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(Sharecast News) - Managed security provider Westminster Group warned on Tuesday that its revenue would be about a third below market expectations, leading to a loss before tax of about half that it reported in the 2021 financial year.
The AIM-traded firm had said in its interim results that it expected the current year to be second-half weighted, which remained the case, although since then a multimillion-pound technology project had suffered slippage.
That meant its current expectation was that the 2022 revenue outturn would be around a third below market expectations, delivering a loss before tax equivalent to about half of that reported in 2021.
Westminster said a key part of achieving 2022 market expectations was the "timely award" of a multimillion-pound technology project for the Middle East and North Africa (MENA) region.
It said that while it still expected to be awarded the contract this year, it was now running short on time to deliver and recognise revenues in 2022, and as a result, some of the revenue was now likely to slip into 2023.
"We have previously advised that we anticipated the ratification process for the contract covering five airports in the Democratic Republic of the Congo (DRC), originally announced in June 2021, would be concluded in the fourth quarter, allowing for the project to commence at last," the board added in its statement.
"Whilst this has been a slow process, the board believes this timing remains the case and recent events and activity add to our confidence that progress is being made."
It said that should ratification occur before year-end, the firm expected revenue would start to be recognised in early 2023.
In its interim results the company also said it expected to secure "at least one more" long-term, large-scale managed services contract this year, saying on Tuesday that it continued to believe that to be the case.
"Whilst there is never certainty of timing or outcome of negotiations for such projects, which are complex and can involve various bodies, we have reached an advanced stage of negotiation with at least one such project.
"However, if signed, there would be little, if any, revenue recognised in the current year."
Westminster said that despite the global economic and political pressures, it was still receiving "healthy levels" of enquiries, a "large bank of opportunities", and over the course of the year had provided goods and services to numerous countries.
There had been no change with its other West Africa port project, as the firm continued to wait for the client to finalise the land allocation issues with the government, and remained "ready to start" once access was granted.
Its guarding business was performing to expectations and had been winning new business, while its training business was performing ahead of expectations.
"However, given the global situation, whilst we expect to maintain current activity levels in these areas, we are not expecting significant growth in 2023."
It was likely that the economic crisis in the UK and around the world would impact business sentiment and spending, with the board saying that it was mindful that it could affect decisions on some of the larger technology project opportunities.
"Regarding our Ghana port operations, whilst we remain on site and continue to operate as normal, the relationship with our local partners, Scanport, has become increasingly strained in recent months.
"We are looking at potential mediation to resolve matters, but we may look to terminate the arrangement early, in 2023, rather than 2024 and receive accelerated receipt in recompense accordingly.
"This would allow us to free up resources for the new and larger managed services projects we expect to have in place by 2023 which will mitigate any impact on our 2023 expectations."
In response to cost inflation, Westminster said it was taking measures to reduce its energy consumption, and had also launched a cost-cutting programme.
"Currency volatility is also something we are monitoring carefully and where possible provide natural hedging by selling goods in the same currency we are purchasing them, but this is not always possible and so we are looking at hedging where appropriate.
"One positive for our business at present is that the majority of our international revenues, such as our West African airport, are in dollars and so showing healthy gains."
The firm's executive said it was monitoring the cash needs of the business on a regular basis, and was of the opinion that, with cost-saving measures and prudent cash management in the near-term, and assuming no further new large-scale projects were signed, there was sufficient cash available to undertake current operations until at least the end of 2023.
"In anticipation of new large-scale projects that would require financing, we have held discussions with a number of funding sources and have various non-dilutive options we can pursue, including potential support from UK Export Finance."
At 1551 GMT, shares in Westminster Group were down 25% at 1.43p.
Reporting by Josh White for Sharecast.com.
