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6
Annual Report & Financial Statements 2016
Worldwide World Class Protection
Managed Services | Security Technology
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 & Government Agencies,
Non Governmental Organisations
& Blue Chip Commercial Organisations Worldwide
with a focus on Africa, Asia, the Middle East & the Americas
Highlights
OPERATIONAL
• Received Letter of Intent on potential major long
term aviation security opportunity in the Middle
East with annual initial revenues of circa £35m and
significant work undertaken in the year in negotiating
and developing the opportunity and in setting up the
appropriate supply chain and infrastructure;
• Substantial incremental business potential relating to
the above Middle East airport opportunity developed;
• Further interest and growing awareness in long term
airport managed services business in Emerging Markets;
• Three more long term airport security MoU’s signed
in 2016 and numerous other opportunities being
progressed;
• Westminster’s ex-pat team in Sierra Leone awarded
Ebola Medals for Service in West Africa during the
Ebola crisis.
FINANCIAL
• Revenues up by 31% to £4.4m (2015: £3.4m);
• Gross margin increased to 71 % (2015: 58 %);
• Adjusted EBITDA profit £25k (2015: Loss £360k);
• Raised £3m in year to support business development and
working capital;
• £1.2m of debt converted into equity in the year;
• Loss per share reduced by 29% to 2.5p (2015: 3.5p).
POST PERIOD END
• Strong recovery in West Africa passenger numbers
following end of Ebola crisis in H1 boosting 2016
revenues;
• Substantial progress achieved towards finalising
contract negotiations on the Middle East airport project
opportunity;
• Sovereign Ferries commenced initial operations in
December 2016 and major capital expenditure now
largely over;
• Technology Division delivered a wide range of sales
and solutions around the world, signed border security
project MoU in Middle East and launched new and
extensive website improving enquiry rates;
• Recovery in West Africa airport passenger numbers
continues;
• Darwin Capital Limited debt now converted into equity
and eliminated;
• £0.6m new equity raised in February 2017 and a further
£1m raised in April 2017;
• Continued to expand international presence including
• CTAC claim award finalised and property assets
establishing subsidiary companies and an operational office
in Germany to provide strategic support to the Group;
transferred from vendors to Westminster. Any sale of
these assets will benefit 2017;
Westminster Group PLC | Annual Report & Financial Statements 2016
61
“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 Statement
06 Chief Executive Officer’s Strategic Report
10 Chief Financial Officer’s Report
14 Board of Directors
15 Directors’ Report
20 Remuneration Committee Report
23 Corporate Governance Report
26 Statement of Directors’ Responsibilities
27 Independent Auditor’s Report
28 Consolidated Statement of Comprehensive Income
29 Consolidated and Company Statements of Financial Position
30 Consolidated Statement of Changes in Equity
31 Company Statement of Changes in Equity
32 Consolidated and Company Cash Flow Statements
33 Notes to the Financial Statements
60 Company Information
1
1
Westminster Group PLC | Annual Report & Financial Statements 2016 Managed Services Division
Managed services contracts and the provision of manned services
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.
We believe that this division represents
a very significant growth opportunity
for Westminster. We provide long term
services typically to 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
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.
The Managed Services Division is
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.
Potential
Passengers under
signed MoU
12.8m
5.1m
0.3m
Dec ‘14
Dec ‘15
Dec ‘16
PORT I AIRPORT I UTILITIES I INFRASTRUCTURE
2
Example Worldwide Projects
Small sample of completed projects worldwide
Westminster Group PLC | Annual Report & Financial Statements 2016
3
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 is its
extensive knowledge of the security
market place 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
division has a large and healthy enquiry
bank many of which arise from its agent
network and comprehensive website
(Westminster 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 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.
Vertical Integration Model
The division is successfully securing
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 USD 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.
Technology Customers
Managed Services Projects
Products & Services
Airports / Ports etc.
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.
4
Chairman’s Statement
“ I am pleased to report that 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 Group”
Lt. Col Sir Malcolm Ross GCVO, OBE
Chairman
Overview
I am pleased to present the Final Results
for Westminster Group plc for the year
ended 31 December 2016.
As we continue to recover from the
challenges of the West Africa Ebola
crisis, the Group has delivered a much
improved financial performance both at
the revenue and adjusted EBITDA levels,
with revenues up by 31% to £4.4m (2015:
£3.4m), resulting in a small £25k profit at
EBITDA level (2015: £360k EBITDA loss).
During the year the Group raised £2.7m
net from the issue of equity (£1.3m) and
convertible unsecured loan notes (£1.4m)
to support working capital requirements
and business development costs.
The Group continued to expand its
operations, opportunities and presence
around the world, notably in the Managed
Services business which is now a key
focus for the Group. More detail on the
strategic developments, projects and
opportunities we are undertaking is
covered under the CEO’s Strategic Report.
We continue to work closely with
and receive excellent support from
the Foreign Office and UK Diplomatic
Missions around the world and I am very
grateful for the support these and other
governmental departments provide our
teams and our operations in the various
countries we are active in.
Corporate Conduct
We operate worldwide with a focus
on emerging markets and in a sector
where discretion, professionalism and
confidentiality are essential. It is vitally
important that we maintain the highest
standards of corporate conduct. The
Corporate Governance Report sets out all
of the detailed steps that we undertake
to ensure that our standards, and those
of our agents, can stand any scrutiny by
Government or other official bodies.
Social Responsibility
As a Group, we take our corporate social
responsibilities very seriously, particularly
as we operate in emerging markets and
in some cases in areas of poverty and
deprivation. I am proud not only of the
support and assistance we as a company
provide in many of the regions in which
we operate but also the support and
interaction our staff provide. I am also
proud of our charitable support to various
bodies and organisations not least our
own registered charity the Westminster
Group Foundation.
Employees and Board
After 10 years with the Group, a period I
have thoroughly enjoyed, I have decided
it is now time for me to step aside as
Chairman, although I will continue to
remain involved with the Group. As our
Group is now anticipating significant
potential growth, and due to my other
commitments, I feel I am no longer able
to devote the time required to chair
the Group. Accordingly, I propose to
stand down at the AGM and our Deputy
Chairman, Sir Tony Baldry, will take
over the chair. I will continue as Deputy
Chairman.
Ian Selby, who has been the Group CFO
since July 2011, will be stepping down
from the Board at the AGM in June to
concentrate on his other ventures. Ian has
been a valued part of our team and has
helped us achieve many of our successes
and helped steer us through difficult
times. On behalf of the Company and the
Board I wish to thank Ian for all his efforts.
I am pleased to say however that Ian
will remain a consultant to the Company
providing assistance where required.
I am delighted to welcome Martin
Boden as our new CFO who will join the
Board on 29 June 2017, the date of this
year’s AGM. Martin has considerable
experience with high growth businesses
and sales into international markets.
He has worked with both AIM and FTSE
250 listed companies as well as Private
Equity owned organisations, having most
recently been CFO at Genus plc and
JDR, a privately owned energy services
business. Martin has worked closely
with both UKTI and UK Export Finance
on overseas projects. I believe Martin’s
experience of international transactions
and financial management of high growth
businesses brings additional strength to
our Board.
In November 2016 we announced that
James Sutcliffe had joined the Board as a
Non-Executive Director and Chair of the
Audit Committee. James has considerable
experience delivering major international
projects particularly in the infrastructure,
ports and marine sector. He is a former
Chairman of UKTI (Ports & Marine 2006-
2013) promoting UK business in Emerging
Markets in the Far East, India, Eastern
Europe and Mediterranean countries. I
am pleased to say James has become a
valued addition to our team.
As a service based business, our
employees are key to delivering success. I
believe we have an exceptional workforce
and I would like to take this 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.
I would also like to pay tribute to our
employees and the various individuals
and organisations for their generous
support and contributions to our
registered charity the Westminster
Group Foundation. We work with local
partners and other established charities
to provide goods or services for the relief
of poverty or advancement of education
or healthcare making a difference to the
lives of the local communities in which
we operate. For more information or to
make a donation please visit www.wg-
foundation.org
I would finally like to extend our
appreciation to all our investors for
their continued support 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
5 June 2017
5
Westminster Group PLC | Annual Report & Financial Statements 2016 Chief Executive Officer’s Strategic Report
“Our business is facing unprecedented growth prospects,
particularly with our airport security operations”
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
revenue 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 Journey timeline below
our business has evolved from a traditional
UK focused security business to what can
be described today as a truly international
business. Furthermore, our evolution
continues as we expand our operations
into new areas and new territories
creating additional 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 focused on international
business as follows:
Managed Services division:
Focusing on long term (typically
10 – 25 years) recurring revenue
managed services contracts such as the
management and operation of security
solutions in airports, ports and other such
facilities, together with the provision
of ferry services, manpower, and
consultancy and training services.
Technology division:
Focussing 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 vital
infrastructure and complex technology
solutions and expertise to the Managed
Services Division, thereby reducing
supplier exposure and cost and increasing
purchasing power. Our Managed Services
Division provides a long term business
platform to deliver other cost effective
incremental services from the Group.
The Journey
Our Business Evolution
6
We continue to deliver a wide range of
solutions to governments and blue chip
organisations around the world as can
be seen from page 3 above, 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 business which is now a key
focus for the Group with its growth
prospects in Emerging Markets and the
resulting significant recurring revenue
stream potential.
Business Review
As highlighted in the Chairman’s
Statement, and elsewhere in this
document, we have delivered a much
improved performance in 2016.
Operationally we have delivered a wide
range of security products and solutions
around the world and continue to expand
our international presence including
the establishment of subsidiaries and
an operational office in Germany which
will provide strategic support to our
projected growth.
Enquiry levels remain healthy and levels
of interest in the Group’s services remains
high across both operating divisions.
However, whilst our Technology Division
provides the technological resources and
platform to expand our operations around
the world it is our Managed Services
Division, with its potential for delivering
large scale, long term, recurring revenue
and transformational growth, which is
increasingly our core focus, particularly
within the aviation security sector.
Airport Security:
Our airport security operations in West
Africa are experiencing strong recovery
from the Ebola crisis that devastated
the region and which finally came to an
end in March 2016. Whilst airline traffic
has not yet fully recovered to pre-Ebola
levels, we have seen steady growth with
flight schedules increasing and new
airlines such as KLM commencing services.
In 2016 our embarking passenger numbers
grew by 52% to 97k (2015: 64k). We
anticipate the recovery towards pre-Ebola
levels will continue and are encouraged
to have seen a further increase of 27% in
embarking passengers in Q1 2017 to 28k
(Q1 2016: 22k - albeit this was before
the region was declared Ebola free).
This together with the cost reduction
measures we have taken has resulted
in the operations once again making a
worthwhile contribution.
In addition, cargo screening operations
commenced in West Africa during 2016,
following the cargo operations and
security screening service achieving the
coveted RA3 status. The new cargo sheds
currently have far greater capacity than
current utilisation and the authorities
are looking to build on this and create a
regional hub for cargo services.
Westminster’s international reputation
and expertise in the field of aviation
security continues to grow, evidenced
by both the number of new training and
support contracts secured for airports
around the world and the ever growing
pipeline of opportunities for aviation
security projects.
Managed Services Division
The Group’s Managed Services Division
continues to make progress on a number
of fronts.
In this respect, we have invested
considerable time, effort, and expense
in progressing several large scale long
term potential opportunities. Amongst
such opportunities in progress are
those for which we have previously
announced the signing of a Memorandum
of Understanding (MoU) and others that
are approaching that stage, including
our previously announced major long
term airport security project opportunity
within the Middle East for which the
Company received a letter of intent in
May 2016. Substantial progress has been
achieved towards closing this opportunity
which is expected to result in annual
revenues in excess of £35m.
With regard to the Middle East project
opportunity, the Company has been
actively preparing the required support
structures and infrastructure necessary to
deliver the projects, including organising
a complex supply chain and other
required resources.
Contracts of this size and nature are not
only time-consuming but involve complex
negotiations with numerous commercial
and political bodies. Discussions can
ebb and flow over many months with
periods of intense activity which can be
followed by long periods of inactivity.
No two opportunities are the same. By
way of example, two of the previously
announced MoUs, the Asia MoU signed in
February 2015 and the MoU announced
on 12 October 2015, are now considered
longer term opportunities due to current
political issues within the countries
concerned. In contrast, the East African
airport opportunity announced in
November 2012 and which has taken
far longer than anticipated due to the
government’s own internal processes and
various political issues unrelated to our
project, is now once again quite active.
All other announced MoU’s are in various
stages of development and continue to
be progressed.
7
Westminster Group PLC | Annual Report & Financial Statements 2016 Chief Executive Officer’s Strategic Report continued
Whilst there is never certainty in relation
to either the outcome or timing of such
negotiations, the considerable progress
made to date with the Middle East and
other opportunities and the ongoing
support received from UK governmental
departments and overseas missions is
extremely encouraging.
Airport security solutions and our
experience in the sector represent a
significant growth opportunity for our
Managed Services Division, however
this is certainly not the only area of
expansion. We are also in discussions
with port operators on similar long term
managed services solutions as well as
continuing to look at managed services
and recurring revenue opportunities
beyond security.
Ferry Project:
In November 2014, we signed a 21
year contract 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
passengers travelling to and from the
airport to the capital, Freetown, either
have to cross the estuary or spend several
hours driving on difficult roads. With over
200,000 passengers a year and growing
passing through the airport, the vast
majority of which will need to cross the
estuary, there is a captive market and
a strong need for a professional ferry
service. The previous ferry services were
largely unsuitable and at times unable
to cope with volumes of passengers and
it could take over an hour to transport
passengers to and from the airport. This
was a potential limitation on the future
growth of the airport and in turn our
revenues and one of the reasons this was
considered a good opportunity for the
Group’s expansion.
for which we believe there is a strong
and untapped demand together with new
regional routes.
Our ferry services, under the branding
Sovereign Ferries, provide a much needed
professional service with well-trained
uniformed staff, air conditioned transit
coaches, well equipped terminals and fast,
safe and internationally compliant vessels.
Over the past two years we have not
only built the required infrastructure and
upgraded the ferry terminals but have
had to deal with a number of challenges
including prolonged vessel repairs to
our flagship vessel the Sierra Queen. I
am pleased to report therefore that this
long-awaited service finally commenced
with a soft start in mid-December 2016
and with formal services commencing in
January 2017.
The current addressable ferry market
is estimated to be worth around £4
million per annum in revenues. As we
now move from a period of major capital
expenditure to an operational phase, our
focus for the business over the next 12
months is to grow our market share. It
is pleasing that we have already secured
3% of the market and we believe that,
given the size of the captive market, the
superior quality of our service, our vessel
safety and the numerous local marketing
initiatives we are pursuing we will
continue to grow volumes to well beyond
a 14% share (the level at which we
anticipate the operation will be providing
a positive contribution).
In addition, we are looking at new
markets and revenue streams by the
provision of new services such as a
coastal taxi service around Freetown,
The current service is focussed on the
Sierra Princess, which will shortly be
joined by the Sierra Duchess, which we
have acquired on a favourable lease basis,
to further provide additional flexibility to
our inshore and water taxi services. Both
vessels are impressive inshore fast ferry
craft specifically fitted out to transport
passengers and their luggage safely and
in comfort. These craft can carry up to 45
passengers and their luggage in comfort.
Our flagship sea going vessel, the larger
200 seat Sierra Queen, is now operational
and subject to a routine engine service
and will be brought into service in due
course as demand and operations dictate
and for longer distance regional routes
currently being planned.
Technology Division
During the year, the Technology Division
secured contracts for a wide range
of products and services delivered
to clients from around the world. By
way of example of the diversity of our
deliverables, we provided equipment
for a nuclear facility in North America;
advanced screening solutions in West
Africa; security solutions for a North
African postal service; secured a museum
in Egypt; equipped various prisons and
supplied a South African forensic police
service facility with specialist equipment.
In 2016 we had clients in Aruba, Australia,
Azerbaijan, Bahamas, Bulgaria, China,
Croatia, UAE, Egypt, Gambia, Germany,
Greece, Hong Kong, India, Indonesia,
Iraq, Italy, Jamaica, Jordan, Kenya,
Korea, Netherlands, Nigeria, Portugal,
Qatar, Romania, Rwanda, Saudi Arabia,
Senegal, Somalia, South Africa, Tanzania,
Thailand and Vietnam.
8
2016 Geographical
Revenue Analysis
The Group’s international business
is conducted on a global scale.
UK & Europe
8%
2%
Middle East
Africa
79%
11%
Rest of World
In addition, the Division has provided
various equipment and technology support
services to the Managed Services Division.
The Technology Division continues to build
its recurring revenue base of maintenance
and service contracts both in the UK and
overseas and now has recurring revenue
maintenance contracts with governmental
and corporate clients valued at over
£180,000 per annum. These contracts
help underpin the cost base of the
Division and is an area of the business we
expect to grow further.
The ongoing world-wide slump in oil
prices continues to impact previously
announced projects such as the Americas
consultancy and pipeline projects due
to government cut backs on capital
spending. As the oil price is expected to
remain an issue for some time and whilst
we continue to investigate alternative
funding solutions, these projects along
with the US Bridge project no longer
form part of the Group’s internal
forecasts as we concentrate on the
rest of the business and, in particular,
our major managed services project
opportunities.
Strategic Review
Last year I announced we were
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 a new level. As part of
that review we have made a number of
changes to our management structure,
broadening the level of experience
and expertise to assist our expansion,
creating a PLC Board responsible for
overall performance and strategy of the
Group, an Operations Board responsible
for day to day management of the
Group’s business and established an
International Advisory Board to advise the
Group on international issues including
governmental and client liaison, cultural,
ethnic and religious sensitivities,
compliance with legal issues, financing
and general business development.
This review is ongoing and we
continue to review our operations,
structure, management and advisors.
Our business is facing unprecedented
growth prospects, particularly with our
airport security operations, and it is
essential we have the right leadership,
management and strategies in place
to successfully deliver such growth.
Accordingly, the changes we have made
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 planned growth.
Performance Indicators
The Key Performance Indicators by which
we measure performance of our business
are set out in the Chief Financial Officer’s
Report on pages 12 and 13.
Financial Review
The financial review for the year ended
31 December 2016 is set out in the Chief
Financial Officer’s Report on page 10.
Business Outlook
Our business is now in a better position
than it has been for some time. The
challenges and trials of the last few
years dealing with the effects of Ebola
are now largely behind us and our West
African airport operations, in particular,
are now producing a healthy and
growing contribution. Our ferry service
is at last operational and should also
be making a contribution by the end
of 2017 as the service expands. Our
Technology Division continues to deliver
a wide range of products and solutions
around the world to destinations which,
so far in 2017, include countries as
widespread as Bangladesh, Belgium,
UAE, Ethiopia, Indonesia, Guyana, Italy,
Lithuania, Nigeria, Tanzania and the
UK. We continue to grow our recurring
revenue base with maintenance and
service contracts both within the UK and
overseas. Our Managed Services Division
continues to make progress on a number
of fronts. We are securing an increasing
number of contracts to assist airport
authorities around the world with their
equipment and training needs and this
further enhances our endeavours and
prospects for our large scale, long term
airport opportunities.
Over the next few months and years
we have an opportunity to achieve
unprecedented growth from the prospects
we are pursuing, such as the Middle East
airport opportunity, any one of which
could be transformational for the Group.
The Board and I remain committed to
delivering on this potential.
Principal Risks and Uncertainties
These are referenced along with key
mitigation strategies on pages 16 and 17.
P.D. Fowler
Chief Executive Officer
5 June 2017
FIRE I SAFETY I SECURITY I DEFENCE
9
Westminster Group PLC | Annual Report & Financial Statements 2016
Chief Financial Officer’s Report
“Revenues in 2016 were up 31% to £4.4m (2015: £3.4m) as
Managed Services revenues recovered from 2015 due to the end
of the Ebola crisis in West Africa.”
Ian Selby
Chief Financial Officer
Revenue
Revenues were £4.4m (2015: £3.4m). The
Technology Division recorded revenues
of £1.6m (2015: £1.7m) and the Managed
Reconciliation to adjusted EBTIDA £’000
2016
2015
Operating Loss
(1,389)
(1,650)
Services Division £2.8m (2015: £1.7m).
Depreciation and Amortisation
234
171
Managed Services revenues recovered
from 2015 due to the abatement and end
of the Ebola crisis in West Africa and the
consequent growth in passenger volumes
Reported EBITDA
Share Option Expense
and security fees. Technology Division
Impact of Ebola
revenues were broadly similar to 2015.
Revenues from the West African ferry
service commenced in December 2016
following soft launch but were immaterial
CTAC settlement receipt
Middle East Airport Opportunity Costs
during the financial year 2016.
Ferry pre-launch costs
Gross Margin
Gross margin rose to 71% (2015: 58%)
due to both the increased revenue
Adjusted EBTIDA profit / (loss)
(1,155)
(1,479)
103
272
-
220
585
25
76
1,120
(77)
-
-
(360)
The ferry pre-launch costs primarily relate to costs of preparing the Sierra Queen
contribution from the Managed Services
vessel for commercial service.
division and its higher margin and also
from improving performance in the
Technology Division.
Operating Cost Base
Our total operating and administrative
£0.4m in the prior year. The estimated
impact of Ebola on Managed Services
Result for the Year
Our loss before taxation was £2.0m (2015:
margins was approximately £0.3m (2015:
£2.0m) and the loss per share was 2.5p
costs were £4.5m (2015: £3.6m).
£1.1m). In context, this crisis produced
(2015: 3.5p).
Within these results an IFRS share
an adverse financial effect on the Groups
option expense of £0.1m (2015:
EBITDA in excess of £1.9m between 2014
£0.1m) was recorded, a depreciation
and 2016.
and amortisation charge of £0.2m
(2015: £0.1m), non-capitalisation of
certain ferry setup costs of £0.6m and
Financing Charges
Total financing charges of £0.6m (2015:
Statement of Financial Position
The Group made a significant investment
in plant and equipment during the year
in support of the Sovereign Ferries ferry
opportunity in West Africa. This went into
specific uncapitalised costs related to
£0.3m) were higher than the prior
initial operations in December 2016. At
progression of the Middle East Airport
year due to an increased average debt
the balance sheet date approximately
opportunity of £0.2m (2015: £nil).
compared to 2015. Senior Secured
£2.7m (2015: £2.2m) was recorded as
Operational EBITDA
Our loss from operations was £1.4m
Convertible Notes (10% coupon)
an asset. This represents the cost of the
generated an underlying cash charge
Sierra Queen and setup costs around the
of £0.2m (2015: £0.1m) reflecting the
leased infrastructure. A further £0.6m
(2015: £1.6m). When adjusted for the
£1.0m issued in October 2015. The
exceptional and non-cash items set out
remaining £0.2m (2015: £0.2m) of
of expenditure was not capitalised in the
period and is recorded as an exceptional
below and depreciation and amortisation,
finance charges were non-cash based
item in note 4 to these financial statements
the Group recorded an adjusted EBITDA
and related to IFRS valuations of the
as these were incurred as a result of delays
profit of £25k as compared to a loss of
convertible loan.
in the launch of the ferry service.
10
2016 Divisional Analysis
Technology
37%
63%
Managed Services
The divisions through which
the group operates are
represented as follows.
Our debtor balance as of the end of
December 2016 was £0.9m (2015: £0.5m).
£0.2m of the increase arose from amounts
recoverable on customer contracts and
billed in 2017, and the remainder from
debtors which were collected early in the
New Year. Average days sales outstanding
at the year-end were 32 (2015: 48),
Certain technology division orders for the
UK government were won in the fourth
quarter of the year and required supply
chain mobilisation payments and therefore
amounts held in inventory increased to
£0.2m (2015: £0.1m). These were shipped
and paid for in full early in 2017.
Trade payables were £1.0m (2015:
£1.1m) and average creditor days were
35 (2015: 32) The Group had no deferred
payment schemes with HMRC at the end
of 2016 with all amounts having been
paid in the year.
Convertible Loan Notes (CLN) and
Convertible Unsecured Loan Notes
(CULN)
The Company issued £1.7m (gross)
of Convertible Unsecured Loan
Notes(“CULN”) to Darwin Capital
Limited (“Darwin”) during the year.
£0.5m was raised in February 2016 and
a further £1.2m was raised in November
2016. The February 2016 loan was
fully converted in the year as was
the outstanding balance at the start
of the year of £0.7m relating to the
loan drawn down in April 2015. At the
year-end a nominal value of £1.2m was
outstanding all of which related to the
November 2016 loan. The group received
approximately 85% of these monies net of
commissions and redemption premiums
and the net proceeds supported the
capital investment in the West African
ferry operation and general corporate
purposes. These loans were structured
to make repayment of any amount at
any point without penalty, and also
allowed for a lower dilution impact with
a potentially higher conversion price than
an equivalent equity issue which would
have in all likelihood been discounted.
Summary of movements in loan notes at
principle value £’000
At 1 January 2016
New Issue in the year
Conversions in the year
CULN
CLN
Total
750
2,245
2,995
1,675
(1,247)
-
-
-
1,675
(1,247)
22
Financing Charge (equity settled) in the year
22
At 31 December 2016
1,200
2,245
3,445
Converted February/April 2017
(1,200)
-
(1,200)
Outstanding at 5 June 2017
-
2,245
2,245
The secured CLN carries a coupon of 10% payable quarterly in arrears, has a
conversion price of 35p and matures on 18 June 2018.
Summary of Non-Employee Share Options & Warrants at 31 December 2016
Number
Holder and Description
Strike
Price (p)
Life
(years)
Vesting Criteria
1,100,000 Darwin, April 2015,
39
(lapsed April 2017)
589,330
Darwin, February 2016
20.15
1,100,000 Darwin, November 2016
5,000,000 Hargreave Hale, June
2016
1,700,000 Business development
partner, July 2012
500,000
Business development
partner, March 2014
(lapsed March 2017)
300,000
Business development
partner, July 2014
28
12
40
85
85
2
3
3
3
5
3
3
At grant:- detachable
At grant:- detachable
At grant:- detachable
At grant:- detachable
0.7m @ £5m revenue
generated by them,
further 1m @ £30m
revenue
£8m new managed
services revenues.
£5m new managed
services revenues in
three years from date
of issue
11
Westminster Group PLC | Annual Report & Financial Statements 2016
Chief Financial Officer’s Report continued
This decision was based on the Company’s
then view as to expected business
performance progress.
Equity Issues
On 3 June 2016 the Company issued 13
million ordinary shares of 10p at nominal
value. Of these 10 million were issued to
Hargreave Hale who also received 5 million
detachable and transferrable warrants over
Adjusted EBITDA
Loss on asset disposal
Net changes in working capital
Equity settlement payment
Reconciliation from adjusted EBITDA to normalised
operating cash flow £’000
2016
2015
25
13
(638)
-
(600)
(360)
4
209
60
(96)
10p ordinary shares. These have a life of
Net Cash used in underlying operating activities
three years from the date of issue and have
an exercise price of 12p per share warrant
Net Cash used in underlying operating activities is presented excluding exceptional
(“Warrant”) valid for three years from the
items, share options expense, and depreciation and amortisation.
date of issue. A further 10,653,365 ordinary
10p shares were issued during the year at
an average price of 11.71p per share on
conversion of £1.2m CULN.
Shareholders’ funds at 31 December stood
at £2.3m (2015: £1.7m).
Cash Flow Statement
During the year the Group had an operating
cash outflow of £1.7m (2015: £1.1m)
which arose from trading losses. The
Group reported an adverse working capital
movement of £0.6m (2015: £0.2m positive
movement) which largely arose from
short term timing issues around increased
inventory levels and amounts recoverable
on contracts as well as a lower level of
outstanding payroll taxes at the balance
sheet date. Debtors were higher due to
greater business volumes and there were no
material overdue items. The Group’s final
stages of the set up costs of the Sovereign
Ferries project in West Africa continued
into 2016 and required a further £1.1m of
spend (2015: £2.3m). A further £0.1m was
spent on upgraded IT infrastructure.
During the year the Group raised £2.7m
net by the issue of equity and CULN.
During the year the Group was provided
with overdraft support by its bankers HSBC
and at present has a small but unused
overdraft facility.
Events after the Reporting Period
• On 1 February 2017, 2,228,367 ordinary
pence per ordinary 10 pence share and
certain property assets from the vendors
consequently issued 5,161,290 new
and any sale will benefit 2017
ordinary 10 pence shares. On the same
day Darwin Capital Limited exercised a
conversion of £0.4m of CULN at 11.625
pence per share resulting in the issuance
Key Performance Indicators
The Group constantly monitors various
key performance indicators for factors
of 3,440,860 new ordinary shares
affecting the overall performance. At
Group level the revenues and gross margin
• On 4 April 2017, employees exercised
are monitored to give a constant view of
55,000 share options which were
the Group’s operational performance. As
originally granted on 5 April 2007 and
employment costs are the single largest
had an exercise price of 10p each
cost base for the Group the number of
employees and employee costs are also
• On 18 April 2017, 10 million new
monitored to ensure best use of resources.
ordinary shares were issued at 10p
Days Sales Outstanding is a measure as
each raising £1m gross to support the
to the cash conversion of revenue and
development of the Company. On the
identifies debtor ageing issues.
same day Beaufort Securities Limited
were appointed as joint broker and
their annual fee of £25,000 was
settled by the issue of 250,000 new
ordinary shares and the issue of
100,000 detachable warrants with
an exercise price of 25p and a life
of five years. As part of the placing
commissions, Beaufort were issued
with a further 0.5 million warrants
with an exercise price of 10p and
a life of five years. On the same
day the final £0.5m of convertible
loan notes issued to Darwin were
converted at a price of 10p. A
condition of the placing was that
Westminster agreed with Beaufort not
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 passengers 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.
shares of 10p each were issued at a
to enter into arrangement for similar
price of 13.462773 pence each pursuant
loan notes for six months from the
to a conversion of £0.3m of CULN
date of this placing
• On 28 February 2017, the Company
• As part of the settlement with the
raised £0.6m (gross) of new monies
vendors of CTAC Limited announced in
by subscription at a price of 11.625
July 2015, Westminster has now received
12
Key Performance Indicators
Group
Revenue (£’m)
Gross Margin
Days Sales Outstanding
Number of Employees
2016
2015
4.4
71%
32
240
3.4
58%
48
218
Average Employee Cost Per Head
£9,450
£10,250
Managed Services
Passengers Served (’000) in the last 12 months
Signed MoUs
Signed MoUs Annual Potential Passengers (m)
97
7
12.8
64
4
5.1
Technology Division
Average Enquiries Per Month
117
99
Average Value of Monthly Enquiries
£11,224
£12,553
Number of Countries Supplied
Number of Return Customers
39
150
33
142
13
Westminster Group PLC | Annual Report & Financial Statements 2016 Board of Directors
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
from 1987 and, from 2006 to 2008, Master of the Household 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.
Rt. Hon. Sir Tony Baldry - Non-Executive Deputy Chairman
Sir Tony, has had a long a prestigious Parliamentary career. He was Personal Aide to Margaret Thatcher in the 1974 General
Election and subsequently remained in her private office when she became Leader of the Opposition.
Sir Tony served as MP for North Oxfordshire from 1983 to 2015. He held various ministerial posts during the 1990s, serving as
Minister of State in the Ministry of Agriculture, Fisheries and Food and as Parliamentary Under Secretary of State in the Foreign
and Commonwealth Office, with a range of responsibilities including South Asia, Africa, North America and the West Indies.
Sir Tony, a practicing barrister, was awarded the Robert Schumann Silver Medal for contribution to European politics in 1975.
He takes a keen interest in foreign affairs and was a Governor of the Commonwealth Institute and a member of the Overseas
Development Institute. Tony was Chairman of the House of Commons Select Committee on International Development in the
2010 Parliament.
James Sutcliffe - Non-Executive Director
James Sutcliffe has gained a broad range of experience managing private and Listed businesses over the last 25 years as
Chairman, CEO or Director in small companies as well as an Executive Director of large, LSE listed public companies. This
included the £475m acquisition of PD Ports plc in 2003 and the development of a new 500,000 TEU container terminal in 2005-7
from a beach at Gdansk in Poland. He Chaired UKTI “Ports & Marine” from 2006-2012 representing the whole of the UK ports
and maritime sector internationally, working with senior UK Ministers and VIP’s promoting the UK to Emerging Market countries
and Governments around the world.
His track record of enhancing ports and logistics businesses, creating new value and his entrepreneurial leadership, in what is
often a traditional business model, has been complemented by a solid background in corporate governance and strategic thinking.
Ports and airports are frontiers to any country and so his experience in border security and international markets is highly
relevant to Westminster Groups activities.
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.
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.
14
Directors Report
The Directors present their annual report and the audited financial statements for the year ended 31 December 2016.
Principal activities
The Westminster Group plc is a specialist security and services group operating worldwide via an extensive international network of
agents and offices in over 50 countries.
Westminster’s principal activity is the design, supply and ongoing support of advanced technology security solutions, encompassing
a wide range of surveillance, detection, tracking and interception technologies and the provision of long-term managed services
contracts such as the management and running of complete security services and solutions in airports, ports and other such facilities
together with the provision of ferry services, manpower, consultancy and training services. The majority of its customer base,
by value, comprises governments and government agencies, non-governmental organisations (NGO’s) and blue chip commercial
organisations.
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 statements on pages 6 to 13.
The Directors who held office during the year were as follows
Executive Directors
Non-Executive Directors
Peter Fowler
Stuart Fowler
Lt Col Sir Malcolm Ross GCVO OBE
Sir Michael Pakenham (retired 30 June 2016)
Roger Worrall (retired 30 June 2016)
Sir Tony Baldry (appointed 30 June 2016)
Ian Selby
Mr James Sutcliffe (appointed 1 December 2016)
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 Committee
The purpose of the Risk Committee (the “Committee”) is to perform centralised oversight and policy setting of risk management
activities and to provide communication to the Board of Directors (the Board) of the Westminster Group (the Company) regarding
important risks and related risk management activities. The Committee’s key areas of responsibility are
•
•
•
•
Oversight of risk;
Adherence to internal risk management policies and procedures;
Compliance with risk-related regulatory requirements; and
External risk assessments in relation to the Company’s international business.
The risk committee is chaired by James Sutcliffe and its members are Sir Tony Baldry (non-executive), Peter Fowler (CEO) and
Ian Selby (CFO).
15
Westminster Group PLC | Annual Report & Financial Statements 2016
Directors’ Report continued
The Board of Directors has identified the Principal Risks and Uncertainties facing the Group and these are shown below, together with
how we manage or mitigate them:
Macro-economic outlook
Risk and potential impact
Current global economic, political and financial market
conditions may materially and adversely affect the Group’s
operational performance. A downturn may affect customers,
suppliers and other parties we do business with. The Group
operates in emerging and frontier markets and therefore is
exposed to the political, geographic and economic risks of such
territories. With the UK committed to leaving the European
Union, we will see uncertainty in the UK, Eurozone and
elsewhere as the economic and political relationship between
the UK and EU is determined. The Board considers that the
current level of market risk is higher than normal given the level
of geo-political unrest.
Financial risks
Risk and potential impact
The main financial risks faced by the Group are credit risk,
foreign currency risk, interest rate risk and liquidity risk.
Mitigation
The Directors are seeking to ensure that the Group’s activities
are not significantly concentrated in any one individual customer
or territory, so as to mitigate the exposure of any downturn in
activity levels. In the event of a downturn the business could
reduce investment plans and downscale its cost base in line
with a deterioration in forecasted sales in any one particular
market. The Group regularly reviews the relevant insurance
requirements.
Probability
Possible
Potential financial impact
Major
Mitigation
The Directors regularly review and agree policies for managing
these risks. Credit risk is managed by monitoring limits and
payment performance of counterparties. Where a customer is
deemed to represent an unacceptable level of credit risk, terms
of trade are modified to limit the Group’s exposure. Foreign
currency risk is managed by matching payments and receipts in
foreign currency to minimise exposure. This is regularly reviewed
as the Group wins new business in foreign currency and we
continue to monitor the business impact of macro-economic
factors, which could affect the value of sterling and in turn have
an impact on supply chain costs. If required, surplus currency
will be protected through forward foreign exchange contracts.
Liquidity risk is managed by the close control of cash and
frequent cash flow forecasting, together with modest overdraft
facilities and additional financing to provide short-term
flexibility. Interest rate risk is low with all Group borrowings
having fixed rates of interest. The Group’s capital raising ability
can be affected by movements in capital markets.
Probability
Possible
Potential financial impact
Moderate
Legislation and regulations
Risk and potential impact
There is a risk that the Group may not always be in complete
compliance with local laws and regulations in overseas
territories. For example, the risk to the Group’s reputation of
failure to comply with ethical and environmental regulations
arising in the countries in which it operates. An example of this
could be inappropriate business ethics in one of the territories
from which Westminster Group operates.
Mitigation
The Directors have taken steps to ensure that all the Group’s
global operations are conducted to the highest ethical and
environmental standards. Westminster Group maintains a strict
anti-bribery policy with both Agents and employees given
training through a series of webinars. The Group appoints
relevant advisors to ensure regulatory requirements are
complied with. Counterparties are vetted in order to minimise
the risk of the Group being associated with a company that
commits a significant breach of the regulations.
Probability
Unlikely
Potential financial impact
Moderate
16
Information technology
Risk and potential impact
The Group’s systems and data are subject to security and
availability risks, particularly in some of the territories the
Group operates in. The Group is dependent on these systems for
the day-to-day management of the Company. Any disruption to
the Group’s information systems could have a significant impact
on the business.
Mitigation
To mitigate these risks the Group ensures a regular full backup
of our systems and data in case of an event. Disaster recovery
plans are in place and are reviewed by senior management for
suitability. Only current and fully supported systems are used
to minimise the risk of cyber-attacks on Group systems. The
Group uses external consultants to test the relevant systems
vulnerability from time to time. Data backups are held in
multiple locations to minimise recovery periods.
Contractual liabilities
Risk and potential impact
Failure to deliver a contract in a timely manner, according to an
agreed specification could lead to higher costs, penalties and
reputational damage.
Talent succession planning
Risk and potential impact
The loss of key personnel or the failure to have an adequate
succession plan could have an impact on the Group’s overall
performance. Recruiting and retaining skilled personnel at board
and operational levels, particularly overseas, is a continual
challenge and competition is fierce in certain territories the
Group operates in. Without the necessary talent recruited and
embedded into the business this could adversely affect the
Group’s growth plans resulting in a loss of market share and the
inability to compete and deliver in its chosen markets.
Probability
Possible
Potential financial impact
Moderate
Mitigation
The Group mitigates this risk by ensuring adequate project
management is in place and any issues identified are dealt with
in a timely and efficient manner. Warranties are sought from
equipment suppliers where appropriate. Material contracts
are reviewed by the Board on a regular basis to ensure that
contractual liabilities are met.
Probability
Possible
Potential financial impact
Major
Mitigation
The risk is mitigated by ensuring development plans are in place,
salary packages are competitive and talent is sourced where
necessary. The Chief Executive reviews all the senior managers’
performance and competencies in the organisation and identifies
critical retention employees, reporting the findings to the Board
of Directors.
Probability
Possible
Potential financial impact
Moderate
17
Westminster Group PLC | Annual Report & Financial Statements 2016 Directors’ Report continued
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 (2015: £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 5 June 2017, 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.
Name of shareholder or nominee
Hargreave Hale
Mr Hamed Al Jamal
No of shares
13,133,333
4,000,000
Holding %
11.6
3.53
Policy on payments to suppliers
It is a policy of the Group in respect of all suppliers, where reasonably practical, to agree the terms of payment with those suppliers
when agreeing the terms of each transaction and to abide by them.
The ratio of amounts owed by the Group to trade creditors at the year-end represented 32 days (2015: 32 days).
Share price
During 2016 the Company’s share price ranged from 5.5p to 32p and the share price at 31 December 2016 was 21p (2015: 25.9p).
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.
Post balance sheet events
These are detailed in the CFO report and in note 28 to the financial statements.
Going Concern
The financial statements 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.
The Group has prepared both a Growth Scenario and a Pessimistic Scenario (for contingency planning) for assessing the Group’s cash
requirements over the next 12 months from the date of these financial statements.
•
•
Growth Scenario. The Group has several large opportunities such as the £35m per annum Middle Eastern contract under
negotiation. Whilst these opportunities will have an inherent need for significant additional capital to mobilise the project, it
is envisaged that certain initial costs could be met from organic resources depending on the timing of the contract closure. 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 on previous experience
operational cash flow from these projects can support capital expenditure within the project plan. This scenario includes a rapid
ramp up in ferry passenger numbers and full achievement of solution sales targets as well as the usual run rate of product sales.
Pessimistic Scenario. A pessimistic forecast for the 12 months following the date of these financial statements has been prepared
for the purpose of stress testing the Group’s cash flows. This includes revenues from the run rate of smaller contracts, a
much-reduced expectation from sales of solutions in the technology division, no large new managed services contracts, and the
continuation of major existing contracts such as the West African airport contract as well as an expected net cash outflow from
the Sierra Leone ferry operation as it builds towards critical mass, it is targeted to become cash flow positive at the end of 2017.
Should these cash flows not happen as expected certain contingency measures have been identified by the Board as part of its
routine planning process. These options include cost reductions, restructuring operations and asset disposals to preserve cash
resources, although additional funding may be required as these measures take effect.
The Group’s convertible secured loan notes have a principal value of £2.245m and a conversion price of 35p maturing on 18 June
2018. Whilst not repayable in the 12 months from the date of these financial statements, the Board believes that the pipeline
of potential Managed Services contracts could either give the Company the capability of repayments from cash flow, or that
the bondholders could convert to equity. As part of a routine planning process the Board has identified options for resolution or
restructuring, with potential variations to the instrument around conversion price, coupon and term. The Group has an asset base
which could be used to support any changes.
Based upon these projections the Group has adequate working capital for the 12 months following the date of signing these financial
statements. For this reason they continue to adopt the going concern basis in preparing the financial statements.
18
Auditor
A resolution to reappoint Moore Stephens LLP as auditor will be proposed at the Annual General Meeting to be held on 29 June 2017.
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
P D Fowler
Director
5 June 2017
I Selby
Director
19
Westminster Group PLC | Annual Report & Financial Statements 2016
Remuneration Committee Report
Introduction
As an AIM listed 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 Non-Executive Directors:
Lt. Col. Sir Malcolm Ross (Chairman)
Sir Tony Baldry
James Sutcliffe
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 met once 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 in 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 22 of these financial statements. 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 per cent. to the placing price of the £1 million fundraising announced on 10
December 2014 and a premium of 66 per cent. 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
Severance
Notice
Contractual Fees
Lt. Col. Sir Malcolm Ross
Sir Tony Baldry
James Sutcliffe
None
None
None
3 months
3 months
3 months
£
18,000
40,000
24,000
Sir Tony Baldry was appointed to the board on 30 June 2016 and Sir Michael Pakenham stood down on that day. Mr James Sutcliffe
joined the board on 1 December 2016.
20
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
2016 are as follows:
Audited
Executive Directors
£’000
£’000
£’000
£’000
£’000
£’000
Basic salary/
fee
Benefits
in kind
Group national
insurance cost
Share Based
Payment cost
Total cost of
employment
Total
2015
Peter Fowler
Stuart Fowler
Roger Worrall
(retired 30 June 2016)
Ian Selby
Total Executive Remuneration
Non-Executive Directors
Lt. Col. Sir Malcolm Ross
Sir Tony Baldry
(joined 30 June 2016)
James Sutcliffe
(joined 1 December 2016)
Sir Michael Pakenham
(resigned 30 June 2016)
Matthew Wood
(resigned 31 August 2015)
Total Non-Executive Remuneration
Total Board Remuneration
157
104
41
88
390
18
20
2
6
-
46
436
-
-
1
1
2
-
-
-
-
-
-
2
22
14
6
12
54
-
-
-
-
-
-
13
10
10
10
43
5
-
-
1
-
6
192
128
192
132
58
104
111
489
115
543
23
20
2
7
-
52
20
-
-
14
16
51
54
49
541
594
Roger Worrall retired from the PLC Board on 30 June 2016, but remains a member of the Operations Board.
No options were exercised during the year and no cash benefit was therefore received by the directors and the share based payment
expense relates to a non-cash value. Matthew Wood is a director of CMS Corporate Consultants Limited (“CMS”) which formerly
provided corporate advisory services to the Company, and he resigned from the board on 31 August 2015.
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 J Fowler
Stuart Fowler
Ian Selby
Sir Tony Baldry
(Joined 30 June 2016)
James Sutcliffe
(Joined 01 December 2016)
140,884
6,361,794
541,618
166,667
-
-
21
Westminster Group PLC | Annual Report & Financial Statements 2016 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
At 1 January 2016
and 31 Dec 2016
Grant price
Market price at
date of grant
Date from which exercisable
Lt. Col. Sir Malcolm Ross
Stuart Fowler
Sir Michael Pakenham
Stuart Fowler
Roger Worrall
Sir Michael Pakenham
Sir Michael Pakenham
Lt. Col. Sir Malcolm Ross
Peter Fowler
Ian Selby
Roger Worrall
Stuart Fowler
67,862
48,000
15,000
15,000
5,000
2,000
93,750
93,750
781,250
625,000
625,000
625,000
67.5p
10.0p
52.5p
34.5p
34.5p
34.5p
28.5p
28.5p
28.5p
28.5p
28.5p
28.5p
67.5p
5.7p
52.5p
34.5p
34.5p
34.5p
25.5p
25.5p
25.5p
25.5p
25.5p
25.5p
21 June 2009
05 April 2009
21 April 2010
25 September 2011
25 September 2011
25 September 2011
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 2016 was 21p and the range during the year was 5.5 p to 32 p. Sir Michael Pakenham
and Roger Worrall retired from the board on 30 June 2016.
* 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 and became exercisable from 10 June 2016.
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
5 June 2017
22
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 listed company, full compliance with the UK
Corporate Governance Code 2014 (“the Code”) or the Corporate Governance Code for Small and Mid-Sized Quoted Companies
2013, as published by the Quoted Companies Alliance, is not a formal obligation. The Directors recognise the importance of
sound corporate governance and the Group has 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.
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. The Group has a dedicated Risk Committee as detailed on page 15 to these financial statements.
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.
23
Westminster Group PLC | Annual Report & Financial Statements 2016 Corporate Governance Report continued
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 risks. Certain key functions are centralised, enabling the Group to address risks to the business present in those
functions quickly and efficiently. The key risks and mitigation strategies of the business are set out on pages 16 and 17 of this report.
Audit Committee
This committee was set up with Terms of Reference agreed in February 2017. It oversees and reviews the Company’s financial
reporting and internal control processes, its relationship with external auditors and the conduct of the audit process together with its
process for ensuring compliance with laws, regulations and corporate governance. It is composed entirely of non-executive directors
but other individuals such as the Company’s CFO and CEO, representatives of the finance team may be invited to attend all or any
part of any meeting when deemed appropriate. The Company’s external auditors will be invited to attend meetings of the Committee
on a regular basis
There is currently no internal audit function in view of the size of the Group, although this is kept under annual review.
The audit committee comprises;
James Sutcliffe - Chairman
Lt. Col. Sir Malcolm Ross
Sir Tony Baldry
Nomination Committee
This committee was set up with Terms of Reference agreed in February 2017. It leads the process for Board Appointments and to
make recommendations to the Board on the constitution of the Board in view of the needs of the group. The majority of members
are non-executive directors and it comprises;
Sir Tony Baldry – Chairman
Lt. Col. Sir Malcolm Ross
James Sutcliffe
Peter Fowler
Other individuals may be invited to attend all or part of any meeting of the Committee when deemed appropriate.
Disclosure Committee
This committee was set up with Terms of Reference agreed in February 2017. It oversees and regulates the Company’s disclosure
obligations and to ensure compliance with Market Abuse Regulations (MAR) and London Stock Exchange rules and it comprises;
Sir Tony Baldry – Chairman
James Sutcliffe
Peter Fowler
Roger Worrall (Secretary)
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;
Protecting the health and safety of all employees is paramount;
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 employees 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 employees 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
•
•
•
•
•
•
24
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. Their interests in the share
capital of the Company are not considered to be likely to affect their judgement as Directors of the Group.
Annual report
The Directors consider the annual report and financial statements, 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.
25
Westminster Group PLC | Annual Report & Financial Statements 2016 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 Group 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 of the Group and Company and of the profit or loss of the Group
and Company for that period. The Directors are also required to prepare financial statements in accordance with the rules of the
London Stock Exchange for companies trading securities on the Alternative Investment Market.
In preparing these financial statements, the Directors are required to
•
•
•
•
Select suitable accounting policies and then apply them 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; and
Prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group 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.
Website publication
The Directors are responsible for ensuring that the Annual Report and financial statements are made available on a website. Financial
statements are published on the Company’s website in accordance with legislation in the United Kingdom governing the preparation
and dissemination of financial statements, which may vary from legislation in other jurisdictions. The maintenance and integrity of
the Company’s website is the responsibility of the Directors. The Directors’ responsibility also extends to the ongoing integrity of the
financial statements contained therein.
On behalf of the Board
P D Fowler
Director
5 June 2017
I Selby
Director
26
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 2016 which are set out on pages
28 to 59. The financial reporting framework that has been applied in their preparation is applicable law and International Financial
Reporting Standards (IFRSs) 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’ Responsibilities Statement set out on page 26, 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 (APB’s) Ethical Standards for Auditors.
Scope of the audit of the financial statements
A description of the scope of an audit of financial statements is provided on the Financial Reporting Council’s web-site at www.frc.
org.uk/auditscopeukprivate.
Opinion on financial statements
In our opinion:
•
•
•
the financial statements give a true and fair view of the state of the group’s and the parent company’s affairs as at Year End and
of the group’s loss for the year then ended;
the group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union;
the parent company financial statements have been properly prepared in accordance with IFRSs 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.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
•
the information given in the Strategic Report and the Directors’ Report for the financial year for which the group financial
statements are prepared is consistent with the group financial statements; and
•
the Strategic Report and the Directors’ Report have been prepared in accordance with applicable legal requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the parent company and its environment obtained in the course of the audit, we
have not identified material misstatements in the strategic report or the directors’ report.
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us 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
150 Aldersgate Street
London
EC1A 4AB
5 June 2017
27
Westminster Group PLC | Annual Report & Financial Statements 2016 Westminster Group PLC
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2016
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 share option expense
Add back exceptional items
EBITDA Profit/(loss) from underlying operations
Finance Costs
LOSS BEFORE TAXATION
Taxation
Note
3
6
11
12
4
5
7
2016
£’000
4,406
(1,296)
3,110
(4,499)
(1,389)
2015
£’000
3,359
(1,403)
1,956
(3,606)
(1,650)
(1,389)
(1,650)
7
227
103
1,077
25
(566)
(1,955)
46
4
167
76
1,043
(360)
(338)
(1,988)
(7)
LOSS ATTRIBUTABLE TO EQUITY SHAREHOLDERS
(1,909)
(1,995)
TOTAL COMPREHENSIVE EXPENSE FOR THE YEAR ATTRIBUTABLE TO EQUITY
SHAREHOLDERS
(1,909)
(1,995)
LOSS PER SHARE
9
(2.46p)
(3.49p)
The accompanying notes form part of these financial statements.
All activities derive from continuing operations.
28
Westminster Group PLC
Consolidated and Company Statements of Financial Position
As at 31 December 2016
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
Called up share capital
Share premium account
Merger relief reserve
Share based payment reserve
Equity reserve on convertible loan note
Revaluation reserve
Retained earnings:
At 1 January
(Loss)/profit for the year
Other changes in retained earnings
At 31 December
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
Group
Company
2016
£’000
397
132
4,635
-
5,164
198
894
152
1,244
6,408
8,711
9,169
299
569
186
134
2015
£’000
397
34
4,343
-
4,774
57
484
150
691
5,465
6,345
9,170
299
258
219
134
2016
£’000
-
103
1,031
12,683
13,817
-
108
21
129
2015
£’000
-
2
1,046
9,979
11,027
-
126
2
128
13,946
11,155
8,711
9,169
299
569
-
134
6,345
9,170
299
258
33
134
(14,739)
(12,757)
(6,071)
(6,062)
(1,909)
(124)
(1,995)
13
(16,772)
(14,739)
2,296
3,059
-
3,059
27
1,026
1,053
4,112
6,408
1,686
2,587
53
2,640
-
1,139
1,139
3,779
5,465
60
(124)
(6,135)
12,747
988
-
988
-
211
211
1,199
13,946
(22)
13
(6,071)
10,168
615
53
668
-
319
319
987
11,155
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 5 June 2017 and signed on its behalf by:
Peter Fowler
Director
Ian Selby
Director
29
Westminster Group PLC | Annual Report & Financial Statements 2016
Westminster Group Plc
Consolidated Statement of Changes in Equity
For the year ended 31 December 2016
Called
up share
capital
Share
premium
account
Merger
relief
reserve
£’000
9,170
£’000
299
Revaluation
reserve
£’000
134
Equity
Reserve on
Convertible
Loan Note
£’000
Retained
earnings
£’000
219
(14,739)
Share
based
payment
reserve
£’000
258
-
103
-
(37)
245
-
-
-
311
-
-
-
-
-
-
-
-
-
-
-
Total
£’000
1,686
1,300
103
-
-
95
-
1,022
(1)
-
-
-
37
(150)
-
(11)
-
-
-
-
-
-
-
(33)
-
(33)
(124)
2,519
-
(1,909)
(1,909)
-
-
-
-
-
-
-
-
-
-
AS OF 1 JANUARY 2016
Shares issued for cash
Share based payment
charge
Exercise of share options
Lapse of share options
Warrants issued with
loan notes
Adjustment in respect of
CLN conversions near par
CLN conversion
Loan notes issued
TRANSACTIONS WITH
OWNERS
£’000
6,345
1,300
-
-
-
-
-
1,066
-
2,366
-
-
-
-
-
-
-
(1)
(1)
Total comprehensive
expense for the year
-
-
AS AT 31 DECEMBER 2016
8,711
9,169
299
569
134
186
(16,772)
2,296
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
-
-
-
-
-
-
-
-
-
-
-
-
-
13
-
-
-
-
60
76
-
-
55
-
861
211
13
1,263
-
-
-
-
-
(39)
211
172
-
(1,995)
(1,995)
AS AT 31 DECEMBER 2013
6,345
9,170
299
258
134
219
(14,739)
1,686
30
Revaluation
reserve
£’000
134
Equity
Reserve on
convertible
loan note
£’000
Retained
earnings
Total
£’000
£’000
33
(6,071)
10,168
Westminster Group Plc
Company Statement of Changes in Equity
For the year ended 31 December 2016
Share
capital
Share
premium
AS OF 1 JANUARY 2016
Shares issued for cash
Share based payment charge
Lapse of share options
Warrants issued with loan
notes
Adjustment in respect of CLN
conversions near par
CLN conversion
Loan notes issued
£’000
6,345
1,300
-
-
-
-
1,066
-
TRANSACTIONS WITH OWNERS
2,366
£’000
9,170
-
-
-
-
-
-
(1)
(1)
Total comprehensive income
for the year
-
-
Merger
relief
reserve
£’000
299
-
-
-
-
-
-
-
-
-
Share
based
payment
reserve
£’000
258
-
103
(37)
245
-
-
-
311
-
-
-
-
-
-
-
-
-
-
AS AT 31 DECEMBER 2016
8,711
9,169
299
569
134
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
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
37
(150)
-
1,300
103
-
95
-
(33)
-
(11)
1,022
-
(1)
(33)
(124)
2,519
-
-
-
-
-
-
-
-
-
33
33
60
60
(6,135)
12,747
(6,062)
9,066
-
-
-
13
-
-
-
-
60
76
-
-
55
-
900
33
13
1,124
(22)
(22)
AS AT 31 DECEMBER 2015
6,345
9,170
299
258
134
33
(6,071)
10,168
31
Westminster Group PLC | Annual Report & Financial Statements 2016
Westminster Group Plc
Consolidated and Company Cash Flow Statements
For The Year Ended 31 December 2016
(LOSS) / PROFIT BEFORE TAXATION
Non-cash adjustments
Net changes in working capital
Equity settlement payment
Note
25
25
Group
2016
£’000
2015
£’000
(1,955)
(1,988)
916
(638)
-
589
209
60
NET CASH (USED IN) / FROM OPERATING ACTIVITIES
(1,677)
(1,130)
INVESTING ACTIVITIES:
Purchase of property, plant and equipment
Purchase of intangible assets
Proceeds from disposal of fixed assets
Advances to subsidiaries
(531)
(105)
-
-
(2,642)
(27)
25
-
CASH OUTFLOW FROM INVESTING ACTIVITIES
(636)
(2,644)
CASHFLOWS FROM FINANCING ACTIVITIES:
Gross proceeds from the issues of Ordinary shares
Costs of share issues
Gross proceeds from the issue of secured and
unsecured convertible loan notes
Costs associated with the issue of secured and
unsecured convertible loan notes
Interest paid
Other loan repayments, including interest
CASH INFLOW FROM FINANCING ACTIVITIES
Net change in cash and cash equivalents
CASH AND EQUIVALENTS AT BEGINNING OF YEAR
CASH AND EQUIVALENTS AT END OF YEAR
The accompanying notes form part of these financial statements.
1,300
(45)
1,675
(272)
(247)
(96)
2,315
2
150
152
-
-
3,155
(280)
(131)
-
2,744
(1,030)
1,180
150
Company
2016
£’000
8
597
(90)
-
515
(2)
(105)
-
(2,704)
(2,811)
1,300
(45)
1,675
(272)
(247)
(96)
2,315
19
2
21
2015
£’000
(22)
261
166
60
465
(20)
-
-
(2,587)
(2,607)
-
-
1,346
-
-
-
1,346
(796)
798
2
32
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 2016 consolidate the individual
financial statements of the Company and its subsidiaries. The Group designs, supplies and provides 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.
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 2016.
(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.
Going concern
The directors have, at the time of approving the financial statements, a reasonable expectation that the Company and the
Group have adequate resources to continue in operational existence for the foreseeable future. Thus they continue to adopt the
going concern basis of accounting in preparing the financial statements.
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.
33
Westminster Group PLC | Annual Report & Financial Statements 2016 Notes to the Financial Statements continued
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).
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 decision 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) 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, and 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 value 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.
34
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 five 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 balance sheet 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
Ferries
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). The 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.
35
Westminster Group PLC | Annual Report & Financial Statements 2016 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 transaction 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 unless a legally enforceable right to offset exists.
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.
Convertible loan notes with an option that leads to a potentially variable number of shares, have 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. The host debt is recognised initially at fair value, and subsequently measured at amortised cost using the
effective interest method.
Convertible loan notes that can be converted to share capital at the option of the holder, and where the number of shares to be
issued does not vary with changes in fair value, are considered to be a compound instrument.
The liability component of a compound instrument is recognised initially at the fair value of a similar liability that does not
have an equity conversion option. The equity component is recognised initially at the difference between the fair value of the
compound instrument and fair value of the liability component. Any directly attributable transaction costs are allocated to the
liability and equity components.
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 in the assets of the Group after deducting all of its liabilities. The accounting policies
adopted in respect of financial liabilities are set out above and 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.
36
Notes to the Financial Statements continued Taxation
The tax expense represents 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 balance sheet 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 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 in the UK and is operating under auto enrolment.
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.
37
Westminster Group PLC | Annual Report & Financial Statements 2016 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 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 review of Sierra Leone Ferry Operations
At the balance sheet date the Group recorded an asset of approximately £2.7m relating to the purchase of the Sierra Queen and
set up costs of the ferry operation in West Africa. Of this c£1.1m relates to the vessel purchase, and the remainder relates to
costs incurred before the commencement of service operations in early December 2016.
• Market Background
Westminster has 19 years remaining of its 21 year contract to operate the terminals and ferry service concession between
the airport and capital. The airport has in excess of 200,000 passengers (annualised) passing through it now, which is a
substantial improvement following the end of the Ebola crisis. A significant portion of these passengers use ferry services to
reach the mainland and capital more quickly than the road option. The ferry service has historically been serviced by smaller
craft which do not have the ruggedness and safety characteristics of the Westminster fleet, which is seagoing. The existing
ferry services do not offer our luxury and safely maintained bus fleet either. Other potential coastal services offer additional
revenue opportunities from serving regional destinations, including non-airport related traffic passing between the airport and
capital city, and new markets such as a proposed water taxi service around Freetown. Charters and Airport traffic has grown
over the last 12 months and is now broadly back at the levels of 2013 which was before the onset of Ebola.
• Project Status
Our period of major capital spend on this project is now completed. Noting that this business is a start-up in 2016 in terms
of passenger handling, it is pleasing that we have already secured 3% of the market share in only three months. We believe
that, given the size of the captive market at 200,000 passengers per annum, the superior quality of our service, our vessel
safety and the numerous local marketing initiatives we are pursuing we will continue to grow volumes. We expect the ferry
operation to become cash positive in the financial year to 31 December 2017 and continue to grow thereafter.
• Impairment Testing
With the planned infrastructure and ferry operations in place there are significant operational opportunities for revenue
growth, increased margins and improved cash flows. The Group has conducted a discounted cash flow exercise which looks at
key assumptions including adoption rates and ticket volumes, ongoing expected costs, available ferry capacity, future airport
passenger levels and the average net revenue per ticket. A discount rate of 10% has been used in this exercise. The scenario
indicates that the net present value of future cash flows is in excess of the current carrying value of the asset and therefore
the Board believes that no impairment is required. The Company will continue to monitor and review traffic levels monthly
against targets to assess the ongoing financial performance. Should these modest passenger targets not be achieved and
the operation not show a clear path to adequate cash generation, then the carrying value of this asset could be subject to a
future impairment charge.
38
Notes to the Financial Statements continued Impairment Review Longmoor Goodwill
This asset is carried at approximately £0.4m at the balance sheet date. There are several opportunities for the delivery of
Longmoor’s training and protection services which are aligned with potential large scale opportunities in managed services.
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. A full revaluation exercise was carried out in May 2017. 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.
Consolidation of entities in which the Group holds less than 50% of the voting rights.
Management considers that the Group has de facto control of Westminster Sierra Leone Limited even though it has less than 50%
of the voting rights. Management does not recognise the non-controlling interest as it does not consider it to be material, for
this or other partially owned subsidiaries (see note 15).
Standards in issue not yet effective
New standards, amendments and interpretations
No new standards, amendments or interpretations effective for the first time in the financial year beginning on or after January
2016 have had a material impact on the Group or parent Company.
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 15 Revenue from Contracts with Customers (effective date 1 January 2017)
• IFRS 16
Leases (effective date 1 January 2019, but yet to be endorsed by the EU)
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.
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 introduces
additional changes relating to financial liabilities. IFRS 9 adds new requirements to address the impairment of financial assets
and hedge accounting.
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 contracts 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 a 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 by lessees 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.
39
Westminster Group PLC | Annual Report & Financial Statements 2016 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
each offer.
2016
Managed
Services
Aviation
Technology
Group and
Central
£’000
£’000
£’000
Managed
Services
Sovereign
Ferries
£’000
Group Total
Managed
Services
Longmoor
£’000
£’000
1,778
177
160
-
-
(492)
1,623
-
-
-
-
-
-
-
-
-
-
-
6
-
6
273
(1,418)
(163)
-
-
(16)
(946)
(689)
-
-
(103)
-
(22)
2,116
573
(566)
53
60
1,523
3,268
107
-
(585)
(107)
-
(855)
-
-
(855)
2,618
85
408
-
157
3
-
-
(157)
3
53
-
-
(10)
(30)
13
-
-
13
33
-
-
1,778
334
2,921
16
6
(649)
4,406
25
(103)
(1,077)
(234)
-
(1,389)
(566)
46
(1,909)
6,408
4,112
636
Supply of products
Supply and installation contracts
-
-
Maintenance and Services
2,758
Training courses
Ferry ticket sales
Intragroup sales
Revenue
Segmental underlying EBITDA
Share option expense
Exceptional items (note 4)
Depreciation & amortisation
16
-
-
2,774
1,280
-
(492)
(79)
Apportionment of central overheads
(1,140)
Segment Operating result
Finance cost
Taxation charge
(431)
-
(7)
Profit/(Loss) for the financial year
(438)
(689)
Segment assets
Segment liabilities
Capital expenditure
1,593
311
79
641
448
42
40
Notes to the Financial Statements continued
Technology
Group and
Central
Managed
Services
Sovereign
Ferries
£’000
Managed
Services
Longmoor
£’000
2015
Supply of products
Supply and installation contracts
Maintenance and Services
Training courses
Intragroup sales
Revenue
Segmental underlying EBITDA
Managed
Services
Aviation
£’000
-
-
2,450
11
(812)
1,649
1,264
Exceptional items (note 4)
(1,120)
Depreciation & Amortisation
Share option expense
Apportionment of central overheads
Segment Operating result
Finance cost
Taxation charge
(94)
-
(948)
(898)
-
(7)
£’000
795
1,546
168
1
(804)
1,706
(140)
-
(10)
-
(837)
(987)
-
-
Loss for the financial year
(905)
(987)
Segment assets
Segment liabilities
Capital expenditure
Geographical areas
1,272
343
186
149
434
-
£’000
-
-
-
-
-
-
(1,540)
77
(22)
(76)
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
-
96
4
-
(96)
(1,712)
4
19
-
(8)
-
(93)
(82)
1
-
3,359
(360)
(1,043)
(171)
(76)
-
(1,650)
(338)
(7)
(81)
(1,995)
25
2
33
5,465
3,779
2,669
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.
United Kingdom & Europe
Africa
Middle East
Rest of the World
Group
2016
£’000
369
3,458
104
475
4,406
2015
£’000
439
2,341
204
375
3,359
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 2016 fixed assets with a net book value of £3,591,000 (2015: £2,992,000) were located in Africa.
Major customers who contributed greater than 10% of total Group revenue
In 2016 no single customer contributed more than 10% of the Group revenue (in 2015 no customers contributed 10% of the
Group’s revenue). Approximately 60% of the Group’s revenues are derived from the contract with a West African airport operator.
41
Westminster Group PLC | Annual Report & Financial Statements 2016 4. Exceptional Items
Loss of margin arising from fall in passenger numbers due to Ebola crisis
Middle East airport pre-contract costs
Ferry pre-launch costs
Receipt from vendors of CTAC (dispute on acquisition consideration price)
2016
£’000
272
220
585
-
1,077
The ferry pre-launch costs primarily relate to costs of preparing the Sierra Queen vessel for commercial service.
5. Finance costs
Interest payable on bank and other borrowings
Cash interest expenses on convertible loan notes (CLN 2016)
Non cash amortised finance cost & other charges on convertible loan notes
Total finance costs
6. Loss from operations
The following items have been included in arriving at the loss for the financial year
Employee 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
Auditor’s remuneration
Group
2016
£’000
(30)
(224)
(254)
(312)
(566)
Group
2016
£’000
2,267
227
7
112
3
42
(22)
2015
£’000
1,120
-
-
(77)
1,043
2015
£’000
(1)
(121)
(122)
(216)
(338)
2015
£’000
2,236
167
4
101
3
60
(89)
Amounts payable in both years relate to Moore Stephens LLP in respect of audit and other services. Local audits in Sierra Leone
were £15,000 (2015: £12,000)
42
Notes to the Financial Statements continued Audit services
Statutory audit of parent and consolidated financial statements and review
of interims results
Statutory audit of subsidiaries of the company pursuant to legislation
Taxation services including research and development tax credits
Local audit in Sierra Leone
Total fees
7. Taxation
Analysis of charge in year
Current year
UK Corporation tax on profits in the year
Potential foreign corporation tax on profits in the year
Reconciliation of effective tax rate
Loss on ordinary activities before tax
Loss on ordinary activities multiplied by the standard rate of corporation tax
in the UK of 20% (2015: 20%)
Effects of:
(Income)/expenses not deductible for tax purposes
Capital allowances less than depreciation
Other short term timing differences
Recognised/unrecognised losses carried forward
Adjustment in respect of prior years
Potential Charge in Overseas Subsidiary
Total tax - (credit)/charge
2016
£’000
2015
£’000
22
31
7
15
75
Group
2016
£’000
-
7
7
23
21
7
12
63
2015
£’000
-
-
-
(1,955)
(1,988)
(391)
88
(203)
1
512
(53)
-
(46)
(398)
77
(72)
3
390
-
7
7
Tax losses available for carry forward (subject to HMRC agreement) were £11m (2015: £10m).
Changes to the UK corporation tax rates were substantively enacted as part of the Finance Bill 2015 (on 26 October 2015) and
Finance Bill 2016 (on 7 September 2016). These include reductions to the main rate to reduce to 19% from 1 April 2017 and
to 17% from 1 April 2020. Deferred taxes at the balance sheet date have been measured using these enacted tax rates and
reflected in these financial statements.
43
Westminster Group PLC | Annual Report & Financial Statements 2016 8. Employee costs
Employee costs for the Group during the year
Wages and salaries
Social security costs
Share based payments
Group
2016
£’000
2,007
157
2,164
103
2,267
2015
£’000
1,999
165
2,164
72
2,236
The Group operates a stakeholder pension scheme. The Group made pension contributions totalling £10,000 during the year
(2015: £7,000), and pension contributions totalling £1,000 were outstanding at the year-end (2015: £1,000)
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
Group
2016
Number
3
209
22
6
240
2015
Number
3
189
20
6
218
Earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number
of ordinary shares outstanding during the year.
For diluted earnings per share the weighted average number of ordinary shares in issue is adjusted to assume conversion of all
dilutive potential ordinary shares. Only those outstanding options that have an exercise price below the average market share
price in the year have been included.
The weighted average number of ordinary shares is calculated as follows:
Issued ordinary shares
Start of year
Effect of shares issued during the year
Weighted average basic and diluted number of shares for year
Group
2016
£’000
63,455
14,261
77,716
2015
£’000
55,145
2,029
57,174
For the year ended 31 December 2016 and 2015 the issue of additional shares on exercise of outstanding share options,
convertible loans and warrants would decrease the basic loss per share and there is therefore no dilutive effect. Loss per share
was 2.46p (2015: 3.49p)
44
Notes to the Financial Statements continued 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
2016
£’000
£’000
1,160
(763)
397
2015
£’000
£’000
1,160
(763)
397
Goodwill on the acquisition of Longmoor 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 10%, is in excess of the current carrying value.
11. Other intangible assets
2016
Cost
At 1 January 2016
Additions
At 31 December 2016
Accumulated amortisation
At 1 January 2016
Charge for the year
At 31 December 2016
Net book value at 31 December 2016
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
Group Website and
Software
£’000
Company Website and
Software
£’000
107
105
212
73
7
80
132
80
27
107
69
4
73
34
63
105
168
61
4
65
103
63
-
63
60
1
61
2
45
Westminster Group PLC | Annual Report & Financial Statements 2016 12. Property, plant and equipment
Group
Freehold
property
Plant and
equipment
£’000
£’000
Office
equipment,
fixtures and
fittings
£’000
Motor
vehicles
Total
£’000
£’000
2016
Cost or valuation
At 1 January 2016
Additions
Disposals
At 31 December 2016
Accumulated depreciation
At 1 January 2016
Charge for the year
Disposals
At 31 December 2016
Net book value at
31 December 2016
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
1,014
-
-
1,014
-
-
-
-
3,032
378
(3)
3,407
438
143
(2)
579
1,014
2,828
1,003
11
-
1,014
-
-
-
-
605
2,436
(9)
3,032
334
104
-
438
Net book value at
31 December 2015
1,014
2,594
1,270
154
-
1,424
610
57
-
667
757
1,181
93
(4)
1,270
569
45
(4)
610
660
118
-
(19)
99
43
27
(7)
63
36
43
102
(27)
118
31
18
(6)
43
75
5,434
532
(22)
5,944
1,091
227
(9)
1,309
4,635
2,832
2,642
(40)
5,434
934
167
(10)
1,091
4,343
Included within Plant and Equipment are ferry setup costs of £1.47m. Depreciation commenced when the ferry became
operational in late 2016.
46
Notes to the Financial Statements continued Company
2016
Cost or valuation
At 1 January 2016
Additions
Disposals
At 31 December 2016
Accumulated depreciation
At 1 January 2016
Charge for the year
Disposals
At 31 December 2016
Net book value at
31 December 2016
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
Net book value at
31 December 2015
Freehold
property
Plant and
equipment
£’000
£’000
Office
equipment
fixtures and
fittings
£’000
Total
£’000
1,279
2
-
1,281
233
17
-
250
245
2
-
247
218
15
-
233
14
1,031
238
9
(2)
245
200
19
(1)
218
1,261
20
(2)
1,279
212
22
(1)
233
27
1,046
1,014
-
-
1,014
-
-
-
-
1,014
1,003
11
-
1,014
-
-
-
-
1,014
20
-
-
20
15
2
-
17
3
20
-
-
20
12
3
-
15
5
The freehold property was valued professionally by Brown and Co Chartered Surveyors, on 16 May 2017 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. The valuation was not materially different to the value of the asset
recorded at the balance sheet date.
47
Westminster Group PLC | Annual Report & Financial Statements 2016
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 at 31 December
2016
£’000
697
66
3
69
628
2015
£’000
697
63
3
63
631
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 2016
Within one year
In the second to fifth years inclusive
Total
As at 31 December 2015
Within one year
In the second to fifth years inclusive
Total
Group
Property
£’000
Group
Other
£’000
Group
Total
£’000
Company
Other
£’000
51
84
135
60
107
167
91
27
118
57
38
173
142
111
253
117
145
262
14
4
18
30
12
42
Remaining lease terms range from four months to four years.
Minimum lease payments under operating leases recognised as an expense in
the year
Group
£’000
158
Company
£’000
22
48
Notes to the Financial Statements continued 14. Investment in subsidiaries
Company
At start and end of period
Amounts due from subsidiaries net of provisions
2016
£’000
357
12,326
12,683
2015
£’000
357
9,622
9,979
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.
15. Subsidiary undertakings
The subsidiary undertakings at 31 December 2016 were as follows:
Name
Country of
incorporation
Principal activity
% of nominal ordinary
share capital and
voting rights held
Westminster International Limited
England
Longmoor Security Limited
England
Westminster Aviation Security Services Limited
England
Sovereign Ferries Limited
Westminster Operating Limited
England
England
Advanced security technology,
(Technology Division)
Close protection training and
provision of security services
(Managed Services)
Managed services of airport
security under long term
contracts. Managed Services
Division
Marine Transport West Africa
Special purpose vehicle which
exists solely for listing the 2013
CLN on the CISX. Year end 31
October. Only transactions are
intra group
Sovereign Ferries SL Ltd
Sierra Leone
Ferry operations
Longmoor (SL) Ltd
Sierra Leone
Security and terminal guarding
Facilities Operations Management Ltd
Sierra Leone
Westminster Sierra Leone Ltd
Sierra Leone
Ferry and other infrastructure
management
Local infrastructure for airport
operations
Westminster Group GMBH
Germany
Dormant
Westminster Sicherheit GMBH
Germany
Managed Services infrastructure
Westminster JV Holdings Ltd
England
Dormant
Westminster Facilities Management Limited
England
Dormant
CTAC Limited
England
Dormant
Westminster Aviation Security Services (ME) Ltd
England
Dormant
Travel Safety and Security Ltd
England
Dormant
Subsidiary company registered addresses:
England
Sierra Leone - 5th Floor, 18/20 Walpole Street, PMB 84, Freetown, Sierra Leone.
- Westminster House, Blacklocks Hill, Banbury, Oxfordshire, OX17 2BS, United Kingdom.
Germany
- Bernauer Strasse 16, 83209 Prien am Chiensee, Germany.
100
100
100
100
100
100
100
90
49
100
85
100
100
100
100
100
49
Westminster Group PLC | Annual Report & Financial Statements 2016 16. Financial instruments and liabilities
Categories of financial instruments 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
Financial liabilities measured at amortised cost
- Borrowings (note 23)
- Trade and other payables (note 24)
Group
2016
£’000
-
814
152
966
3,059
951
4,010
2015
£’000
-
403
150
553
2,587
981
3,568
Company
2016
£’000
12,326
87
21
12,434
988
182
1,170
2015
£’000
9,622
101
2
9,725
615
239
854
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.
Convertible Loan Notes
The group had the following convertible loan notes outstanding during the year the key details of which are set out below:
Secured Convertible Loan Notes
(“CLN”)
Convertible Unsecured Loan Notes
(“CULN”)
Amount
£2.245m
£1.2m outstanding 31 December 2016 The £0.75m outstanding
at the start of the year and the £0.475m issued in the year
were fully converted during the year. The outstanding balance
was fully converted by April 2017.
Conversion Price
35p
Variable see below
Security
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% paid quarterly in arrears. Listed on
the CISX
nil
nil
Conversion Detail
Company can force conversion if the
share price is > 65p for 15 working days
after 19 June 2016. Company can make
repayment without penalty if the share
price is > 42p for 15 working days after
19 June 2016
The conversion price for these loan notes is calculated as the
lesser of i) 65 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 unsecured loan notes (CULN) leads to a potentially
variable number of shares, therefore the CULN 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).
50
Notes to the Financial Statements continued At 1 January
520
1,972
2,492
2016
CULN
£’000
2016
CLN
£’000
2016
Total
£’000
2015
CULN
£’000
-
2015
CLN
£’000
538
2015
Total
£’000
538
Fair value of new loans issued
Fair value of warrants included in the issue
(note 22)
1,408
(112)
-
(112)
Amortised Finance Cost
Interest paid
Converted in the year
116
324
-
(225)
(980)
-
440
(225)
(980)
-
162
-
(860)
-
-
175
(132)
-
337
(132)
(860)
-
1,408
1,218
1,391
2,609
Closing Balance
952
2,071
3,023
520
1,972
2,492
Analysis of movement in debt at principal value (excluding IFRS impacts), memorandum only
At 1 January
New Issue
Conversion
Financing Charge (equity settled)
2016
CULN
£’000
2016
CLN
£’000
2016
Total
£’000
750
2,245
2,995
1,675
(1,247)
22
-
1,675
-
-
(1,247)
22
2015
CULN
£’000
-
1,650
(900)
-
2015
CLN
£’000
575
1,670
-
-
2015
Total
£’000
575
3,320
(900)
-
Closing Balance
1,200
2,245
3,445
750
2,245
2,995
Reconciliation on Conversion
Group & Company
Amortisation of Loan Note Interest Cost Element
Carrying Value at Conversion
Total
2016
£’000
(86)
1,066
980
2015
£’000
(40)
900
860
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 value of the embedded derivative was not material at inception and at the
end of the year and is included in the fair value of the overall instrument for disclosure.
Secured convertible loan notes (CLN) are compound financial instruments that can be converted to share capital at the option of
the holder, and the number of shares to be issued does not vary with changes in fair value.
Unlike convertible unsecured loan notes (CULN), this instrument is determined to have a liability and equity component. The
liability component is initially recognised at fair value of a similar liability without a conversion option. The equity component is
recognised initially as the difference between the fair value of the compound financial instrument as a whole and the fair value
of the liability component. It is not subsequently remeasured. The liability component is measured at amortised cost using the
effective interest method.
51
Westminster Group PLC | Annual Report & Financial Statements 2016 17. Deferred tax assets and liabilities
Deferred tax assets and liabilities have been calculated using the expected future tax rate of 18% (2015: 18%). 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
2016
£’000
-
-
-
2015
£’000
(53)
(53)
(53)
Group
2016
£’000
198
198
Group
2015
£’000
57
57
Company
2016
£’000
Company
2015
£’000
-
-
-
-
The cost of inventories recognised as an expense within cost of sales amounted to £1,371,000 (2015: £1,361,000). No reversal of
previous write-downs was recognised as a reduction of expense in 2016 or 2015.
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
2016
£’000
2015
£’000
Company
2016
£’000
2015
£’000
564
(75)
489
199
126
814
80
80
894
294
(69)
225
4
174
403
81
81
484
-
-
-
-
87
87
21
21
108
-
-
-
-
101
101
25
25
126
The average credit period taken on sale of goods in 2016 was 32 days (2015: 48 days). An allowance has been made for
estimated irrecoverable amounts from the sale of £75,000 (2015: £69,000). This allowance has been based on the knowledge
of the financial circumstances of individual receivables at the reporting date. During the previous year previously provided for
items were written off against the relevant provision. The provision made in the year related to debts from Arik Air, a Nigerian
airline which entered administration in 2017 and these debts were not older than three months.
52
Notes to the Financial Statements continued 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.
Current
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
2016
£’000
2015
£’000
342
222
-
-
564
69
(45)
51
75
170
47
7
70
294
44
(8)
33
69
There are no significant credit risks from financial assets that are neither past due nor impaired. At 31 December 2016 £353,000
(2015: £232,000) of trade receivables were denominated in US dollars and £51,000 (2015: £nil) in euros, and £160,000 (2015:
£62,000) in sterling. The directors consider that the carrying amount of trade and other receivables approximates to their fair
value.
20. Cash and cash equivalents
Cash at bank and in hand
Bank overdraft
Cash and cash equivalents
Group
2016
£’000
181
(29)
152
2015
£’000
203
(53)
150
Company
2016
£’000
21
-
21
2015
£’000
2
-
2
All the bank accounts of the Group are set against each other where a right of offset exists 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.
53
Westminster Group PLC | Annual Report & Financial Statements 2016 21. Called up share capital
Group and Company
The total amount of issued and fully paid shares is as follows:
Ordinary Share Capital
2016
2015
At 1 January
Number
63,454,538
Arising on conversion of Convertible Loan Notes
10,653,365
Arising on exercise of Share Options and Warrants
-
£’000
6,345
1,066
-
1,300
Number
55,145,412
6,753,270
13,000
400,000
£’000
5,515
675
1
40
114
Other Issues for Cash
Bond issue
At 31 December
13,000,000
-
-
1,142,856
87,107,903
8,711
63,454,538
6,345
The Group removed the historic authorised share capital limit at the Annual General Meeting held on 30 June 2016.
During the year the following equity issues took place
Date
Comment
25 January 2016
Darwin loan note conversion
15 March 2016
Darwin loan note conversion
4 April 2016
Darwin loan note conversion
18 April 2016
Darwin loan note conversion
19 May 2016
Darwin loan note conversion
03 June 2016
Equity placing and subscription
30 June 2016
Equity placing
07 July 2016
Darwin loan note conversion
14 July 2016
Darwin loan note conversion
22. Share Options
Shares Issued
Issue price (£)
966,978
0.15512238
1,590,836
0.12572010
1,601,753
0.10925532
2,000,000
0.10000000
500,000
0.10000000
9,885,895
0.10000000
3,114,105
0.10000000
2,375,550
0.11050073
1,618,248
0.12977000
The Company adopted the Share Option Scheme on 3 April 2007 that provides for the granting of both Enterprise Management
Incentives (EMI) and unapproved share 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.
54
Notes to the Financial Statements continued Business Development Options
Westminster has granted share options to business partners to incentivise them to generate business and cash flow. These
options vest on achievement of revenue and cash milestones. None have been achieved as of the balance sheet date.
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 31December 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 five
years and a further 1.0m vest on delivery of £30m revenue directly generated by them within the same period.
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 three 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 three 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 eight years (being the point
at which they lapse). The number of options vesting is based on forecast new business from that partner.
The company has the following share options outstanding to its employees (including those on good leaver terms).
The weighted average share price at the reporting date was 30.7p (2015: 31.6p). The average life of the unexpired share options
was 7.1 years (2015: 8.1 years).
Analysis of share options outstanding
31 December 2016
31 December 2015
Exercise
Price
Number
Outstanding
Average Life
Outstanding Years
Number
outstanding
Average Life
Outstanding Years
Grant
Date
05 April 2007
21 June 2007
21 April 2008
25 September 2009
27 May 2010
28 June 2012
10 September 2013
26 February 2013
1 July 2014
10 December 2014
£0.1000
£0.6750
£0.5250
£0.3450
£0.3275
£0.3650
£0.7100
£0.3400
£0.5100
£0.2800
176,000
67,862
15,000
56,000
15,000
395,000
-
-
320,000
3,000,000
4,044,862
0.3
0.5
1.3
2.7
3.4
5.5
6.7
6.2
7.5
7.9
7.1
194,000
67,862
15,000
60,000
15,000
420,000
50,000
60,000
430,000
3,093,750
4,405,612
During the year, no employee options were granted, none were exercised, and 365,750 lapsed.
1.3
1.5
2.3
3.7
4.4
6.5
7.7
7.2
8.5
8.9
8.1
55
Westminster Group PLC | Annual Report & Financial Statements 2016 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 listed 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 employee share-based payments was £103,000 (2015: £76,000).
Warrants
The Company has issued the following warrants to Darwin Securities Limited alongside issues of convertible loan notes.
• On 22 April 2015 (£1.65m CULN) 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. These lapsed in April 2017.
• On 22 February 2016 (£0.475m CULN), 589,330 warrants with a life of three years and an exercise price of 20.15p per share
• On 22 November 2016 (£1.2m CULN), 1.1m warrants, exercise price of 28.0p with a life of three years
On 3 June 2016 the Company announced a placing of 10,000,000 Ordinary Shares to Hargreave Hale. For every two shares one
detachable warrant was issued to Hargreave, each warrant having a life of three years and an exercise price of 12p per share.
Darwin and Hargreave warrants are valued by the use of the Black-Scholes model, using volatility based on the previous three
years varying between 50-70% and a relevant risk-free rate as noted above. Warrants are recorded at fair value at inception and
are not remeasured.
23. Borrowings
All non-current
Convertible loan note (note 16)
Convertible unsecured loan note (note 16)
Other
Total borrowings
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
2016
£’000
2,071
952
36
3,059
Group
2016
£’000
398
553
951
75
27
102
2015
£’000
1,972
520
95
2,587
2015
£’000
366
615
981
158
-
158
Total current trade and other payables
1,053
1,139
56
Company
2016
£’000
-
952
36
988
Company
2016
£’000
89
93
182
29
-
29
211
2015
£’000
-
520
95
615
2015
£’000
123
116
239
80
-
80
319
Notes to the Financial Statements continued 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 2016 was 35 days (2015: 32 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 31 December 2016 £72,000 (2015: £91,000) of payables were denominated in US dollars, £56,000 (2015: £nil) in euros and
£270,000 (2015: £275,000) in sterling.
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
Finance costs
Loss on disposal of non-financial assets
Share-based payment expenses
Total adjustments
Net changes in working capital:
(Increase)/decrease in inventories
Decrease/(increase) in trade and other receivables
(Decrease)/increase in trade and other payables
Total changes in working capital
Group
2016
£’000
234
566
13
103
916
(141)
(410)
(87)
(638)
2015
£’000
171
338
4
76
589
15
1,625
(1,431)
209
Company
2016
£’000
2015
£’000
21
473
-
103
597
-
18
(108)
(90)
23
162
-
76
261
-
(21)
187
166
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 2016 was £40,000 (2015: £40,000) and this potential liability lapsed in March 2017.
As part of the settlement with the vendors of CTAC Limited which was announced in July 2015 a first payment of approximately
$123,000 was received. The final transfer of assets has now been received and their fair value will be reflected in the results for 2017.
The Company is party to a multilateral guarantee in respect of bank overdrafts of all companies within the Group. At
31 December 2016, these borrowings amounted to £6,000 (2015: £50,000).
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.
57
Westminster Group PLC | Annual Report & Financial Statements 2016 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 2016
Financial assets
Financial liabilities
Total exposure
31 December 2015
Financial assets
Financial liabilities
Total exposure
Short-term exposure USD
£’000
356
(72)
284
232
(91)
141
If the US dollar were to depreciate by 10% relative to its year end rate, this would cause a loss of profits in 2016 of £27,000
(2015: £14,000). 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 main 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 and “other” loans noted in note 23 is not material and therefore no
calculations 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 assets are secured by collateral or other credit enhancements.
Details of allowance for credit losses are shown 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.
As at 31 December 2016, the Group’s financial liabilities have contractual maturities (including interest payments where
applicable) as summarised below:
58
Notes to the Financial Statements continued Convertible loans held by the Company and Group 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
31 December 2016
Convertible Loans
Other Loans
Trade and Other Payables
Total
Company
31 December 2016
Other Loans
Trade and Other Payables
Total
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)
112
41
1,026
1,179
113
-
-
113
2,357
-
-
2,357
Current
(within 6 months)
6 to 12 months
Non Current
(1-5 years)
41
211
252
-
-
-
-
-
-
Current
(within 6 months)
6 to 12 months
Non Current
(1-5 years)
114
961
1,075
Current
(within 6 months)
114
-
114
2,582
-
2,582
Non Current
6 to 12 months
(1-5 years)
-
239
239
-
-
-
-
-
-
28. Post balance sheet events
On 1 February 2017 2,228,367 ordinary shares of 10p each were issued at a price of 13.462773 pence each pursuant to a
conversion of £0.3m of CULN
On 28 February 2017 the Company has raised £0.6m (gross) of new monies by subscription at a price of 11.625 pence per
ordinary 10 pence share and consequently issued 5,161,290 new ordinary 10 pence shares. On the same day Darwin exercised a
conversion of £0.4m of CULN at 11.625 pence per share resulting in the issuance of 3,440,860 new ordinary shares.
On 4 April 2017 employees exercised 55,000 share options which were originally granted on 5 April 2007 and had an exercise
price of 10p each.
On 18 April 2017 10m new ordinary shares were issued raising £1m gross to support the development of the Company. On the
same day Beaufort Securities Ltd were appointed as joint broker and their annual fee of £25,000 was settled by the issue of
250,000 new ordinary shares and the issue of 100,000 detachable warrants with an exercise price of 25p and a life of five years.
As part of the placing commissions Beaufort were issued with a further 0.5m warrants with an exercise price of 10p and a life
of five years. On the same day the final £0.5m of convertible loan notes issued to Darwin Capital Limited were converted at a
price of 10p. A condition of the placing was that Westminster agreed with Beaufort not to enter into such an arrangement for six
months from the date of this placing.
59
Westminster Group PLC | Annual Report & Financial Statements 2016
Non-Executives
Lt Col Sir Malcolm Ross (Chairman)
Sir Tony Baldry
James Sutcliffe
Company Information
Directors
Executive
Peter Fowler
Stuart Fowler
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 Joint Broker
SP Angel Corporate Finance LLP
Prince Frederick House
35-39 Maddox Street
London
W1S 2PP
Beaufort Securities Ltd
63 St Mary Axe
London
EC3A 8AA
Financial public relations
Solicitors
Wallbrook PR
4 Lombard Street
London
EC3V 9HD
Auditor
Moore Stephens LLP
150 Aldersgate Street
London
EC1A 4AB
Westminster Group Plc
Ashfords LLP
1 New Fetter Lane
London
EC4A 1AN
Bird & Bird LLP
12 New Fetter Lane
London
EC4A 1JP
P +44 (0) 1295 756300
F +44 (0) 1295 756302
E info@wg-plc.com
Westminster International Limited
P +44 (0) 1295 756300
F +44 (0) 1295 756302
E info@wi-ltd.com
Longmoor Security Limited
P +44 (0) 1295 756380
F +44 (0) 1295 756381
E info@longmoor-security.com
Westminster Aviation Security Services Limited
P +44 (0) 1295 756300
F +44 (0) 1295 756302
E info@wass-plc.com
E info@wg-plc.com
60
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 & Government Agencies,
Non Governmental Organisations
& Blue Chip Commercial Organisations Worldwide
with a focus on Africa, Asia, the Middle East & the Americas
Highlights
OPERATIONAL
• Received Letter of Intent on potential major long
term aviation security opportunity in the Middle
East with annual initial revenues of circa £35m and
significant work undertaken in the year in negotiating
and developing the opportunity and in setting up the
appropriate supply chain and infrastructure;
• Substantial incremental business potential relating to
the above Middle East airport opportunity developed;
• Further interest and growing awareness in long term
airport managed services business in Emerging Markets;
• Three more long term airport security MoU’s signed
in 2016 and numerous other opportunities being
progressed;
• Westminster’s ex-pat team in Sierra Leone awarded
Ebola Medals for Service in West Africa during the
Ebola crisis.
FINANCIAL
• Revenues up by 31% to £4.4m (2015: £3.4m);
• Gross margin increased to 71 % (2015: 58 %);
• Adjusted EBITDA profit £25k (2015: Loss £360k);
• Raised £3m in year to support business development and
working capital;
• £1.2m of debt converted into equity in the year;
• Loss per share reduced by 29% to 2.5p (2015: 3.5p).
POST PERIOD END
• Strong recovery in West Africa passenger numbers
following end of Ebola crisis in H1 boosting 2016
revenues;
• Substantial progress achieved towards finalising
contract negotiations on the Middle East airport project
opportunity;
• Sovereign Ferries commenced initial operations in
December 2016 and major capital expenditure now
largely over;
• Technology Division delivered a wide range of sales
and solutions around the world, signed border security
project MoU in Middle East and launched new and
extensive website improving enquiry rates;
• Recovery in West Africa airport passenger numbers
continues;
• Darwin Capital Limited debt now converted into equity
and eliminated;
• £0.6m new equity raised in February 2017 and a further
£1m raised in April 2017;
• Continued to expand international presence including
• CTAC claim award finalised and property assets
establishing subsidiary companies and an operational office
in Germany to provide strategic support to the Group;
transferred from vendors to Westminster. Any sale of
these assets will benefit 2017;
Westminster Group PLC | Annual Report & Financial Statements 2016
61
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Annual Report & Financial Statements 2016
Worldwide World Class Protection
Managed Services | Security Technology
Westminster Group plc
Westminster House
Blacklocks Hill
Banbury
Oxfordshire
OX17 2BS
United Kingdom
www.wsg-corporate.com