Westminster Group Regulatory News (WSG)

30 May 2014

Westminster Group Plc

Final Results for the 12 months ended 31 December 2013

Westminster Group Plc ('Westminster', the 'Company' or 'the Group'), the AIM listed supplier of managed services, system solutions and products to the security, defence, fire protection and safety markets worldwide, is pleased to announce its audited Final Results for the 12 months ended 31 December 2013. A copy of its Annual Report has been posted to shareholders and is also available for download on its corporate website www.wsg-corporate.com.

Westminster operates globally via an extensive network of agents and offices in over 50 countries and is focussed on delivering 'end to end' integrated security solutions to high growth and emerging markets around the world particularly its target markets in Africa, Asia, the Middle East and the Americas. Westminster operates, through two vertically integrated and internationally focussed divisions - Managed Services and Technology. Westminster's client base is predominantly governments and governmental agencies, non-governmental organisations (such as the UN) and large 'blue-chip, commercial organisations worldwide.

Highlights:

Business Performance

· Gross margin increased from 37% to 42%

· Managed services revenues £2.8m (2012: £1.7m). Passenger volume growth at West African Airport up 14% for first 4 months to April 2014 compared to the same period pre contract commencement in May 2012

· Managed Services contract producing underlying EBITDA margin 24% (2012: 23%), with further improvement in 2014

· Financing costs reduced by 80% to £0.09m (2012: £0.44m)

Financial

· Cash balances £0.7m (2012: £0.2m)

· Convertible debt reduced by 83% since June 2013

· Zero bank debt

· Shareholders' funds substantially improved by £3.09m to £2.16m (2012: Net deficit £0.93m)

· UK focused businesses disposed in March 2013

Operational

· Major transformation achieved in security situation at West African airport commenced in May 2012, receiving recognition from ICAO and major airlines

· Managed Services prospect pipeline, with various stage discussions at 42 airports in 24 countries across 4 continents, combined embarking PAX count of approximately 30m pa

· Technology prospect pipeline in various stage discussions - 423 projects in 79 countries across 6 continents with an aggregate value of approximately £368m

· Appointed as strategic partner for security for the International Air Travel Association (IATA)

· The Group's achievements for export recognised by winning the International Achievement Award at the Security Excellence Awards in October 2013

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

"Our vision has been to build a global security business focussed on delivering 'end to end' integrated solutions to high growth and emerging markets around the world and I am pleased to report that we are delivering on that vision.

"We have spent the last few years investing in and building our international base and reputation, which is now both extensive and a market advantage for us. The reputation that Westminster now holds internationally is illustrated by the seniority of our discussions and scale of the prospect pipeline. Our priority is to deliver on the current opportunities while continuing to develop the reputation and long term prosperity of the Group for our shareholders. We are now in the foothills of what could be a substantial growth phase over the next few years."

Enquiries:

Notes:

Westminster Group plc is a leader in the supply of system solutions and products to the security, defence and safety markets worldwide.

Westminster's principal activity is the design, supply and ongoing support of advanced technology security solutions, encompassing a wide range of surveillance, detection, tracking and interception technologies and the provision of long term managed services contracts such as the management and running of complete security services and solutions in airports, ports and other such facilities together with the provision of manned services, 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. For further information please visit www.wsg-corporate.com.

Chairman's Statement

Overview

I am pleased to report that the Group has made good progress in developing its business, particularly the Managed Services division. Whilst ongoing revenues of £7.4m were less than the £7.9m recorded in 2012, our successful delivery in the Managed Services division has increased our gross margin from 37% to 42%. This division has generated very significant interest from prospective customers such as governments and airport operators and as a result, our pipeline of prospects, when measured by passenger footfall, has increased since I wrote to you in May 2013 from 4.3m passengers per annum to over 30m as of today. To put that in context, the airport contract the division won in February 2012 caters for approximately 0.1m passengers per annum.

Whilst the business development process can at times be protracted and frustrating, we are dealing with governments in growing regions of the world and are working on very large, long term, high value contracts. An illustration of the level of our contacts and discussions is that we have, over the past year, met with several regional heads of state and numerous government ministers. The quality of our delivery has been recognised by industry bodies such as ICAO (the International Civil Aviation Organisation) and by airlines such as British Airways who have acknowledged that airport security at the West African airport is now equivalent with European standards. We continue to invest in our organisational network and infrastructure to support this future potential, and whilst it does come at a cost, managed services contracts have the proven capability to change our financial prospects.

Managed services projects are highly dependent on the delivery of a strong technology infrastructure and, as well as winning its own projects, the Technology division has been instrumental in ensuring the success of our Managed Services business.

I am pleased that the team at Westminster was recognised with the International Achievement Award at the Security Excellence Awards 2013 presented on the 23rd October 2013 at the Hilton Hotel, Park Lane, London. The award recognises a UK company that has realised an outstanding achievement or improvement in international sales or exports, or has otherwise been instrumental in a significant security application or project outside of the UK and I am proud of our team's achievements.

2013 has also given us the opportunity to resolve several legacy issues and to realign the business. We disposed of our UK centric businesses in March 2013 and removed the Synergy Loan note, achieving a refund of £0.3m. Our balance sheet is far stronger and we now have a far lower interest cost which means that we retain more money in the business for investing in the future.

Westminster strongly believes that working closely with local communities is essential and I am proud of all the support we give to the local communities in the regions in which we operate as well as the support we give to local and international charities. I am pleased therefore to announce that we are in the process of setting up the Westminster Foundation, a charitable organisation which will act as an umbrella for the many community support activities we are involved in, such as healthcare and education.

We have built a strong brand and international reputation and the momentum we are seeing means we have increasing confidence in our business model and its ability to generate long term consistent profits and thus shareholder value.

Corporate Conduct

In our industry it is vitally important that we maintain the highest standards of corporate conduct. You will see in the Directors' report on corporate governance all the detailed measures we take to ensure that our standards, and those of our agents, can stand any scrutiny by Government or other official bodies.

Staff and Board

As ever our staff are key to delivering success. We have a dedicated team of security experts and I am further delighted by the progress both the expatriate and local teams in West Africa have made. I would like to take the opportunity to express my appreciation to all our employees, both in the UK and our ever expanding overseas workforce, who have worked extremely hard during the year. I look forward to welcoming more UK and overseas employees on board as we expand our business in 2014 and beyond.

As a service based business, our staff are vital to the continued growth and development of our business and we are fortunate in having a highly committed and dedicated workforce. Their dedication is crucial to how we are able to rapidly grow our business and develop our worldwide reputation.

I would finally like to thank all our investors for their support and particularly to our strategic investors who are bringing their expertise to help deliver value for all.

Lt. Col. Sir Malcolm Ross GCVO, OBEChairman29 May 2014

Chief Executive Officer's Statement

Business Description

Our vision has been to build a global security business focussed on delivering 'end to end' integrated security solutions to high growth and emerging markets around the world and I am pleased to report that we are delivering on that vision.

As can be seen from the table below our business has evolved from a traditional UK focussed security business to what can be described today as a truly international business providing a wide range of security solutions, primarily to governments and governmental agencies, non-governmental organisations (NGO's such as the UN) and 'blue-chip' corporations worldwide.

We have achieved this global footprint by building an extensive network of agents and well placed business partners. Today we have a presence in over 50 countries covering all continents with the exception of Antarctica but with a strong focus on our target markets of Africa, Asia, the Middle East and the Americas. This extensive network, which has been time consuming and costly to establish and would be difficult to replicate, makes us a scalable business and provides us with a distinct operational and commercial advantage in our chosen markets.

Our operating companies are structured into two operating divisions, Managed Services and Technology, both primarily focussed on international business as follows:

Managed Services division:

Focussing on long term (typically 10 - 25 years) managed services contracts such as the management and running of complete security solutions in airports, ports and other such facilities and the provision of manned services, 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.

We have a track record of successfully delivering complex security solutions around the world and have an impressive client list of governments and blue chip organisations underpinning our growing international reputation. Our 15 year contract for the provision of complete airport security services in West Africa has received numerous endorsements and accolades from major international organisations for its effectiveness and quality of services. Westminster believes that satisfied customers with successful projects are the best advocates for our services and we have a number of impressive reference sites available and therefore we can host reference visits by prospective customers.

Our evolution continues however and we are now in the foothills of what could be a substantial growth phase over the next few years.

We are developing an active prospect pipeline (potential projects which are in active discussions and which are at various stages of development) and continue to advance these. Our Managed Services division has a growing number of potential long term, high value managed services projects each with a potential sales value of several hundred million USD over the life of the contract, whilst our Technology division has a growing pipeline of substantial potential projects many of which are tens of million USD in value. Further information on the size and geographical spread of these opportunities is given in the Divisional Review.

Business Development Process

Within our chosen markets of high growth and emerging economies we particularly target key countries based on a number of factors such as political stability, low country risk, good GDP growth and business potential.

Doing business with any government can be a time consuming process and this is certainly the case in many of our target markets where processes can be slow and bureaucratic due to the evolving nature of governments and inherent complexities of doing business in such countries. Whilst this can be a frustration at times, it also underlines the opportunity, as our services are both needed and welcomed in such markets and we are able to make a real difference.

We develop new business opportunities from a number of sources - introductions from our agent and partner network, enquiries from our extensive group websites (Westminster operates one of the largest websites in the world for security equipment and services) and from repeat business and referrals from existing customers. Currently we are receiving around 300 enquiries for our services each month.

Our agents and business partners, all of whom operate on a commission basis payable from contract revenues only when we receive payment from the client, work with us through the sale process providing in country support, knowledge and logistics together with arranging meetings, translations where required and assisting with client discussions and negotiations. This is of particular importance where large scale multimillion USD projects are involved requiring high level meetings. We have judiciously built a network of well-placed and influential business partners around the world, some of whom have become strategic investors, who are able to organise meetings with governments and corporations at the highest levels and who are currently assisting us to negotiate a number of very high value, long term potential contracts.

With the aid of our business partners, together with strong support from the British Government through UK Trade and Industry (UKTI) and in-country diplomatic missions, we have established high level contacts and built business relationships with numerous key decision makers in target countries around the world. In recent months I have personally met and had discussions with numerous heads of state including the presidents and prime ministers of Burundi, Namibia, Tanzania, Zambia and Zanzibar. My team and I have also met numerous senior ministers and other governmental officials from many other countries around the world and regularly host visiting delegations at our UK headquarters for trials, demonstrations and discussions.

The business development process on large scale projects from project concept to contract signature can be a lengthy process and will vary from project to project depending on the government and project complexity concerned. Typically early stage meetings will involve presenting the proposed solutions and the advantages that brings to the client and country, this may involve numerous meetings with key decision makers and senior government officials from various ministries. Once the concept is approved by the client, detailed discussions and contract negotiations will take place and the government's internal procurement process, which can be lengthy and at times bureaucratic, commences.

Whilst these large scale governmental contracts can take time to negotiate, the potential long term revenue opportunities from such contracts mean the time taken, be it weeks, months, or in some cases years, is very much worth the investment in time and effort.

Our Markets

We operate in a huge and growing market with strong economic, political and social drivers and we believe this is unlikely to see any contraction in the foreseeable future. To put that in context, the annual global market for security equipment and services was expected to be $700bn in 2013 with growth of 7.4% expected in 2014. Furthermore, our focus is on high growth market opportunities in Africa, Asia, the Middle East and the Americas where the IMF expects average annual GDP growth in the period 2014 to 2018 of between 4% and 7% with the GDP growth in many of our target countries being even higher. As a comparative the expected GDP growth for the Eurozone in the same period is 1.5%. Aviation demand is increasing, particularly in Africa as these economies develop and a middle class emerges. BCC Research estimates the global market for advanced airport technologies to have been just over $9 billion in 2012. The market should exceed $9.2 billion in 2013 and $11.1 billion in 2018, a compound annual growth rate of 3.8% over the next five years. Against this backdrop Boeing expects African passenger volumes to grow at 5.6% per annum until 2032. Many airlines are ordering new equipment and are reporting increasing load factors and this bodes well for our Managed Services division.

Divisional Review

Technology division

The Technology division continues to secure numerous orders and contracts for a wide and diverse range of products and services from a wide range of customers worldwide, delivering a regular monthly revenue flow for the Group. These include an order for the provision of vehicle screening solution to a petrochemical facility in the Middle East, valued at $3.25m; explosive detection solutions to various clients around the world; airport screening and security solutions to a number of airports in the Middle East and Africa, including specialist cargo screening solutions to Ethiopia; and complete security installations to a number of banks in Africa. In addition, we have provided various countries embassies with security solutions to their missions around the world; we have provided specialist body screening solutions to a drug enforcement agency in East Africa; security screening equipment to an Asian prison service and a regular supply of security equipment and services to the UK prison service; and we have continued to expand our K9 unit and supplied specialist substance detection dogs, trained to find explosives, to various areas of the world.

The division has a growing prospect pipeline of potential business around the world as can be seen from the table below:

The division recently announced a border security contract in Asia valued at $2.6m. The system will enable screening of trucks and vehicles crossing a border to detect illegal cargo and contents such as drugs, weapons, explosives, human trafficking and other contraband. This is a very significant contract as following the initial installation, once proven, the intention is to extend the programme to provide similar solutions covering numerous other border crossings in the country concerned which could result in significant additional revenues. The division is currently in discussions with various clients regarding similar and larger scale potential projects around the world.

A key value add for the Technology Division is the vertical integration support it is providing to the Managed Services division in terms of equipment and technical expertise which has reduced the Group's overall cash investment by eliminating the need for 3rd parties and their associated margins. Furthermore the increased use of products in developing Managed Services increases our purchasing power with manufacturers.

Managed Services division

Our managed Services division continues to go from strength to strength both in terms of operational performance and also potential growth prospects.

The West African airport operation is now operating effectively and has made a dramatic difference to the security of the airport. We have a strong expat management team in place who have delivered major achievements and have developed a well-trained and highly motivated local workforce now numbering around 160 (May 2012: 126). Our operations have received numerous endorsements from airlines and other users of the airport. During the year the International Civil Aviation Organisation (ICAO) conducted an audit of the security operations and concluded that we had brought the security operations of the airport up to that equivalent of any European airport.

We have significantly invested in our airport operations, including provision of new screening equipment, erecting a new perimeter fence and the installation of specialist detection and surveillance systems including ground based radar, being one of very few airports in the world with such technology.

Commencement of cargo screening services at the airport, which were originally expected to commence in 2013, have been delayed due to logistics and construction of a new cargo shed at the airport. However we have advanced screening equipment in place and staff trained and certified ready for operation. We anticipate that cargo screening operations will commence in the summer of 2014 resulting in additional revenues for the operation.

I am pleased to report that embarking passenger numbers at the airport are now increasing year on year (currently 13.7% up on 2012) and this is expected to accelerate going forward now that the new terminal is open and airport services generally improve. I am also pleased to report that interest in our airport security services from governments and airport operators from around the world continues to grow and we are currently in various stages of discussion, some quite advanced, with 42 airports in 24 countries across 4 continents as can be seen from the table below.

This does include the East African airport project we have been in advanced discussions with for some time. I am pleased to report that whilst this process has taken longer than anticipated due to the government's internal processes, which have nothing to do with our negotiations, the project remains very much active and advanced. This is not necessarily indicative of the time frame for any other opportunities we are discussing as each project has its own dynamics and complexities. The growing prospect pipeline of airports interested in our services and the momentum we are building in this sector is however most encouraging as can be seen from the table below.

In addition to our 'Total Care' complete airport security services model we are also developing a streamlined solution for smaller airports around the world (typically 50,000 - 100,000 embarking passengers per annum) whereby we can still provide the required investment, expertise and support to governments and airport operators but on a reduced cost model - we anticipate this will be attractive to many smaller airports around the world.

Airport security solutions and our experience in the sector represent a significant growth area for our Managed Services division but certainly not the only area of expansion. We are currently in discussions with a number of port operators on a similar Total Care security solution as well as expanding the managed services offering to other key infrastructure sites such as ports, railways and border crossings. Furthermore we are looking to expand our services at airports and other such facilities into other managed services and training services beyond security.

Disposals of RMS (CTAC) Integrated Solutions and International Monitoring Services

In order to focus on our growing international business we disposed of our UK centric businesses RMS (CTAC) Integrated Solutions and International Monitoring Services in March 2013 to a management buyout. Both companies will however continue to provide certain services to the Group. The consideration was £0.2m payable across the first 12 months with an incremental earnout dependent on a percentage of revenues achieved in excess of certain metrics over the 2 years from disposal.

Business Outlook

We are continuing our investment in the business; we have developed our team of experienced and talented people and are creating a global network of agents and business partners who give us a global footprint. This has helped build a platform from which we can grow our business and deliver our vision of being a vertically integrated global business focussed on delivering end to end integrated security solutions. I believe that this investment, which has always been written off to the P&L as incurred, has been wisely spent and we are now well on our way to fulfilling our vision.

We have created an international business and a strong brand which is well recognised in our target markets. Our network is assisting us in the delivery against the vast market opportunity which we are addressing. We have a successful track record of delivering complex security solutions to governments and blue chip organisations worldwide and our successful reputation is allowing us access at the highest levels with key decision makers.

Our Technology division has a substantial pipeline of potential new business, and we are experiencing a high level of interest in large scale solutions, similar to the one sold for $2.6m in April this year. However it is our Managed Services division that offers dramatic growth prospects and customer interest in our services. Interest in these long term contracts, which each have a potential sales value in excess of $100m, continues to grow. By way of illustration, the aggregate life time sales value of our prospective customers is currently over $11Bn and further enquiries continue to add to this. Not-with-standing the timescales and bureaucracy inherent in our customer base this is a very encouraging position from which to grow the business. Whilst of course there can be no certainty as to the outcome or timing of such discussions and whilst we obviously do not expect every prospect to reach contract stage, any one of these contracts can significantly add to our margins, and several would transform our business beyond recognition.

In conclusion, we have a strong management team and an experienced board of Directors with over 100 years' experience in the security sector and with strong international and governmental connections. We have clear strategic goals and objectives and a commitment to delivering on our vision and delivering healthy shareholder returns. Accordingly, the Board and I remain excited about our future growth prospects and where our business will be in a few years.

P.D. Fowler

Chief Executive Officer

Chief Financial Officer's Statement

Revenue

Revenues from our ongoing businesses were £7.4m (2012: £7.9m). The Technology division recorded revenues of £4.4m which comprised of the run rate product sales business of circa £2m with the remainder arising from larger project sales and the scanning gantry announced in January 2013. The Managed Services division reflected a full year of the airport contract announced in February 2012 which went live on 1 May 2012 and recorded revenue of £2.8m (2012: £1.7m). Longmoor Security was restructured during the year to reflect changing market conditions and delivered revenues of £0.2m (2012: £0.4m). Our primary UK operations were sold at the end of the first quarter and these recorded revenues of £0.2m (2012: £1.5m).

Gross Margin

Gross margin from our ongoing business rose to 42.2% (2012: 37.3%) reflecting the increased mix of the high margin Managed Services division, which marked the 3rd consecutive year of gross margin improvement. Gross margins in the Technology division reduced due to the revenue mix reflecting a greater element of product sales in 2013 compared to the solution sales which benefitted 2012. Due to the vertically integrated nature of the Group, the Technology division has done very significant work around the delivery of the West African airport contract on behalf of WASS and we estimate that this has reduced our capital expenditure by over £0.6m since the commencement of the project compared to what we would have spent with external suppliers.

Operating Cost base

Our total operating and administrative costs were £5.1m (2012: £4.7m) and this is a necessary cost as we build to underpin the future opportunity. Within this are several factors which related to the changes in operations during the year and the ongoing investment in the Managed Services division of about £25,000 per month. These are detailed within note 4 to these accounts. Our current ongoing monthly non-depreciation cost base is currently circa £0.35m. In addition to this we are continuing to invest in the expanded capability of the Managed Services division referenced above.

Financing Charges

Financing charges were reduced by 80% to £0.09m (2012: £0.44m). This was due to a £0.31m credit arising from the reduction in capital value outstanding on the legacy loan note from Synergy Capital and an overall lower debt level as other loan notes converted into equity and Synergy was fully repaid. As of the 1 May 2014 only £0.6m of the 2013 CLN was outstanding and this carries a coupon of 10% per annum.

Result for the Year

Our underlying loss from ongoing operations before depreciation was £0.8m (2012: £0.2m). This includes costs related to investment in the Group's expansion capability against the dramatic growth opportunity the Company is addressing.

The direct contribution before depreciation from managed services contracts improved from £0.39m to £0.67m, reflecting improving operational efficiencies as the contract evolved into a more "steady state" operation. The UK subsidiaries sold in March 2013 for £0.2m, lost £0.37m. The Group's loss before taxation was £1.99m (2012: £1.65m). Loss per share from continuing operations was 4.1p (2012: 4.0p) and overall loss per share was 5.09p (2012: 5.10p).

Balance Sheet

The Group invested £0.46m in fixed assets during the year, with a very significant amount of this being allocated to the ongoing West African airport project. The freehold at the Banbury HQ remains valued at approximately £0.9m. Our depreciation charge was £0.25m (2012: £0.13m) reflecting the larger fixed asset base. Our debtor book represented 52 days of sales on average (2012: 60 days). Within this the Managed Services division achieved a reduction to 39 debtor days (2012: 50 days) as the West African airport contract evolved. Creditors were reduced by approximately 33% to £1.46m due to a stronger cash position. Cash balances at 31 December were £0.71m (2012: £0.22m).

Debt movements in the year are explained in note 8 of this final results statement. Borrowings were reduced by £1.5m as Synergy Capital were repaid in full and the entire balance of £1.475m of the 8% CLN issued in 2012 converted into equity at a rate of 27.5 pence. In June 2013, £1.317m of new 10% convertible secured loan notes with a conversion price of 35p per pound of loan note were issued. Subsequently £0.5m of these were converted during the period leaving a principal amount of £0.79m outstanding at the balance sheet date. During the year a further £3.1m of funds were raised by the issue of 7,754,421 new ordinary 10p shares. The Company entered into an Equity Finance Facility ("EFF") with Darwin Strategic Limited in April 2013, and during the period raising approximately £1.5m of the above. This means that £3.5m is still available should Westminster need it, and, its use is solely at our discretion. It should be noted that during the drawdown periods we increased the associated floor price to minimise shareholder dilution.

Consequently the shareholders equity position strengthened by £3.09m to £2.16m (2012: deficit £0.93m).

Post Balance Sheet Events

On 26 February 2014, Westminster issued 10,000 new ordinary shares of 10p each in the Group, following the exercise of options by the widow of a former employee of the Company. On 24 March 2014, the Company issued and allotted 389,610 new ordinary shares of 10p each at a price of 77p per share, to a new strategic investor (the 'Investor') who has significant interests in emerging markets, raising £300,000.

On the same day, Westminster received gross proceeds of £150,150 via a draw down on its Equity Financing Facility ("EFF") with Darwin Strategic Limited. This was achieved by the issue of 195,000 new ordinary shares of 10p each being issued at a price of 77p per share.

This Investor is active in certain of the Company's target high growth geographical markets. They are focussed on infrastructure and natural resources projects in these regions and can assist the Company in the development of long term regular business from the delivery of security contracts for the Company's Managed Services division.

In line with Westminster's strategy and the alignment with strategic partners, the Investor has been appointed as a Business Development Partner to the Group and has been granted 0.5m options over 10p ordinary shares in Westminster ("Options"). The Options have a strike price of 85p each and vest on delivery of certain revenue based milestones as set out below.

The Options vest on achievement of incremental recurring revenue performance milestones arising from business in our Managed Services division. 0.3m Options vest on achievement of £5m of new Managed Services revenues directly generated by the Business development Partner within 3 years and a further 0.2m vesting on delivery of an aggregate of £8m new recurring revenue directly generated by them within the same period. The Options have a life of 8 years from date of grant, but will lapse after three years if the above revenue criteria are not achieved. A condition of the agreement is that revenue is defined in accordance with the Group's standard revenue recognition policies and that it has also been paid in full. Westminster will be involved at all stages in client negotiations and product specifications and will have ultimate sanction over contractual terms.

Key Performance Indicators

The Group consistently monitors the likely level of future demand and interest in its products and services. The Managed Services division derives its revenues and cash flows based on the number of passengers using a facility such as an airport. As these are long term contracts the Board monitors the expected growth rate in volumes by reference to industry data, and focuses on the regional makeup of its sales pipeline.

The Technology division measures its sales activity by reference to the value of quotes issued against sales prospects which are currently active and dialogue is ongoing ("Quote Bank") and by reference to the number of qualified sales enquiries which are received on a monthly basis.

Ian Selby

Chief Financial Officer

The accompanying notes form part of these preliminary financial statements.

CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2013

CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2013

Notes to 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 2013 consolidate the individual financial statements of the Company and its subsidiaries (together referred to as "the Group"). Westminster Group plc and its subsidiaries design, supply and provide on-going advanced technology solutions and services to governmental and non-governmental organisations on a global basis

2. Summary of significant accounting policies

Basis of preparation

The Group financial statements have been prepared and approved by the Directors in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union. The Company has elected to prepare its parent company financial statements in accordance with IFRS as adopted by the European Union.

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.

The accounts are prepared on a going concern basis. In assessing whether the going concern assumption is appropriate, management have taken into account all relevant available information about the future. As part of its assessment, management have taken into account the profit and cash forecasts, the continued support of the shareholders and Directors and management ability to affect costs and revenues.

Management regularly forecast results, financial position and cash flows for the Group. A worst case budget for 2014 and 2015 has been prepared which includes revenues from major contracts that have already been secured by the end of May 2014, the predictable regular flow of smaller contracts, a much downgraded view of new Technology Division contracts and excludes incremental Managed Services contract wins. Based upon these projections the Group has adequate working capital for the 12 months following the date of signing these accounts. For this reason they continue to adopt the going concern basis in preparing the financial statements.

3. Segment reporting

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 companies Westminster Aviation, Westminster International and Longmoor Security. This split of business segments is based on the products and services each offer. In 2013 Longmoor and Westminster Aviation were amalgamated and now form the Managed Services Division and Westminster International is now referenced as the Technology division.

4. Operating exceptional items

5. Finance costs

6. Taxation

Tax losses available for carry forward (subject to HMRC agreement) were £6.5m (2012: £4.5m).

7. Loss per share

Loss 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 diluted 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:

For the year ended 31 December 2013 and 2012 the issue of additional shares on exercise of outstanding share options would decrease the basic loss per share and there is therefore no dilutive effect. Loss per share excluding discontinued items was 4.09p (2012: 4.0p).

8. Convertible Loan Notes

The only loan not outstanding at the 31 December 2013 was the Convertible Secured Loan note issued in June 2013. This is secured over the assets of the company (fixed and floating charge ranking behind the Group's principal bankers, HSBC). It has a coupon of 10% per annum and a conversion price of 35p. It is repayable in June 2016. After June 2014 the Group can force conversion if the average share price is greater 65p for more than 15 days or force repayment if the average share price is above 42p for the same period. All other loan notes were either converted in full during the year or were repaid in full. The closing balance of £795,000 carries an implied equity element of £144,000 and a debt element of £651,000 and these are shown in the balance sheet. A further £220,000 of this loan note has converted into equity since the balance sheet date.

An analysis of movement in debt at principal value (excluding IFRS impacts) is set out below;

9. 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)/profit before tax to arrive at operating cash flow

10. Post balance sheet events

Exercise of Employee Share Options

On 26 February issued 10,000 new ordinary shares of 10p each in the Group, following the exercise of options by the widow of a former employee of the Company.

Issue of Shares

On 24 March 2014 the company issued and allotted 389,610 new ordinary shares of 10p each at a price of 77p per share, to a new strategic investor who has significant interests in emerging markets, raising £300,000.

This Investor is active in certain of the Company's target high growth geographical markets. They are focussed on infrastructure and natural resources projects in these regions and can assist the Company in the development of long term regular business from the delivery of security contracts for the Company's Managed Services Division. The Company also raised on the same day gross proceeds of £150,150 via a draw down on its Equity Financing Facility ("EFF") with Darwin Strategic Limited. This was achieved by the issue of 195,000 new ordinary shares of 10p each being issued at a price of 77p per share.

In line with Westminster's strategy and the alignment with strategic partners, the Investor has been appointed as a Business Development Partner to the Group and has been granted 0.5m options over 10p ordinary shares in Westminster ("Options"). The Options have a strike price of 85p each and vest on delivery of certain revenue based milestones as set out below.

The Options vest on achievement of incremental recurring revenue performance milestones arising from business in our Managed Services Division. 0.3m Options vest on achievement of £5m of new Managed Services revenues directly generated by the Business Development Partner within 3 years and a further 0.2m vesting on delivery of an aggregate of £8m new recurring revenue directly generated by them within the same period. The Options have a life of 8 years from date of grant, but will lapse after three years if the above revenue criteria are not achieved. A condition of the agreement is that revenue is defined in accordance with the Group's standard revenue recognition policies and that it has also been paid in full. Westminster will be involved at all stages in client negotiations and product specifications and will have ultimate sanction over contractual terms.

Conversion of Loan Note

On 7 April 2014 the Company received notices from holders of the 10% secured Convertible Loan Note ("CLN") which was issued on 19 June 2013, that they were converting £220,000 of the CLN into new ordinary shares of 10 pence each. The conversion rate is 35 pence of CLN converts into 1 ordinary share of 10 pence nominal value. Therefore the Group will be issuing 628,571 new ordinary shares. This reduced the Group's annual cash interest cost by a further £22,000. This meant that following conversion the Group only had outstanding debt of £0.575m which marked a reduction of 83% since June 2013 and reduced the annualised cash interest cost to £0.06m.

11. Publication of Non Statutory Accounts

The financial information set out above does not constitute the Company's Annual Report and Financial Statements for the years ended 31 December 2013 or 2012. The Annual Report and Financial Statements for 2012 have been delivered to the Registrar of Companies and those for 2013 will be delivered following the Company's annual general meeting. The auditor's reports on both the 2013 and 2012 accounts were unqualified, did not draw attention to any matters by way of emphasis and did not contain statements under s498(2) or (3) of the Companies Act 2006. Whilst the financial information included in this preliminary announcement has been computed in accordance with International Financial Reporting Standards (IFRSs) this announcement does not itself contain sufficient information to comply with IFRSs. Copies of the Annual Report and Financial Statements for the year to 31 December 2013 will be posted to shareholders today and will be obtainable from the Company's registered offices or www.wg-plc.com when published. The information in this preliminary announcement was approved by the board on 29 May 2014.