Annual Report &
Financial Statements 2017
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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
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Highlights
Operational
• Transformational fifteen-year aviation security
opportunity in the Middle East with annual initial
revenues of €24m very well advanced in 2017.
This is a large and complex opportunity with very
significant effort and progress in setting up the
appropriate supply chain and infrastructure
• Managed Services now the key focus of the Group
and the pipeline of major long-term project
opportunities continues to grow. Discussions in
progress with governments and airport authorities
in various parts of the world
• New contract awards for equipment and services
to airports around the world including a six-month
airport security training programme
• Strong recovery in West Africa passenger numbers
continues, several new airlines commenced services
with Turkish Airlines commencing in February 2018
• Sovereign Ferries operations transferred to Sea
Coach Express end September 2017
• Board strengthened with the appointment of the
Rt. Hon Sir Tony Baldry as Chairman and Martin
Boden as Chief Financial Officer from 29 June 2017.
Sir Malcolm Ross remains on the Board as
Deputy Chairman
Financial
• Revenues up by 22% to £5.4m (2016: £4.4m) with
£3.6m from Managed Services division (2016:
£2.8m) marking the end of the Ebola period in
West Africa and resumption of passenger volumes.
Technology division revenues of £1.8m compared
with £1.6m in 2016
• Gross margin decreased to 59% (2016: 71 %) as a
result of lower Technology margins (fewer large
higher margin orders) and the impact of cost of
sales being higher than revenues at Sovereign
Ferries
• Adjusted EBITDA loss £1.2m (2016; Profit £25k)
largely due to the discontinued ferry operation.
For continuing operations, EBITDA loss of £0.5m
(2016: Profit £0.1m)
• Equity of £2.4m issued in the year compared
with £1.3m in 2016. No new debt finance
raised in 2017 compared with £1.7m raised
in 2016
• The last remaining £1.2m of Darwin unsecured loan
notes were converted into equity in 2017
• Loss per share of 5.60p (2016: 2.46p). For continuing
operations, loss per share of 2.24p (2016: 1.42p)
• Cash balance of £0.4m at 31 December 2017
and £0.7m at 1 May 2018 (31 December 2016:
£0.2m)
Post Period End
• Middle East airport project confirmed as Iran, with
initial annual revenues of €24m, signed but on
hold awaiting clarification of the impact of the US
withdrawal from the JCPOA and the implications
for the Company’s supply chain
• Second separate contract for equipment supply
into Iran, worth €2.6m, also signed but on hold
awaiting clarification of the impact of the US
withdrawal from the JCPOA and the implications
for the Company’s supply chain
• Technology division contract worth $4.5m
secured in March 2018, expected to be mostly
delivered in 2018
• New Managing Director appointed for Technology
division in February 2018
• £750k of new equity raised in January 2018
• £87k of Beaufort warrants exercised in January
2018, Beaufort no longer joint broker
• Convertible Secured Loan notes extended from
18 June 2018 to 30 June 2019, the Company has
an option to extend for a further six months to
31 December 2019
• Group in a much stronger financial position than
at the start of the year
Contents
02 Company Overview
06 Chairman’s Statement
30 Independent Auditor’s Report
33 Consolidated Statement of Comprehensive Income
07 Chief Executive Officer’s Strategic Report
34 Consolidated and Company Statements of Financial Position
12 Chief Financial Officer’s Report
35 Consolidated Statement of Changes in Equity
17 Board of Directors
19 Directors’ Report
36 Company Statement of Changes in Equity
37 Consolidated Cash Flow Statement
23 Remuneration Committee Report
38 Company Cash Flow Statement
26 Corporate Governance Report
39 Notes to the Financial Statements
29 Statement of Directors’ Responsibilities
65 Company Information
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Westminster Group PLC | Annual Report & Financial Statements 2017
1
The Westminster Group is a specialist security and
services group operating worldwide through an
extensive international network of agents
and contacts in over 50 countries.
The Group’s operating companies
are structured into two vertically
integrated operating divisions, Managed
Services and Technology and the Group’s
principal activity is the design, supply
and ongoing support of advanced
technology security solutions and the
provision of long term managed services,
consultancy and training services;
primarily to:
Governments & Governmental
Agencies,
Non Governmental Organisations
& Blue Chip Commercial
Organisations Worldwide
with a focus on Africa, Asia,
the Middle East & the Americas
“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
Company Information
Directors
Executive
Non-Executives
Sir Tony Baldry (Chairman)
Lt Col Sir Malcolm Ross (Deputy Chairman)
James Sutcliffe
Peter Fowler
Stuart Fowler
Martin Boden
Secretary
Roger Worrall
Registered office
Westminster House
Blacklocks Hill
Banbury
Oxfordshire
OX17 2BS
Principal bankers
Registrars
HSBC Bank Plc
17 Market Place
Banbury
Oxfordshire
OX16 5ED
Link Asset Services
6th Floor
65 Gresham Street
London
EC2V 7NQ
Nominated adviser & Stockbroker
SP Angel Corporate Finance LLP
Prince Frederick House
35-39 Maddox Street
London
W1S 2PP
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 Aviation Security Services Limited
P +44 (0) 1295 756300
F +44 (0) 1295 756302
E info@wass-plc.com
Westminster International Limited
P +44 (0) 1295 756300
F +44 (0) 1295 756302
E info@wi-ltd.com
Westminster Sicherheit GmbH
P: +49 8051 93 904 50
F: +49 8051 93 904 57
E: info@w-sicherheit.com
Longmoor Security Limited
P +44 (0) 1295 756380
F +44 (0) 1295 756381
E info@longmoor-security.com
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Westminster Group PLC | Annual Report & Financial Statements 2017
65
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
Limited, Westminster Facilities Management
Limited, and Longmoor Security Limited.
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 employees involved in these operations
remain properly trained and certificated.
We enter into these contracts on a long
term basis (typically 15-20 years) and are
remunerated by a per passenger 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 predictability. 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 a cash outflow into a cash inflow.
The Managed Services Division is
generating considerable interest from
The Managed
Services Division
is generating
considerable
interest from
governments
around the
world
2
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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 employees
involved in these operations
remain properly trained
and certificated.
Passengers Served
Managed Services Division Revenue
governments around the world particularly
regarding airport security solutions
and it has a growing prospect pipeline
(potential projects which are in active
discussions and which are at various
stages of development). The division is
currently in discussions with a growing
number of airports, several of which
have advanced to signed Memorandum of
Understanding (MoU) stage. A measure of
potential passenger volumes under the
signed MoU’s is shown in the table opposite.
The relevance of these numbers is 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,
further expansion of the prospect
pipeline is expected providing the potential
for substantial growth from this division
over the next few years.
The division is also actively pursuing other
managed services opportunities such as
port security and other infrastructure
security solutions and is developing
expanded service offerings at airports.
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Westminster Group PLC | Annual Report & Financial Statements 2017
3
Technology Division
Providing advanced technology
led security solutions
A key strength
of Westminster’s
Technology
division is
its extensive
knowledge of the
security market
place
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 Westminster International
Limited and has a strong track record
of providing security solutions and
technology products 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. 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. With 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 enquiry bank arising from
its international 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
pipeline of potential projects that are
in active discussions at various stages of
development. Some of these projects can
Orders Received
Technology Division Revenue
4
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Example Worldwide Projects
The division
is successfully
securing
smaller contracts
for equipment
and services
take a long time, in some cases years, to
negotiate and as always timing and outcome
remain uncertain.
The division is successfully
securing smaller contracts for equipment
and services creating a regular monthly
run rate of business from clients
worldwide. Added to these are the potential
larger contracts that create 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 opportunities at our
managed services division. The technology
division’s worldwide reputation and
market reach provides a platform from
which the managed services division can
deliver opportunities and in addition
it reduces capital expenditure by
eliminating third party margins that
would otherwise add to the capital cost.
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Westminster Group PLC | Annual Report & Financial Statements 2017
5
Chairman’s Statement
I am pleased to present the
Final Results for Westminster
Group plc for the year ended 31
December 2017.
The Group has made progress during the
year with revenues up by 22% to £5.4m
(2016: £4.4m), although at EBITDA level
the loss of £1.2m compares to a profit in
2016 of £25k. Whilst over half of the EBITDA
loss in 2017 related to the discontinued
Ferry operations in Sierra Leone, we also
continued with the necessary investment
in our business, people and operations to
deliver the significant potential growth we
are working towards.
As a result of this investment we started
2018 in a stronger position than we have
been in for some time. Both our Managed
Services and Technology divisions are
performing well and the Group closed its
ferry operations from late September 2017
to focus on its core business. Our prospects
have increased and operationally we have
made significant progress. More detail on
the strategic developments, projects and
opportunities we are undertaking is covered
in the CEO’s Strategic Report.
During the year the Group raised £2.35m
gross from the issue of new equity to
support working capital requirements and
business development costs, and the last
remaining Darwin convertible unsecured
loan notes (£1.2m) were converted into
equity. In May 2018, the remaining secured
convertible loan notes were extended to 30
June 2019, with an option for the Company
to extend for a further six months to 31
December 2019.
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 to our teams and our
operations worldwide.
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 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.
We are conscious of the new AIM Notice 50
which requires companies to review their
corporate governance disclosures annually
and to adopt a recognised corporate
governance code from 28 September
2018. We take our corporate governance
responsibilities very seriously and will
be adopting and working to the Quoted
Companies Alliance (QCA) Corporate
Governance Code with appropriate
disclosures to be set out on the Company’s
corporate website.
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 of the support and assistance
we as a company provide in many of the
regions in which we operate, and I would
like to pay tribute to our employees and
other 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
Employees and Board
I am delighted to have become Chairman
of the Westminster Group from the end of
June 2017, and to have become Executive
Chairman with effect from the end of
January 2018. Sir Malcolm Ross remains on
the Board as a Non-Executive Director and
Deputy Chairman.
Martin Boden replaced Ian Selby as Chief
Financial Officer at the end of June 2017
and I believe Martin’s experience of
international transactions and financial
management of high growth businesses
brings additional strength to our Board.
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 overseas, who have worked
extremely hard during the year.
I would finally like to extend my
appreciation to our investors for their
continued support and to our strategic
investors who are bringing their expertise to
help deliver value for all.
Rt. Hon Sir Tony Baldry DL, Chairman
24 May 2018
Rt. Hon Sir Tony Baldry
DL
Chairman
“We continue
to work closely
with and receive
excellent support
from the Foreign
Office and UK
Diplomatic
Missions around
the world”
6
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Chief Executive Officer’s
Strategic Report
Peter Fowler
Chief Executive
Officer
Our vision remains 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 (such as airports,
ports & harbours, borders and power
plants), and large scale commercial
organisations worldwide.
As depicted in “Our business Evolution”
on page 11, 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 managed security services and security
products.
We deliver our wide range of solutions and
services through a number of operating
companies that 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 manpower, 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. This
reduces both supplier exposure and cost
and provides us with increasing purchasing
power. Our Managed Services division
provides a long-term business platform to
deliver other cost effective incremental
services from the Group.
We continue to deliver a wide range of
solutions to governments and blue-chip
organisations around the world as can be
seen from the example worldwide aviation
projects shown on page 5. 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. This
remains 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
the Group has made progress during 2017.
Revenues rose strongly in both our Managed
Services and Technology divisions and the
loss making Sovereign Ferries operation was
discontinued in September 2017.
Enquiry levels remain healthy and levels
of interest in the Group’s services remain
high across both operating divisions.
However, whilst our Technology division
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Westminster Group PLC | Annual Report & Financial Statements 2017
7
Chief Executive Officer’s Strategic Report
Continued
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.
Managed Services Division
Our Managed Services division and the
significant growth opportunities it is
progressing is the key focus of the Group.
During 2017 the Managed Services division
made progress on several fronts.
Our aviation security business in West
Africa has performed well as the recovery
from the West African Ebola outbreak
continues. We have seen steady growth
with flight schedules increasing in 2017 and
passenger growth across all airlines apart
from Air France where their flights are
code-shared with KLM. For the full year we
had c.111,000 embarking passengers, an
increase of 14% on the c.97,000 embarking
in 2016. The growth in the number of
carriers is encouraging and we expect to see
a continuation of passenger growth in 2018
as several new airlines commenced services
towards the end of 2017 and in Q1 2018
Turkish Airlines also commenced services
with a new route to Istanbul.
Westminster’s international reputation and
expertise in the field of aviation security
continues to grow and in 2017 we secured
contracts to assist airport authorities
around the world with their equipment
and training needs. We plan to expand our
training team in 2018 to meet the demand
for their services.
We have signed a number of Memorandums
of Understanding (MoU) with governments
and airport authorities in our target markets,
several of which were added in 2017. Due,
in part, to the confidential nature of such
projects and commercial sensitivity, we are
no longer announcing any individual MoU
when signed and we will update the market
on material developments as appropriate
and in accordance with our regulatory
responsibilities.
During 2017 we continued to spend
considerable time, effort, and expense
in progressing our large scale long term
potential opportunities. In this respect, a
defining aspect of our activities during the
year has been the progress made with our
major Middle East airport project opportunity
in Iran. Iran has a population of close to
80 million people and over 60 airports and
as such could be one of the world’s fastest
growing aviation opportunities.
Following the relaxation of sanctions on the
Joint Comprehensive Plan of Action (JCPOA)
agreement, we commenced discussions
with the Iranian Airport Authorities and
signed a Memorandum of Understanding
in March 2016 to assist with equipment,
processes and support systems to help bring
Iranian airport security up to international
standards. Following preliminary
consultations, we received a formal Letter
of Intent in May 2016 relating, initially, to
one of the country’s main airports.
Over the past two years we have been
involved in wide ranging and complex and
ongoing negotiations with commercial
and political bodies with meetings in
various jurisdictions. To be in a position to
undertake this transformational project
we have had to put in place a complex
supply chain and invest in our corporate
infrastructure, including the establishment
of operations in Germany. We also dealt
with a constantly changing scope of works
as the client prioritised its requirements.
In addition, given the sensitivities around
operating in Iran, we have had to overcome
Our aviation
security business
in West Africa
has performed
well as the post
Ebola recovery
continues
8
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In 2017
we supplied
numerous clients
in around 60
countries across
the world,
especially in
the UK, Middle
East, both East
and West Africa,
Eastern Europe,
Asia and Latin
America
numerous challenges including banking,
financing and strict compliance with
international restrictions involving detailed
due diligence and considerable professional
advice from across Europe and the United
States (US). Throughout the process we
have received valuable support from the UK
government at the highest levels.
On 22 December 2017, we announced we had
finalised legal and commercial negotiations
apart from a few minor commercial and
contractual issues. On 28 March 2018 we
announced that the outstanding commercial
and contractual issues has been agreed
and that we were awaiting the client’s
internal approval process to complete. On 7
May 2018, we signed a long term (15 year)
contract with annual revenues in excess
of €24 million Euros which will become
effective on the exchange of formal board
letters between us and the client. The
purpose of the exchange of letters is to allow
both parties time to ensure everything is
in place before commencing operations. In
addition, we also signed a secondary smaller
equipment supply contract for €2.65 million
Euros. Unfortunately, on 8 May President
Trump made an announcement that the
US were unilaterally and immediately
withdrawing from the JCPOA agreement
and re-imposing sanctions. This has created
uncertainty both in Iran and the international
business community.
None of Westminster’s proposed equipment
or services relates to any proposed
sanctions. The other signatories to the
JCPOA agreement, being China, Russia,
Germany, France and the UK, have all stated
their continued support for the agreement,
as have the European Union (EU), the United
Nations, the International Atomic Energy
Agency and most other leading countries
around the world. Germany, France and
the United Kingdom have jointly vowed to
uphold the JCPOA agreement and the EU
is considering putting measures in place
to protect European companies. However,
given the initial uncertainty and following
initial discussions with our customer and
commercial partners, the Board made the
decision to place both projects on hold
whilst it seeks clarification on the impact of
the US withdrawal from the JCPOA and the
implications for the Company’s supply chain
including the potential replacement of some
equipment suppliers.
Securing this major contract was a
momentous achievement and we remain
hopeful that non-sanctioned activities
by non-US companies will be allowed to
continue in Iran, and that the EU will
put measures in place to protect EU
companies against US extraterritorial
actions allowing these projects, and
others planned, to proceed.
Whilst the Iranian airport project has been a
high priority and any delay in implementing
the contract now signed is a frustration it is
only one of a number of significant project
opportunities we are pursuing around the
world and we are well placed to sign at
least one other long term Managed Services
contract during 2018, although with projects
of this scale and complexity there can never
be certainty of outcome or timing.
Technology Division
During the year the Technology division
secured contracts for a wide range of
products and services to clients from
around the world. By way of example of
the diversity of our contracts we secured
orders for Explosive Ordnance Disposal
equipment for the Italian Army, Underwater
Security systems for a Middle East Navy,
Port security equipment to Bangladesh,
screening equipment to Japan and Vietnam
and we continued to provide security
equipment and services to government
facilities across the UK.
In 2017, we supplied numerous clients
in around 60 countries across the world,
especially in the UK, Middle East, both East
and West Africa, Eastern Europe, Asia and
Latin America.
With our ever-growing population of sold
systems that require regular maintenance,
in 2017 we increased our recurring revenue
base of maintenance and service contracts,
both in the UK and overseas, by over 30%
to £236k per annum (2016: £180k). These
contracts help underpin the cost base of the
Division and is an area of the business we
expect to grow further.
In addition, the Division has provided
various equipment and technology support
services to the Managed Services division.
In order to improve the management
and potential of the Technology division
in February 2018, we appointed Stuart
Gilbert as Managing Director. Stuart has a
strong background in international security
solutions, previously holding senior positions
in multinational security organisations and
will lead the growth of this division.
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Westminster Group PLC | Annual Report & Financial Statements 2017
9
Chief Executive Officer’s Strategic Report
Continued
Our business
is facing
unprecedented
growth prospects,
particularly
with our
airport security
operations
Sovereign Ferries
Our ferry services in Sierra Leone, under
the branding Sovereign Ferries, commenced
formal services in January 2017. In June
2017, we announced that we had secured
around 3% of the addressable ferry market,
with the market as a whole estimated to
be worth around £4 million per annum
in revenues and that over the next 12
months we would be seeking to grow
our market share to beyond a 14% share
(the level at which we anticipated the
operation would be providing a positive
contribution). However, passenger growth
and financial performance did not meet
the Board’s expectations, due in part to
growing competition. Revenues in H1 2017
amounted to £51k (H1 2016: nil) and the
EBITDA loss amounted to £0.4m (H1 2016:
nil). With future passenger growth forecasts
being downgraded, losses would be greater
in quantum and duration than had been
previously forecast. The Board took the
decision in September 2017 to exit the
ferry service in a manner that would not
adversely affect airport passenger transfer
to and from the mainland - this was one of
the initial drivers for the ferry service.
We consequently entered into a formal
agreement to transfer the operation to Sea
Coach Express, the largest ferry operator in
Sierra Leone, commencing on 25 September
2017. Under this Agreement, Sea Coach
took over the Sovereign Ferries’ operations
and responsibility for management
and operation of the ferry service. We
transferred the Sierra Princess to Sea Coach
as part of the transaction and cancelled
the lease on our second vessel the Sierra
Duchess without penalty.
By combining the ferry operations, the
enlarged service is able to offer the
travelling public a greatly enhanced service
with increased choice, routes, vessels and
landing stages.
We will continue to operate and manage the
ferry terminals in accordance with our 21-
year agreement and will receive a share of
revenues on ticket sales made through our
own operations, together with a payment
for all passengers travelling to and from our
terminals although we do not expect these
revenues to be material.
We still own the Sierra Queen and given
our exit from the ferry operations we are
reviewing our options for disposal including
a sale. As the vessel requires maintenance
work and is not in service a sale may take
time. The Board has made a full provision in
the 2017 financial statements to write down
the remaining Sovereign Ferries assets (not
transferred to Sea Coach Express) to nil. The
costs associated with the exit from the ferry
operations have been treated as exceptional
exit costs in the 2017 results.
Strategic Review
In 2016, 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. This review is ongoing, and
we continue to review our operations,
structure, management and advisors. In
2017, we made a number of changes to
our management structure and board of
directors. This process continues with
both senior management and new board
appointments in 2018 broadening our range
of experience and expertise.
Our business is set to benefit from
unprecedented growth opportunities,
particularly with our airport security
operations, and it is essential we have the
right strategies, people, processes and
systems in place to successfully deliver
such growth. Accordingly, the changes we
have made to date and intend to make
over the coming months will, I believe,
serve the Company well and greatly assist
our planned growth.
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 page 16.
Financial Review
The Financial Review for the year ended
31 December 2017 is set out in the Chief
Financial Officer’s Report on pages 12 to 16.
Principal Risks and Uncertainties
The Principal Risks and Uncertainties are
referenced along with key mitigation
strategies on pages 20 to 21.
Business Outlook
Our business is now in a better position
than it has been for some time in terms
of management, structure, revenues and
prospects.
It has been extremely frustrating to
have finally signed the major Iranian
airport contract we have been pursuing
for the past two years, only to have to
delay implementing it following the US
unilateral withdrawal from the JCPOA and
threat of renewed sanctions. Whilst none
of our equipment and services come under
existing or threatened sanctions we must
10
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Our Business Evolution
be certain of our position and that of our
suppliers, before proceeding.
Never-the-less securing this major contract
was an important achievement and
demonstrates our managed services model
is attractive and deliverable to airports of
varying sizes and in challenging markets
world-wide. We remain hopeful that the EU,
which exported €10.8 billion of goods and
services to Iran in 2017, will put measures
in place to protect EU companies doing
business in Iran against US extraterritorial
actions, allowing projects such as ours in
Iran to proceed. As previously announced,
the Iranian airport project in question,
which is just one of over 60 airports in the
country, would if it proceeds add over €24
million Euros annually to our revenue.
We continue to pursue the other project
opportunities underway around the world
and our Managed Services division is making
progress on a number of fronts. We are also
securing an increasing number of smaller
contracts to assist airport authorities
around the world with their equipment
and training needs, and this enhances our
prospects for our large scale, long term
airport opportunities. We are working
towards signing at least one other long term
Managed Services contract during 2018
although with projects of this scale and
complexity there can never be certainty of
outcome or timing.
Our Technology division continues to
deliver a wide range of products and
solutions around the world. Our recent
$4.5m order received in the Middle East
that we have been pursuing for over three
years demonstrates the time such large-
scale projects can take to finalise. Being
the first multi-million-pound order for this
division for a while it also demonstrates
the lumpy revenue nature of this division.
There are however many such opportunities
we are pursuing and to capitalise on these
opportunities, we have strengthened the
management of this division with the
recent appointment of Stuart Gilbert as
Managing Director.
Over the next few months and years
we have an opportunity to achieve
unprecedented growth from the prospects
we are pursuing. The Iranian airport
opportunity and other managed services
contracts could be transformational for the
Group. The Board and I remain committed
to delivering on this potential.
Peter Fowler, Chief Executive Officer
24 May 2018
We continue
to pursue the
other project
opportunities
underway around
the world and our
Managed Services
Division is making
progress on a
number of fronts
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Westminster Group PLC | Annual Report & Financial Statements 2017
11
Chief Financial Officer’s Report
Martin Boden
Chief Financial Officer
Discontinued Operations
On 25 September 2017, the Group entered
into a sale agreement to transfer the
operation of Sovereign Ferries in Sierra
Leone to Sea Coach Express. As part of this
agreement, title of the Sierra Princess has
been transferred to Sea Coach Express and
the local company Sovereign Ferries (SL)
Limited was transferred with an effective
date as at 1 January 2018 following
completion of the local 2017 audit. The
company is being transferred with no assets
and no liabilities – the Sierra Princess was
leased and not on the balance sheet and the
Sierra Queen and other Sovereign Ferries
assets have been written down to nil.
The results of the discontinued operations
are shown separately in the Consolidated
Statement of Comprehensive Income and
this report refers to both the results for
all Group operations and the results for
continuing operations.
Revenue
Revenues of £5.4m were 22% higher than
the £4.4m reported in 2016. The Managed
Services division revenues increased by 28%
to £3.6m (2016: £2.8m) and the Technology
division revenues rose by 9% to £1.8m
(2016: £1.6m). The. Managed Services
revenues continued to recover following
the end of the Ebola crisis in West Africa
and the consequent growth in passenger
volumes and security fees. The discontinued
Sovereign Ferries revenues were immaterial
in both 2017 and 2016.
Gross Margin
Gross margin fell to 59% (2016: 71%) as
a result of lower margins on Technology
division sales and cost of sales exceeding
revenues on the discontinued operations.
There were fewer high margin technology
sales in 2017 than achieved in 2016.
Operating Cost Base
Total Group administrative expenses were
£8.7m (2016: £4.5m). Within these expenses
an IFRS share option expense of £0.1m
(2016: £0.1m) was recorded, a depreciation
and amortisation charge of £0.3m (2016:
£0.2m), impairment charges of £2.9m
(2016: £nil), costs associated with exiting
the ferry operation of £0.3m and specific
pre-contract costs related to progression of
the Iranian Middle East Airport opportunity
of £0.5m (2016: £0.2m).
Operational EBITDA
The Group loss from operations was £5.5m
(2016: £1.4m). When adjusted for the
exceptional and non-cash items set out
below and depreciation and amortisation,
the Group recorded an adjusted EBITDA loss
of £1.2m compared to a small profit of £25k
in the prior year.
12
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On 25 September
2017 the group
entered into a
sale agreement
to transfer the
operation of
Sovereign Ferries
in Sierra Leone
to Sea Coach
Express
Reconciliation to adjusted EBTIDA £’000
Loss from Operations
Depreciation, Amortisation and Impairment charges
Reported EBITDA
Share Option expense
Impact of Ebola
Iranian Middle East Airport Opportunity Costs
Ferry exit costs
Other exceptional items
Adjusted EBTIDA (loss) / profit
2017
2016
(5,487)
(1,389)
3,202
234
(2,285)
(1,155)
63
-
603
335
50
(1,234)
103
272
220
585
-
25
The adjusted EBITDA loss for continuing operations in 2017 was £0.5m with a further £0.7m of
losses from discontinued operations.
Finance Costs
Total finance costs of £0.6m (2016: £0.6m)
were consistent with the prior year as
interest bearing debt levels remained
constant. Senior Secured Convertible Notes
(10% coupon) generated an underlying
cash charge of £0.2m (2016: £0.2m). The
remaining £0.4m (2016: £0.4m) of finance
charges were non-cash based and related to
IFRS valuations of the convertible loan notes.
Result for the Year
The Group loss before taxation was £6.1m
(2016: £2.0m) and the loss per share
was 5.6p (2016: 2.5p). For continuing
operations, the loss before taxation was
£2.4m (2016: £1.1m) and the loss per share
was 2.2p (2016: 1.4p).
Statement of Financial Position
Total Group assets amounted to £3.2m at
31 December 2017 compared with £6.4m at
31 December 2016.
Net Group current assets amounted to
less than £0.1millon at 31 December 2017
compared to £0.2m at 31 December 2016.
The Group debtor balance as at
31 December 2017 was £0.7m (2016:
£0.9m). Average days sales outstanding at
the year-end were 36 (2016: 32).
Cash and cash equivalents of £0.4m at
31 December 2017 compared with £0.2m at
31 December 2016.
Trade payables were £1.1m (2016: £1.1m) and
average creditor days were 24 (2016: 35).
Total equity at 31 December 2017 stood at a
deficit of £0.3m (2016: surplus of £2.3m).
Convertible Loan Notes (CLN) and
Convertible Unsecured Loan Notes
(CULN)
The convertible unsecured loan notes issued
to Darwin Capital Limited (“Darwin”) were
repaid in full in February and April 2017.
Darwin held warrants attached to their loan
notes and details are provided under Equity
Issues below.
Summary of movements in loan notes
at principal value £’000
At 1 January 2017
Conversions in the year
CULN
CLN
Total
1,200
2,245
3,445
(1,200)
-
(1,200)
At 31 December 2017 and 24th May 2018
-
2,245
2,245
At 31 December 2017, the secured CLN carried a coupon of 10% payable quarterly in arrears, had
a conversion price of 35p and matured on 18 June 2018. In May 2018, with maturity getting close,
we have extended the term of the secured CLN to 30 June 2019 at a coupon of 12%. The Company
has an option to extend the term to 31 December 2019 at a higher coupon of 15% for that last six
months. The conversion price has been reduced to 25p per share.
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Westminster Group PLC | Annual Report & Financial Statements 2017
13
Chief Financial Officer’s Report
Continued
Equity Issues
On 28 February 2017, the Company issued
5,161,290 ordinary shares of 10p at 11.625p
per share, with a further 10 million ordinary
shares issued at nominal value on 18 April
2017, and 7.5 million ordinary shares issued
at nominal value on 26 September 2017.
Summary of Warrants at 31 December 2017
A further 10,669,227 ordinary 10p shares
were issued during the year at an average
price of 11.24p per share on conversion of
the remaining £1.2m CULN.
Number
Holder and Description
Strike
Price (p)
Life
(years)
Vesting Criteria
589,330
Darwin, February 2016
20.15
1,100,000
Darwin, November 2016
5,000,000
Hargreave Hale, June 2016
28
12
3
3
3
At grant:- detachable
At grant:- detachable
At grant:- detachable
The November 2016 Warrants were sold by Darwin to a new holder in April 2018.
The Group
reported a
favourable
working capital
movement of
£0.6m (2016:
£0.6m adverse
movement)
Cash Flow Statement
During the year the Group had an operating
cash outflow of £1.5m (2016: £1.7m)
which arose primarily from trading losses.
Just under half of cash outflow (£0.7m)
related to continuing operations with
£0.8m relating to discontinued operations.
In 2016, £1.0m of cash outflow related to
continuing operations with £0.7m relating to
discontinued operations.
The Group reported a favourable working
capital movement of £0.6m (2016: £0.6m
adverse movement).
During the year the Group raised £2.4m
gross from the issue of new equity. In 2016,
£1.3m was raised from new equity with a
further £1.7m of proceeds from the issue of
convertible loan notes.
During the year the Group was provided
with overdraft support by its bankers HSBC
and at present has a small but unused
overdraft facility.
14
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Reconciliation from adjusted EBITDA to normalised
operating cash flow £’000
Adjusted EBITDA
Loss on asset disposal
Net changes in working capital
Equity settlement payment
2017
2016
(1,234)
9
641
25
25
13
(638)
-
Net Cash used in underlying operating activities
(559)
(600)
Net Cash used in underlying operating activities is presented excluding exceptional items, share
options expense, and depreciation and amortisation.
Events after the Reporting Period
• On 3 January 2018, Beaufort Securities
exercised warrants over 875,000 new
Ordinary Shares of 10 each at an
exercise price of 10p per Ordinary Share.
Accordingly, 875,000 new Ordinary
Shares were issued in settlement of this
exercise. Beaufort Securities Limited are
no longer joint broker to the Company
• On 31 January 2018, the Company raised
£0.75m (gross) through a placing of
3,409,091 new Ordinary Shares of 10p
each at 22 pence per Ordinary Share.
The placing was undertaken by S P Angel
Corporate Finance LLP who received
170,455 Warrants to subscribe for
Ordinary Shares at an exercise price of
22 pence per share
• On 28 March 2018, the Technology
division secured a $4.5m contract for the
provision of advanced vehicle screening
solutions to an existing client in the
Middle East
• On 10 May 2018, the Company announced
that its major Middle East project
opportunity is in Iran. The contract has
been signed but the project is on hold
as the Company investigates the impact
of the US withdrawal from the JCPOA
and the implications for the Company’s
supply chain
Westminster Group PLC | Annual Report & Financial Statements 2017
15
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Chief Financial Officer’s Report
Continued
• On 24 May 2018, the Company extended
the term of its Secured Convertible Loan
Notes from 18 June 2018 to 30 June
2019, with an option to extend for a
further six months to 31 December 2019.
The coupon has been raised from 10% to
12% until June 2019 and increases to 15%
for the six months to 31 December 2019
should the Company exercise its option.
The conversion price has been reduced
from 35p per share to 25p
Key Performance Indicators
The Group constantly monitors various key
performance indicators for factors affecting
the overall performance. At Group level, the
revenues and gross margin are monitored
to give a constant view of the Group’s
operational performance. As employment
costs are the single largest cost base for
the Group the number of employees and
employee costs are also monitored to
ensure best use of resources. Days Sales
Outstanding is used to measure as to the
cash conversion of revenue and identifies
debtor aging issues.
The Managed Services division derives
its revenues and cash flows based on the
number of passengers using a facility such as
an airport. The number of passengers served
is monitored and with the growth in aviation
training we have introduced KPI’s for the
number of contracts won.
The Technology division measures its sales
activity by reference to the number of
enquiries received per month and the
number of orders received. The number of
countries and number of return customers
are monitored to give a view on the
performance of the division.
Key Performance Indicators
Group
Revenue £’m
Gross Margin
Days Sales Outstanding
Number of Employees
2017
2016
5.4
59%
36
283
4.4
71%
32
240
Average Employee Cost Per Head
£8,365
£9,450
Projects Won
Passengers Served (‘000)
Number of Training Projects Won
% of Training Projects Won
Technology Division
Average Enquiries Per Month
Average Number of Orders Per Month
Number of Countries Supplied
Number of Return Customers
Martin Boden, Chief Financial Officer
24 May 2018
2017
2016
111
16
97
2
61.5%
100%
2017
2016
128
29
41
164
117
21
39
150
16
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Board of Directors
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.
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 VVIP’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 Group’s activities.
Rt. Hon. Sir Tony Baldry
Executive Chairman
Sir Tony has had a long and 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.
Lieutenant Colonel Sir Malcolm Ross
GCVO, OBE
Non-Executive Deputy 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
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Westminster Group PLC | Annual Report & Financial Statements 2017
17
Board of Directors
Continued
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.
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.
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.
Martin Boden
Chief Financial Officer
18
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Directors Report
The Directors present their annual report and the audited financial statements for the year ended 31 December 2017.
Principal activities
The Westminster Group plc is a specialist security and services group operating worldwide through an extensive international network
of agents and contacts 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 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 7 to 16.
The Directors who held office during the year were as follows
Executive Directors
Peter Fowler
Stuart Fowler
Ian Selby (resigned 29 June 2017)
Martin Boden (appointed 29 June 2017)
Non-Executive Directors
Lt. Col. Sir Malcolm Ross
Sir Tony Baldry
Mr James Sutcliffe
Sir Tony Baldry became Executive Chairman on 31 January 2018.
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 during the year), Peter Fowler
(CEO) and Martin Boden (CFO).
The Risk Committee met twice during the year.
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Westminster Group PLC | Annual Report & Financial Statements 2017
19
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 continue to 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.
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 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
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
20
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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 a
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
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Westminster Group PLC | Annual Report & Financial Statements 2017
21
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 (2016: £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 24 May 2018, 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 o f shareholder o r nominee
Hargreave Hale
Mr Hamed Al Jamal
No o f shares
13,133,333
4,000,000
Holding %
10.5
3.2
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 24 days (2016: 35 days).
Share price
During 2017 the Company’s share price ranged from 9.0p to 24.0p and the share price at 31 December 2017 was 24.0p (2016: 21p).
Directors’ and officers’ liability insurance
The Company, as permitted by sections 234 and 235 of the Companies Act 2006, maintains insurance cover on behalf of the Directors
and Company secretary indemnifying them against certain liabilities which may be incurred by them in relation to the Company.
Events after the reporting period
These are detailed in the CFO report and in note 30 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 loan note holders and Directors
and management ability to affect costs and revenues. Management regularly forecast results, financial position and cash flows for
the Group.
The Group’s convertible secured loan notes have a principal value of £2.245m and the term has recently been extended from 18 June
2018 to 31 December 2019. 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 covert to equity. As part of a routine planning process the Board has identified options for the
repayment of the convertible secured loan notes from either cash generated from operations or as part of any financing to support
new projects won.
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.
Auditor
A resolution to reappoint Moore Stephens LLP as auditor will be proposed at the Annual General Meeting to be held on 26 June 2018.
In so far as each of the directors is aware
• There is no relevant audit information which the Group’s auditor is unaware, and
• The Directors have taken all steps that they ought to have taken to make themselves aware of any relevant audit information and
to establish that the auditor is aware of that information.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Group’s
website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from
legislation in other jurisdictions.
On behalf of the Board
Peter Fowler
Director
24 May 2018
Martin Boden
Director
22
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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.
The Remuneration Committee of the Board was established on admission of the Company to AIM in June 2007 and consists solely of the
following Directors:
Lt. Col. Sir Malcolm Ross (Chairman)
Sir Tony Baldry
James Sutcliffe
Each of these Directors were Non-Executive Directors during 2017. Sir Tony Baldry became Executive Chairman on 31 January 2018 and
will continue to serve on the Remuneration Committee until a Non-Executive replacement is appointed.
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, pension payments, 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 three times during the year.
Options
The Group considers it important to incentivise employees and Directors through share incentive arrangements. The Group adopted
a new Share Option Scheme in September 2017, under which it plans to award both 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 under the previous 2007
Share Option Scheme, the details of which are set out in Note 22 of these financial statements. A demanding share price target of 60p
before vesting must be achieved In order for the Directors to benefit from this scheme.
In context, this threshold represents a premium of 140 per cent. to the placing price of the £1 million fundraising in 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
Lt. Col. Sir Malcolm Ross
Sir Tony Baldry
James Sutcliffe
None
None
None
Notice
3 months
3 months
3 months
Contractual fees
£
18,000
40,000
24,000
There were no Non-Executive Director changes in 2017. Sir Tony Baldry was appointed to the board on 30 June 2016 and James
Sutcliffe joined the board on 1 December 2016.
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Westminster Group PLC | Annual Report & Financial Statements 2017
23
Remuneration Committee Report continued
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
2017 are as follows:
Audited
Executive Directors
Peter Fowler
Stuart Fowler
Martin Boden
Ian Selby
Roger Worrall
Total Executive Remuneration
Non-Executive Directors
Lt. Col. Sir Malcolm Ross
Sir Tony Baldry
James Sutcliffe
Sir Michael Pakenham
Total Non-Executive Remuneration
Total Board Remuneration
Basic salary/
fee
£’000
Benefits in
kind
£’000
Group
national
insurance cost
£’000
Share Based
Payment cost
£’000
Total cost of
employment
£’000
Total
2016
£’000
157
104
75
94
-
430
17
49
32
-
98
528
1
-
1
-
-
2
4
-
-
-
4
6
22
14
10
6
-
52
2
7
-
-
9
61
12
10
-
5
-
27
1
-
-
-
1
28
192
128
86
105
-
511
24
56
32
-
112
623
192
128
-
111
58
489
23
20
2
7
52
541
No options were issued or 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.
The Executive and Non-Executive Directors who held office during the year had no interests in the shares 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
Martin Boden
Sir Tony Baldry
James Sutcliffe
140,884
6,361,794
541,618
-
-
-
24
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In addition to the interests disclosed above, the following Executive and Non-Executive Directors have options to acquire ordinary
shares of 10p each in the Company granted under the 2007 Share Option Plan. Full details are as follows:
Directors
Lt. Col. Sir Malcolm Ross
Stuart Fowler
Stuart Fowler
Sir Malcolm Ross
Peter Fowler
Stuart Fowler
At 1 January 2017 and 31
Dec 2017
Grant price
Market price at date of
grant
Date from which
exercisable
2,000
48,000
15,000
93,750
781,250
625,000
67.5p
10.0p
34.5p
28.5p
28.5p
28.5p
67.5p
5.7p
34.5p
25.5p
25.5p
25.5p
21 April 2011
05 April 2009
25 September 2011
10 June 2016*
10 June 2016*
10 June 2016*
The market price of the shares at 31 December 2017 was 24.0p and the range during the year was 9.0p to 24.0p.
(*) These options were granted to the Directors at a price of 28.5 pence under the 2007 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. 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.
On behalf of the Board
Lt. Col. Sir Malcolm Ross
Chairman of the Remuneration Committee
24 May 2018
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Westminster Group PLC | Annual Report & Financial Statements 2017
25
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 2016 (“the Code”) or the Quoted Companies Alliance Corporate Governance Code, 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 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 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, especially strategic issues. The
Chairman promotes a culture of openness and debate by facilitating the effective contribution of Non-Executive Directors 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 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 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 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, 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 19 of this report.
Risk reviews are carried out by each subsidiary and reviewed annually as part of an ongoing risk assessment process. The focus of
these reviews is to identify the circumstances, both internally and externally, where risks might affect the Group’s ability to achieve
its business objectives. The management of each subsidiary periodically reports to the Board any new risks. In addition to risk
assessment, the Board believes that the management structure within the Group facilitates free and rapid communication across
the subsidiaries and between the Group Board and those subsidiaries and consequently allows a consistent approach to managing
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 20 and 21 of this report.
26
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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 and 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
The Audit Committee met three times during the year
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.
The Nomination Committee met twice during the year.
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)
The Disclosure Committee met three times during the year.
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.
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 each month to identify any variances from approved
plans. Monthly rolling cash flow forecasts form part of the reporting system. The Group remains alert to react to other business
opportunities as they arise.
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Westminster Group PLC | Annual Report & Financial Statements 2017
27
Corporate Governance Report continued
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
• 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 adjusts 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 review any
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.
28
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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
Peter Fowler
Director
24 May 2018
Martin Boden
Director
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Westminster Group PLC | Annual Report & Financial Statements 2017
29
Independent Auditor’s Report to the
Members of Westminster Group Plc
Opinion
We have audited the financial statements of Westminster Group PLC for the year ended 31 December 2017 which comprise:
•
•
•
•
•
the Consolidated Statement of Comprehensive Income;
the Consolidated and Company Statements of Financial Position;
the Consolidated and Company Statements of Changes in Equity;
the Consolidated and Company statements of Cash Flows; and
the notes to the financial statements, which include a summary of significant accounting policies and other explanatory notes.
The financial reporting framework that has been applied in the preparation of the consolidated and parent company financial
statements is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union and, as
regards the Company financial statements, as applied in accordance with the provisions of the Companies Act 2006.
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 31 December
2017 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.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements
section of our report. We are independent of the group in accordance with the ethical requirements that are relevant to our audit
of the financial statements in the UK, including the FRC’s Ethical Standard, and we have fulfilled our ethical responsibilities in
accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a
basis for our audit opinion.
Conclusions relating to going concern
We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to report to you where:
•
•
the directors’ use of the going concern basis of accounting in the preparation of the financial statements is not appropriate, or
the directors have not disclosed in the financial statements any identified material uncertainties that may cast significant doubt
about the group’s or the parent company’s ability to continue to adopt the going concern basis of accounting for a period of at
least twelve months from the date when the financial statements are authorised for issue.
An overview of the scope of our audit
The group operates through nine trading subsidiaries which we considered to be significant components for the purposes of the
consolidated financial statements. The financial statements consolidate these entities together with a number of non-trading
subsidiary undertakings. In establishing our overall approach to the group audit, we determined the type of audit work that needed
to be performed on each subsidiary. This consisted of us carrying out a full audit of six significant components of the group in the
United Kingdom and reviewing the component auditors’ working papers on three significant components in Sierra Leone.
We considered the risk of the financial statements being misstated or not prepared in accordance with the underlying legislation or
standards. We then directed our work towards those areas of the financial statements which we assessed as having the highest risk of
containing material misstatements.
We tested and examined information using both analytical procedures and tests of detail, to the extent necessary to provide us
with a reasonable basis to draw conclusions. These procedures, together with our detailed review of the procedures performed by
component auditors, gave us the evidence that we need for our opinion on the financial statements as a whole and, in particular,
helped mitigate the risks of material misstatements mentioned below.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were the most significant in our audit of the financial
statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to the
fraud) we identified, including those which had the greatest effect on: the overall audit strategy, the allocation of resources in the
audit, and directing the efforts of the engagement team.
These matters were addressed in the context of our audit for the financial statements as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on these matters.
30
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1) Impairment of Sierra Queen and onerous exit costs within Sovereign Ferries Limited
During the year the group’s ferry operations were closed down resulting in an impairment of £2,491,000. Given that the ferry
operations have been treated as discontinued in the financial statements for the year ended 31 December 2017, there is a risk that
assets relating to these operations may have been recorded at amounts higher than their recoverable amounts and costs relating to
the exit from these operations are not sufficiently provided for at the end of the reporting period.
In this area our procedures included:
• Reviewing the company’s assessment of the ferry operation, ensuring that the impairment charge is properly quantified, recorded
and disclosed in the financial statements;
• Ensuring that all costs that may be associated with the discontinued operations have been recorded and disclosed in the financial
statements; and
• Performing unrecorded liabilities testing and reviewing transactions around the year end to confirm amounts are correctly
recorded and disclosed in the financial statements.
2) Going concern
Significant losses are being incurred by the group and it continue to rely on external finance for its operating needs during the year.
There is a risk that the group might not be a going concern.
In this area our procedures included:
• Reviewing management’s cash flow forecasts, which cover a future period of 6 years from the financial reporting date;
• Making enquiries with management and obtaining support for the significant inputs and assumptions used in the forecasts. We
also carried out sensitivity analysis on the revenue projections;
• Reviewing board minutes during the year and up to the date of approval of the financial statements to indicate any other issues
that may indicate the inability of the group to continue as a going concern;
• Reviewing documentation relating to the rollover of the convertible loan notes through to 30 June 2019; and
• Reviewing the group’s ability to raise new funds successfully from the market since the financial reporting date.
Based on the outcome of the above procedures, we concluded that there was no material uncertainty in relation to going concern.
Our application of materiality
We set certain thresholds for materiality. These helped us to determine the nature, timing and extent of our audit procedures and to
evaluate the effect of misstatements, both individually and on the financial statements as a whole.
We determined the materiality of the consolidated financial statements as a whole to be £161,000, calculated with reference to a
benchmark of 5% of the group loss before tax before impairment. This is the threshold above which missing or incorrect information
in the financial statements is considered to have an impact on the decision making of users.
The parent company materiality was set at £109,000 being 5% of loss before tax.
We reported to the Audit Committee all potential adjustments above £5,500 being 5% of the materiality for the financial statements
as a whole.
Other information
The Directors are responsible for the other information. The other information comprises the information included in the annual
report, other than the financial statements and audit report thereon. Our opinion on the financial statements does not cover the
other information and, except to the extend otherwise explicitly stated in our report, we do not express any form of assurance
conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read other information and, in doing so, consider
whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or
otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we
are required to determine whether there is a material misstatements in the financial statements or a material misstatement of
the other information. If, based on our work we have performed, we conclude that there is a material misstatement of this other
information, we are required to report the fact.
We have nothing to report in this regards.
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Westminster Group PLC | Annual Report & Financial Statements 2017
31
Independent Auditor’s Report continued
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 financial statements
are prepared is consistent with the 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 group and 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:
• 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.
Responsibilities of directors
As explained more fully in the Directors’ responsibilities statement, the directors are responsible for the preparation of the financial
statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is
necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the group’s and the parent company’s ability
to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of
accounting unless the directors either intend to liquidate the group or the parent company or to cease operations, or have no
realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable
assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs(UK) will always detect
a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually
or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these
consolidated financial statements.
A further description of our responsibilities for the audit of the consolidated financial statements is located on the Financial
Reporting Councils website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
Use of our Report
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.
Michael Simms, Senior Statutory Auditor
For and on behalf of Moore Stephens LLP, Statutory Auditor
150 Aldersgate Street
London
EC1A 4AB
24 May 2018
32
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Westminster Group PLC
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2017
Note
2017
Continuing
Operations
£’000
2017
Discontinued
Operations
£’000
3
5,330
(2,015)
3,315
66
(182)
(116)
REVENUE
Cost of sales
GROSS PROFIT
2016
Continuing
Operations
£’000
2016
Discontinued
Operations
£’000
2017
Total
£’000
5,396
4,397
(2,197)
(1,217)
3,199
3,180
Administrative expenses
(5,133)
(3,553)
(8,686)
(3,757)
LOSS FROM OPERATIONS
6
(1,818)
(3,669)
(5,487)
(577)
2016
Total
£’000
4,406
(1,296)
3,110
(4,499)
(1,389)
9
(79)
(70)
(742)
(812)
Analysis of operating loss
Loss from operations
Add back amortisation
Add back depreciation
Add back impairment charges
Add back share option expense
11
12
Add back exceptional items1
4
EBITDA Profit/(loss) from
underlying operations
Finance costs
LOSS BEFORE TAXATION
Taxation
5
7
LOSS AND TOTAL COMPREHENSIVE
EXPENSE FOR THE YEAR
LOSS AND TOTAL COMPREHENSIVE
LOSS ATTRIBUTABLE TO:
(1,818)
(3,669)
(5,487)
(577)
(812)
(1,389)
31
139
397
63
653
-
144
31
283
2,491
2,888
-
335
63
988
(535)
(699)
(1,234)
7
110
-
103
492
135
-
117
-
-
7
227
-
103
585
1,077
(110)
25
(630)
-
(630)
(566)
-
(566)
(2,448)
(3,669)
(6,117)
(1,143)
(812)
(1,955)
-
-
-
46
-
46
(2,448)
(3,669)
(6,117)
(1,097)
(812)
(1,909)
OWNERS OF THE PARENT
(2,248)
(3,669)
(5,917)
(1,097)
(812)
(1,909)
NON-CONTROLLING INTEREST
(200)
-
(200)
-
-
-
LOSS AND TOTAL
COMPREHENSIVE LOSS
(2,448)
(3,669)
(6,117)
(1,097)
(812)-
(1,909)
LOSS PER SHARE
9
(2.24p)
(3.36p)
(5.60p)
(1.42p)
(1.04p)
(2.46p)
The accompanying notes form part of these financial statements.
1 Exceptional items relate to certain costs or incomes that derive from events or transactions that fall within the normal activities
of the Group but which, individually or, if of a similar type, in aggregate, are excluded by virtue of their size and nature in order
to reflect management’s view of the performance of the Group
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Westminster Group PLC | Annual Report & Financial Statements 2017
33
Westminster Group PLC
Consolidated and Company Statements of Financial Position
As at 31 December 2017
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
Assets of disposal groups classified as held for sale
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
Note
10
11
12
14
18
19
20
29
21
Group
Company
2017
£’000
-
129
1,952
-
2,081
39
693
392
1,124
-
3,205
12,074
9,226
299
621
186
134
2016
£’000
397
132
4,635
-
5,164
198
894
152
1,244
-
6,408
8,711
9,169
299
569
186
134
(16,772)
(5,917)
36
(14,739)
(1,909)
(124)
2017
£’000
-
128
1,028
7,116
8,272
-
42
78
120
-
8,392
12,074
9,226
299
621
-
134
(6,135)
(8,128)
36
2016
£’000
-
103
1,031
12,683
13,817
-
108
21
129
-
13,946
8,711
9,169
299
569
-
134
(6,071)
60
(124)
At 31 December
(22,653)
(16,772)
(14,227)
(6,135)
(DEFICIT)/EQUITY ATTRIBUTABLE TO:
OWNERS OF THE COMPANY
NON CONTROLLING INTEREST
TOTAL (DEFICIT)/EQUITY
Borrowings
Deferred tax liabilities
TOTAL NON-CURRENT LIABILITIES
Deferred income
Trade and other payables
TOTAL CURRENT LIABILITIES
Liabilities of disposal group classified as held for sale
TOTAL LIABILITIES
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
23
17
24
24
29
(113)
(200)
(313)
2,184
-
2,184
-
1,096
1,096
238
3,518
3,205
2,296
-
2,296
3,059
-
3,059
27
1,026
1,053
-
4,112
6,408
8,127
-
8,127
-
-
-
-
265
265
-
265
8,392
12,747
-
12,747
988
-
988
-
211
211
-
1,199
13,946
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 24 May 2018 and signed on its behalf by:
Peter Fowler
Director
Martin Boden
Director
24 May 2018
34
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Westminster Group PLC
Consolidated Statement of Changes in Equity
For the year ended 31 December 2017
Called
up share
capital
Share
premium
account
Merger
relief
reserve
£’000
£’000
£’000
Share
based
payment
reserve
£’000
Revaluation
reserve
£’000
Equity
Reserve on
Convertible
Loan Note
£’000
Retained
earnings
Non
Controlling
interest
Total
£’000
£’000
£’000
AS OF
1 JANUARY 2017
8,711
9,169
299
569
134
186
(16,772)
12,074
9,226
299
621
134
186
(22,653)
(200)
(313)
(5,917)
(200)
(6,117)
Shares issued for cash
2,291
Cost of share issues
Share based payment
charge
Exercise of share
options
Lapse of share
options
CLN conversion
TRANSACTIONS
WITH OWNERS
-
-
5
-
1,067
3,363
-
(76)
-
-
-
133
57
Total comprehensive
expense for the year
-
-
-
-
-
-
-
-
-
-
-
-
88
(2)
(34)
-
52
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2
34
-
36
AS AT
31 DECEMBER 2017
AS OF
1 JANUARY 2016
6,345
9,170
299
258
134
219
(14,739)
Shares issued for cash
1,300
Share based payment
charge
Lapse of share
options
Warrants issued with
loan notes
CLN conversion
Loan notes issued
TRANSACTIONS
WITH OWNERS
-
-
-
1,066
-
2,366
-
-
-
-
-
(1)
(1)
Total comprehensive
expense for the year
-
-
-
-
-
-
-
-
-
-
-
103
(37)
245
-
-
311
-
-
-
-
-
-
-
-
-
-
-
-
-
(33)
-
-
-
37
(150)
(11)
-
(33)
(124)
-
(1,909)
AS AT
31 DECEMBER 2016
8,711
9,169
299
569
134
186
(16,772)
-
-
-
-
-
-
-
-
2,296
2,291
(76)
88
5
-
1,200
3,508
-
-
-
-
-
-
-
-
-
-
1,686
1,300
103
-
95
1,022
(1)
2,519
(1,909)
2,296
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Westminster Group PLC | Annual Report & Financial Statements 2017
35
Westminster Group PLC
Company Statement of Changes in Equity
For the year ended 31 December 2017
Called
up share
capital
Share
premium
account
Merger
relief
reserve
£’000
£’000
£’000
Share
based
payment
reserve
£’000
9,169
299
569
AS OF 1 JANUARY 2017
Shares issued for cash
Cost of share issues
Share based payment charge
Exercise of share options
Lapse of share options
CLN conversion
TRANSACTIONS WITH OWNERS
8,711
2,291
-
-
5
-
1,067
3,363
Total comprehensive expense
for the year
-
-
-
(76)
-
-
-
133
57
-
-
-
-
-
(1)
(1)
Revaluation
reserve
£’000
134
-
-
-
-
-
-
-
-
Equity
Reserve on
convertible
loan note
£’000
-
-
-
-
-
-
-
-
-
-
Retained
earnings
Total
£’000
£’000
(6,135)
12,747
-
-
-
2
34
-
36
2,291
(76)
88
5
-
1,200
3,508
(8,128)
(8,128)
(14,227)
8,127
-
-
-
-
-
-
-
-
-
-
-
-
-
-
37
(150)
1,300
103
-
95
(33)
-
(11)
1,022
-
(1)
(33)
(124)
2,519
-
-
60
60
(6,135)
(12,747)
-
-
-
-
-
-
-
-
-
-
88
(2)
(34)
-
52
-
258
-
103
(37)
245
-
-
311
-
-
-
-
-
-
-
-
-
AS OF 1 JANUARY 2016
Shares issued for cash
Share based payment charge
Lapse of share options
Warrants issued with loan
notes
CLN conversion
Loan notes issued
6,345
1,300
-
-
-
1,066
-
TRANSACTIONS WITH OWNERS
2,366
Total comprehensive income
for the year
-
-
AS AT 31 DECEMBER 2016
8,711
9,169
299
569
134
AS AT 31 DECEMBER 2017
12,074
9,226
299
621
134
9,170
299
134
33
(6,071)
10,168
36
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Westminster Group PLC
Consolidated Cash Flow Statement
For the year ended 31 December 2017
LOSS AFTER TAX
Taxation credit
LOSS BEFORE TAX
Note
2017
Continuing
Operations
£’000
2017
Discontinued
Operations
£’000
2017
Total
£’000
2016
Continuing
Operations
£’000
2016
Discontinued
Operations
£’000
2016
Total
£’000
(2,448)
(3,669)
(6,117)
(1,097)
(812)
(1,909)
-
-
-
(46)
-
(46)
(2,448)
(3,669)
(6,117)
(1,143)
(812)
(1,955)
Non-cash adjustments
Net changes in working capital
25
25
NET CASH USED IN OPERATING ACTIVITIES
INVESTING ACTIVITIES:
Purchase of property, plant and
equipment
Purchase of intangible assets
Proceeds from disposal of fixed assets
CASH OUTFLOW FROM INVESTING
ACTIVITIES
CASHFLOWS FROM FINANCING ACTIVITIES:
Gross proceeds from the issues of
ordinary shares
Costs of share issues
Net proceeds from the issue of
convertible loan notes
Costs associated with the issue of
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
1,294
435
(719)
(69)
(56)
1
2,635
206
3,929
641
809
(691)
107
53
916
(638)
(828)
(1,547)
(1,025)
(652)
(1,677)
(4)
-
-
(73)
(56)
1
(123)
(408)
(531)
(105)
-
-
-
(105)
-
(124)
(4)
(128)
(228)
(408)
(636)
2,376
(160)
-
-
(265)
(36)
1,915
1,072
-
-
-
-
-
-
-
(832)
2,376
1,300
(160)
(45)
-
-
(265)
(36)
1,675
(272)
(247)
(96)
1,915
2,315
-
-
-
-
-
-
-
1,062
(1,060)
240
152
392
1,300
(45)
1,675
(272)
(247)
(96)
2,315
2
150
152
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Westminster Group PLC | Annual Report & Financial Statements 2017
37
Westminster Group PLC
Company Cash Flow Statement
For the year ended 31 December 2017
Note
25
25
(LOSS)/PROFIT AFTER TAX
Non-cash adjustments
Net changes in working capital
NET CASH (USED IN) /FROM OPERATING ACTIVITIES
INVESTING ACTIVITIES:
Purchase of property, plant and equipment
Purchase of intangible assets
Advances to subsidiaries
CASH OUTFLOW FROM INVESTING ACTIVITIES
CASHFLOWS FROM FINANCING ACTIVITIES:
Gross proceeds from the issues of ordinary shares
Costs of share issues
Net proceeds from the issue of convertible loan notes
Costs associated with the issue of 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.
Company
2017
£’000
(8,128)
6,215
120
(1,793)
(9)
(56)
-
(65)
2,376
(160)
-
-
(265)
(36)
1,915
57
21
78
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
38
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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 2017 consolidate the individual
financial statements of the Company and its subsidiaries. The Group designs, supply 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 2017.
(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 Group made losses during the period of £6,117,000 (2016: £1,909,000), of which £2,448,000 (2016: £1,097,000) related
to continuing operations. The cash outflow from operating activities during the year was £719,000 (2016: £1,025,000), which
was financed through raising new equity. The directors have reviewed the Group’s resources at the date of approving the
financial statements, and their projections for future trading, which due to discontinuing the Sierra Leone Ferry Operation
and winning incremental new business give a reasonable expectation that the Group has adequate resources to continue in
operational existence for the foreseeable future, which for the avoidance of doubt is at least 12 months from the date of signing
the financial statements. Thus they continue to adopt the going concern basis of accounting in the 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.
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Westminster Group PLC | Annual Report & Financial Statements 2017
39
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 decisions maker to make decisions about
resources to be allocated to the segment and assess its performance, and
• For which discrete financial information is available.
Revenue
Revenue comprises the fair value of the consideration received or receivable for the sale of products and services, net of value
added tax, rebates and discounts and after eliminating sales within the Group. Revenue is recognised as follows:
(i) Supply of products
Revenue in respect of the supply of products is recognised when title effectively passes to the customer.
(ii) Supply and installation contracts and supply of services
Where the outcome can be estimated reliably in respect of long-term contracts and contracts for on-going services, revenue
represents the value of work done in the period, including estimates of amounts not invoiced. Revenue in respect of long-
term contracts and contracts for on-going services is recognised by reference to the stage of completion, where the stage of
completion can be assessed with reasonable accuracy. This is assessed by reference to the estimated project costs incurred
to date compared to the total estimated project costs. Revenue is calculated to reflect the substance of the contract, and
is reviewed on a contract-by-contract basis, with revenues and costs at each divisible stage reflecting known inequalities of
profitability. Where a contract is loss making, the full loss is recognised immediately. Managed Services income is recognised on
the basis of the volume of passengers and freight.
(iii) Maintenance income
Revenues in respect of the supply of maintenance contracts are recognised on a straight line basis over the life of the contract.
The unrecognised portion of maintenance income is included within trade and other payables as deferred income.
(iv) 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 nature and their separate disclosure should enable better
understanding of the financial dynamics.
Interest income and expenses
Interest income and expenses are reported on an accruals 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.
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Other intangible assets
Acquired intangibles that are as a result of a business combination are recorded at fair value and are amortised on a straight
line over the expected useful lives.
Other intangible assets comprise website costs and licences. Website costs are capitalised and amortised on a straight line basis
over 5 years, the expected economic life of the asset. This amortisation is charged to administrative expenses.
Property, plant and equipment
Land and buildings held for use are held at their revalued amounts, being the fair value on the date of revaluation, less any
subsequent accumulated depreciation. Revaluations are performed with sufficient regularity such that the carrying amount does
not differ materially from that which would be determined using fair values at the 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.
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Westminster Group PLC | Annual Report & Financial Statements 2017
41
Notes to the Financial Statements continued
Financial instruments
Financial assets
The Group’s financial assets include cash and cash equivalents and loans and other receivables. All financial assets are
recognised when the Group becomes party to the contractual provisions of the instrument. All financial assets are initially
recognised at fair value, plus 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 Cash Flows 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 which 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.
Investments in subsidiaries
Subsidiary fixed asset investments are valued at cost less provision for impairment.
Inventories
Inventories are stated at the lower of cost and net realisable value. Costs of ordinarily interchangeable items are assigned using
the first in, first out cost formula. Costs principally comprise of materials and bringing them to their present location.
Net realisable value represents the estimated selling price less all estimated costs to completion and costs to be incurred in
marketing, selling and distribution.
Taxation
The tax 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
42
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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 shown within borrowings in current
liabilities unless a legally enforceable right to offset exists.
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.
Share-based compensation (Employee based benefits)
The Group operates an equity-settled share-based compensation plan. The fair value of the employee services received in
exchange for the grant of options is recognised as an expense over the vesting period, based on the Group’s estimate of awards
that will eventually vest, with a corresponding increase in equity as a share based payment reserve. For plans that include
market based vesting conditions, the fair value at the date of grant reflects these conditions and are not subsequently revisited.
Fair value is determined using Black-Scholes option pricing models. Non-market based vesting conditions are included in
assumptions about the number of options that are expected to vest. At each reporting date, the number of options that are
expected to vest is estimated. The impact of any revision of original estimates, if any, is recognised in profit or loss, with a
corresponding adjustment to equity, over the remaining vesting period.
The proceeds received when vested options are exercised, net of any directly attributable transaction costs, are credited to
share capital (nominal value) and share premium.
Provisions
Provisions are recognised when the Group has a present legal or constructive obligation as a result of a past event which it is
probable will result in an outflow of economic benefits that can be reliably estimated.
SIGNIFICANT MANAGEMENT JUDGEMENTS IN APPLYING ACCOUNTING POLICIES
The following are significant management judgements in applying the accounting policies of the Group that have the most
significant effect on the financial statements.
Revenue recognition
Recognition of income is considered appropriate when all significant risks and rewards of ownership are transferred to third
parties. In respect of long-term contracts and contracts for on-going services, turnover represents the value of work done in the
year, including estimates of amounts not invoiced. Turnover in respect of long-term contracts and contracts for on-going services
is recognised by reference to the stage of completion, where the stage of completion can be assessed with reasonable accuracy.
In this process management make significant judgements about milestones, actual work performed and the estimated 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.
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Westminster Group PLC | Annual Report & Financial Statements 2017
43
Notes to the Financial Statements continued
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.
SIGNIFICANT MANAGEMENT ESTIMATES IN APPLYING ACCOUNTING POLICIES
The following are significant management estimates in applying the accounting policies of the Group that have the most
significant effect on the financial statements.
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.
Standards in issue not yet effective
New standards, amendments and interpretations
No new standards, amendments or interpretations effective for the first time in the year ended 31st December 2017 have had a
material impact on 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 date1 January 2018)
• IFRS 16
Leases (effective date 1 January 2019)
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 1 January 2018. The standard removed multiple
classification and measurement models for financial assets requirement by IAS 39 and introduces a model that has only three
classification categories: fair value through other comprehensive income, fair value through the income statement 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 contacts with customers. Revenue is recognised at an
amount that reflects the consideration to which an entity expects to be entitled in exchange for those goods or services. This
is a converged standard on revenue recognition which replaces IAS 18 ‘Revenue’, IAS 11 ‘Construction contracts’ and related
interpretations. The Group has assessed the impact of the new standard which is not material to the Group’s operations.
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 has assessed the
impact of the new standard which is not material to the Group’s operations.
Alternative performance measures (APM)
In the reporting of financial information, the Directors have adopted the APM ‘EBITDA profit from underlying operations’ (APMs
were previously termed ‘Non-GAAP measures’), which is not defined or specified under International Financial Reporting
Standards (IFRS).
This measure is not defined by IFRS and therefore may not be directly comparable with other companies’ APMs, including those
in the Group’s industry.
APMs should be considered in addition to, and are not intended to be a substitute for, or superior to, IFRS measurements.
44
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Purpose
The Directors believe that this APM assists in providing additional useful information on the underlying trends, performance and
position of the Group. This APM is also used to enhance the comparability of information between reporting periods and business
units, by adjusting for non-recurring or uncontrollable factors which affect IFRS measures, to aid the user in understanding the
Group’s performance.
Consequently, APMs are used by the Directors and management for performance analysis, planning, reporting and incentive
setting purposes and this remains consistent with the prior year.
The key APM that the Group has focused on is as follows:
EBITDA profit from underlying operations: This is the headline measure used by management to measure the Group’s
performance, and is based on operating profit before the impact of financing costs, share based payment charges, depreciation,
amortisation, impairment charges and exceptional items. Exceptional items relate to certain costs that derive from events or
transactions that fall within the normal activities of the Group but which, individually or, if of a similar type, in aggregate, are
excluded by virtue of their size and nature in order to reflect management’s view of the performance of the Group.
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 three operating divisions; Managed Services Aviation, Technology
and Managed Services Sovereign Ferries. This split of business segments is based on the products and services each offer.
2017
Supply of products
Supply and installation contracts
Maintenance and services
Training courses
Ferry ticket sales
Revenue
Segmental underlying EBITDA
Share option expense
Exceptional items (note 4)
Impairments
Depreciation & amortisation
Segment operating result
Finance cost
Profit/(Loss) for the financial year
Segment assets
Segment liabilities
Capital expenditure
Technology
Group and
Central
Managed
Services
Aviation
£’000
-
-
3,386
174
-
£’000
1,470
36
264
-
-
3,560
1,770
Managed
Services
Sovereign
Ferries
£’000
-
-
-
-
66
66
Group
Total
£’000
1,470
36
3,650
174
66
5,396
£’000
-
-
-
-
-
-
1,195
-
(603)
-
(100)
492
-
492
1,429
368
23
(44)
(1,714)
(671)
(1,234)
-
-
-
(15)
(59)
-
(59)
360
359
3
(63)
(50)
(397)
(55)
-
(335)
(63)
(988)
(2,491)
(2,888)
(144)
(314)
(2,279)
(3,641)
(5,487)
(630)
-
(630)
(2,909)
(3,641)
(6,117)
1,414
2,553
99
2
238
4
3,205
3,518
129
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Westminster Group PLC | Annual Report & Financial Statements 2017
45
Notes to the Financial Statements continued
2016
Supply of products
Supply and installation contracts
Maintenance and Services
Training courses
Ferry ticket sales
Revenue
Segmental underlying EBITDA
Share option expense
Exceptional items (note 4)
Depreciation & amortisation
Apportionment of central overheads
Segment operating result
Finance cost
Income tax charge
Managed
Services
Aviation
Technology
Group and
Central
£’000
£’000
£’000
Managed
Services
Sovereign
Ferries
£’000
-
-
2,758
16
-
1,286
177
160
-
-
2,774
1,623
-
-
-
-
-
-
-
-
3
-
6
9
273
(1,418)
(110)
1,280
-
(492)
(79)
(1,140)
(431)
-
(7)
-
-
(16)
(946)
(689)
-
-
Group Total
£’000
1,286
177
2,921
16
6
4,406
25
(103)
(1,077)
(234)
-
(1,389)
(566)
46
-
(585)
(117)
(30)
(842)
-
-
(842)
(1,909)
2,651
85
408
6,408
4,112
636
(103)
-
(22)
2,116
573
(566)
53
60
1,523
3,268
107
Profit/(Loss) for the financial year
(438)
(689)
Segment assets
Segment liabilities
Capital expenditure
Geographical areas
1,593
311
79
641
448
42
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
2017
£’000
919
3,779
152
546
5,396
2016
£’000
369
3,458
104
475
4,406
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 2017 fixed assets with a net book value of £895,000 (2016: £3,591,000) were located in Africa.
Major customers who contributed greater than 10% of total Group revenue
In 2017 no single customer contributed more than 10% of the Group revenue (in 2016 no customers contributed 10% of the
Group’s revenue). Approximately 60% (2016: 60%) of the Group’s revenues are derived from the contract with the Sierra Leone
airport authority. This contract contains many individual customers.
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4. Exceptional Items
Middle East airport pre-contract costs
Ferry closure costs
Ferry pre-launch costs
Loss of margin arising from fall in passenger numbers due to Ebola crisis
Other
5. Finance costs
Interest payable on bank and other borrowings
Interest expenses on convertible loan notes (Note 16)
Total finance costs
6. Loss from operations
The following items have been included in arriving at the loss for the financial year
Staff costs (see Note 8)
Depreciation of property, plant and equipment
Amortisation of intangible assets
Operating lease rentals payable
- Property
- Plant and machinery
- Other
Foreign exchange loss/(gain)
Auditor’s remuneration
2017
£’000
603
335
-
-
50
988
Group
2017
£’000
(44)
(586)
(630)
Group
2017
£’000
2,367
283
31
83
3
26
102
2016
£’000
220
-
585
272
-
1,077
2016
£’000
(30)
(536)
(566)
2016
£’000
2,267
227
7
112
3
42
(22)
Amounts payable in both years relate to Moore Stephens LLP in respect of audit and other services with the exception of local
audits in Sierra Leone which were performed by BDO LLP.
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Westminster Group PLC | Annual Report & Financial Statements 2017
47
Notes to the Financial Statements continued
Audit services
Statutory audit of parent and consolidated financial statements and review
of interim results
Statutory audit of subsidiaries of the company pursuant to legislation
Taxation services including research and development tax credits
Other services not included in the above
Local audit in Sierra Leone
Total fees
7. Taxation
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
Group
2017
£’000
40
30
14
8
21
113
Group
2017
£’000
-
-
-
2016
£’000
22
31
7
-
15
75
2016
£’000
-
7
7
(6,117)
(1,955)
Loss on ordinary activities multiplied by the standard rate of corporation tax
in the UK of 19.25% (2016: 20.0%)
(1,178)
Effects of:
Expenses not deductible for tax purposes
Capital allowances less than depreciation
Other short term timing differences
Unrecognised losses carried forward
Adjustment in respect of prior years
Total tax - credit
973
(105)
-
310
-
-
(391)
88
(203)
1
512
(53)
(46)
Tax losses available for carry forward (subject to HMRC agreement) were £12.6m (2016: £11.0m).
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) 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.
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8. Employee costs
Employee costs for the Group during the year
Wages and salaries
Social security costs
Share based payments
Group
2017
£’000
2,117
187
2,304
63
2,367
2016
£’000
2,007
157
2,164
103
2,267
The Group operates a stakeholder pension scheme. The Group made pension contributions totalling £7,000 during the year
(2016: £10,000), and pension contributions totalling £1,000 were outstanding at the year-end (2016: £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. The total Directors’ remuneration during the year was £623,000 (2016:
£541,000) and the highest paid director received remuneration totalling £192,000 (2016: £192,000).
Average monthly number of people (including Executive Directors) employed
Group
2017 Number
2016 Number
Continuing
Operations
Discontinued
Operations
Total
Continuing
Operations
Discontinued
Operations
Total
By function:
Sales
Operations
Administration
Management
9. Loss per share
3
220
23
5
251
-
32
-
-
32
3
252
23
5
283
3
195
22
6
226
-
14
-
-
14
3
209
22
6
240
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
2017
’000
87,107
22,087
109,194
2016
’000
63,455
14,261
77,716
For the year ended 31 December 2017 and 2016 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 5.60p (2016: 2.46p).
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49
Notes to the Financial Statements continued
10. Goodwill
Group
Gross carrying amount at 1 January and 31 December
Accumulated impairment at 1 January
Impairment charge for the year
Accumulated impairment at 31 December
Carrying amount at 1 January
Carrying amount at 31 December
2017
£’000
1,160
(763)
(397)
(1,160)
397
-
2016
£’000
1,160
(763)
-
(763)
397
397
The entire goodwill balance relates to the acquisition of Longmoor Security Limited. The directors have reviewed the expected
future cash flows from this asset and concluded that these cash flows no longer support the carrying value. As such the goodwill
balance has been impaired down to nil during the period.
11. Other intangible assets
Group
Website and Software
£’000
Company
Website and Software
£’000
2017
Cost
At 1 January 2017
Additions
Disposals
Transfers to assets held for sale
At 31 December 2017
Accumulated amortisation and impairment
At 1 January 2017
Charge for the year
Disposals
Impairment of ferry operation
Transfer to assets held for sale
At 31 December 2017
Net book value at 31 December 2017
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
212
56
(43)
(32)
193
80
31
(40)
25
(32)
64
129
107
105
212
73
7
80
132
168
56
-
-
224
65
31
-
-
-
96
128
63
105
168
61
4
65
103
The impairment charge recognised during the year relates to the assets related to the Ferry Operations in Sierra Leone which
was written down to nil at the year end date.
50
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12. Property, plant and equipment
Group
2017
Cost or valuation
At 1 January 2017
Additions
Disposals
Transfers
Transfer to assets held for sale
At 31 December 2017
Accumulated depreciation and impairment
At 1 January 2017
Charge for the year
Disposals
Impairment
Transfers
Transfer to assets held for sale
At 31 December 2017
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
Freehold
property
Plant and
equipment
£’000
£’000
Office
equipment,
fixtures and
fittings
£’000
Motor
vehicles
Total
£’000
£’000
1,014
3,407
-
-
-
-
1,014
-
-
-
-
-
-
-
4
(8)
42
(2,718)
727
579
180
(7)
2,385
15
(2,718)
434
293
1,014
3,032
1,270
-
-
378
(3)
154
-
1,014
3,407
1,424
-
-
-
-
438
143
(2)
579
1,424
69
(226)
(42)
(102)
1,123
667
77
(220)
81
(15)
(102)
488
635
610
57
-
667
757
99
-
-
-
-
99
63
26
-
-
-
-
89
10
118
-
(19)
99
43
27
(7)
63
36
5,944
73
(234)
-
(2,820)
2,963
1,309
283
(227)
2,466
-
(2,820)
1,011
1,952
5,434
532
(22)
5,944
1,091
227
(9)
1,309
4,635
Net book value at 31 December 2017
1,014
Net book value at 31 December 2016
1,014
2,828
The impairment charge recognised during the year relates to the assets related to the Ferry Operations in Sierra Leone which
was written down to nil at 30th September 2017 and transferred to assets held for sale.
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51
Notes to the Financial Statements continued
Company
Freehold
property
Freehold
property
Freehold
property
Freehold
property
£’000
£’000
£’000
£’000
2017
Cost or valuation
At 1 January 2017
Additions
Disposals
At 31 December 2017
Accumulated depreciation
At 1 January 2017
Charge for the year
Disposals
At 31 December 2017
Net book value at 31 December 2017
2016
Cost or valuation
At 1 January 2016
Additions
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
1,014
-
-
1,014
-
-
-
-
1,014
1,014
-
1,014
-
-
-
1,014
20
-
(6)
14
17
2
(6)
13
1
20
-
20
15
2
17
3
247
9
(40)
216
233
10
(40)
203
13
245
2
247
218
15
233
14
1,281
9
(46)
1,244
250
12
(46)
216
1,028
1,279
2
1,281
233
17
250
1,031
The freehold property was valued professionally by Brown and Co, Chartered Surveyors, on 16 May 2017, which provided a
valuation of £1,014,000. 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 the asset is recorded at the balance sheet date.
No depreciation has been charged on the freehold property. The difference between the net book value of the freehold property
if this depreciation had been charged as shown in the financial statements is not materially different to the value the asset is
recorded at the balance sheet date.
The freehold property is stated at valuation, the comparable historic cost and depreciation values are as follows:
Historical cost
Accumulated depreciation
At 1 January
Charge for the year
At 31 December
Net book value as at 31 December
2017
£’000
697
69
3
72
625
2016
£’000
697
66
3
69
628
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.
52
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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 2017
Within one year
In the second to fifth years inclusive
Total
As at 31 December 2016
Within one year
In the second to fifth years inclusive
Total
Remaining lease terms range from 4 months to 4 years.
Minimum lease payments under operating leases
recognised as an expense in the year
14. Investment in subsidiaries
Company
Cost
At 31 December
Accumulated impairment
At 1 January
Provided for in the year
At 31 December
Group
Property
£’000
Group
Other
£’000
Group
Total
£’000
Company
Other
£’000
57
42
99
51
84
135
14
15
29
91
27
118
71
57
128
142
111
253
3
1
4
14
4
18
Group
2017
£’000
113
Group
2016
£’000
158
Company
2017
£’000
Company
2016
£’000
8
22
2017
£’000
2016
£’000
16,458
16,089
(3,406)
(5,936)
(9,342)
7,116
(3,406)
-
(3,406)
12,683
The impairment charge booked in the year relates to the investments in Westminster Facilities Management Limited, Sovereign
Ferries Limited, Sovereign Ferries SL Limited, Longmoor Security Limited and CTAC Limited. The expected net present values
of cash flows arising from the remaining investments in subsidiaries is expected to be in excess of the carrying value of these
investments.
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53
Notes to the Financial Statements continued
15. Subsidiary undertakings
The subsidiary undertakings at 31 December 2017 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
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
Sovereign Ferries Limited
England
Marine Transport West Africa
Westminster Operating Limited
England
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 Limited
Sierra Leone
Ferry operations (sold Jan 2018)
Longmoor (SL) Limited
Sierra Leone
Security and terminal guarding
Facilities Operations Management Limited
Sierra Leone
Westminster Sierra Leone Limited
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 Facilities Management Limited
England
CTAC Limited
England
Dormant
Dormant
Westminster Aviation Security Services (ME)
Limited
England
Dormant
Westminster JV Holdings Limited
Travel Safety and Security Limited
England
England
Dormant (liquidated February 2018)
Dormant (liquidated February 2018)
Subsidiary company registered addresses:
England
- Westminster House, Blacklocks Hill, Banbury, Oxfordshire, OX17 2BS, United Kingdom.
Sierra Leone – Government Wharf, Freetown, Sierra Leone.
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
54
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16. Financial instruments
Categories of financial assets and liabilities
The carrying amounts presented in the Consolidated and Company statement of financial position relate to the following
categories of assets and liabilities:
Financial assets
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)
Liabilities held for sale (note 29)
Group
2017
£’000
644
392
1,036
2,184
1,040
238
3,462
2016
£’000
814
152
966
3,059
951
-
4,010
Company
2017
£’000
12
78
90
-
231
-
231
2016
£’000
87
21
108
988
182
-
1,170
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”)
Amount
£2.245m
Conversion Price
35p
Security
Secured fixed and floating subordinate to HSBC
Redemption Date
19 June 2018
Management Fee
£25,000 per annum
Coupon
10% paid quarterly in arrears. Listed on the CISX
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 > 42p for 15 working
days after 19 June 2016. These conditions were not met in the year.
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Westminster Group PLC | Annual Report & Financial Statements 2017
55
Notes to the Financial Statements continued
At 1 January
Fair value of new loans issued
Fair value of warrants included in the
issue (note 22)
Amortised finance cost
Interest paid
Converted in the year
At 31 December
2017
CULN
£’000
952
-
-
248
-
2017
CLN
£’000
2,071
-
-
338
(225)
2017
Total
£’000
3,023
-
-
586
(225)
(1,200)
-
(1,200)
-
2,184
2,184
2016
CULN
£’000
520
1,408
(112)
116
-
(980)
952
2016
CLN
£’000
1,972
-
-
324
(225)
-
2,071
Analysis of movement in debt at principal value (excluding IFRS impacts), memorandum only
At 1 January
New Issue
Conversion
Financing Charge
(equity settled)
Closing Balance
2017
CULN
£’000
1,200
-
(1,200)
-
-
2017
CLN
£’000
2,245
-
-
-
2017
Total
£’000
3,445
-
(1,200)
2016
CULN
£’000
2016
CLN
£’000
750
2,245
1,675
(1,247)
-
22
-
-
-
2,245
2,245
1,200
2,245
3,445
2016
Total
£’000
2,492
1,408
(112)
440
(225)
(980)
3,023
2016
Total
£’000
2,995
1,675
(1,247)
22
The carrying value of the convertible loan notes upon conversion in the year was as follows:
Reconciliation on Conversion
Group and Company
Amortisation of Loan Note Interest Cost Element
Carrying Value at conversion
Total
2017
£’000
(248)
1,200
952
2016
£’000
(86)
1,066
980
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.
56
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17. Deferred tax assets and liabilities
Deferred tax assets and liabilities have been calculated using the expected future tax rate of 17% (2016: 18.0%). Any changes in
the future would affect these amounts proportionately.
The Group has not recognised a UK deferred tax assets of £2,210,000 (2016: £2,340,000) in respect of losses on the grounds that
recoverability of the assets is considered uncertain in the foreseeable future based on expected profitability.
18. Inventories
Finished goods
Group
Company
2017
£’000
39
39
2016
£’000
198
198
2017
£’000
-
-
2016
£’000
-
-
The cost of inventories recognised as an expense within cost of sales amounted to £1,182,000 (2016: £1,371,000). No reversal of
previous write-downs was recognised as a reduction of expense in 2017 or 2016.
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
2017
£’000
557
(52)
505
116
23
644
49
49
693
2016
£’000
564
(75)
489
199
126
814
80
80
894
Company
2017
£’000
2016
£’000
-
-
-
-
12
12
30
30
42
-
-
-
-
87
87
21
21
108
The average credit period taken on sale of goods in 2017 was 36 days (2016: 32 days). An allowance has been made for
estimated irrecoverable amounts of £52,000 (2016: £75,000). This allowance has been based on the knowledge of the financial
circumstances of individual receivables at the reporting date.
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Westminster Group PLC | Annual Report & Financial Statements 2017
57
Notes to the Financial Statements continued
The following table provides an analysis of trade and other receivables at 31 December. 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
Allowances for Credit Losses
Opening balance at 1 January
Net amounts written off
Impairment loss
Closing balance at 31 December
2017
£’000
346
208
3
557
75
(36)
13
52
2016
£’000
342
222
-
564
69
(45)
51
75
There are no significant credit risks from financial assets that are neither past due nor impaired. At 31 December 2017
£510,000 (2016: £353,000) of trade receivables were denominated in US dollars and £nil (2016: £51,000) in Euros, and £47,000
(2016: £160,000) 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
2017
£’000
392
-
392
2016
£’000
181
(29)
152
Company
2017
£’000
78
-
78
2016
£’000
21
-
21
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 and the statement of financial position.
21. Called up share capital
Group and Company
The total amount of issued and fully paid shares is as follows:
Ordinary Share Capital
2017
2016
At 1 January
Arising on conversion of Convertible Loan Notes
Arising on exercise of Share Options and Warrants
Shares issued to settle an annual broker fee
Other Issues for Cash
At 31 December
Number
87,107,903
10,669,227
55,000
250,000
£’000
8,711
1,067
5
25
Number
63,454,538
10,653,365
-
-
22,661,290
2,266
13,000,000
120,743,420
12,074
87,107,903
£’000
6,345
1,066
-
-
1,300
8,711
58
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During the year the following equity issues took place:
Date
1 February 2017
28 February 2017
28 February 2017
4 April 2017
18 April 2017
18 April 2017
18 April 2017
Comment
CULN conversion
Equity placing
CULN conversion
Employee share options exercised
Equity placing
Share based payment
CULN conversion
26 September 2017
Equity Placing
22. Share Options
Shares Issued
Issue price
2,228,367
5,161,290
3,440,860
55,000
10,000,000
250,000
5,000,000
7,500,000
13.463p
11.625p
11.625p
10.0p
10.0p
10.0p
10.0p
10.0p
The Company adopted the Share Option Scheme on 3 April 2007 that provides for the granting of both Enterprise Management
Incentives 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.
These options are valued by the use of the Black-Scholes model using a volatility of 50% and a life of 8 years (being the point at
which they lapse). The number of options vesting is based on forecast new business from that partner.
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 30.5p (2016: 30.7p). The average life of the unexpired share options
was 6.6 years (2016: 7.1 years).
Grant Date
5 April 2007
21 June 2007
21 April 2008
25 September 2009
27 May 2010
28 June 2012
1 July 2014
10 December 2014
9 October 2015
31 December 2017
31 December 2016
Exercise Price
Number Out-
standing
Average Life Out-
standing (Years)
Number Out-
standing
Average Life Out-
standing (Years)
£0.1000
£0.6750
£0.5250
£0.3450
£0.3275
£0.3650
£0.5100
£0.2850
£0.1400
-
-
15,000
58,000
-
295,000
250,000
3,000,000
40,000
3,658,000
n/a
n/a
0.3
1.7
n/a
4.5
6.5
6.9
7.3
6.6
176,000
67,862
15,000
58,000
15,000
395,000
320,000
3,000,000
40,000
4,086,862
0.3
0.5
1.3
2.7
3.4
5.5
7.5
7.9
8.3
7.1
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59
Notes to the Financial Statements continued
During the year, no employee options were granted, 55,000 were exercised and 373,862 lapsed. The weighted average price of
the options lapsed in the year was 35.8p (2016: 42.9p).
The Black-Scholes option-pricing model is used to determine the fair value of share options at grant date. The assumptions used
to determine the fair values of share options at grant dates were as follows:
For share options granted post IPO the expected share price volatility was determined taking account of the historic daily share
price movements. Since 2009, the standard deviation of the share price over the year has been used to calculate volatility. As
the Company was not quoted at the dates of granting of the share options before the IPO on 21 June 2007, the calculation of the
expected volatility of the shares was estimated by comparisons of the historic volatility of a sample of securities of companies
of a similar size to the Company, quoted on AIM, as well as the volatility of other listed companies in similar industries.
The average expected term to exercise used in the models is based on management’s best estimate for the effects of non-
transferability, exercise restrictions and behavioural conditions, forfeiture and historical experience. The risk free rate has been
determined from market yields for government gilts with outstanding terms equal to the average expected term to exercise for
each relevant grant.
The amount recognised in profit or loss in respect of employee share-based payments was £63,000 (2016: £112,000).
Warrants
The Company has historically issued the following warrants which are still in force at the balance sheet date:
• On 22 April 2015 (£1.65m CULN) Darwin Securities Limited 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 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
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
2017
£’000
2,184
-
-
2,184
Group
2017
£’000
257
783
1,040
56
-
56
2016
£’000
2,071
952
36
3,059
2016
£’000
398
553
951
75
27
102
Total current trade and other payables
1,096
1,053
Company
2017
£’000
-
-
-
-
Company
2017
£’000
90
141
231
34
-
34
265
2016
£’000
-
952
36
988
2016
£’000
89
93
182
29
-
29
211
60
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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 2017 was 24 days (2016: 35 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 2017 £155,000 (2016: £72,000) of payables were denominated in US dollars, £nil (2016: £56,000) in Euros and
£102,000 (2016: £270,000) 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
2017
Continuing
Operations
£’000
2017
Discontinued
Operations
£’000
2017
Total
£’000
2016
Continuing
Operations
£’000
2016
Discontinued
Operations
£’000
2016
Total
£’000
to arrive at operating cash flow:
Group
Adjustments:
Depreciation, amortisation and
impairment of non-financial assets
Finance costs
Loss on disposal of non-financial
assets
Share-based payment expenses
567
630
9
88
2,635
3,202
-
-
-
630
9
88
Total adjustments
1,294
2,635
3,929
Net changes in working capital:
Decrease/(increase) in inventories
Decrease/(increase) in trade and
other receivables
Decrease in deferred income
Increase/(decrease) in trade and
other payables
Total changes in working capital
159
162
(27)
141
435
-
39
-
167
206
159
201
(27)
308
641
Company
Adjustments:
Depreciation, amortisation and impairment of non-financial assets
Finance costs
Share-based payment expenses
Total adjustments
Net changes in working capital:
Decrease in trade and other receivables
Increase/(decrease) in trade and other payables
Total changes in working capital
107
-
-
-
107
-
21
-
32
53
127
566
13
103
809
(141)
(431)
-
(119)
(691)
2017
£’000
5,611
516
88
6,215
66
54
120
234
566
13
103
916
(141)
(410)
-
(87)
(638)
2016
£’000
21
473
103
597
18
(108)
(90)
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Westminster Group PLC | Annual Report & Financial Statements 2017
61
Notes to the Financial Statements continued
26. Contingent assets and contingent liabilities
The Company is party to a multilateral guarantee in respect of bank overdrafts of all companies within the Group. At
31 December 2017, these borrowings amounted to £nil (2016: £6,000).
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 and interest rate risk.
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 2017
Financial assets
Financial liabilities
Total exposure
31 December 2016
Financial assets
Financial liabilities
Total exposure
Short-term exposure USD
£’000
510
(155)
355
356
(72)
284
If the US dollar were to depreciate by 10% relative to its year end rate, this would cause a loss of profits in 2017 of £194,000
(2016: £27,000). 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
calculation of interest rate sensitivity have been undertaken.
Credit risk analysis
The Group has a credit policy in place and the exposure to credit risk is monitored on an ongoing basis. Credit evaluations are
performed on all customers requiring credit over a certain amount. In the case of material sales transactions, the Group usually
demands an initial deposit from customers and generally seeks to ensure that the balance of funds is secured by way of a letter
of credit or similar instruments.
None of the Group’s financial 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.
62
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As at 31 December 2017, the Group’s financial liabilities have contractual maturities (including interest payments where
applicable) as summarised below:
Current (within 6 months)
6 to 12 months
Non Current (1-5 years)
Group
As at 31 December 2017
Convertible loans
Trade and other payables
Total
Company
As at 31 December 2017
Trade and other payables
Total
Group
As at 31 December 2016
Convertible loans
Other Loans
Trade and other payables
Total
Company
As at 31 December 2016
Other loans
Trade and other payables
Total
2,184
1,096
3,280
265
265
112
41
1,026
1,179
41
211
252
-
-
-
-
-
113
-
-
113
-
-
-
-
-
-
-
-
2,357
-
-
2,357
-
-
-
28. Discontinued operations
At 30 September 2017 the Group took the decision to dispose of its ferry operation in Sierra Leone, from this date the operation
together with the related finance obligations was being actively marketed for sale, and therefore has been reclassified as a
disposal group held for sale within the financial statements.
A discontinued operation is a component of the Group’s activities that is distinguishable by reference to geographical area or
line of business that is held for sale, has been disposed of or discontinued, or is a subsidiary acquired exclusively with a view to
resale. When an operation is classified as discontinued, the comparative statement of comprehensive income is re-presented as
if the operation had been discontinued from the start of the comparative period.
Loss for the year from discontinued operations:
Revenue
Cost of sales
Gross Profit
Administration expenses
Operating loss from discontinued activities before taxation
Income tax expense
Loss from discontinued ordinary activities after taxation
Earnings per share relating to the discontinued operations
Cash flows relating to the discontinued operation are as follows:
Operating cash flows
Investing cash flows
2017
£’000
66
(182)
(116)
(3,553)
(3,669)
-
(3,669)
(3.36p)
(828)
(4)
2016
£’000
9
(79)
(70)
(742)
(812)
-
(812)
(1.04p)
(652)
(408)
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Westminster Group PLC | Annual Report & Financial Statements 2017
63
Notes to the Financial Statements continued
29. Disposal groups held for sale
At 30 September 2017 the Group took the decision to dispose of its ferry operation in Sierra Leone, from this date the operation
together with the related finance obligations was being actively marketed for sale, and therefore has been reclassified as a
disposal group held for sale within the financial statements. On this date the Group impaired the assets of the disposal group to
nil. Details of the assets and liabilities held for sale are as follows:
Assets held for sale:
Tangible fixed assets at cost
Accumulated depreciation
Intangible assets at cost
Accumulated amortisation
Impairment charge
Assets held for sale
Related liabilities:
Accruals
Trade payables
Liabilities directly associated with assets classified as held for sale
30. Events after the Reporting Period
2017
£’000
2,820
(354)
32
(7)
(2,491)
-
(222)
(16)
(238)
2016
£’000
-
-
-
-
-
-
-
-
-
• On 3 January 2018, Beaufort Securities exercised warrants over 875,000 new Ordinary Shares of 10p each at an exercise
price of 10p per Ordinary Share. Accordingly, 875,000 new Ordinary Shares were issued in settlement of this exercise.
Beaufort Securities Limited are no longer joint broker to the Company
• On 31 January 2018, the Company raised £0.75m (gross) through a placing of 3,409,091 new Ordinary Shares of 10p each
at 22 pence per Ordinary Share. The placing was undertaken by S P Angel Corporate Finance LLP who received 170,455
Warrants to subscribe for Ordinary Shares at an exercise price of 22 pence per share
• On 28 March 2018, the Technology division secured a $4.5m contract for the provision of advanced vehicle screening
solutions to an existing client in the Middle East
• On 10 May 2018, the Company announced that its major Middle East project opportunity is in Iran. The contract has been
signed but the project is on hold as the Company investigates the impact of the US withdrawal from the JCPOA and the
implications for the Company’s supply chain
• On 24 May 2018, the Company extended the term of its Secured Convertible Loan Notes from 18 June 2018 to 30 June 2019,
with an option to extend for a further six months to 31 December 2019. The coupon increases from 10% to 12% until June
2019 and increases to 15% for the six months to 31 December 2019 should the Company exercise its option. The conversion
price has been reduced from 35p per share to 25p
64
64
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The Westminster Group is a specialist security and
services group operating worldwide through an
extensive international network of agents
and contacts in over 50 countries.
The Group’s operating companies
are structured into two vertically
integrated operating divisions, Managed
Services and Technology and the Group’s
principal activity is the design, supply
and ongoing support of advanced
technology security solutions and the
provision of long term managed services,
consultancy and training services;
primarily to:
Governments & Governmental
Agencies,
Non Governmental Organisations
& Blue Chip Commercial
Organisations Worldwide
with a focus on Africa, Asia,
the Middle East & the Americas
“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
Company Information
Directors
Executive
Non-Executives
Sir Tony Baldry (Chairman)
Lt Col Sir Malcolm Ross (Deputy Chairman)
James Sutcliffe
Peter Fowler
Stuart Fowler
Martin Boden
Secretary
Roger Worrall
Registered office
Westminster House
Blacklocks Hill
Banbury
Oxfordshire
OX17 2BS
Principal bankers
Registrars
HSBC Bank Plc
17 Market Place
Banbury
Oxfordshire
OX16 5ED
Link Asset Services
6th Floor
65 Gresham Street
London
EC2V 7NQ
Nominated adviser & Stockbroker
SP Angel Corporate Finance LLP
Prince Frederick House
35-39 Maddox Street
London
W1S 2PP
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 Aviation Security Services Limited
P +44 (0) 1295 756300
F +44 (0) 1295 756302
E info@wass-plc.com
Westminster International Limited
P +44 (0) 1295 756300
F +44 (0) 1295 756302
E info@wi-ltd.com
Westminster Sicherheit GmbH
P: +49 8051 93 904 50
F: +49 8051 93 904 57
E: info@w-sicherheit.com
Longmoor Security Limited
P +44 (0) 1295 756380
F +44 (0) 1295 756381
E info@longmoor-security.com
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Westminster Group PLC | Annual Report & Financial Statements 2017
65
Annual Report &
Financial Statements 2017
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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
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