1,003
The freehold property was valued professionally by Berry Morris, Chartered Surveyors, on 24 February 2011. The valuation
was made on the basis of recent market transactions on arm’s length terms and on an alternative use basis. The Revaluation
Reserve is not available for distribution to shareholders. The directors are of the opinion that the valuation has not moved
materially since the last valuation was performed. A subsequent valuation was carried out in early 2016 for the purposes of
evaluating overdraft facilities by the Group’s bankers and this indicated no material change in valuation. A full market valuation
exercise will be conducted in 2016.
42
Notes to the Financial Statements continued The freehold property is stated at valuation, the comparable historic cost and depreciation values are as follows:
Historical cost
Accumulated depreciation
At 1 January
Charge for the year
At 31 December
Net book value as at 31 December
2015
£’000
697
63
3
66
631
2014
£’000
697
60
3
63
634
The Group’s land and buildings have been pledged as security for contingent liabilities incurred as part of the normal trading of
Westminster International, see note 26.
13. Operating lease commitments
The Group and the Company lease various office equipment and motor vehicles under non-cancellable operating lease
agreements. The total commitments under these leases can be analysed as follows:
As at 31 December 2015
Within one year
In the second to fifth years inclusive
Total
As at 31 December 2014
Within one year
In the second to fifth years inclusive
Total
Group
Property
£’000
60
107
167
Group
Property
£’000
64
123
187
Other
£’000
57
38
95
Other
£’000
71
102
173
Remaining lease terms range from 2 months to 5 years.
Company
Minimum lease payments under operating leases recognised
as an expense in the year
14. Investment in subsidiaries
Company
At start and end of year
Amounts due from subsidiaries net of provisions
Group
Total
£’000
117
145
262
Group
Total
£’000
135
225
360
2015
£’000
164
2015
£’000
357
9,622
9,979
Other
£’000
30
12
42
Other
£’000
36
41
77
2014
£’000
38
2014
£’000
357
7,034
7,391
The expected net present values of cash flows arising from these subsidiaries is expected to be in excess of the carrying value of
these investments.
43
Westminster Group PLC | Annual Report & Accounts 2015 15. Subsidiary undertakings
The subsidiary undertakings at 31 December 2015 were as follows:
Name
Country of
incorporation
Principal activity
Westminster International Limited
England
Longmoor Security Limited
CTAC Limited
Westminster Aviation Security Services
Limited
Westminster Facilities Management
Limited
Sovereign Ferries Limited
England
England
England
England
England
Westminster Operating Limited
England
Longmoor (Sierra Leone) Limited
Sierra Leone
Advanced security technology, (Technology
Division)
Close protection training and provision of
security services (Managed Services)
Dormant
Managed services of airport security under
long term contracts. Managed Services
Division
Dormant
Marine Transport West Africa
Special purpose vehicle which exists solely for
listing the 2013 CLN on the CISX. Year end 31
October 14. Only transactions are intra group
Dormant
Westminster Management Services
Limited
Sierra Leone
Local presence required to deliver services
Westminster Sierra Leone Limited
Sierra Leone
Local presence required to deliver services
% of nominal
ordinary share
capital and voting
rights held
100
100
100
100
100
100
100
100
100
49
The full cost base of Westminster Sierra Leone Limited has been included in these financial statements on the basis that the
company has no revenue of its own. The remaining 51% is owned by Nahsac, a local partnership.
16. Financial assets and liabilities
Categories of financial assets and liabilities
The carrying amounts presented in the Consolidated and Company statement of financial position relate to the following
categories of assets and liabilities:
Financial assets
Loans and receivables
Amount owed by subsidiary
undertakings (note 14)
Trade and other receivables (note 19)
Cash and cash equivalents (note 20)
Financial liabilities measured at amortised cost
Borrowings (note 23)
Trade and other payables (note 24)
Group
2015
£’000
-
403
150
553
2,587
961
3,548
2014
£’000
-
1,979
1,180
3,159
538
1,054
1,592
Company
2015
£’000
9,622
101
2
9,725
520
239
759
2014
£’000
7,034
83
798
7,915
-
199
199
See note 2 for a description of the accounting policies for each category of financial instruments. The fair values are presented
in the related notes. A description of the Group’s risk management and objectives for financial instruments is given in note 27.
44
Notes to the Financial Statements continued Convertible Loan Notes
The group had the following convertible loan notes outstanding during the year the key details of which are set out below:
Amount
Conversion Price
Security
Secured Convertible Loan Notes (“CLN”)
£2.245m
35p
Convertible Unsecured Convertible Loan
Notes (“CULN”)
£1.65m drawn down £0.75m outstanding
at 31 Dec 2015
Variable see below
Secured fixed and floating subordinate to
HSBC
Unsecured
Redemption Date
19 June 2018
Conversions allowed within certain
market driven parameters
Management Fee
£25,000 per annum
Coupon
10%
nil
nil
Conversion Detail
Company can force conversion if > 65p
for 15 working days after 19 June 2014.
Company can make repayment without
penalty if > 42p for 15 working days after
19 June 2014
The conversion price for these loan notes
is calculated as the lessor of i) 39 pence
and ii) 90% of the arithmetic average of
the five lowest daily volume weighted
average share price calculations per
ordinary share out of the ten trading days
prior to conversion.
On initial recognition the conversion option in relation to the convertible loan leads to a potentially variable number of shares,
therefore the convertible loan is accounted for as a host debt, (recorded initially at fair value, net of transaction costs and
subsequently valued at amortised cost) with an embedded derivative (recorded at fair value through profit and loss and fair
valued at each reporting date).
Host Debt
As at 1 January
Issued in the year
Amortised finance cost
Interest paid
Conversions
CLN
£’000
Group
538
1,391
175
(132)
-
2015
CULN
£’000
Company
-
1,218
162
-
(860)
Total
£’000
Group
538
2,609
337
(132)
(860)
2014
£’000
Group
651
-
88
(78)
(123)
As at 31 December
1,972
520
2,492
538
Reconciliation on Conversion
Amortisation of Loan Note Interest Cost Element
Principal Value
2015
2014
Group and Company
Company Only
£’000
(40)
900
£’000
(97)
220
860
123
The Convertible Loan Notes have been separated into two components, the Host Debt Instrument and the Embedded Derivative
on initial recognition. The value of the Host Debt Instrument will increase to the principal sum amount by the date of maturity.
The effective interest cost of the Notes is the sum of that increasing value in the period and the interest paid to Noteholders.
The Derivative element will vary in value according to the market price of the underlying Ordinary Shares and the period
remaining for conversion amongst other factors. The valuation of embedded derivative on initial recognition was undertaken by
a Black-Scholes valuation model.
45
Westminster Group PLC | Annual Report & Accounts 2015 Analysis of movement in debt at principal value (excluding IFRS impacts), memorandum only
Group Numbers
2015
Opening balance 1 January
Fresh issue
Conversion into equity
Closing balance 31 December
CLN
£’000
-
1,650
(900)
750
CULN
£’000
575
1,670
-
2,245
Total
£’000
575
3,320
(900)
2,995
2014
Secured
£’000
795
-
(220)
575
17. Deferred tax assets and liabilities
Deferred tax assets and liabilities have been calculated using the expected future tax rate of 18% (2014: 20.0%). Any changes in
the future would affect these amounts proportionately. The movements in deferred tax assets and liabilities during the year are
shown below.
Group & Company
At 1 January and 31 December
Non current assets
Property, plant & equipment
Recognised as
Deferred tax liability
18. Inventories
Finished goods
2015
£’000
(53)
(53)
(53)
Group
Company
2015
£’000
57
57
2014
£’000
72
72
2015
£’000
-
-
2014
£’000
(53)
(53)
(53)
2014
£’000
-
-
The cost of inventories recognised as an expense within cost of sales amounted to £1,361,000 (2014: £520,000). No reversal of
previous write-downs was recognised as a reduction of expense in 2015 or 2014.
46
Notes to the Financial Statements continued 19. Trade and other receivables
Amounts falling due within one year:
Trade receivables, gross
Allowance for credit losses
Trade receivables
Amounts recoverable on contracts
Other receivables
Financial assets
Prepayments
Non-financial assets
Trade and other receivables
Group
2015
£’000
294
(69)
225
4
174
403
81
81
484
2014
£’000
1,797
(44)
1,753
46
180
1,979
65
65
2,044
Company
2015
£’000
-
-
-
-
101
101
25
25
126
2014
£’000
10
-
10
-
73
83
22
22
105
The average credit period at the end of the year was 48 days (2014: 68 days). An allowance has been made for estimated
irrecoverable amounts from the sale of £69,000 (2014: £44,000). This allowance has been based on the knowledge of the
financial circumstances of individual receivables at the reporting date. During the year previously provided for items were
written off against the relevant provision.
The following table provides an analysis of trade and other receivables that were past due at 31 December, but not impaired.
The Group believes that the balances are ultimately recoverable based upon a review of past payment history and the current
financial status of the customers.
Not more than 3 months
More than 3 months but less than 6 months
More than 6 months but not more than 1 year
Allowances for credit losses
Opening balance at 1 January
Net amounts written off
Impairment loss
Closing balance at 31 December
2015
£’000
217
7
70
294
2015
£’000
44
(8)
33
69
2014
£’000
1,577
3
217
1,797
2014
£’000
1,453
(1,409)
-
44
There are no significant credit risks from financial assets that are neither past due nor impaired. At 31 December 2015 £232,000
(2014: £121,000) of trade receivables were denominated in US dollars and £nil (2014: £109,000) in Euros, £nil (2014: £32,000)
in Saudi Riyals and £62,000 (2014: £1,535,000) in sterling. The directors consider that the carrying amount of trade and other
receivables approximates to their fair value.
47
Westminster Group PLC | Annual Report & Accounts 2015 20. Cash and cash equivalents
Cash at bank and in hand
Bank overdraft
Cash and cash equivalents
Group
Company
2015
£’000
203
(53)
150
2014
£’000
1,180
-
1,180
2015
£’000
2
-
2
2014
£’000
798
-
798
All the bank accounts of the Group are set against each other in establishing the cash position of the Group. The bank
overdrafts do not therefore represent bank borrowings, which is why they are presented as above for the purposes of the cash
flow statement.
21. Called up share capital
Group and Company
The total number of authorised shares is 80,000,000 ordinary shares of £0.10 each (2014: 80,000,000 ordinary shares of £0.10
each). These shares carry no fixed right to income. The Company proposes to abolish the authorised share capital limit at the
AGM of 30 June 2016.
The total amount of issued and fully paid shares is as follows:
2015
2014
Ordinary shares
At 1 January
Issued on conversion of Convertible
Loan Notes
Issued on exercise of Share Options and
Warrants
Other Issues for cash
Bonus issue
At 31 December
Number
55,145,412
6,753,270
13,000
400,000
1,142,856
63,454,538
During the year the following equity issues took place
£’000
5,515
675
1
40
114
Number
46,949,234
628,570
10,000
7,557,608
-
£’000
4,695
63
1
756
-
6,345
55,145,412
5,515
Date
08-Jun-15
30-Sep-15
28-Oct-15
28-Oct-15
30-Oct-15
23-Dec-15
Comment
Darwin Conversion
Darwin Conversion
Shares Issued
Issue Price £
1,355,245
2,767,674
0.1844685
0.1264600
Strategic Investor Consulting Fees
400,000
0.1500000
Strategic Investor (Bonus Issue)
Darwin Conversion
Employee Share Options
1,142,856
2,630,351
Nil
0.1140530
13,000
0.1000000
48
Notes to the Financial Statements continued 22. Share Options
The Company adopted the Share Option Scheme on 3 April 2007 that provides for the granting of both EMI and unapproved
options (Westminster Group Individual Share Option Agreements). The main terms of the option scheme are as follows:
• Although no special conditions apply to the options granted in 2007, the model form agreement allows the Company to
adopt special conditions to tailor an option for any particular employee.
• The scheme is open to all full time employees and Directors except those who have a material interest in the Company.
For the purposes of this definition, a material interest is either beneficial ownership of, or the ability to control directly, or
indirectly, more than 30% of the ordinary share capital of the Company.
• The Board determines the exercise price of options before they are granted. It is provided in the scheme rules that options
must be granted at the prevailing market price in the case of EMI options and must not be granted at an exercise price that
is less than the nominal value of a share.
• There is a limit that options over unissued shares granted under the scheme and any discretionary share option scheme or
other option agreement adopted or entered into by the Company must not exceed 10% of the issued share capital.
• Options can be exercised on the second anniversary of the date of grant and may be exercised up to the 10th anniversary of
granting. Options will remain exercisable for a period of 40 days if the participant is a “good leaver”.
Options have subsequently been granted on this basis.
Business Development Options
In July 2012 a business development partner was appointed to assist in the development of Asian, African and Middle Eastern
business. As part of the remuneration agreement they were incentivised to generate direct incremental revenue for Westminster
with a grant of 2m options over 2m 10p ordinary shares.
These options have an exercise price of 30p each. 0.3m options vested on granting and were exercised before 31 December
2013. The remainder vest on achievement of incremental revenue performance milestones. 0.7m options vest on achievement
of £5m of revenue directly generated by that entity within 5 years and a further 1.0m vest on delivery of £30m revenue directly
generated by them within the same period.
In line with Westminster’s strategy and the alignment with strategic partners, further options were granted to additional
business development partners during the year ended 31 December 2014. In March 2014 an existing investor was appointed as a
Business Development Partner to the Group and was granted 0.5m options over 10p ordinary shares in Westminster. They have
a strike price of 85p each and vest on achievement of incremental recurring revenue performance arising from incremental
business in our Managed Services division. 0.3m Options vest on achievement of £5m of new Managed Services revenues directly
generated by the Business development Partner within 3 years and a further 0.2m vesting on delivery of an aggregate of £8m
new recurring revenue directly generated by them within the same period. The Options have a life of 8 years from date of grant,
but will lapse after three years if the above revenue criteria are not achieved.
A further 0.3m options with a strike price of 85p were granted to another business development partner on 1 July 2014. They
vest on achievement of £5m of new Managed Services revenues which are directly delivered by that partner within 3 years of
issue.
A condition of all of these agreements is that revenue is defined in accordance with the Group’s standard revenue recognition
policies and that it has also been paid in full. Westminster will be involved at all stages in client negotiations and product
specifications and will have ultimate sanction over contractual terms.
These options are valued by the use of the Black-Scholes model using a volatility of 50% and a life of 8 years (being the point at
which they lapse). The number of options vesting is based on forecast new business from that partner.
Darwin Options
Along side the issue of the £1.65m CULN detailed in note 16 Darwin were issued with 1.1m detachable warrants over 10p ordinary shares.
They have a strike price of 39p, a life of 2 years and were exercisable with immediate effect.
49
Westminster Group PLC | Annual Report & Accounts 2015 Employee Share options and weighted average exercise prices are as follows:
Outstanding at 1 January 2015
Granted
Exercised
Forfeited & Lapsed
Outstanding at 31 December 2015
Exercisable at 31 December 2015
Number of options
Weighted average exercise
price per share (p)
4,533,612
-
(13,000)
(170,000)
4,350,612
756,862
34.0
31.4
32.6p
The weighted average share price at the reporting date was 31.4p (2014: 34.0p). The average life of the unexpired share options
was 8.2 years (2014: 9.3 years).
The range of exercise prices and the weighted average remaining contractual life of share options outstanding at the end of the
period were as follows:
Grant Date
Exercise Price
Number
Outstanding
Average Life
Outstanding Years
Number
Outstanding
Average Life
Outstanding Years
2015
2014
05-Apr-07
27-May-10
25-Sep-09
21-Apr-08
21-Jun-07
28-Jun-12
10-Sep-13
26-Feb-13
01-Jul-14
10-Dec-14
£0.1000
£0.3275
£0.3450
£0.5250
£0.6750
£0.3400
£0.7100
£0.3650
£0.5100
£0.2800
194,000
15,000
60,000
15,000
67,862
60,000
50,000
405,000
390,000
3,093,750
4,350,612
2.3
5.4
4.7
3.3
2.5
7.5
7.7
6.5
9.0
9.0
8.2
207,000
15,000
60,000
15,000
67,862
80,000
50,000
505,000
440,000
3,093,750
4,533,612
3.3
6.4
5.7
4.3
3.5
8.5
8.7
7.5
10.0
10.0
9.3
The Black-Scholes option-pricing model is used to determine the fair value of share options at grant date. The assumptions used
to determine the fair values of share options at grant dates were as follows:
For share options granted post IPO the expected share price volatility was determined taking account of the historic daily share
price movements. Since 2009, the standard deviation of the share price over the year has been used to calculate volatility. As
the Company was not quoted at the dates of granting of the share options before the IPO on 21 June 2007, the calculation of the
expected volatility of the shares was estimated by comparisons of the historic volatility of a sample of securities of companies
of a similar size to the Company, quoted on AIM, as well as the volatility of other listed companies in similar industries.
The average expected term to exercise used in the models is based on management’s best estimate for the effects of non-
transferability, exercise restrictions and behavioural conditions, forfeiture and historical experience. The risk free rate has been
determined from market yields for government gilts with outstanding terms equal to the average expected term to exercise for
each relevant grant.
The amount recognised in profit or loss in respect of share-based payments was £72,000 (2014: £52,000).
50
Notes to the Financial Statements continued 23. Borrowings
Non-current
Convertible loan notes (note 16)
Other
Group
Company
2015
£’000
2,492
95
2,587
2014
£’000
538
-
538
2015
£’000
520
95
615
2014
£’000
-
-
-
The bank overdrafts represent overdrawn amounts in some subsidiaries, which are offset by cash balances in other subsidiaries.
See note 16 for details of the convertible loan notes.
24. Trade and other payables
Current
Trade payables
Accruals and other creditors
Financial liabilities
Other taxes and social security payable
Deferred income
Non-financial liabilities
Group
2015
£’000
366
615
981
158
-
158
Total current trade and other payables
1,139
2014
£’000
190
864
1,054
64
1,475
1,539
2,593
Company
2015
£’000
123
116
239
80
-
80
319
2014
£’000
103
96
199
28
-
28
227
Trade and other payables principally comprise amounts outstanding for trade purchases and ongoing costs, as well as payments
received in advance on contracts. The average credit period taken for trade purchases in 2015 was 32 days (2014: 36 days).
The directors consider that the carrying value of trade payables approximates to their fair value.
Deferred income relates to amounts received from customers at year-end but not yet earned. At the year end the company had
no customers were cash had been received and income not recognised, consequently both trade debtors and deferred income
had fallen compared with the prior year.
At 31 December 2015 £91,000 (2014: £35,000) of payables were denominated in US dollars, and £275,000 (2014: £155,000) in
sterling.
There were no finance leases outstanding at the end of 2015.
51
Westminster Group PLC | Annual Report & Accounts 2015 25. 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 loss before taxation
to arrive at operating cash flow:
Adjustments:
Depreciation, amortisation and
impairment of non-financial assets
Financing costs
Provision on intercompany debt
Loss on disposal of non-financial assets
Share-based payment expenses
Total adjustments
Net changes in working capital:
Decrease in inventories
Decrease/(increase) in trade and other
receivables
Decrease/(increase) in trade, deferred
income and other payables
Total changes in working capital
Group
2015
£’000
171
338
-
4
76
589
15
1625
(1,431)
209
2014
£’000
167
37
-
5
52
261
31
(628)
1,132
535
Company
2015
£’000
23
162
-
-
76
261
-
(21)
187
166
2014
£’000
22
-
(1)
-
52
73
-
168
(191)
(23)
26. Contingent assets and contingent liabilities
Westminster International has, in the normal course of business, given guarantees and entered into counter-indemnities
in respect of bonds relating to its contracts, which are cross guaranteed by the other Group companies. The total amount
outstanding at 31 December 2015 was £40,000 (2014: £366,000).
As part of the settlement with the vendors of CTAC Limited which was announced in July 2015 a first payment of approximately
$123,000 has been received. A further payment of $315,000 is due for payment in 2017 and this is secured against certain assets
held by the vendors of CTAC limited. It has not been reflected in these financial statements and will be reflected when monies
are received.
The Company is party to a multilateral guarantee in respect of bank overdrafts of all companies within the Group. At 31
December 2015, these borrowings amounted to £50,000 (2014: £nil).
27. Financial risk management
The Group is exposed to various risks in relation to financial assets and liabilities. The main types of risk are foreign currency
risk, interest rate risk, credit risk and liquidity risk.
The Group’s risk management is closely controlled by the Board and focuses on actively securing the Group’s short to medium
term cash flows by minimising the exposure to financial markets. The Group does not actively trade in financial assets for
speculative purposes nor does it write options. The most significant financial risks are currency risk, interest rate risk and
certain price risks.
52
Notes to the Financial Statements continued Foreign currency sensitivity
The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily
with respect to the Euro and US dollar. The Group’s policy is to match the currency of the order with the principal currency
of the supply of the equipment. Where it is not possible to match those foreign currencies, the Group might consider hedging
exchange risk through a variety of hedging instruments such as forward rate agreements, although no such transactions have
ever been entered into.
Foreign currency denominated financial assets and liabilities, translated into GBP at the closing rate, are as follows. Euro assets
and liabilities are not material.
Group
31 December 2015
Financial assets
Financial liabilities
Total exposure
31 December 2014
Financial assets
Financial liabilities
Total exposure
Short-term exposure
USD £’000
232
(91)
141
541
(36)
505
If the US dollar were to depreciate by 10% relative to its year end rate, this would cause a loss of profits in 2015 of £0.01m
(2014: £0.02m). Exposures to foreign exchange rates vary during the year depending on the volume of overseas transactions.
Nonetheless, the analysis above is considered to be representative of the Group’s exposure to currency risk. Foreign currency
denominated financial assets and liabilities are immaterial for the Company.
Interest rate sensitivity
The only borrowings of the Group are the convertible loans and bank overdraft and are detailed in note 16. All have fixed
interest rates. Interest on the cash holdings of the Group is not material and therefore no calculation of interest rate sensitivity
have been undertaken.
Credit risk analysis
The Group has a credit policy in place and the exposure to credit risk is monitored on an ongoing basis. Credit evaluations are
performed on all customers requiring credit over a certain amount. In the case of material sales transactions, the Group usually
demands an initial deposit from customers and generally seeks to ensure that the balance of funds is secured by way of a letter
of credit or similar instruments.
None of the Group’s financial asset are secured by collateral or other credit enhancements.
See further disclosure in note 19 of these financial statements.
Liquidity risk analysis
The Group manages its liquidity needs by monitoring scheduled debt repayments for long term financial liabilities as well
as forecast cash flows due in day to day business. Net cash requirements are compared to borrowing facilities in order to
determine headroom or any shortfalls. This analysis shows if available borrowing facilities are expected to be sufficient over the
lookout period.
53
Westminster Group PLC | Annual Report & Accounts 2015 As at 31 December 2015, the Group’s financial liabilities have contractual maturities (including interest payments where
applicable) as summarised below:
Group
31 December 2015
Convertible loans
Trade and other payables
Total
Company
31 December 2015
Convertible loans
Trade and other payables
Total
Current (within 6 months)
6 to 12 months
Non Current (1-5 years)
114
961
1,075
114
-
114
2,582
-
2,582
Current (within 6 months)
6 to 12 months
Non Current (1-5 years)
-
239
239
-
-
-
-
-
-
Convertible loans held by the Company do not include the CULN which is expected by the directors to convert into equity.
This compares to the Group’s financial liabilities in the previous reporting period as follows:
Group
Current (within 6 months)
6 to 12 months
Non Current (1-5 years)
As at 31 December 2014
Convertible loans
Trade and other payables
Total
Company
31 December 2014
Convertible loans
Trade and other payables
Total
24
1,402
1,426
24
-
24
575
-
575
Current (within 6 months)
6 to 12 months
Non Current (1-5 years)
24
360
384
24
-
24
575
-
575
54
Notes to the Financial Statements continued 28. Post balance sheet events
Since 1 January 2016 the Company issued the following ordinary shares of 10 pence each arising on conversions of CULN by
Darwin
Date
25 January 2016
15 March 2016
4 April 2016
18 April 2016
19 May 2016
Number of ordinary
10p shares issued
Amount of CULN
converted
Conversion Price
per Share (pence)
966,978
1,590,836
1,601,753
2,000,000
500,000
£150,000
£200,000
£175,000
£200,000
£50,000
15.5512
12.5720
10.9255
10.000
10.000
On 22 February the Company issued a further £475,000 of CULN to Darwin Strategic raising approximately £403,000 net of
expenses and redemption premium. On that day a 589,330 detachable and fully vested warrants over 10p ordinary shares were
issued to Darwin. They have a strike price of 20.15p and a life of 3 years from date of grant.
On 3 June 2016 the Company announced the issue of 13,000,000 ordinary shares of 10p. 10,000,000 were issued to Hargreave
Hale who also received 5,000,000 detachable and transferrable warrants over 10p ordinary shares. These have a life of 3 years
from the date of issue and have an exercise price of 12p per share warrant over 10p ordinary Shares (“Warrant”) valid for 3
years from the date of issue, exercisable at 12p per share. The Warrants may not be exercised until the relevant authorities
have been granted at the Company’s AGM on 30 June 2016. The shares above are issued in 2 tranches:
A first tranche of 9,885,895 new Ordinary Shares (the “First Tranche Shares”) will be issued immediately following settlement on
or by 8 June 2016, raising £988,589 before expenses.
A second tranche of 3,114,105 new Ordinary Shares (the “Second Tranche Shares”) will be issued on or around 1 July 2016,
subject to, inter alia , the receipt of shareholder approval of the necessary resolutions at the Annual General Meeting. This will
raise a further £311,411 before expenses.
The remaining 3 million first tranch shares were issued to another institutional investor
55
Westminster Group PLC | Annual Report & Accounts 2015 Non-Executive
Lt Col Sir Malcolm Ross (Chairman)
Sir Michael Pakenham
Company Information
Directors
Executive
Peter Fowler
Stuart Fowler
Roger Worrall
Ian Selby
Secretary
Ian Selby
Registered office
Westminster House
Blacklocks Hill
Banbury
Oxfordshire
OX17 2BS
Principal bankers
Registrars
HSBC Bank Plc
17 Market Place
Banbury
Oxfordshire
OX16 5ED
Capita Corporate Registrars plc
The Registry
34 Beckenham Road
Beckenham
Kent BR3 4TU
Nominated adviser & stockbroker
SP Angel Corporate Finance LLP
Prince Frederick House
35-39 Maddox Street
London
W1S 2PP
Auditor
Moore Stephens LLP
150 Aldersgate Street
London
EC1A 4AB
Financial public relations
Walbrook PR
Westpoint
78 Queens Road
Bristol
BS8 1QX
Solicitors
Charles Russell LLP
7600 The Quorum
Oxford Business Park North
Oxford
OX4 2JZ
Westminster Group Plc
P +44 (0) 1295 756300
F +44 (0) 1295 756302
E info@wg-plc.com
Westminster International Ltd
P +44 (0) 1295 756300
F +44 (0) 1295 756302
E info@wi-ltd.com
Longmoor Security Ltd
P +44 (0) 1295 756380
F +44 (0) 1295 756381
E info@longmoor-security.com
Westminster Aviation Security Services Ltd
P +44 (0) 1295 756370
F +44 (0) 1295 756372
E info@wass-ltd.com
Sovereign Ferries Ltd
P +44 (0) 1295 756300
F +44 (0) 1295 756302
E info@sovereign-ferries.com
56
The Westminster Group is a specialist security and services
group operating worldwide via an extensive international
network of agents and offices in over 50 countries.
The Group’s operating companies are structured into two vertically
integrated operating divisions, Managed Services and Technology and
the Group’s principal activity is the design, supply and ongoing support
of advanced technology security solutions and the provision of long
term managed services, consultancy and training services.
primarily to
Governments & Governmental Agencies,
Non Governmental Organisations
& Blue Chip Commercial Organisations Worldwide
with a focus on Africa, Asia, the Middle East & the Americas
HIGHLIGHTS
OPERATIONAL
• Three new large scale long term Memorandums of
Understanding signed for airport security;
investment in Ferry project and working capital needs,
£0.9m converted into equity in the year;
• Overall Loss £1.99m (2014 £2.43m);
• Prospect list of potential long term managed services
• Loss per share reduced by 29% to 3.49p (2014: 4.94p).
projects significantly enhanced;
• Maintained full operations and all staff safe during Ebola
Crisis in West Africa;
• Ebola crisis waning in H2 and airlines begin to return;
• Flagship ferry vessel Sierra Queen arrives in country but
suffers damage creating delays in ferry commencement;
• Second vessel, Sierra Princess, a 70 seater vessel secured;
• Technology Division sales increased by 43%;
• New Technology Division website underway.
FINANCIAL
• Revenues £3.4m (2015 : £3.5m) with £1.7m from Technology
Division (£1.2m). Decrease in Managed Services revenues
reflected worst period of Ebola crisis now over and making a
strong recovery;
POST BALANCE SHEET
• Three more signed MoU’s making seven in total under
discussion;
• Letter of Intent received for long term airport project with
potential for over £30m annual revenues;
• Recovery in passenger numbers in West Africa enabling
it to produce record financial performance, further cost
reductions since January;
• Group close to EBITDA break even;
• £0.475m unsecured debt issued and a further £0.75m
converted into equity;
• £1.3m new equity placed in June 2016 to provide additional
working capital and to support growing airport security
opportunity;
• Underlying EBITDA loss reduced by 70% to £0.44m (2014:
• Group now in a much stronger financial position than at the
£1.59m);
start of the year;
• Operating cost reductions of 8% continued into 2016;
• Full strategic review underway.
• Debt of £3.32m issued in the year to support capital
Westminster Group PLC | Annual Report & Accounts 2015
57
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Annual Report & Accounts 2015
Worldwide World Class Protection
Security Technology | Managed Services
Westminster Group plc
Westminster House
Blacklocks Hill
Banbury
Oxfordshire
OX17 2BS
United Kingdom
www.wsg-corporate.com