Westminster Group Regulatory News (WSG)

The information contained in this announcement is deemed by the Company to constitute inside information as stipulated under Article 7 of the Market Abuse Regulations (EU) No 596/2014, which is part of UK law by virtue of the European Union (Withdrawal) Act 2018. With the publication of this announcement via a Regulatory Information Service, this inside information is now considered to be in the public domain. 

Westminster Group Plc

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

Trading Update

Westminster Group Plc (AIM: WSG), a leading supplier of managed services and technology-based security solutions worldwide, is pleased to provide a trading update for the 12 months to 31 December 2020 and an update on its current business activities.

2020 Review

A defining aspect of 2020 has been the global impact of Covid-19 and we are pleased to report that, despite parts of our business being adversely impacted by lockdowns and travel restrictions, the strength of our business model, with multiple revenue streams from multiple sources around the world, together with our global footprint, has meant that we were better placed than many companies to deal with the numerous challenges created by the pandemic.

We commenced 2020 on a positive note, with visibility over circa £8m of annual recurring revenues from our long-term managed services, guarding and maintenance contracts. Our managed services contracts were running at record levels in early 2020, we had a healthy backlog of work in hand, our product sales, guarding and training businesses were all operating successfully, and we had positive momentum with a number of our major business development activities. In short, we were on course to continue our year on year revenue growth and to deliver healthy post tax profits.

As an international business we regularly monitor global activities for issues that may affect our business and in early January 2020 we identified the potential threats and opportunities from the Covid-19 outbreak, long before it was declared a pandemic. We took early steps accordingly to mitigate any adverse impact and to maximise opportunities including restructuring our operations to maintain services and keep our people safe. We undertook targeted marketing and significantly increased our stockholding of products such as fever screening equipment, in order to deal with expected demand. These measures were to prove invaluable as the Covid crisis unfolded and logistics became challenging.

H1 2020 was very successful, delivering a 24% increase over H1 2019 revenues, continuing our four years of double-digit % revenue growth, and resulting in a pre-tax profit of circa £230k. This, in part, was due to record revenues from our West African airport operations for the first two months of the year, the delivery of the 2nd Asian Port scanner (secured in 2019), a successful campaign around Covid sales resulting in a surge of product sales, a significant contract for a global financial institution worth $665k supplying fever screening to their 85 offices in 37 countries and of course an increasing contribution from our Ghana operations.

H2 2020 was a more challenging period due to the prolonged impact of Covid lockdowns and travel restrictions. Our West African airport operations were completely closed for several months, reopening only at the end of July 2020 with significantly reduced traffic volumes, even lower than we experienced during the height of the Ebola crisis. However, we witnessed a steady and sustained improvement in passenger numbers towards the end of the 2020 year, which is encouraging for 2021. Our training and guarding operations were heavily impacted throughout H2 2020 and the spike in Covid related sales we saw in H1 2020 dwindled as companies retrenched and reduced spending due to uncertainty. Ghana continued to show increasing revenues making a healthy contribution.

Despite the challenges created by Covid, and in some cases because of it, 2020 was a busy year and a year in which, due to our early action and multiple revenue stream business model, we managed to not only navigate the crisis, maintain our operations and keep our people safe but continued to make progress on a number of fronts. During the year we expanded our marketing activities, including a UK focussed TV advertising campaign across a variety of channels, with the theme 'Get Back to Work Safely'. We launched a new group wide website as part of our One Company, One Vision programme. We continued to deliver on business opportunities, supplying goods and services to a wide range of customers in 78 countries across 6 continents including National Governments, Sports Stadia, Educational Facilities, Conference/Exhibition Centres, Shopping Malls, Financial Institutions, Hospitality Sector and Medical Centres etc., and we achieved some notable contract wins, such as the coveted Palace of Westminster contract. We undertook various initiatives such as the deployment of PPE vending machines, fever screening trials and expanded our strategic partnerships. We 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.

All these activities helped deliver 2020 results which, although encouraging given the pandemic, would have been even better If it were not for the prolonged travel restrictions and lockdown periods in the year which delayed the signing of various anticipated contracts and the delivery of various already signed, such as the Palace of Westminster and the final completion of our Asian Port project, the revenues of which will now be recognised in 2021. Despite all the challenges, delays and revenue slippage into 2021, we expect to report revenues of around £10m (2019: £10.9m) but due to improved margins still expect to deliver a pre-tax loss broadly in line with market expectations.

As part of our Corporate Social Responsibility activities we were pleased to continue to provide much needed support through the Covid pandemic to the communities in which we operate through our own registered charity the Westminster Group Foundation.

Outlook

The outlook for 2021 is looking positive. Revenues from existing contracts, including long-term managed services and the revenue slippage from 2020 provide a basis for our optimism and together with the ongoing recovery from Covid-19 in our guarding, training and West African Airport operations, which in January 2021 experienced the highest passenger numbers since the airport closure in March 2020, some 14.6% ahead of budget, is all encouraging. These together with recent and anticipated new contract wins, are expected to put the Company back on course for the double digit % revenue growth in 2021 that we were experiencing prior to the Covid impact, although the Directors recognise that the global outlook remains uncertain and subject to change.

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. At the time of our recent fundraising in December 2020 we listed out some of the larger project opportunities we are pursuing, which remain in play, and we also announced that we were in the advanced stages of securing a long-term contract with the Government of an African country for the provision of airport security managed services relating to five airports in the country. Whilst in the current climate we have, frustratingly, experienced delays in travelling and finalising matters we remain excited by this near-term prospect although there can never be absolute certainty of outcome or timing.

The final legalisation of documents relating to the formation of Westminster Arabia in the Kingdom of Saudi Arabia was delayed by several months due to the closure of government and embassy offices as a result of Covid, which has delayed progressing some of the project opportunities we have been working on in the Kingdom, however this process is now being completed and we look forward to Westminster Arabia being an important part of our growth through 2021 and beyond. The Kingdom is a potentially significant market for Westminster particularly given the Crown Prince's 2030 vision which offers opportunities for several of our Group services.

To date our product sales are in line with budget and our Ghana operations continue to remain largely unaffected by Covid and continue to generate healthy revenues, which demonstrates the value of this long-term managed services contract. In 2020 the project generated circa $2.6 million USD revenues for Westminster, and we expect this to continue to rise as the port expands capacity and the fourth berth comes on stream later in 2021.

We have recently entered into an exclusive service agreement with a company about to launch an innovative and verified Covid testing service with UK government approval, under which Westminster will provide a range of specialist services. Whilst too early to assess the likely scale or success of the project, this initiative could potentially lead to interesting business developments in what could be an important new service in helping to open up the leisure and entertainment sector.

We are closely monitoring geo-political events with regards to the US and Iran regarding the JCPOA agreement. As reported in our 2018 Annual Report and our 2019 interim Report we previously signed a 15 year, €24 million per annum contract for airport security, with the full support on the British Government, which was put on hold when President Trump unilaterally withdrew from JCPOA. Should circumstances change and US and international sanctions, including banking, be lifted, there remains an opportunity for our German office to revisit this prospect.

The £5m capital raise we undertook in December has enabled the Company to repay all its outstanding Convertible Loan Notes and the outstanding RiverFort loan, saving some £300k annual costs, which means we enter 2021 debt free, other than operating leases and with the capital reserves to deal with the current global uncertainties and to undertake current and anticipated new projects.

At this current time and excluding the revenue that was expected to be recognised in 2020 that will now be recognised in 2021, the Company expects to meet 2021 financial year market expectations at the revenue and PBT level.

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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 (including Fever 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.