Westminster Group Regulatory News (WSG)

01 June 2023

Westminster Group Plc

('Westminster', the 'Group' or the 'Company')

Final Results for 12 months to 31 December 2022

& Investor Presentation

Westminster Group Plc (AIM: WSG), a leading supplier of managed services and technology-based security solutions worldwide, announces Final Results for the 12 months ending 31 December 2022.

Highlights:

Operational:

· A strong recovery in airport operations exceeding pre-pandemic levels by year end.

· Training business delivered record levels of revenues.

· A strong recovery in our guarding business with a near doubling of revenues and return to profitability.

· Supplied products and solutions to 60 countries across the world.

· Secured £300,000 contract to protect a West African Parliament building.

· Under Martyn's Law (amended Protect Duty) forthcoming legislation, secured two important new mass screening contracts, an iconic building in London and a theatre and exhibition complex in Northern England.

· Secured a $300,000 3-year contract to provide aviation support services to the UN in Mali.

· $1.7m airport security contract in Southeast Africa confirmed and underway.

· Westminster Arabia achieved HCIS certification required for government regulated contracts.

Financial:

· 35% increase in revenues to £9.5m (2021: £7.1m)

· 65% increase in Technology Division revenues to £3.2m (2021: £2.0m)

· 23% increase in Services Division revenues to £6.3m (2021: £5.1m)

· 99% decrease in loss after tax to an effective break-even position £0.0 (2021: loss of £1.9m).

Post period end:

· Q1 2023 trading ahead of internal budget.

· Commenced 2023 with £1.8m of work in hand.

· Commenced 2023 with more than £5m of annual recurring revenue from existing contracts.

· West African airport operations currently running at record levels and new terminal opened April 2023.

· Training & Guarding businesses performing well.

· Land issue resolved and construction works due to commence on West African container port project.

Commenting on the results and prospects, Peter Fowler, Chief Executive said:

"I am pleased to report that, despite the challenges from the tail end of the Covid pandemic, the impact of the Ukraine conflict and the ensuing global economic turmoil, we still delivered a 35% increase in revenues to £9.5m (2021: £7.1m) and achieved an effective break-even position with a 99% improvement in losses to £0.0m (2021: loss £1.9m), demonstrating the recovery underway and that we are heading back to a growth trajectory.

"I am also pleased to report that all areas of our business delivered growth in the year. Our Technology Division delivered a 65% increase in revenues to £3.2m (2021: £2.0m) showing strong recovery from the pandemic challenges, whilst our Services Division delivered a 23% increase in revenues to £6.3m (2021: £5.1m) underpinning our growing recurring revenue businesses.

"Not only did we significantly increase year on year revenues, but we secured and delivered some notable and important accomplishments during the year such as providing an extensive screening solution for the late Queen Elizabeth II's funeral event in September 2022, which was a great honour. We secured important new contracts in the year, significantly increased our returning customers demonstrating brand loyalty, we continued to develop our pipeline of new large-scale opportunities including some exciting, long-term prospects and we continued to progress existing projects such as DRC and our West African Port project.

"Building on our 2022 results, we believe a record year of revenues and profitability are in sight for 2023. The key to achieving this, of course, is to secure new contracts with enough time to recognise revenues in the year and we are working hard to deliver that."

Investor Presentation: 3pm on Thursday 8 June 2023

Peter Fowler (CEO) and Mark Hughes (CFO) will provide a live presentation to review the results and update on prospects at 3pm on Thursday 08 June 2023.

The presentation is open to all existing and potential shareholders. Questions can be submitted pre-event via your Investor Meet Company dashboard or at any time during the live presentation.

Investors can sign up to Investor Meet Company for free and add to meet Westminster Group Plc via:

https://www.investormeetcompany.com/westminster-group-plc/register-investor

Annual Report and Accounts - The final results announcement can be downloaded from the Company's website (www.wsg-corporate.com). The notice of the Annual General Meeting to be held on 28 June 2023 was posted to shareholders on 31 May 2023 and copies of the Annual Report and Accounts will be sent to shareholders on or before 16 June 2023 for approval at the Annual General Meeting and will be available from the Company's website (www.wsg-corporate.com) once posted.

For further information please contact:

Notes:

Westminster Group plc is a specialist security and services group operating worldwide via an extensive international network of agents and offices in over 50 countries.

Westminster's principal activity is the design, supply and ongoing support of advanced technology security solutions, encompassing a wide range of surveillance, detection, tracking and interception technologies and the provision of long-term managed services contracts such as the management and running of complete security services and solutions in airports, ports and other such facilities together with the provision of manpower, consultancy and training services. The majority of its customer base, by value, comprises governments and government agencies, non-governmental organisations (NGO's) and blue-chip commercial organisations.

The Westminster Group Foundation is part of the Group's Corporate Social Responsibility activities. www.wg-foundation.org

The Foundation's goal is to support the communities in which the Group operates by working with local partners and other established charities to provide goods or services for the relief of poverty and the advancement of education and healthcare particularly in the developing world.

The Westminster Group Foundation is a Charitable Incorporated Organisation, CIO, registered with the Charities Commission number 1158653.

Overview

Following the challenges of the previous two years due to the global pandemic, associated lockdowns and travel restrictions, we entered 2022 with optimism. We could see that the impact of the pandemic was coming to an end and business confidence was returning.

Sadly, the Russian invasion of Ukraine and the global economic turmoil that followed has created a number of new challenges, although also some opportunities.

Stock markets, particularly with small cap companies, have been impacted, access to capital has become more challenging, rising prices, inflation and global uncertainty all make for a more challenging business environment. Governments and corporations are reviewing budgets and spending plans, postponing capital expenditure and creating delays in some order placements, as we experienced with a delayed multi-million-dollar Technology project we were verbally awarded in early 2022 and was anticipated to be completed that year. Due to the country's currency issues causing budget constraints the project was delayed and will hopefully go forward in 2023.

Against that backdrop and despite the delayed Technology project mentioned above we still achieved a 35% increase in our revenues to £9.5m (2021: £7.1m) and a 99% reduction in losses to an effective break-even position £0.0 (2021: loss of £1.9m), with many areas of the business trading at new highs.

Despite other disappointments in the year, such as the continued delay in the ratification of our DRC contract, which is covered in the Chief Executive Officer (CEO) report, there were a number of notable successes and achievements. Of these I was particularly proud that Westminster was chosen to provide the security screening solution for our late Queen Elizabeth II's lying in state. This was a complex project for which Westminster had been identified and selected some time ago and we have been planning and rehearsing for the event for some time. I was impressed by the speed and professionalism with which we undertook the assignment and I wish to pay tribute to all our staff involved in that sad but prestigious event.

Corporate Conduct

As a company whose shares are traded on the AIM market of the London Stock Exchange, we recognise the importance of sound corporate governance throughout our organisation, giving our shareholders and other stakeholders including employees, customers, suppliers and the wider community confidence in our business. We endeavour to deliver on our corporate Vision and Mission Statements in an ethical and sensitive manner irrespective of race, colour or creed. This is not only a requirement of a well-run public company but makes good commercial and business sense.

In my capacity as Chairman, I have ultimate responsibility for ensuring the Board adopts and implements a recognised corporate governance code in accordance with our stock market status. Accordingly, the Board has adopted, and is working to, the Quoted Companies Alliance (QCA) Corporate Governance Code 2018. The Chief Executive Officer (CEO) has responsibility for the implementation of governance throughout our organisation, commensurate with our size of business and worldwide operations.

The QCA Corporate Governance Code 2018 has ten key principles and we set out on our website how we apply those principles to our business, and more detailed information is provided in these accounts.

We operate worldwide with a focus on emerging markets and in a sector where discretion, professionalism and confidentiality are essential. It is important that we maintain the highest standards of corporate conduct. The Corporate Governance Report in this annual 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.

Corporate and Social Responsibility

As a Group, we take our corporate and social responsibilities very seriously, particularly as we operate in emerging markets and in some cases in areas of poverty and deprivation. As highlighted in the CEO Report we are building on our environment, social and governance strategies. I am proud of the support and assistance we as a business 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 donate please visit www.wg-foundation.org.

Employees and Board

Our overriding priority however is and has been the safety and wellbeing of our people around the world and to continue to provide a valuable service to our customers. To those ends, we put in place various precautionary measures, including cost reductions and are undertaking regular risk assessments for all areas of our business. We have put in place processes and safe working practices, with a number of employees working from home.

We have not made any changes to the Board this year. I do however congratulate Lorraine Hellend on her promotion to Head of Sales as of 1 January 2023.

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

Business Description

The Westminster Group is a global integrated security services company 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.

We deliver our wide range of Land, Sea and Air solutions and services through a number of operating companies that are currently structured into two operating divisions, Services and Technology, both primarily focused on international business as follows:

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

Focusing on providing advanced technology led security solutions encompassing a wide range of surveillance, detection, tracking, screening and interception technologies to governments and organisations worldwide.

In addition to providing our business with a broad range of opportunities, these two divisions offer cost effective dynamics and vertical integration with the Technology Division providing vital infrastructure and complex technology solutions and expertise to the Services Division. This reduces both supplier exposure and cost and provides us with increasing purchasing power. Our Services Division provides a long-term business platform to deliver other cost-effective incremental services from the Group.

We have a successful track record of delivering a wide range of solutions to governments and blue-chip organisations around the world. 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 business.

Overview

2022 has been a year of both challenges and achievements.

Challenges from the tail end of the global pandemic and associated travel restrictions, the challenges from the impact of the Russian invasion of Ukraine in February 2022, the resulting global economic turmoil and financial uncertainty, has resulted in governments and businesses reviewing their spending plans with the inevitable knock-on delays on contract awards.

I am pleased to report that, despite the challenges, we still delivered a 35% increase in revenues to £9.5m (2021: £7.1m). This was however, circa £4.6m short of full year expectations, set at the beginning of the year which, as reported in our 1 November 2022 update, was predominantly due the slippage of a multimillion-pound Technology project, verbally awarded in 2022 but delayed due to the country's budget constraints as a result of the economic downturn and now expects to be formally awarded and largely delivered in 2023. Despite this however we still achieved an effective break-even position with a 99% improvement in losses to £0.0m (2021: loss £1.9m), demonstrating the recovery underway from the previous years' challenges.

I am also pleased to report that all areas of our business delivered growth in the year. Our Technology Division delivered a 65% increase in revenues to £3.2m (2021: £2.0m) showing strong recovery from the pandemic challenges, whilst our Services Division delivered a 23% increase in revenues to £6.3m (2021: £5.1m) underpinning our growing recurring revenue businesses.

In terms of achievements, not only did we significantly increase year on year revenues, but we secured and delivered some notable and important accomplishments during the year such as providing an extensive screening solution for the late Queen Elizabeth II's funeral event in September 2022, which was a great honour. We secured important new contracts in the year, significantly increased our returning customers demonstrating brand loyalty, we continued to develop our pipeline of new large-scale opportunities including some exciting, long-term prospects and we continued to progress existing projects such as DRC and our West African Port project as detailed in our Divisional Review below.

Divisional Review

Services Division

Our Services Division and the growing recurring revenue base we are building is a key element to our future growth and I am pleased to report therefore that the Division has performed well with a 23% increase in turnover to £6.3m for the period which is at a record level despite our airport business having not fully recovered from the impact of Covid on the travel industry.

Our West African airport operations, which, like aviation across the world, had been severely impacted by lockdowns and travel restrictions during the Covid pandemic of the previous years, experienced a strong recovery from around 84% of pre-pandemic passenger numbers at the start of the year to achieving record monthly numbers by the end of the year and this trend has continued into 2023 which augers well for the future.

In addition, Summa Airports, who took over the running of Freetown International Airport in early 2023 completed the construction of an impressive new terminal which opened in April 2023, further increasing passenger experience and capacity. Westminster's contract with the government for the airport security remains in force and Westminster will, under separate contract with Summa, provide the aviation security services at the new terminal for at least the duration of Westminster's existing contract with the government, although this may be extended. Under its contract with Summa, Westminster will no longer be responsible for the cost of new or replacement security equipment and has reduced its fee accordingly, whilst SUMMA will be responsible for the cost of all required equipment and the collection of the security fees from airlines and will remit the funds based on passenger numbers in the preceding month directly to Westminster's designated bank account on a monthly basis, thereby reducing Westminster's costs and accelerating receipts. These changes, which do not affect economics of the project, are beneficial and we look forward to continuing growth from this project.

Both our guarding and training businesses were heavily impacted during the global pandemic over the previous couple of years and I am pleased to report both have rebounded strongly in 2022. Our training business has not only recovered to pre-pandemic levels but delivered record levels of revenues, securing new contracts from governments and organisations including a sizeable long-term contract for one of the UK's largest airports. The global pandemic demonstrated the importance of distance and online training and, we believe, the strategic decision we took some time ago to invest in building an online training capability, both in house and through strategic partnerships, will prove to be very beneficial and we expect this part of our business to continue to grow.

Our guarding business equally produced a remarkable recovery, not only securing important new business in the year but also a near doubling of revenues over the previous year.

As previously announced, we expected to secure one more long-term, large-scale managed services contract in 2022 and were close to achieving that. By year end we were at the final stages of negotiating a sizeable long term airport security project in West Africa. However, it is always difficult to accurately predict timing for such projects, which are complex and can involve various bodies in bureaucratic processes, but we still expect that contract to be secured and delivering a material contribution to revenues in 2023.

Frustratingly, the long overdue ratification process of our DRC contract, signed in June 2021, has still not been completed. This matter has taken far longer than anticipated, largely due to the Governments' internal procedures. However, an important step in the process was completed towards the end of 2022. We know that not only is the delay in finalising this matter a frustration for us and our shareholders but has become a significant issue for the government who recognise the importance of the project and the urgent need to improve the security of the country's airports. I would like to pay tribute not only to the tireless pursuit of this project by our staff involved but also the tremendous support we have received from the British Ambassador and Embassy staff in Kinshasa.

As previously reported, we have been waiting for our client to resolve the land issues for the construction of the new container port storage and inspection complex in West Africa, for which Westminster have been contracted to provide the screening operations under a 10-year managed services agreement, signed in June 2021. I am pleased to report that the land issue has now been resolved and construction of the port is due to commence this year.

We announced in November 2022 that the relationship with our local partners, Scanport, regarding our Ghana port project had become increasingly strained and that we were looking to resolve matters through mediation to include accelerated receipt in recompense for early termination, which would free up resources for new large-scale projects expected in 2023.

The matter is still in process. We have not included any revenues from this project in our 2023 internal projections although we anticipate reaching a settlement in the year. We will update the market on these various developments when appropriate.

Technology Division

We continue to experience healthy enquiry levels and during 2022 secured orders for our products and services from 60 countries (2021: 60) around the world.

The global economic turmoil and financial uncertainty created by the Russian invasion of Ukraine has resulted in governments and businesses reviewing their spending plans with the inevitable knock-on delays on contract awards. A case in point being the multi-million USD Technology project we were verbally awarded in 2022 and expected to be formally confirmed and completed by the end of the year but due to the economic situation and currency issues within the country concerned, the project keeps being delayed. This project is still a high priority for the client, and we have been informed by them that they expect to move forward in 2023. We also saw similar slippage with other large capital-intensive potential projects.

Notwithstanding the above the Division did still achieve a 65% increase in revenues to £3.2m (2021: £2.0m) and delivered some important successes.

In September 2022 we were honoured to have provided the extensive screening requirements at the late Queen Elizabeth II's lying in state. Westminster had been selected for this task some time ago and had been storing the required equipment and undertaking secret rehearsals with the police and authorities over the years in preparation. Within hours of the announcement of the Queen's passing we had mobilised and began preparations for deployment. It was a complex operation involving the deployment of a number of screening lanes and a Westminster team to be on duty at the event 24 hours a day for the duration. I am proud to say the everything ran smoothly, and credit is due to the exceptional service provided by our dedicated team. The fact we were chosen for this high profile, high security event is evidence of the reputation and professionalism associated with Westminster.

In January 2022 we announced that the $1.7m airport security contract for two airports in South-East Africa, provisionally awarded in 2021, had been formally issued. The contract, funded by the European Investment Bank, involved the upgrading of security equipment, including new x-ray screening & metal detection equipment, an advanced CCTV surveillance system and new control and command centres at both airports. Westminster is providing a full turnkey solution including the design, supply and installation of the systems and will be establishing an engineering presence in-country for future maintenance and support services. This project is well underway and will be completed in 2023. The client is extremely pleased with Westminster's performance and has expressed interest in a long-term managed services programme once the project has been completed.

Other important new contracts secured in the period include a £300,000 contract to supply and install an advanced people and baggage screening solution within a West African parliament building. This project was successfully delivered in the year, and we are now in discussions on a much larger project to upgrade security at that parliament. We also supplied a wide range of technology-based security products and solutions to clients around the world.

In 2022 we reported on the initiative we have been pursuing regarding the forthcoming new legislation in the UK, Martyn's Law (amended Protect Duty). Martyn's Law is named after Martyn Hett, who at 29 years was killed in the Manchester Arena terrorist attack in May 2017. Martyn's mother, Figen Murray, has been a tireless campaigner and the force behind Martyn's Law legislation that will require many businesses giving access to the general public, to formally assess and take measures to address terrorism risks for the first time. Martyn's Law is set to have a profound and lasting effect on security provision in the UK - encompassing Publicly Accessible Locations (PALs) and requiring them to actively protect visitors and staff with appropriate levels of security. The Home Office estimates that 650,000 UK businesses could be affected by Martyn's Law, and this offers substantial business opportunities for Westminster's extensive portfolio of products and services.

Westminster has been supporting Figen and working on this opportunity for some time, and like many government related issues, the enactment of this legislation was delayed in 2022 it is now expected to become law in 2023. However, many organisations are proactively making arrangements to be compliant ahead of the legislation and in this respect, I am pleased that Westminster secured important new contracts. During 2022 we secured a contract to provide a 'Mass Screening' solution for an iconic building in London, and a similar contract, also for 'Mass Screening' to an important theatre and exhibition complex in the north of England. We are also in discussions with a number of important venues and sites in the UK for effective and large-scale security solutions ahead of the expected legislation. For more information on Martyn's Law see here https://www.wg-plc.com/protect-duty# or to see the latest news and video from Figen Murray see here https://www.wg-plc.com/news/figen-murray-obe-martyns-law-amended-protect-duty

Our various high profile security projects, such as the Palace of Westminster and the Tower of London, are performing well and we are discussing expanded operations.

In September 2022 Westminster Arabia was, after a long process, finally officially certified by the Saudi Arabian High Commission for Industrial Security (HCIS) for the supply, installation and maintenance of security devices. This certification is important and is required to bid for government regulated and/or funded endeavours (such as Giga Projects, critical infrastructure, transport etc.) and for the supply of products & services to Government affiliated companies. Few (if any) Saudi companies which are formed through joint ventures with foreign entities have achieved this status and the award of the licence is an important step forward for our business. Westminster Arabia remains an important component in our growth strategy.

Our German subsidiary, GLIS, situated to the Southeast of Munich, is focussed on supplying security technology and solutions to the European market. Post Brexit the business is particularly well positioned to serve the Group's EU clients. The team continues to secure a number of important new clients including US military bases and is developing substantial business opportunities in the region. Through GLIS, we continue to monitor the Joint Comprehensive Plan of Action JCPOA talks and are maintaining discussions with stakeholders (including the UK and German governments) however, despite the optimism of an EU brokered deal in September 2022, the fallout from the Ukraine war and other issues have meant a deal in the short term is unlikely. However, should circumstances change and the US and international sanctions, including banking be lifted, there remains an opportunity for our German office to revisit the substantial opportunities previously created.

Our French business, Euro Ops, continues to be a valuable strategic addition to the Group. The company provides aviation focussed services such as humanitarian flights and logistics, emergency flights, flight operations, charter and storage management. The company has not only brought new skills, services and revenues to the Group but provides greatly improved access to Francophone countries for the wider Group services, with some interesting project opportunities currently being pursued. One example a $300,000 3-year contract, awarded in May 2022, to provide aviation support services and logistics for Swiftair and the UN in Mali.

Summary

On a wider front, despite the challenges we have continued to progress various existing and new large-scale managed services project opportunities around the world which can and will provide step changes in growth should they be secured. No two opportunities are the same and each can have their own idiosyncrasies and challenges. As we have previously advised, project opportunities of this size and nature, particularly in emerging markets, are not only time-consuming and involve complex negotiations with numerous commercial and political bodies, but discussions can ebb and flow over many months, with periods of intense activity which can be followed by long periods of inactivity. It is however precisely because of such challenges that competition is limited and the opportunities offer transformational growth opportunities.

Whilst there is never certainty as to timing or outcome of the many project opportunities we are pursuing, we are making progress on a number of fronts, however due to the nature of the projects and the numerous bodies involved it is notoriously difficult to forecast timing of any contract award. I know this can be frustrating at times but the upside of securing such contracts with long-term, high margin recurring revenues is worth the efforts. We obviously cannot provide regular updates or details on contract negotiations, but we will provide market updates on material developments when appropriate and in line with our regulatory responsibilities.

In summary, despite the various challenges and in some cases because of them, 2022 was a busy year and whilst our results for the year were impacted largely by one multi-million USD Technology contract, delayed through budget constraints, our business has recovered strongly from the Covid impact, with some revenue streams now trading at record levels. We have continued to develop and deliver on business opportunities and during the year supplied goods and services to numerous countries around the world, including some notable achievements. We have continued to invest in our worldwide business development programmes in order to deliver on our growth potential, particularly in our long-term major managed services projects. We believe the benefits from these achievements will begin to be seen in 2023 and beyond and the Board and I remain excited by our growth prospects.

Strategy

Our vision is to build a global business with strong brand recognition delivering advanced security solutions and long-term managed services, on Land, at Sea and in the Air, primarily to high growth and emerging markets around the world, with a particular focus on building multiple revenue streams, many of which involve long term recurring revenue business, from diverse sources in varying parts of the world, providing a degree of resilience to external events and enhancing shareholder value.

The Board considers strategy at each regular Board Meeting and has at least one 'off-site' strategy day each year to review the Company's rolling five-year Strategic Growth Plan and to consider new short-, medium- and long-term strategies that could be implemented to achieve our goals and to deal with changing global and economic issues.

As part of our strategy for growth, we will also continue to improve and enhance our Board and senior management team broadening our range of experience and expertise. If we are to maximise the substantial growth opportunities we are developing, particularly with our managed services operations, it is essential we have the right strategies, people, processes and systems in place to successfully deliver such growth.

Whilst we still believe that the opportunities we have been developing, primarily in emerging and high growth markets, are what will deliver exponential growth over the next few years, these can and do take time to develop and as we have seen, can be disproportionately impacted by global, regional and local events. Accordingly, one of the strategies we are now developing is to balance some of that risk by building more core business in the UK and developed world areas. We have made a good start with important contracts such as the Tower of London, Palace of Westminster, Scottish Parliament, HM Prisons, and the UK Border force, and we will be looking to materially increase such business through 2023 and beyond, not least by developing and delivering on opportunities created by the forthcoming Martyn's Law legislation, with two important mass screening contracts already delivered in relation to this strategy.

Given budget constraints for many companies resulting from the global economic situation another strategy we are exploring is with debt funding and leasing providers to transition large scale projects from a 'capital' purchase to a longer term, 5+ years, revenue model, which would also include maintenance and training. Given that some of these project opportunities can be multi-million dollars in value, we believe that this model brings added value which sets us apart from the competition and will be attractive to many potential clients; indeed, we are already in discussions with a few government bodies on this basis. With large scale projects such as these, there is never certainty of outcome or timing, but we are optimistic this initiative will lead to material and additional long-term revenues.

We are also looking to expand our global footprint through the development of our agent network and through strategic joint ventures (JVs) in key markets and regions, and we believe that this strategy will enable the Company to expand its sphere of operations in a controlled and cost-effective way.

Our risk strategies are developed from our Risk Committee who hold regular meetings and report to the Audit Committee. Mitigation and risk strategies are then developed to address potential risks, as we successfully did during the Covid pandemic. Covid is of course not the first and will not be the last external challenge for which we need to have strategies in place to deal with. In 2014, the world experienced the West African Ebola outbreak which caused huge problems for the region, and now the Russian invasion of Ukraine has world-wide implications. I am confident the strategies we have now and will further put in place, together with our diverse business model, will help us not only manage the challenges but seek new opportunities from them.

The challenges of the last few years have impacted our performance against our stated goals and accordingly, the Board has reset its key goals for 2023 as:

1. Improve ratio of enquiries received/quotations issued by number and quotations issued/orders received by value;

2. Increase product portfolio and sales achieved;

3. Increase our global footprint with new offices, agents, and strategic alliances;

4. Increase sales in the UK and other first world countries;

5. Secure at least one more long-term managed services contract;

6. Deliver another year of significant recurring revenue growth;

7. Deliver a material improvement in revenue and a move to profitability;

8. Deliver a sustained and material improvement in our share price;

9. Develop a more formal and structured Environment, Social, and Governance (ESG) strategy;

10. Instigate an Investors in People programme.

Environment, Social, and Governance (ESG) Strategy

The Westminster Group takes its corporate and social responsibilities very seriously and recognises that sustainability across our various business sectors is important to us and our future growth, important to our shareholders and wider stakeholders. In this respect, one of our key goals for 2023 is to develop our existing corporate social responsibility and governance activities into a more formal and focussed ESG strategy.

Our people are our most valued asset, and we recognise that a happy and motivated workforce is important. We are an equal opportunities employer and endeavour to treat all our staff, equally, fairly and to assist them reach their maximum potential. We do this by having structured systems to support staff in their job roles and in providing training programmes to improve their skills. We hold regular meetings and appraisals with staff and welcome input and feedback suggestions.

We provide flexible working arrangements, including home working where possible. We provide free refreshments, allow gym time to help keep our staff healthy and provide medical support where appropriate. We organise team building and social events across our business units.

We take our social responsibilities very seriously including supporting the communities in which we operate and, in this respect, have our own registered charity - the Westminster Group Foundation - see here www.wg-foundation.org

Equally, we take our environmental responsibilities seriously and look to minimise our carbon footprint, for example by use of electric vehicles where possible. As an international business, travel has always featured heavily in our business activities. One thing the recent pandemic lockdowns have demonstrated is that some of this travel can be replaced by remote meetings and conference by systems such as Microsoft Teams and Zoom, which has now become commonplace and far more accepted across the world. Accordingly, we intend to focus, where possible, on reducing travel by continuing with remote meetings. Where international travel is still necessary, we are investigating carbon offset programmes. We are also working towards ISO 14001 Environmental Management (EMS).

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. A key focus for the Group is in building its recurring revenue base from contracted income relating to its managed services, maintenance and guarding contracts, and this is a key metric being monitored. Employment is the single largest cost base for the Group, the costs are strictly monitored to ensure best use of resources. Days Sales Outstanding is used to measure the cash conversion of revenue and identifies debtor aging issues this is low this year which is good but 2021 represents more normal levels.

The Services Division measures its performance in the four key areas of its deliverables - passengers served in its airport operations, vehicles and containers served in its port and border operations, the number of days training delivered by our training businesses and the number of guarding hours delivered by our guarding businesses.

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 served and number of return customers are monitored to give a view on the performance of the division. It is pleasing to see higher levels of return customers, demonstrating brand loyalty. The material increases in passengers served, training hours and guarding hours delivered are all indicators of the strong recovery from different parts of our business in 2022.

Current Trading & Business Outlook

We have commenced 2023 on a positive note with Q1 trading ahead of budget and, whilst remaining mindful of the global uncertainty which could yet have adverse impacts on trading, we expect 2023 to be a record year.

We commenced 2023 with £1.8m of work in hand which is a good start to the year, and we are experiencing increasing levels of enquiries from around the world for our products and services. Our business development teams are working on a number of exciting opportunities, and already we are seeing new contracts coming to fruition.

As mentioned in the Divisional Review above we believe the forthcoming Martyn's Law legislation which is due to become law in 2023 and which The Home Office estimates will affect circa 650,000 UK businesses, is a significant opportunity for our business and we look to build on the work we have done preparing for this and the successful contracts secured in 2022 and fully expect to secure further important new contracts in 2023.

Our West African airport operations have continued the growth we saw in 2022 and are currently running at record levels.

Our guarding and training businesses performed well in 2022 and we expect that to continue in 2023.

We traditionally secured one or two large-scale multi-million USD Technology solution sales projects each year although this has proved more challenging over the past couple of years due to customer spending constraints. However, we do have several potential projects in the pipeline, including the postponed project from 2022, which we expect to materialise in 2023.

We are focussed on building our recurring revenue base of contracted income, particularly from long term contracts, which is, and will continue to be, a key growing strength of our business. In this respect we commenced 2023 with over £5m of annual recurring revenues, which we expect materially increase through new contracts during the year.

As mentioned in the Divisional Review there are developments regarding the long overdue ratification of our DRC contract and we are hopeful this prolonged process will be finally concluded and the programme will move forward this year.

We are also encouraged that the land issue regarding our West African port project has been finalised and that construction on the new container storage and inspection area can commence.

As previously mentioned, we have not included any revenues from the Ghana port operation in our 2023 internal projections although we anticipate reaching a settlement during the year.

We continue to invest in our worldwide business development programmes in order to deliver on our growth potential, particularly in our long-term major managed services projects. We believe that we will secure at least one, possibly two, long-term managed services contract in 2023, each producing a multi-million dollar step change in revenues.

The foregoing, outlining the recovery and growth we are seeing in our various businesses, together with our business model and the opportunities we have been developing over the years which, despite the challenges and setbacks we have experienced in recent years, underpin our confidence for the future growth of our business. Building on our 2022 results, we believe a record year of revenues and profitability are in sight for 2023. The key to achieve this, of course, is to secure new contracts with enough time to recognise revenues in the year and we are working hard to deliver that.

Peter Fowler

Chief Executive Officer

Revenue

2022 revenues of approximately £9.5m (2021: £7.1m) are up 35% with all areas showing increases despite the Ukrainian war and general turmoil in the world. However, large projects continued to be delayed awaiting confidence that the world was returning back to more normal times.

Services revenues increased by 23% to £6.3m (2021: £5.1m). This was because of the continuing strength of our West African Airport passenger levels during the year, combined with Guarding revenues up 35% and training hours over 5 times the number in 2021 as the world needs to train to recover from staff lost in the pandemic.

Westminster's Technology Division revenues were up 65% to £3.2m (2021: £2.0m). 2021 did not have any large solutions sales whereas in 2022 the market was returning albeit a number of expected contract awards were delayed.

Gross Margin

Despite an increase in Technology Solution sales (typically at 15% to 20%), which would normally bring down the average margin; better Technology margins and the increase in higher margin Services Division sales was enough to improve the Gross Margin Percent to 54% (2021: 46%). 

Operating Cost Base

Group administrative costs increased by 7% to £5.5m (2021: £5.2m) in total. A little over one third of the increase was because in 2021 we had £141,000 of support under the Covid furlough scheme whereas there was none in 2022. Approximately another third is the full year effect of growth initiatives started in 2021. The rest is because of the general inflationary background despite strenuous efforts to control costs.

Effect of Covid-19

Whilst Westminster has mitigated certain effects of the Covid-19 pandemic due to its multi revenue stream business model and early action taken by management to plan for the crisis, there is no doubt that Covid-19 did have a significant impact on the business and the performance in 2021. This has continued into 2022 as the prevailing economic situation has not fully returned to pre-covid levels in our sectors.

Operational EBITDA^ from underlying operations

The Group's loss from operations was £0.3m (2021: £1.9m). When adjusted for the exceptional and non-cash items and depreciation and amortisation, as set out below, the Group recorded an EBITDA^ loss from underlying operations of £0.1m (2021: £1.7m loss).

^ This is an Alternative Performance Measure refer to Note 2 for further details

Finance Costs

Total finance costs for 2022 £0.0m (2021: £0.0m), because the Group has very low debts. There was an underlying cash charge of £0.0m (2021: £0.0m).

Earnings Results for the Year

The Group loss before taxation was £0.4m (2021: £1.9m). The Group loss after tax was £0.0m (2021: £1.9m loss) and the loss per share was 0.00p (2021: 0.62p). 

Statement of Financial Position

The Group's gross assets amounted to £10.0m on 31 December 2022 compared with £9.3m on 31 December 2021. The main movement was a reduction in cash offsetting a £0.6m decrease in working capital and funding the losses.

The Group's current assets amounted to £5.6m on 31 December 2022 (2021: £5.3m) for the same reasons as the change in total Group assets.

The Group's trade and other receivables balance as at 31 December 2022 was £4.8m (2021: £3.7m). Average days sales outstanding at the year-end were 30 (2021: 57). This was improved by the large solution sale close to the year end.

Cash and cash equivalents were £0.3m at 31 December 2022 compared with £0.9m at 31 December 2021. The decrease is mainly due to losses and movement in working capital.

Trade and other payables were £2.6m (2021: £1.8m) and average creditor days were 51 (2021: 43). 

A deferred tax asset of £1.3m (2021: £1.0m) was held at the year end the movement related to the increase in expected tax rate.

Total equity on 31 December 2022 stood at a surplus of £7.4m (2021: £7.5m).

Again, the large solution sale close to the year-end has distorted the figures.

Key Performance Indicators

The Key Performance Indicators by which we measure performance of our business are set out in the Chief Executive Officer's Report.

Equity Issues

There were no equity issues in 2022 (2021: Funds raised £2.51m).

Summary of Warrants

As at 31 December 2022 the warrants outstanding were:

The S P Angel warrants have now lapsed.

For further details on warrants, refer to Note 21.

Cash Flow Statement

During the year, the Group had an operating cash outflow of £0.7m (2021: outflow £3.3m) which arose from the loss and an adverse working capital movement of £0.6m (2021: £1.6m adverse) which was a decrease in receivables, investment in the new projects and an increase in payables.

During the year, the Group raised nothing from the issue of new equity (2021: £2.51m gross).

Net cash used in underlying operating activities is presented excluding exceptional items, share options expense, and depreciation and amortisation.

Mark L W Hughes

Chief Financial Officer 

^ This is an Alternative Performance Measure refer to Note 2 for further details

Westminster Group PLC

^ This is an Alternative Performance Measure refer to Note 2 for further details

Westminster Group PLC

Consolidated and Company Statements of Financial Position

As at 31 December 2022

Peter Fowler Mark L W Hughes

Director Director

Westminster Group PLC

Company Statement of Changes in Equity

Consolidated Cash Flow Statement

Company Cash Flow Statement

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 2022 consolidate the individual financial statements of the Company and its subsidiaries. The Group 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 UK-adopted IAS. The Parent Company has elected to prepare its financial statements in accordance with UK-adopted IAS. The Company has taken advantage of the exemption under Section 408 of the Companies Act 2006 from presenting its own profit and loss account.

The financial information is presented in the Company's functional currency, which is British pounds sterling ('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 2022.

(ii) Subsidiaries

Where the company has control over an investee, it is classified as a subsidiary. The company controls an investee if all three of the following elements are present: power over the investee, exposure to variable returns from the investee, and the ability of the investor to use its power to affect those variable returns. Control is reassessed whenever facts and circumstances indicate that there may be a change in any of these elements of control.

De-facto control exists in situations where the company has the practical ability to direct the relevant activities of the investee without holding the majority of the voting rights. In determining whether de-facto control exists the company considers all relevant facts and circumstances, including:

· The size of the company's voting rights relative to both the size and dispersion of other parties

· who hold voting rights

· Substantive potential voting rights held by the company and by other parties

· Other contractual arrangements

· Historic patterns in voting attendance.

The consolidated financial statements present the results of the company and its subsidiaries ("the Group") as if they formed a single entity. Intercompany transactions and balances between group companies are therefore eliminated in full.

The consolidated financial statements incorporate the results of business combinations using the acquisition method. In the statement of financial position, the acquiree's identifiable assets, liabilities and contingent liabilities are initially recognised at their fair values at the acquisition date. The results of acquired operations are included in the consolidated statement of comprehensive income from the date on which control is obtained. They are deconsolidated from the date on which control ceases.

(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 a loss during the period of £0.0m (2021: £1.9m), The cash outflow from operating activities during the year was £0.7m (2021: £3.3m). 

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 current and future position of the Group, including new long-term contracts. As part of its assessment, management have taken into account the profit and cash forecasts, the continued support of the shareholders and the Directors' and management's ability to affect costs and revenues. Management regularly forecast results, the financial position and cash flows for the Group.

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 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 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.

Foreign currency

Items included in the financial statements of the Company are measured using the currency of the primary economic environment in which the entity operates - 'the functional currency'. The functional and presentation currency in these financial statements is the Great British Pounds (GBP).

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 5).

Segmental reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief decision-maker. The chief decision-maker has been identified as the Executive Board, at which level strategic decisions are made.

An operating segment is a component of the Group;

· That engages in business activities from which it may earn revenues and incur expenses,

· Whose operating results are regularly reviewed by the entity's chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance, and

· For which discrete financial information is available.

Revenue

Revenue recognition

Revenue represents income derived from contracts for the provision of goods and services, over time or at a point in time, by the Group to customers in exchange for consideration in the ordinary course of the Group's activities.

 Performance Obligations

Upon approval by the parties to a contract, the contract is assessed to identify each promise to transfer either a distinct good or service or a series of distinct goods or services that are substantially the same and have the same pattern of transfer to the customer. Goods and services are distinct and accounted for as separate performance obligations in the contract if the customer can benefit from them either on their own or together with other resources that are readily available to the customer, and they are separately identifiable in the contract.  

Transaction price

At the start of the contract, the total transaction price is estimated as the amount of consideration to which the Group expects to be entitled in exchange for transferring the promised goods and services to the customer, excluding sales taxes. Variable consideration, such as price escalation, is included based on the expected value or most likely amount only to the extent that it is highly probable that there will not be a reversal in the amount of the cumulative revenue recognised. The transaction price does not include estimates of consideration resulting from contract modifications, such as change orders, until they have been approved by parties to the contract. The total transaction price is allocated to the performance obligations identified in the contract in proportion to their relative stand-alone selling prices. Given the nature of many of the Group's products and services, which are designed and/or manufactured under contract to customers' individual specifications, there are typically no observable stand-alone selling prices. Instead, stand-alone selling prices are typically estimated based on expected costs plus contract margin consistent with the Group's pricing principles.

Whilst payment terms vary from contract to contract, an element of the transaction price may be received in advance of delivery. The Group may therefore have contract liabilities depending on the contracts in existence at a period end. The Group's contracts are not considered to include significant financing components on the basis that there is no difference between the consideration and the cash selling price.

Revenue recognition

Revenue is recognised as performance obligations are satisfied as control of the goods and services is transferred to the customer.

For each performance obligation within a contract the Group determines whether it is satisfied over time or at a point in time. Performance obligations are satisfied over time if one of the following criteria is satisfied:

· The customer simultaneously receives and consumes the benefits provided by the Group's performance as it performs;

· The Group's performance creates or enhances an asset that the customer controls as the asset is created or enhanced; or

· The Group's performance does not create an asset with an alternative use to the Group and it has an enforceable right to payment for performance completed to date.

The Group has determined that most of its contacts satisfy the overtime criteria, either because the customer simultaneously receives and consumes the benefits provided by the Group's performance as it performs, or the Group's performance does not create an asset with an alternative use to the Group and it has an enforceable right to payment for performance completed to date. For each performance obligation recognised over time, the Group recognises revenue using an input method, based on costs incurred in the period. Revenue and attributable margin are calculated by reference to reliable estimates of transaction price and total expected costs, after making suitable allowances or technical and other risks. Revenue and associated margin are therefore recognised progressively as costs are incurred, and as risks have been mitigated or retired. The Group has determined that this method appropriately depicts the Group's performance in transferring control of the goods and services to the customer.

If the overtime criteria for revenue recognition is not met, revenue is recognised at the point in time that control is transferred to the customer which is usually when legal title passes to the customer and the business has the right to payment.

When it is expected that total contract costs will exceed total contract revenue, the expected loss is recognised immediately as an expense.

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, 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 exceeds 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.

Property, plant and equipment

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 land is not depreciated.

Leases

All leases that fall under IFRS 16 will be recorded on the balance sheet as liabilities, at the present value of the future lease payments, along with an asset reflecting the right to use the asset over the lease term. Rentals payable under operating leases exempt from IFRS 16 are charged to income on a straight-line basis over the term of the relevant lease. At inception of a contract, the Group assesses whether a contract is, or contains, a lease based on whether the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.

The Group recognises a right-of-use asset and a corresponding lease liability at the lease commencement date. The lease liability is initially measured at the present value of the following lease payments:

- fixed payments;

- variable payments that are based on index or rate;

- the exercise price of any extension or purchase option if reasonably certain it can be exercised; and

- penalties for terminating the lease, if relevant.

The lease payments are discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Group's incremental borrowing rate for that type of asset.

The right-of-use assets are initially measured based on initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs. The right-of-use assets are depreciated over the period of the lease term using the straight-line method. The lease term includes periods covered by the option to extend, if the Group is reasonably certain to exercise that option. In addition, right-of-use assets may during the lease term be reduced by any impairment losses, if any, or adjusted for certain remeasurements of the lease liability.

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. 

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 carrying 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.

The Group recognises a loss allowance for expected losses on financial assets that are measured at amortised cost including trade receivables and contract assets. The amount of expected credit losses is updated at each reporting date to reflect changes in credit risk since initial recognition.

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.

The RiverFort sundry debtor is classified at fair value through profit or loss and is re-measured to fair value at the end of each reporting period. Gains and losses arising from re-measurement are taken to profit or loss, as are transaction costs incurred.

Management review at each reporting date the significant observable inputs and valuation adjustments with respect to the fair value measurement of the RiverFort debtor. The value of the Group's shares is observable in an active market as quoted prices are available hence valuation is within level 1 of the fair value hierarchy under IFRS 13, Fair value measurement. There were no changes in either the inputs or the valuation technique in the year.

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 and loans in subsidiaries

Subsidiary fixed asset investments are valued at cost less provision for impairment. The Group applies the IFRS 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss allowance for all investment and loans in subsidiaries.

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 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 include 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.

The share-based payment reserve represents equity-settled share-based employee remuneration until such share options are exercised or lapse. It also includes the equity settled items such as warrants for services rendered accounted for in accordance with IFRS 2.

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.

Pensions

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.

Share-based payments

The Group has two types of share-based payments other than employee compensation.

Warrants issued for services rendered which are accounted for in accordance with IFRS 2 recognising either the cost of the service if it can be reliably measured or the fair value of the warrant (using Black-Scholes option pricing models).

Warrants issued as part of Share Issues have been determined as equity instruments under IAS 32. Since the fair value of the shares issued at the same time is equal to the price paid, these warrants, by deduction, are considered to have been issued at nil value.

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.

Items included in the financial statements of each of the Group's entities are measured using the currency of the primary economic environment in which the entity operates ('the functional currency'). The Board has judged that because most of the Group's costs and a substantial part of its sales are situated in the UK.

Goodwill

Goodwill (note 9) has been tested for impairment by considering its net present value for the expected income stream in perpetuity at a discount rate judged to be 5% based on the normal lending rate we are offered leases at, which management consider is a good surrogate for cost of capital. It was also established that 20% (2021: 34%) is the discount rate at which no impairment still would be needed. The income is assumed to be flat and stable for the purpose of this test. Goodwill which does not show a net present value higher than its carrying cost will be impaired.

Deferred tax asset

Deferred tax assets (note 16) are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. The Directors have prepared projections for the next five years based on the best available evidence and have concluded that this deferred tax asset will be utilised in the future.

Subsidiary intercompany balances

Intercompany balances are stated at full value if the subsidiary is continuing to trade, and a reasonable projection indicates that the subsidiary will be able to repay the balance at some time in the future. Dormant subsidiaries owing money to the group are therefore fully impaired. The Group will support subsidiaries to meet their obligations as and when they fall due.

Debtors and Accrued Income

The collectability of debtor balances, which include amounts due from various projects including Ghana, have been reviewed in depth by management and the collectability of each debt has been considered carefully. The outcome of these reviews, as well as a more general exercise, is that the carrying value of the debtors is stated at the amount owed less a realistic provision for those debtors considered to be uncollectable or needing impairment. The collectability of the debt in relation to Ghana revolves around agreement with the counterparty over the quantum and the payment terms due under the contract for services rendered and early termination. Management have taken a prudent approach to ensure the carrying value of the amount owed is collectable. The accrued income has been estimated based solely on the volume of containers passing through the screening systems. Management believe the final income figure could be in excess of the amount disclosed in the financial statements.

Sundry Debtors

The collectability of sundry debtor balances has been reviewed and considered by the executive team. The carrying value of the sundry debtor in particular RiverFort has been tested and it is considered to be fairly stated although there is potential for a contingent liability as disclosed in Note 25.

The judgements involved in determining the appropriate classification of the receivable being a financial asset held at fair value through profit or loss include the asset not being held for trading investment in an equity instrument that is designated at fair value through other comprehensive income at initial recognition. The contractual terms of the sundry debt does not give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. The RiverFort sundry debtor balance is therefore measured at fair value and any gains and losses recognised in the profit and loss as they arise.

Revalued freehold property

The freehold property is stated at fair value. A full revaluation exercise was carried out in December 2020. 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. The Directors are of the opinion that the 2020 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.

New standards, amendments and interpretations

The following new standards have been adopted as appropriate and where required the prior year's figures have been restated.

Onerous Contracts - Cost of Fulfilling a Contract (Amendments to IAS 37)

The amendments specify that the 'cost of fulfilling' a contract comprises the 'costs that relate directly to the contract'. Costs that relate directly to a contract can either be incremental costs of fulfilling that contract (examples would be direct labour, materials) or an allocation of other costs that relate directly to fulfilling contracts (an example would be the allocation of the depreciation charge for an item of property, plant and equipment used in fulfilling the contract). This applied for annual reporting periods beginning on or after 1 January 2022.

Reference to the Conceptual Framework (Amendments to IFRS 3)

The amendments update an outdated reference to the Conceptual Framework in IFRS 3 without significantly changing the requirements in the standard. This applied for annual reporting periods beginning on or after 1 January 2022.

Amendment to IFRS 9 Financial Instruments

The amendment clarifies which fees an entity includes when it applies the '10 per cent' test in paragraph B3.3.6 of IFRS 9 in assessing whether to derecognise a financial liability. An entity includes only fees paid or received between the entity (the borrower) and the lender, including fees paid or received by either the entity or the lender on the other's behalf. This applied for annual reporting periods beginning on or after 1 January 2022.

Property, Plant and Equipment - Proceeds before Intended Use (Amendments to IAS 16)

The amendments prohibit deducting from the cost of an item of property, plant and equipment any proceeds from selling items produced while bringing that asset to the location and condition necessary for it to be capable of operating in the manner intended by management. Instead, an entity recognises the proceeds from selling such items, and the cost of producing those items, in profit or loss. This will apply for annual reporting periods beginning on or after 1 January 2022.

New standards, amendments and interpretations adopted early

Income Taxes (Amendments to IAS 12)

This implements a so-called 'comprehensive balance sheet method' of accounting for income taxes which recognizes both the current tax consequences of transactions and events and the future tax consequences of the future recovery or settlement of the carrying amount of an entity's assets and liabilities. Differences between the carrying amount and tax base of assets and liabilities, and carried forward tax losses and credits, are recognized, with limited exceptions, as deferred tax liabilities or deferred tax assets, with the latter also being subject to a 'probable profits' test. The amendments are effective for annual reporting periods beginning on or after January 1, 2023 but have been adopted early.

Standards amendments and interpretations in issue not yet effective

IAS 1 Presentation of Financial Statements

IAS 1 "Presentation of Financial Statements" sets out the overall requirements for financial statements, including how they should be structured, the minimum requirements for their content and overriding concepts such as going concern, the accrual basis of accounting and the current/non-current distinction. The standard requires a complete set of financial statements to comprise a statement of financial position, a statement of profit or loss and other comprehensive income, a statement of changes in equity and a statement of cash flows. The amendments are effective for annual periods beginning on or after January 1, 2023.

IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors

This standard is applied in selecting and applying accounting policies, accounting for changes in estimates and reflecting corrections of prior period errors. The standard requires compliance with any specific IFRS applying to a transaction, event or condition, and provides guidance on developing accounting policies for other items that result in relevant and reliable information. Changes in accounting policies and corrections of errors are generally retrospectively accounted for, whereas changes in accounting estimates are generally accounted for on a prospective basis. The amendments are effective for annual periods beginning on or after January 1, 2023.

IFRS 17 Insurance Contracts

IFRS 17 requires insurance liabilities to be measured at a current fulfilment value and provides a more uniform measurement and presentation approach for all insurance contracts. These requirements are designed to achieve the goal of a consistent, principle-based accounting for insurance contracts. IFRS 17 supersedes IFRS 4 Insurance Contracts as of 1 January 2023. This is not applicable to the Group.

Classification of Liabilities as Current or Non-Current (Amendments to IAS 1)

IFRS 3 "Business Combinations" outlines the accounting when an acquirer obtains control of a business (e.g. an acquisition or merger). Such business combinations are accounted for using the 'acquisition method', which generally requires assets acquired and liabilities assumed to be measured at their fair values at the acquisition date. The amendments aim to promote consistency in applying the requirements by helping companies determine whether, in the statement of financial position, debt and other liabilities with an uncertain settlement date should be classified as current (due or potentially due to be settled within one year) or non-current. This will apply for annual reporting periods beginning on or after 1 January 2023.

Deferred Tax Related to Assets and Liabilities Arising from a Single Transaction - Amendments to IAS 12

Targeted amendments to IAS 12 Income Taxes clarify how companies should account for deferred tax on certain transactions - e.g. leases and decommissioning provisions. The amendments narrow the scope of the initial recognition exemption (IRE) so that it does not apply to transactions that give rise to equal and offsetting temporary differences. As a result, companies will need to recognise a deferred tax asset and a deferred tax liability for temporary differences arising on initial recognition of a lease and a decommissioning provision. This will apply for annual reporting periods beginning on or after 1 January 2023.

Alternative performance measures (APM)

In the reporting of financial information, the Directors have adopted the APM 'EBITDA profit from underlying continuing and discontinued operations (APMs were previously termed 'Non-GAAP measures'), which is not defined or specified under International Financial Reporting Standards (IFRS).

The Directors also look at recurring revenue as a key performance indicator. This is revenue arising from multi-year contracts.

These measures are not defined by UK-adopted IAS 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, UK-adopted IAS measurements.

Purpose

The Directors believe that the EBITDA 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 UK-adopted IAS 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 continuing and discontinued 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-makers in the Group. The Business Units operating during the year are the two operating divisions; Services and Technology. This split of business segments is based on the products and services each offer.

 This is an Alternative Performance Measure refer to Note 2 for further details

Geographical areas

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.

Some of the Group's assets are located outside the United Kingdom where they are being put to operational use on specific contracts.

Information about major customers

No single customer contributed more than 10% of the Group revenue in 2022.

^ This is an Alternative Performance Measure refer to Note 2 for further details

4. Finance costs

5. Loss from operations

The following items have been included in arriving at the loss for the financial year

Auditor's remuneration

Amounts payable in 2022 relate to PKF in respect of audit and other services. The local Audit in Sierra Leone is performed by Moore Sierra Leone (both years). The local audit in Ghana was performed by PKF Ghana in 2021 only.

6. Taxation

Analysis of tax charge / (credit) in year

The Finance Act 2020 set the Corporation Tax main rate at 19% for the financial year beginning 1 April 2020. Deferred taxes at the balance sheet date have been measured using a 25% tax rate and reflected in these financial statements.

For further details on Tax refer to Note 16.

7. Employee costs

Employee costs for the Group during the year

Group

The Group operates a stakeholder pension scheme. The Group made pension contributions totalling £73,000 during the year (2021: £68,000), and pension contributions totalling £83,000 were outstanding at the year-end (2021: £15,000).

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 £635,000 (2021: £656,000) and the highest paid director received remuneration totalling £206,000 (2021: £196,000).

Average monthly number of people (including Executive Directors) employed

8. Loss per share

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: