TIDMWSG
RNS Number : 0858H
Westminster Group PLC
05 June 2017
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES
OF ARTICLE 7 OF EU REGULATION 956/2014
For immediate release
5 June 2017
Westminster Group Plc
Final Results for the year ended 31 December 2016 and
Directorate Changes
Westminster Group Plc ('Westminster' or the 'Company'), the AIM
listed supplier of managed services and technology based security
solutions to governments and government agencies, non-governmental
organisations (NGO's) and blue chip commercial organisations
worldwide, is pleased to announce its results for the year ended 31
December 2016 and changes to the board.
Key Points:
Operational
-- Received Letter of Intent on potential major long term
aviation security opportunity in the Middle East with annual
initial revenues of circa GBP35m and significant work undertaken in
the year in negotiating and developing the opportunity and in
setting up the appropriate supply chain and infrastructure;
-- Substantial incremental business potential relating to the
above Middle East airport opportunity developed;
-- Further interest and growing awareness in long term airport
managed services business in Emerging Markets;
-- Three more long term airport security MoU's signed in 2016
and numerous other opportunities being progressed;
-- Strong recovery in West Africa passenger numbers following
end of Ebola crisis in H1 boosting 2016 revenues;
-- Sovereign Ferries commenced initial operations in December
2016 and major capital expenditure now largely over;
-- Technology Division delivered a wide range of sales and
solutions around the world, signed border security project MoU in
Middle East and launched new and extensive website improving
enquiry rates;
-- Continued to expand international presence including
establishing subsidiary companies and an operational office in
Germany to provide strategic support to the Group;
-- Westminster's ex-pat team in Sierra Leone awarded Ebola
Medals for Service in West Africa during the Ebola crisis.
Financial
-- Revenues up by 31% to GBP4.4m (2015: GBP3.4m);
-- Gross margin increased to 71 % (2015: 58 %);
-- Adjusted EBITDA profit GBP25k (2015: Loss GBP360k);
-- Raised GBP3m in year to support business development and working capital;
-- GBP1.2m of debt converted into equity in the year;
-- Loss per share reduced by 29% to 2.5p (2015: 3.5p).
Post Period End
-- Substantial progress achieved towards finalising contract
negotiations on the Middle East airport project opportunity
-- Recovery in West Africa airport passenger numbers continues;
-- Darwin Capital Limited debt now converted into equity and eliminated;
-- GBP0.6m new equity raised in February 2017 and a further GBP1m raised in April 2017;
-- CTAC claim award finalised and property assets transferred
from vendors to Westminster. Any sale of these assets will benefit
2017;
Commenting on the results and current trading Peter Fowler,
Chief Executive of Westminster Group, said:
"I am pleased to report in 2016 the Group has delivered a much
improved financial performance both at the revenue and adjusted
EBITDA levels.
"Our business is now in a better position than it has been for
some time as the challenges and trials of the last few years are
now largely behind us. Our market proposition, particularly our
managed services business, has never been more relevant against a
backdrop of increasing threats to air travel and a more unstable
world and we are well positioned though our extensive network and
governmental relationships to transform our business. Over the next
few months and years we have an opportunity to achieve
unprecedented growth from the prospects we are pursuing such as the
Middle East airport opportunity. The Board and I remain committed
to delivering on this potential.
"Finally we will be making some board changes at the AGM this
year as detailed in the Chairman's Report. I would like to thank
Ian, our outgoing CFO, for his excellent contribution over the last
few years and wish him well, and to welcome Martin on board as our
new CFO at this inflexion point in our growth story"
For further information please contact:
Westminster Group plc. Tel: 01295 756
300
Peter Fowler (Chief Executive)
Ian Selby (Chief Financial Officer)
S. P. Angel Corporate Finance Tel: 020 3470
LLP (NOMAD + Joint Broker) 0470
Stuart Gledhill/Lindsay Mair
Beaufort Securities Limited (Joint Tel: 020 7382
Broker) 8300
Elliot Hance
Walbrook PR (Financial PR) Tel: 020 7933
8780
Tom Cooper/Paul Vann 0797 122 1972
tom.cooper@walbrookpr.com
Notes:
Westminster Group plc is a leader in the supply of system
solutions and products to the security, defence, fire protection
and safety markets worldwide.
Westminster's principal activity is the design, supply and
ongoing support of advanced technology security solutions,
encompassing a wide range of surveillance, detection, tracking and
interception technologies and the provision of long term managed
services contracts such as the management and running of complete
security services and solutions in airports, ports and other such
facilities together with the provision of ferry services, 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. For further information please visit
www.wsg-corporate.com.
Neither the content of the Company's website nor any website
accessible by hyperlinks on the Company's website is incorporated
in, or forms part of, this Announcement.
Chairman's Statement
Overview
I am pleased to present the Final Results for Westminster Group
plc for the year ended 31 December 2016.
As we continue to recover from the challenges of the West Africa
Ebola crisis, the Group has delivered a much improved financial
performance both at the revenue and adjusted EBITDA levels, with
revenues up by 31% to GBP4.4m (2015: GBP3.4m), resulting in a small
GBP25k profit at EBITDA level (2015: GBP360k EBITDA loss). During
the year the Group raised GBP2.7m net from the issue of equity
(GBP1.3m) and convertible unsecured loan notes (GBP1.4m) to support
working capital requirements and business development costs.
The Group continued to expand its operations, opportunities and
presence around the world, notably in the Managed Services business
which is now a key focus for the Group. More detail on the
strategic developments, projects and opportunities we are
undertaking is covered under the CEO's Strategic Report.
We continue to work closely with and receive excellent support
from the Foreign Office and UK Diplomatic Missions around the world
and I am very grateful for the support these and other governmental
departments provide our teams and our operations in the various
countries we are active in.
Corporate Conduct
We operate worldwide with a focus on emerging markets and in a
sector where discretion, professionalism and confidentiality are
essential. It is vitally important that we maintain the highest
standards of corporate conduct. The Corporate Governance Report
sets out all of 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.
Social Responsibility
As a Group, we take our corporate social responsibilities very
seriously, particularly as we operate in emerging markets and in
some cases in areas of poverty and deprivation. I am proud not only
of the support and assistance we as a company provide in many of
the regions in which we operate but also the support and
interaction our staff provide. I am also proud of our charitable
support to various bodies and organisations not least our own
registered charity the Westminster Group Foundation.
Employees and Board
After 10 years with the Group, a period I have thoroughly
enjoyed, I have decided it is now time for me to step aside as
Chairman, although I will continue to remain involved with the
Group. As our Group is now anticipating significant potential
growth, and due to my other commitments, I feel I am no longer able
to devote the time required to chair the Group. Accordingly, I
propose to stand down at the AGM and our Deputy Chairman, Sir Tony
Baldry, will take over the chair. I will continue as Deputy
Chairman.
Ian Selby, who has been the Group CFO since July 2011, will be
stepping down from the Board at the AGM in June to concentrate on
his other ventures. Ian has been a valued part of our team and has
helped us achieve many of our successes and helped steer us through
difficult times. On behalf of the Company and the Board I wish to
thank Ian for all his efforts. I am pleased to say however that Ian
will remain a consultant to the Company providing assistance where
required.
I am delighted to welcome Martin Boden as our new CFO who will
join the Board on 29 June 2017, the date of this year's AGM. Martin
has considerable experience with high growth businesses and sales
into international markets. He has worked with both AIM and FTSE
250 listed companies as well as Private Equity owned organisations,
having most recently been CFO at Genus plc and JDR, a privately
owned energy services business. Martin has worked closely with both
UKTI and UK Export Finance on overseas projects. I believe Martin's
experience of international transactions and financial management
of high growth businesses brings additional strength to our
Board.
In November 2016 we announced that James Sutcliffe had joined
the Board as a Non-Executive Director and Chair of the Audit
Committee. James has considerable experience delivering major
international projects particularly in the infrastructure, ports
and marine sector. He is a former Chairman of UKTI (Ports &
Marine 2006-2013) promoting UK business in Emerging Markets in the
Far East, India, Eastern Europe and Mediterranean countries. I am
pleased to say James has become a valued addition to our team.
As a service based business, our employees are key to delivering
success. I believe we have an exceptional workforce and I would
like to take this opportunity to express my appreciation to all our
employees, both in the UK and our ever expanding overseas
workforce, who have worked extremely hard during the year.
I would also like to pay tribute to our employees and the
various individuals and organisations for their generous support
and contributions to our registered charity the Westminster Group
Foundation. We work with local partners and other established
charities to provide goods or services for the relief of poverty or
advancement of education or healthcare making a difference to the
lives of the local communities in which we operate. For more
information or to make a donation please visit
www.wg-foundation.org
I would finally like to extend our appreciation to all our
investors for their continued support and also to our strategic
investors who are bringing their expertise to help deliver value
for all.
Lt. Col. Sir Malcolm Ross GCVO, OBE
Chairman
5 June 2017
Chief Executive Officer's Strategic Report
Business Description
Our vision is to build a global business with strong brand
recognition delivering niche security solutions and long term
managed services to high growth and emerging markets around the
world with a particular focus on long term recurring revenue
business.
Our target customer base is primarily governments and
governmental agencies, critical infrastructure (airports, ports
& harbours, borders, power plants etc.) and large scale
commercial organisations worldwide.
Our business has evolved from a traditional UK focused security
business to what can be described today as a truly international
business. Furthermore, our evolution continues as we expand our
operations into new areas and new territories creating additional
opportunities around the world in the provision of long term
security and managed services.
We deliver our wide range of solutions and services through a
number of operating companies which are currently structured into
two operating divisions; Managed Services and Technology; both
primarily focused on international business as follows:
Managed Services division:
Focusing on long term (typically 10 - 25 years) recurring
revenue managed services contracts such as the management and
operation of security solutions in airports, ports and other such
facilities, together with the provision of ferry services,
manpower, and consultancy and training services.
Technology division:
Focussing on providing advanced technology led security
solutions encompassing a wide range of surveillance, detection,
tracking, screening and interception technologies to governments
and organisations worldwide.
In addition to providing our business with a broad range of
opportunities, these two divisions offer cost effective dynamics
and vertical integration with the Technology Division providing
vital infrastructure and complex technology solutions and expertise
to the Managed Services Division, thereby reducing supplier
exposure and cost and increasing purchasing power. Our Managed
Services Division provides a long term business platform to deliver
other cost effective incremental services from the Group.
We continue to deliver a wide range of solutions to governments
and blue chip organisations around the world, and our reputation
grows with each new contract delivered. This in turn underpins our
strong brand and provides a platform from which we can expand our
Managed Services business which is now a key focus for the Group
with its growth prospects in Emerging Markets and the resulting
significant recurring revenue stream potential.
Business Review
As highlighted in the Chairman's Statement, and elsewhere in
this document, we have delivered a much improved performance in
2016.
Operationally we have delivered a wide range of security
products and solutions around the world and continue to expand our
international presence including the establishment of subsidiaries
and an operational office in Germany which will provide strategic
support to our projected growth.
Enquiry levels remain healthy and levels of interest in the
Group's services remains high across both operating divisions.
However, whilst our Technology Division provides the technological
resources and platform to expand our operations around the world it
is our Managed Services Division, with its potential for delivering
large scale, long term, recurring revenue and transformational
growth, which is increasingly our core focus, particularly within
the aviation security sector.
Managed Services Division
The Group's Managed Services Division continues to make progress
on a number of fronts.
Airport Security:
Our airport security operations in West Africa are experiencing
strong recovery from the Ebola crisis that devastated the region
and which finally came to an end in March 2016. Whilst airline
traffic has not yet fully recovered to pre-Ebola levels, we have
seen steady growth with flight schedules increasing and new
airlines such as KLM commencing services. In 2016 our embarking
passenger numbers grew by 52% to 97k (2015: 64k). We anticipate the
recovery towards pre-Ebola levels will continue and are encouraged
to have seen a further increase of 27% in embarking passengers in
Q1 2017 to 28k (Q1 2016: 22k - albeit this was before the region
was declared Ebola free). This together with the cost reduction
measures we have taken has resulted in the operations once again
making a worthwhile contribution.
In addition, cargo screening operations commenced in West Africa
during 2016, following the cargo operations and security screening
service achieving the coveted RA3 status. The new cargo sheds
currently have far greater capacity than current utilisation and
the authorities are looking to build on this and create a regional
hub for cargo services.
Westminster's international reputation and expertise in the
field of aviation security continues to grow, evidenced by both the
number of new training and support contracts secured for airports
around the world and the ever growing pipeline of opportunities for
aviation security projects.
In this respect, we have invested considerable time, effort, and
expense in progressing several large scale long term potential
opportunities. Amongst such opportunities in progress are those for
which we have previously announced the signing of a Memorandum of
Understanding (MoU) and others that are approaching that stage,
including our previously announced major long term airport security
project opportunity within the Middle East for which the Company
received a letter of intent in May 2016. Substantial progress has
been achieved towards closing this opportunity which is expected to
result in annual revenues in excess of GBP35m.
With regard to the Middle East project opportunity, the Company
has been actively preparing the required support structures and
infrastructure necessary to deliver the projects, including
organising a complex supply chain and other required resources.
Contracts of this size and nature are not only time-consuming
but involve complex negotiations with numerous commercial and
political bodies. Discussions can ebb and flow over many months
with periods of intense activity which can be followed by long
periods of inactivity. No two opportunities are the same. By way of
example, two of the previously announced MoUs, the Asia MoU signed
in February 2015 and the MoU announced on 12 October 2015, are now
considered longer term opportunities due to current political
issues within the countries concerned. In contrast, the East
African airport opportunity announced in November 2012 and which
has taken far longer than anticipated due to the government's own
internal processes and various political issues unrelated to our
project, is now once again quite active. All other announced MoU's
are in various stages of development and continue to be
progressed.
Whilst there is never certainty in relation to either the
outcome or timing of such negotiations, the considerable progress
made to date with the Middle East and other opportunities and the
ongoing support received from UK governmental departments and
overseas missions is extremely encouraging.
Airport security solutions and our experience in the sector
represent a significant growth opportunity for our Managed Services
Division, however this is certainly not the only area of expansion.
We are also in discussions with port operators on similar long term
managed services solutions as well as continuing to look at managed
services and recurring revenue opportunities beyond security.
Ferry Project:
In November 2014, we signed a 21 year contract for the operation
and management of ferry terminals and the provision of a
professional ferry service in Sierra Leone across the estuary
between the capital Freetown and the International Airport on the
Lungi peninsula.
The background to this project is that passengers travelling to
and from the airport to the capital, Freetown, either have to cross
the estuary or spend several hours driving on difficult roads. With
over 200,000 passengers a year and growing passing through the
airport, the vast majority of which will need to cross the estuary,
there is a captive market and a strong need for a professional
ferry service. The previous ferry services were largely unsuitable
and at times unable to cope with volumes of passengers and it could
take over an hour to transport passengers to and from the airport.
This was a potential limitation on the future growth of the airport
and in turn our revenues and one of the reasons this was considered
a good opportunity for the Group's expansion.
Our ferry services, under the branding Sovereign Ferries,
provide a much needed professional service with well-trained
uniformed staff, air conditioned transit coaches, well equipped
terminals and fast, safe and internationally compliant vessels.
Over the past two years we have not only built the required
infrastructure and upgraded the ferry terminals but have had to
deal with a number of challenges including prolonged vessel repairs
to our flagship vessel the Sierra Queen. I am pleased to report
therefore that this long-awaited service finally commenced with a
soft start in mid-December 2016 and with formal services commencing
in January 2017.
The current addressable ferry market is estimated to be worth
around GBP4 million per annum in revenues. As we now move from a
period of major capital expenditure to an operational phase, our
focus for the business over the next 12 months is to grow our
market share. It is pleasing that we have already secured 3% of the
market and we believe that, given the size of the captive market,
the superior quality of our service, our vessel safety and the
numerous local marketing initiatives we are pursuing we will
continue to grow volumes to well beyond a 14% share (the level at
which we anticipate the operation will be providing a positive
contribution).
In addition, we are looking at new markets and revenue streams
by the provision of new services such as a coastal taxi service
around Freetown, for which we believe there is a strong and
untapped demand together with new regional routes.
The current service is focussed on the Sierra Princess, which
will shortly be joined by the Sierra Duchess, which we have
acquired on a favourable lease basis, to further provide additional
flexibility to our inshore and water taxi services. Both vessels
are impressive inshore fast ferry craft specifically fitted out to
transport passengers and their luggage safely and in comfort. These
craft can carry up to 45 passengers and their luggage in comfort.
Our flagship sea going vessel, the larger 200 seat Sierra Queen, is
now operational and subject to a routine engine service and will be
brought into service in due course as demand and operations dictate
and for longer distance regional routes currently being
planned.
Technology Division
During the year, the Technology Division secured contracts for a
wide range of products and services delivered to clients from
around the world. By way of example of the diversity of our
deliverables, we provided equipment for a nuclear facility in North
America; advanced screening solutions in West Africa; security
solutions for a North African postal service; secured a museum in
Egypt; equipped various prisons and supplied a South African
forensic police service facility with specialist equipment. In 2016
we had clients in Aruba, Australia, Azerbaijan, Bahamas, Bulgaria,
China, Croatia, UAE, Egypt, Gambia, Germany, Greece, Hong Kong,
India, Indonesia, Iraq, Italy, Jamaica, Jordan, Kenya, Korea,
Netherlands, Nigeria, Portugal, Qatar, Romania, Rwanda, Saudi
Arabia, Senegal, Somalia, South Africa, Tanzania, Thailand and
Vietnam.
In addition, the Division has provided various equipment and
technology support services to the Managed Services Division.
The Technology Division continues to build its recurring revenue
base of maintenance and service contracts both in the UK and
overseas and now has recurring revenue maintenance contracts with
governmental and corporate clients valued at over GBP180,000 per
annum. These contracts help underpin the cost base of the Division
and is an area of the business we expect to grow further.
The ongoing world-wide slump in oil prices continues to impact
previously announced projects such as the Americas consultancy and
pipeline projects due to government cut backs on capital spending.
As the oil price is expected to remain an issue for some time and
whilst we continue to investigate alternative funding solutions,
these projects along with the US Bridge project no longer form part
of the Group's internal forecasts as we concentrate on the rest of
the business and, in particular, our major managed services project
opportunities.
Strategic Review
Last year I announced we were undertaking a wide ranging
strategic review of our operations to ensure we are well positioned
to maximise opportunities going forward and successfully take the
business to a new level. As part of that review we have made a
number of changes to our management structure, broadening the level
of experience and expertise to assist our expansion, creating a PLC
Board responsible for overall performance and strategy of the
Group, an Operations Board responsible for day to day management of
the Group's business and established an International Advisory
Board to advise the Group on international issues including
governmental and client liaison, cultural, ethnic and religious
sensitivities, compliance with legal issues, financing and general
business development.
This review is ongoing and we continue to review our operations,
structure, management and advisors. Our business is facing
unprecedented growth prospects, particularly with our airport
security operations, and it is essential we have the right
leadership, management and strategies in place to successfully
deliver such growth. Accordingly, the changes we have made and
intend to make in the near future, to strengthen our management and
broaden our range of experience and expertise, together with the
strategies we are putting in place, will, I believe, serve the
Company well and greatly assist our planned growth.
Performance Indicators
The Key Performance Indicators by which we measure performance
of our business are set out in the Chief Financial Officer's
Report.
Financial Review
The financial review for the year ended 31 December 2016 is set
out in the Chief Financial Officer's Report.
Principal Risks and Uncertainties
These are referenced along with key mitigation strategies in the
annual report and financial statements for the year ended 31
December 2016.
Business Outlook
Our business is now in a better position than it has been for
some time. The challenges and trials of the last few years dealing
with the effects of Ebola are now largely behind us and our West
African airport operations, in particular, are now producing a
healthy and growing contribution. Our ferry service is at last
operational and should also be making a contribution by the end of
2017 as the service expands. Our Technology Division continues to
deliver a wide range of products and solutions around the world to
destinations which, so far in 2017, include countries as widespread
as Bangladesh, Belgium, UAE, Ethiopia, Indonesia, Guyana, Italy,
Lithuania, Nigeria, Tanzania and the UK. We continue to grow our
recurring revenue base with maintenance and service contracts both
within the UK and overseas. Our Managed Services Division continues
to make progress on a number of fronts. We are securing an
increasing number of contracts to assist airport authorities around
the world with their equipment and training needs and this further
enhances our endeavours and prospects for our large scale, long
term airport opportunities.
Over the next few months and years we have an opportunity to
achieve unprecedented growth from the prospects we are pursuing,
such as the Middle East airport opportunity, any one of which could
be transformational for the Group. The Board and I remain committed
to delivering on this potential.
P.D. Fowler
Chief Executive Officer
5 June 2017
Chief Financial Officer's Report
Revenue
Revenues were GBP4.4m (2015: GBP3.4m). The Technology Division
recorded revenues of GBP1.6m (2015: GBP1.7m) and the Managed
Services Division GBP2.8m (2015: GBP1.7m). Managed Services
revenues recovered from 2015 due to the abatement and end of the
Ebola crisis in West Africa and the consequent growth in passenger
volumes and security fees. Technology Division revenues were
broadly similar to 2015. Revenues from the West African ferry
service commenced in December 2016 following soft launch but were
immaterial during the financial year 2016.
Gross Margin
Gross margin rose to 71% (2015: 58%) due to both the increased
revenue contribution from the Managed Services division and its
higher margin and also from improving performance in the Technology
Division.
Operating Cost Base
Our total operating and administrative costs were GBP4.5m (2015:
GBP3.6m). Within these results an IFRS share option expense of
GBP0.1m (2015: GBP0.1m) was recorded, a depreciation and
amortisation charge of GBP0.2m (2015: GBP0.1m), non-capitalisation
of certain ferry setup costs of GBP0.6m and specific uncapitalised
costs related to progression of the Middle East Airport opportunity
of GBP0.2m (2015: GBP nil).
Operational EBITDA
Our loss from operations was GBP1.4m (2015: GBP1.6m). When
adjusted for the exceptional and non-cash items set out below and
depreciation and amortisation, the Group recorded an adjusted
EBITDA profit of GBP25k as compared to a loss of GBP0.4m in the
prior year. The estimated impact of Ebola on Managed Services
margins was approximately GBP0.3m (2015: GBP1.1m). In context, this
crisis produced an adverse financial effect on the Groups EBITDA in
excess of GBP1.9m between 2014 and 2016.
Reconciliation to adjusted EBTIDA 2016 2015
GBP'000
Operating Loss (1,389) (1,650)
Depreciation and Amortisation 234 171
-------- --------
Reported EBITDA (1,155) (1,479)
Share Option expense 103 76
Impact of Ebola 272 1,120
CTAC settlement receipt - (77)
Middle East Airport Opportunity 220 -
Costs
Ferry pre-launch costs 585 -
-------- --------
Adjusted EBTIDA profit / (loss) 25 (360)
======== ========
The ferry pre-launch costs primarily relate to costs of
preparing the Sierra Queen vessel for commercial service.
Financing Charges
Total financing charges of GBP0.6 m (2015: GBP0.3m) were higher
than the prior year due to an increased average debt compared to
2015. Senior Secured Convertible Notes (10% coupon) generated an
underlying cash charge of GBP0.2m (2015: GBP0.1m) reflecting the
GBP1.0m issued in October 2015. The remaining GBP0.2m (2015:
GBP0.2m) of finance charges were non-cash based and related to IFRS
valuations of the convertible loan.
Result for the Year
Our loss before taxation was GBP2.0m (2015: GBP2.0m) and the
loss per share was 2.5p (2015: 3.5p).
Statement of Financial Position
The Group made a significant investment in plant and equipment
during the year in support of the Sovereign Ferries ferry
opportunity in West Africa. This went into initial operations in
December 2016. At the balance sheet date approximately GBP2.7m
(2015: GBP2.2m) was recorded as an asset. This represents the cost
of the Sierra Queen and setup costs around the leased
infrastructure. A further GBP0.6m of expenditure was not
capitalised in the period and is recorded as an exceptional item in
note 4 to these financial statements as these were incurred as a
result of delays in the launch of the ferry service.
Our debtor balance as of the end of December 2016 was GBP0.9m
(2015: GBP0.5m). GBP0.2m of the increase arose from amounts
recoverable on customer contracts and billed in 2017, and the
remainder from debtors which were collected early in the New Year.
Average days sales outstanding at the year-end were 32 (2015: 48),
Certain technology division orders for the UK government were won
in the fourth quarter of the year and required supply chain
mobilisation payments and therefore amounts held in inventory
increased to GBP0.2m (2015: GBP0.1m). These were shipped and paid
for in full early in 2017.
Trade payables were GBP1.0m (2015: GBP1.1m) and average creditor
days were 35 (2015: 32) The Group had no deferred payment schemes
with HMRC at the end of 2016 with all amounts having been paid in
the year.
Convertible Loan Notes (CLN) and Convertible Unsecured Loan
Notes (CULN)
The Company issued GBP1.7m (gross) of Convertible Unsecured Loan
Notes ("CULN") to Darwin Capital Limited ("Darwin") during the
year. GBP0.5m was raised in February 2016 and a further GBP1.2m was
raised in November 2016. The February 2016 loan was fully converted
in the year as was the outstanding balance at the start of the year
of GBP0.7m relating to the loan drawn down in April 2015. At the
year-end a nominal value of GBP1.2m was outstanding all of which
related to the November 2016 loan. The group received approximately
85% of these monies net of commissions and redemption premiums and
the net proceeds supported the capital investment in the West
African ferry operation and general corporate purposes. These loans
were structured to make repayment of any amount at any point
without penalty, and also allowed for a lower dilution impact with
a potentially higher conversion price than an equivalent equity
issue which would have in all likelihood been discounted. This
decision was based on the Company's then view as to expected
business performance progress.
Summary of movements in CULN CLN Total
loan notes at principal
value GBP'000
At 1 January 2016 750 2,245 2,995
New Issue in the year 1,675 - 1,675
Conversions in the year (1,247) - (1,247)
Financing Charge (equity
settled) in the year 22 - 22
-------- ------ --------
At 31 December 2016 1,200 2,245 3,445
Converted February/April
2017 (1,200) - (1,200)
======== ====== ========
Outstanding at 5 June 2017 - 2,245 2,245
======== ====== ========
The secured CLN carries a coupon of 10% payable quarterly in
arrears, has a conversion price of 35p and matures on 18 June
2018.
Equity Issues
On 3 June 2016 the Company issued 13 million ordinary shares of
10p at nominal value. Of these 10 million were issued to Hargreave
Hale who also received 5 million detachable and transferrable
warrants over 10p ordinary shares. These have a life of three years
from the date of issue and have an exercise price of 12p per share
warrant ("Warrant") valid for three years from the date of issue. A
further 10,653,365 ordinary 10p shares were issued during the year
at an average price of 11.71p per share on conversion of GBP1.2m
CULN.
Shareholders' funds at 31 December stood at GBP2.3m (2015:
GBP1.7m).
Summary of Non-Employee Share Options & Warrants at 31
December 2016
Number Holder and Strike Life Vesting Criteria
Description Price (years)
(p)
---------- --------------------- ------- --------- ----------------------
Darwin, April
2015, (lapsed
1,100,000 April 2017) 39 2 At grant:- detachable
---------- --------------------- ------- --------- ----------------------
Darwin, February
589,330 2016 20.15 3 At grant:- detachable
---------- --------------------- ------- --------- ----------------------
Darwin, November
1,100,000 2016 28 3 At grant:- detachable
---------- --------------------- ------- --------- ----------------------
Hargreave
Hale, June
5,000,000 2016 12 3 At grant:- detachable
---------- --------------------- ------- --------- ----------------------
0.7m @ GBP5m revenue
Business development generated by them,
partner, July further 1m @ GBP30m
1,700,000 2012 40 5 revenue
---------- --------------------- ------- --------- ----------------------
Business development
partner, March
2014 (lapsed GBP8m new managed
500,000 March 2017) 85 3 services revenues
---------- --------------------- ------- --------- ----------------------
GBP5m new managed
Business development services revenues
partner, July in three years from
300,000 2014 85 3 date of issue
---------- --------------------- ------- --------- ----------------------
Cash Flow
During the year the Group had an operating cash outflow of
GBP1.7m (2015: GBP1.1m) which arose from trading losses. The Group
reported an adverse working capital movement of GBP0.6m (2015:
GBP0.2m positive movement) which largely arose from short term
timing issues around increased inventory levels and amounts
recoverable on contracts as well as a lower level of outstanding
payroll taxes at the balance sheet date. Debtors were higher due to
greater business volumes and there were no material overdue items.
The Group's final stages of the set up costs of the Sovereign
Ferries project in West Africa continued into 2016 and required a
further GBP1.1m of spend (2015: GBP2.3m). A further GBP0.1m was
spent on upgraded IT infrastructure.
During the year the Group raised GBP2.7m net by the issue of
equity and CULN. During the year the Group was provided with
overdraft support by its bankers HSBC and at present has a small
but unused overdraft facility.
Reconciliation from adjusted EBITDA to normalised operating cash flow GBP'000 2016 2015
Adjusted EBITDA 25 (360)
Loss on asset disposal 13 4
Net changes in working capital (638) 209
Equity settlement payment - 60
------ ------
Net Cash used in underlying operating activities (600) (96)
====== ======
Net Cash used in underlying operating activities is presented
excluding exceptional items, share options expense, and
depreciation and amortisation.
Events after the Reporting Period
-- On 1 February 2017, 2,228,367 ordinary shares of 10p each
were issued at a price of 13.462773 pence each pursuant to a
conversion of GBP0.3m of CULN
-- On 28 February 2017, the Company raised GBP0.6m (gross) of
new monies by subscription at a price of 11.625 pence per ordinary
10 pence share and consequently issued 5,161,290 new ordinary 10
pence shares. On the same day Darwin Capital Limited exercised a
conversion of GBP0.4m of CULN at 11.625 pence per share resulting
in the issuance of 3,440,860 new ordinary shares
-- On 4 April 2017, employees exercised 55,000 share options
which were originally granted on 5 April 2007 and had an exercise
price of 10p each
-- On 18 April 2017, 10 million new ordinary shares were issued
at 10p each raising GBP1m gross to support the development of the
Company. On the same day Beaufort Securities Limited were appointed
as joint broker and their annual fee of GBP25,000 was settled by
the issue of 250,000 new ordinary shares and the issue of 100,000
detachable warrants with an exercise price of 25p and a life of
five years. As part of the placing commissions, Beaufort were
issued with a further 0.5 million warrants with an exercise price
of 10p and a life of five years. On the same day the final GBP0.5m
of convertible loan notes issued to Darwin were converted at a
price of 10p. A condition of the placing was that Westminster
agreed with Beaufort not to enter into arrangement for similar loan
notes for six months from the date of this placing
-- As part of the settlement with the vendors of CTAC Limited
announced in July 2015, Westminster has now received certain
property assets from the vendors and any sale will benefit 2017
Key Performance Indicators
The Group constantly monitors various key performance indicators
for factors affecting the overall performance. At Group level the
revenues and gross margin are monitored to give a constant view of
the Group's operational performance. As employment costs are the
single largest cost base for the Group the number of employees and
employee costs are also monitored to ensure best use of resources.
Days Sales Outstanding is a measure as to the cash conversion of
revenue and identifies debtor aging issues.
The Managed Services Division derives its revenues and cash
flows based on the number of passengers using a facility such as an
airport; therefore the number of passengers served is monitored
along with the future potential of the division with reference to
the number of potential airports and passengers in the divisional
pipeline.
The Technology Division measures its sales activity by reference
to the value of quotes issued against sales enquiries and therefore
monitors the average enquiries received per month and the potential
value of those enquiries. Additionally the conversion rate by
quantity is monitored to counter the effects of large scale
enquiries which can distort value comparisons. Finally the number
of countries and number of return customers are monitored to give a
view on the performance of the division both pre and post
sales.
Group 2016 2015
--------------------------- --------- ----------
Revenue GBP'm 4.4 3.4
--------------------------- --------- ----------
Gross Margin 71% 58%
--------------------------- --------- ----------
Days Sales Outstanding 32 48
--------------------------- --------- ----------
Number of Employees 240 218
--------------------------- --------- ----------
Average Employee Cost Per GBP9,450 GBP10,250
Head
--------------------------- --------- ----------
Managed Services 2016 2015
------------------------------- ----- -----
Passengers Served ('000)
in the last 12 months 97 64
------------------------------- ----- -----
Signed MoUs 7 4
------------------------------- ----- -----
Signed MoU's Annual Potential
Passengers (m) 12.8 5.1
------------------------------- ----- -----
Technology Division 2016 2015
------------------------------ ---------- ----------
Average Enquiries Per Month 117 99
------------------------------ ---------- ----------
Average Value of Monthly GBP11,224 GBP12,553
Enquiries
------------------------------ ---------- ----------
Number of Countries Supplied 39 33
------------------------------ ---------- ----------
Number of Return Customers 150 142
------------------------------ ---------- ----------
WESTMINSTER GROUP PLC
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 December 2016
Note 2016 2015
-------------------------------------- ------- -------- --------
GBP'000 GBP'000
-------------------------------------- ------- -------- --------
REVENUE 3 4,406 3,359
-------------------------------------- ------- -------- --------
Cost of sales (1,296) (1,403)
-------------------------------------- ------- -------- --------
GROSS PROFIT 3,110 1,956
-------------------------------------- ------- -------- --------
Administrative expenses (4,499) (3,606)
-------------------------------------- ------- -------- --------
LOSS FROM OPERATIONS 6 (1,389) (1,650)
-------------------------------------- ------- -------- --------
Analysis of operating loss
Loss from operations (1,389) (1,650)
Add back amortisation 7 4
Add back depreciation 227 167
Add back share option expense 103 76
Add back exceptional items 4 1,077 1,043
----------------------------------------------- -------- --------
EBITDA Profit/(loss) from underlying
operations 25 (360)
-------------------------------------- ------- -------- --------
Finance costs 5 (566) (338)
LOSS BEFORE TAXATION (1,955) (1,988)
-------------------------------------- ------- -------- --------
Taxation 7 46 (7)
-------------------------------------- ------- -------- --------
LOSS ATTRIBUTABLE TO EQUITY
SHAREHOLDERS (1,909) (1,995)
-------------------------------------- ------- -------- --------
TOTAL COMPREHENSIVE EXPENSE
FOR THE YEAR ATTRIBUTABLE TO
EQUITY SHAREHOLDERS (1,909) (1,995)
-------------------------------------- ------- -------- --------
LOSS PER SHARE 9 (2.46p) (3.49p)
-------------------------------------- ------- -------- --------
WESTMINSTER GROUP PLC
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 31 December 2016
2016 2015
Note GBP'000 GBP'000
------------------------------------- ----- --------- ---------
Goodwill 397 397
Other intangible assets 132 34
Property, plant and equipment 4,635 4,343
TOTAL NON-CURRENT ASSETS 5,164 4,774
------------------------------------- ----- --------- ---------
Inventories 198 57
Trade and other receivables 894 484
Cash and cash equivalents 152 150
------------------------------------- ----- --------- ---------
TOTAL CURRENT ASSETS 1,244 691
------------------------------------- ----- --------- ---------
TOTAL ASSETS 6,408 5,465
------------------------------------- ----- --------- ---------
Called up share capital 8,711 6,345
Share premium account 9,169 9,170
Merger relief reserve 299 299
Share based payment reserve 569 258
Equity reserve on convertible
loan note 186 219
Revaluation reserve 134 134
Retained earnings:
At 1 January (14,739) (12,757)
(Loss)/profit for the year (1,909) (1,995)
Other changes in retained
earnings (124) 13
At 31 December (16,772) (14,739)
------------------------------------- ----- --------- ---------
TOTAL SHAREHOLDERS' EQUITY 2,296 1,686
------------------------------------- ----- --------- ---------
Borrowings 10 3,059 2,587
Deferred tax liabilities - 53
------------------------------------- ----- --------- ---------
TOTAL NON-CURRENT LIABILITIES 3,059 2,640
------------------------------------- ----- --------- ---------
Deferred income 27 -
Trade and other payables 1,026 1,139
------------------------------------- ----- --------- ---------
TOTAL CURRENT LIABILITIES 1,053 1,139
------------------------------------- ----- --------- ---------
TOTAL LIABILITIES 4,112 3,779
------------------------------------- ----- --------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY 6,408 5,465
------------------------------------- ----- --------- ---------
WESTMINSTER GROUP PLC
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2016
Called Share Equity
up Share based Reserve on
share premium Merger relief payment Revaluation Convertible Retained
capital account reserve reserve reserve Loan Note earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
AS OF 1
JANUARY 2016 6,345 9,170 299 258 134 219 (14,739) 1,686
Shares issued
for cash 1,300 - - - - - - 1,300
Share based
payment
charge - - - 103 - - - 103
Exercise of
share options - - - - - - - -
Lapse of share
options - - - (37) - - 37 -
Warrants
issued with
loan notes - - - 245 - - (150) 95
Adjustment in
respect of CLN
conversions
near par - - - - - - - -
CLN conversion 1,066 - - - (33) (11) 1,022
Loan notes
issued - (1) - - - - - (1)
--------------- -------- -------- -------------- -------- ------------ ------------ -------------
TRANSACTIONS
WITH OWNERS 2,366 (1) - 311 - (33) (124) 2,519
--------------- -------- -------- -------------- -------- ------------ ------------ ------------- --------
Total
comprehensive
expense for
the year - - - - - - (1,909) (1,909)
AS AT 31
DECEMBER 2016 8,711 9,169 299 569 134 186 (16,772) 2,296
--------------- -------- -------- -------------- -------- ------------ ------------ ------------- --------
AS OF 1
JANUARY 2015 5,515 9,039 299 141 134 47 (12,757) 2,418
Shares issued
for cash 40 20 - - - - - 60
Share based
payment
charge - - - 76 - - - 76
Exercise of
share options 1 - - (1) - - - -
Lapse of share
options - - - (13) - - 13 -
Warrants
issued with
loan notes - - - 55 - - - 55
Bonus Issue 114 (114) - - - - - -
CLN conversion 675 225 - - - (39) - 861
Loan notes
issued - - - - - 211 - 211
--------------- -------- -------- ---- -------- ---------------------- ------------ ------------- --------
TRANSACTIONS
WITH OWNERS 830 131 - 117 - 172 13 1,263
--------------- -------- -------- ---- -------- ---------------------- ------------ ------------- --------
Total
comprehensive
expense for
the year - - - - - - (1,995) (1,995)
AS AT 31
DECEMBER 2015 6,345 9,170 299 258 134 219 (14,739) 1,686
--------------- -------- -------- ---- -------- ---------------------- ------------ ------------- --------
WESTMINSTER GROUP PLC
CONSOLIDATED CASH FLOW STATEMENT
For the year ended 31 December 2016
2016 2015
Note GBP'000 GBP'000
------------------------------------------------------------- ------ -------- --------
(LOSS)/PROFIT BEFORE TAX (1,955) (1,988)
Non-cash adjustments 11 916 589
Net changes in working capital 11 (638) 209
Equity settlement payment - 60
NET CASH (USED IN) /FROM OPERATING ACTIVITIES (1,677) (1,130)
------------------------------------------------------------- ------ -------- --------
INVESTING ACTIVITIES:
Purchase of property, plant and equipment (531) (2,642)
Purchase of intangible assets (105) (27)
Proceeds from disposal of fixed assets - 25
Advances to subsidiaries - -
------------------------------------------------------------- ------ -------- --------
CASH OUTFLOW FROM INVESTING ACTIVITIES (636) (2,644)
------------------------------------------------------------- ------ -------- --------
CASHFLOWS FROM FINANCING ACTIVITIES:
Gross proceeds from the issues of ordinary shares 1,300 -
Costs of share issues (45) -
Net proceeds from the issue of convertible loan notes 1,675 3,155
Costs associated with the issue of convertible loan notes. (272) (280)
Interest paid (247) (131)
Other loan repayments, including interest (96) -
CASH INFLOW FROM FINANCING ACTIVITIES 2,315 2,744
------------------------------------------------------------- ------ -------- --------
Net change in cash and cash equivalents 2 (1,030)
------------------------------------------------------------- ------ -------- --------
CASH AND EQUIVALENTS AT BEGINNING OF YEAR 150 1,180
------------------------------------------------------------- ------ -------- --------
CASH AND EQUIVALENTS AT OF YEAR 152 150
------------------------------------------------------------- ------ -------- --------
Notes to the Financial Statements
1. General information and nature of operations
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 2016
consolidate the individual financial statements of the Company and
its subsidiaries. The Group designs, supplies and provides on-going
advanced technology solutions and services to governmental and
non-governmental organisations on a global basis.
2. Accounting Policies
Basis of preparation
The Group's financial statements have been prepared and approved
by the Directors in accordance with International Financial
Reporting Standards ("IFRS") as adopted by the European Union. The
Parent Company (Westminster Group plc) has elected to prepare its
financial statements in accordance with IFRS.
The financial information is presented in the Group's functional
currency, which is Great British Pounds ('GBP') since that is the
currency in which the majority of the Group's transactions are
denominated.
Basis of measurement
The financial statements have been prepared under the historical
cost convention with the exception of certain items which are
measured at fair value as disclosed in the accounting policies
below.
Consolidation
(i) Basis of consolidation
The consolidated financial statements comprise the financial
statements of the Company and its subsidiaries for the year ended
31 December 2016.
(ii) Subsidiaries
Subsidiaries are entities controlled by the Company. Control
exists when the Company has the power, directly or indirectly, to
govern the financial and operating policies of an entity so as to
obtain benefits from its activities. In assessing control,
potential voting rights that presently are exercisable or
convertible are taken into account. Subsidiaries are fully
consolidated using the purchase method of accounting from the date
that control commences until the date that control ceases.
Accounting policies of subsidiaries have been adjusted where
necessary to ensure consistency with the policies adopted by the
Group.
(iii) Transactions eliminated on consolidation
Intragroup balances and any unrealised gains and losses or
income and expenses arising from intragroup transactions are
eliminated in preparing the consolidated financial statements.
(iv) Company financial statements
Investments in subsidiaries are carried at cost less provision
for any impairment. Dividend income is recognised when the right to
receive payment is established.
Going concern
The financial statements are prepared on a going concern basis.
In assessing whether the going concern assumption is appropriate,
management have taken into account all relevant available
information about the future. As part of its assessment, management
have taken into account the profit and cash forecasts, the
continued support of the shareholders and bondholders and Directors
and management ability to affect costs and revenues. Management
regularly forecast results, financial position and cash flows for
the Group.
The Group has prepared both a Growth Scenario and a Pessimistic
(for contingency planning) for assessing the Group's cash
requirements over the next 12 months from the date of these
financial statements.
-- Growth Scenario. The Group has several large opportunities
such as the GBP35m per annum Middle Eastern contract under
negotiation. Whilst these opportunities will have an inherent need
for significant additional capital to mobilise the project, it is
envisaged that certain initial costs could be met from organic
resources depending on the timing of the contract closure. The
Directors believe that based on the strong financial dynamics of
incremental Managed Services contracts that they should be able to
secure financing and are already in discussions with various debt
and equity providers. Based on previous experience operational cash
flow from these projects can support capital expenditure within the
project plan. This scenario includes a rapid ramp up in ferry
passenger numbers and full achievement of solution sales targets as
well as the usual run rate of product sales.
Pessimistic Scenario. A pessimistic forecast for the 12 months
following the date of these financial statements has been prepared
for the purpose of stress testing the Group's cash flows. This
includes revenues from the run rate of smaller contracts, a
much-reduced expectation from sales of solutions in the technology
division, no large new managed services contracts, and the
continuation of major existing contracts such as the West African
airport contract as well as an expected net cash outflow from the
Sierra Leone ferry operation as it builds towards critical mass it
is targeted to become cash flow positive at the end of 2017. Should
these cash flows not happen as expected certain contingency
measures have been identified by the board as part of its routine
planning process. These options include cost reductions,
restructuring operations and asset disposals to preserve cash
resources, although additional funding may be required as these
measures take effect.
The Group's convertible secured loan notes have a principal
value of GBP2.245m and a conversion price of 35p mature on 18 June
2018. Whilst not repayable in the 12 months from the date of these
financial statements, the board believes that the pipeline of
potential Managed Services contracts could either give the Company
the capability of repayments from cash flow, or that the
bondholders could covert to equity. As part of a routine planning
process the Board has identified options for resolution or
restructuring, with potential variations to the instrument around
conversion price, coupon and term. The Group has an asset base
which could be used to support any changes.
Based upon these projections the Group has adequate working
capital for the 12 months following the date of signing these
accounts. For this reason they continue to adopt the going concern
basis in preparing the financial statements
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
Transactions in foreign currencies are translated at the foreign
exchange rate ruling at the date of the transaction (spot exchange
rate). Foreign exchange gains and losses resulting from the
settlement of such transactions and from the re-measurement of
monetary items at year-end exchange rates are recognised in profit
or loss. Non-monetary items measured at historical cost are
translated using the exchange rates at the date of the transaction
and not subsequently retranslated.
Foreign exchange gains and losses are recognised in arriving at
profit before interest and taxation (see Note 6).
Segmental reporting
Operating segments are reported in a manner consistent with the
internal reporting provided to the chief decision-maker. The chief
decision-maker has been identified as the Executive Board, at which
level strategic decisions are made.
An operating segment is a component of the Group
-- That engages in business activities from which it may earn
revenues and incur expenses,
-- Whose operating results are regularly reviewed by the
entity's chief operating decisions maker to make decisions about
resources to be allocated to the segment and assess its
performance, and
-- For which discrete financial information is available.
Revenue
Revenue comprises the fair value of the consideration received
or receivable for the sale of products and services, net of value
added tax, rebates and discounts and after eliminating sales within
the Group. Revenue is recognised as follows:
(i) Supply of products
Revenue in respect of the supply of products is recognised when
title effectively passes to the customer.
(ii) Supply and installation contracts and supply of
services
Where the outcome can be estimated reliably in respect of
long-term contracts and contracts for on-going services, revenue
represents the value of work done in the period, including
estimates of amounts not invoiced. Revenue in respect of long-term
contracts and contracts for on-going services is recognised by
reference to the stage of completion, where the stage of completion
can be assessed with reasonable accuracy. This is assessed by
reference to the estimated project costs incurred to date compared
to the total estimated project costs. Revenue is calculated to
reflect the substance of the contract, and is reviewed on a
contract-by-contract basis, with revenues and costs at each
divisible stage reflecting known inequalities of profitability.
Where a contract is loss making, the full loss is recognised
immediately. Managed Services income is recognised on the basis of
the volume of passengers and freight.
(iii) Maintenance income
Revenues in respect of the supply of maintenance contracts are
recognised on a straight line basis over the life of the contract.
The unrecognised portion of maintenance income is included within
trade and other payables as deferred income.
(iv) Training courses
Revenues in respect of training courses are recognised when the
trainees attend the courses.
Operating expenses
Operating expenses are recognised in profit or loss upon
utilisation of the service or at the date of their origin.
Expenditure for warranties is recognised and charged against the
associated provision when the related revenue is recognised.
Certain items have been disclosed as operating exceptional due to
their size and their separate disclosure should enable better
understanding of the financial dynamics.
Interest income and expenses
Interest income and expenses are reported on an accrual basis
using the effective interest method.
Goodwill
Goodwill is stated after separate recognition of identifiable
intangible assets. It is calculated as the excess of the sum of a)
fair value of consideration transferred, and b) the recognised
amount of any non-controlling interest in the acquiree and c)
acquisition date fair value of any existing equity interest in the
acquiree, over the acquisition date fair value of identifiable net
assets. If the fair value of identifiable net assets exceed the sum
calculated above, the excess amount (i.e. gain on a bargain
purchase) is recognised in profit or loss immediately. Goodwill is
carried at cost less accumulated impairment losses.
Other intangible assets
Acquired intangibles that are as a result of a business
combination are recorded at fair value and are amortised on a
straight line over the expected useful lives.
Other intangible assets comprise website costs and licences.
Website costs are capitalised and amortised on a straight line
basis over 5 years, the expected economic life of the asset. This
amortisation is charged to administrative expenses.
Property, plant and equipment
Land and buildings held for use are held at their revalued
amounts, being the fair value on the date of revaluation, less any
subsequent accumulated depreciation. Revaluations are performed
with sufficient regularity such that the carrying amount does not
differ materially from that which would be determined using fair
values at the balance sheet date.
Any revaluation increase arising on the revaluation of such land
and buildings is recognised in other comprehensive income, except
to the extent that it reverses a revaluation decrease for the same
asset previously recognised as an expense, in which case the
increase is credited to the profit or loss to the extent of the
decrease previously charged. A decrease in carrying amount arising
on the revaluation of land and buildings is charged as an expense
to the extent that it exceeds the balance, if any, held in the
revaluation reserve relating to a previous revaluation of that
asset.
Depreciation on revalued buildings is charged to the statement
of comprehensive income.
Plant and equipment, office equipment, fixtures and fittings and
motor vehicles are stated at cost less accumulated depreciation and
any recognised impairment loss.
Depreciation is charged so as to write off the cost or valuation
of assets to their residual value over their estimated useful
lives, using the straight-line method, typically at the following
rates. Where certain assets are specific for a long term contract
and the customer has an obligation to purchase the asset at the end
of the contract they are depreciated in accordance with the
expected disposal / residual value.
Rate
---------------------------- --------------------
Freehold buildings 2%
Plant and equipment 7% to 25%
Office equipment, fixtures
& fittings 20% to 33%
Ferries Depreciated over 21
years.
Motor vehicles 20%
---------------------------- --------------------
Leases
Leases are classified as finance leases whenever the terms of
the lease transfer substantially all the risks and rewards of
ownership to the lessee. All other leases are classified as
operating leases.
Assets held under finance leases are recognised as assets of the
Group at their fair value or, if lower, at the present value of the
minimum lease payments, each determined at the inception of the
lease. The corresponding liability to the lessor is included in the
balance sheet as a finance lease obligation. Lease payments are
apportioned between finance charges and reduction of lease
obligation so as to achieve a constant rate of interest on the
remaining balance of the liability. Finance charges are charged
directly against income, unless they are directly attributable to
qualifying assets, in which case they are capitalised.
Rentals payable under operating leases are charged to income on
a straight-line basis over the term of the relevant lease.
Impairment on non-financial assets
At each reporting date, the Group reviews the carrying amounts
of its non-current assets to determine whether there is any
indication that those assets have suffered an impairment loss. If
any such indication exists, the recoverable amount of the asset is
estimated in order to determine the extent of the impairment loss
(if any). The recoverable amount is the higher of fair value less
costs to sell and value in use. If the recoverable amount of an
asset is estimated to be less than its carrying amount, the
carrying amount of the asset is reduced to its recoverable amount.
An impairment loss is recognised as an expense immediately, unless
the relevant asset is carried at a revalued amount, in which case
the impairment loss is treated as a revaluation decrease. Where an
impairment loss subsequently reverses, the carrying amount of the
asset is increased to the revised estimate of its recoverable
amount, but so that the increased carrying amount does not exceed
the carrying amount that would have been determined had no
impairment loss been recognised for the asset in prior years.
Financial instruments
Financial assets
The Group's financial assets include cash and cash equivalents
and loans and other receivables. All financial assets are
recognised when the Group becomes party to the contractual
provisions of the instrument. All financial assets are initially
recognised at fair value, plus transaction costs. They are
subsequently measured at amortised cost using the effective
interest method, less any impairment losses. Any changes in value
are recognised in the Statement of Comprehensive Income. Interest
and other cash flows resulting from holding financial assets are
recognised in the Statement of Comprehensive Income when received,
regardless of how the related carrying amount of financial assets
is measured.
Loans and other receivables are provided against when objective
evidence is received that the Group will not be able to collect all
amounts due to it in accordance with the original terms of the
receivables. The amount of the write-down is determined as the
difference between the asset's carrying amount and the present
value of estimated future cash flows.
Cash and cash equivalents comprise cash at bank and deposits and
bank overdrafts. Bank overdrafts are shown within borrowings in
current liabilities unless a legally enforceable right to offset
exists.
Financial liabilities
The Group's financial liabilities comprise trade and other
payables and borrowings. All financial liabilities are recognised
initially at their fair value and subsequently measured at
amortised cost using the effective interest method. Financial
liabilities are derecognised when they are extinguished,
discharged, cancelled or expire.
Convertible loan notes with an option that leads to a
potentially variable number of shares, have been accounted for as a
host debt with an embedded derivative. The embedded derivative is
accounted for at fair value through profit and loss at each
reporting date. The host debt is recognised initially at fair
value, and subsequently measured at amortised cost using the
effective interest method.
Convertible loan notes that 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, as they 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. The accounting
policies adopted in respect of financial liabilities are set out
above and below.
Other financial liabilities
Other financial liabilities include other payables and bank
loans and are recognised initially at fair value and subsequently
measured at amortised cost, using the effective interest
method.
Financial liabilities are recognised when the Group becomes a
party to the contractual agreements of the instrument. All interest
related charges are recognised as an expense in "finance cost" in
the Statement of Comprehensive Income. Trade and other payables are
recognised initially at their fair value and subsequently measured
at amortised cost using the effective interest method.
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 includes cash in hand, deposits held
at call with banks, other short-term highly liquid investments with
original maturities of three months or less, and bank overdrafts.
Bank overdrafts are offset against cash balances and a net cash
balance is presented.
Equity, reserves and dividend payments
Share capital represents the nominal value of shares that have
been issued.
Share premium includes any premiums received on issue of share
capital. Any transaction costs associated with the issuing of
shares are deducted from share premium, net of any related income
tax benefits.
Merger relief reserve includes any premiums on issue of share
capital as part or all of the consideration in a business
combination.
The share based payment reserve represents equity-settled
share-based employee remuneration until such share options are
exercised or lapse.
The revaluation reserve within equity comprises gains and losses
due to the revaluation of property, plant and equipment.
Retained earnings include all current and prior period retained
profits and losses.
Dividend distributions payable to equity shareholders are
included in liabilities when the dividends have been approved in a
general meeting prior to the reporting date.
Defined contribution pension scheme
The Group operates a defined contribution pension scheme for
employees in the UK and is operating under auto enrolment. Local
labour in Africa benefit from a termination payment on leaving
employment. The expected value of this is accrued on a monthly
basis.
Shared-based compensation (Employee Based Benefits)
The Group operates an equity-settled share-based compensation
plan. The fair value of the employee services received in exchange
for the grant of options is recognised as an expense over the
vesting period, based on the Group's estimate of awards that will
eventually vest, with a corresponding increase in equity as a share
based payment reserve. For plans that include market based vesting
conditions, the fair value at the date of grant reflects these
conditions and are not subsequently revisited.
Fair value is determined using Black-Scholes option pricing
models. Non-market based vesting conditions are included in
assumptions about the number of options that are expected to vest.
At each reporting date, the number of options that are expected to
vest is estimated. The impact of any revision of original
estimates, if any, is recognised in profit or loss, with a
corresponding adjustment to equity, over the remaining vesting
period.
The proceeds received when vested options are exercised, net of
any directly attributable transaction costs, are credited to share
capital (nominal value) and share premium.
Provisions
Provisions are recognised when the Group has a present legal or
constructive obligation as a result of a past event which it is
probable will result in an outflow of economic benefits that can be
reliably estimated.
SIGNIFICANT MANAGEMENT JUDGEMENTS IN APPLYING ACCOUNTING
POLICIES
The following are significant management judgements in applying
the accounting policies of the Group that have the most significant
effect on the financial statements.
Revenue recognition
Recognition of income is considered appropriate when all
significant risks and rewards of ownership are transferred to third
parties. In respect of long-term contracts and contracts for
on-going services, turnover represents the value of work done in
the year, including estimates of amounts not invoiced. Turnover in
respect of long-term contracts and contracts for on-going services
is recognised by reference to the stage of completion, where the
stage of completion can be assessed with reasonable accuracy. In
this process management make significant judgements about
milestones, actual work performed and the estimated costs to
complete the work. Revenue is calculated to reflect the substance
of the contract, and is reviewed on a contract-by-contract basis,
with revenues and costs at each divisible stage reflecting known
inequalities of profitability.
Estimation uncertainty
When preparing the financial statements management undertakes a
number of judgements, estimates and assumptions about recognition
and measurement of assets, liabilities, income and expenses. The
actual results are likely to differ from the judgements, estimates
and assumptions made by management, and will seldom equal the
estimated results. Information about the significant judgements,
estimates and assumptions that have the most significant effect on
the recognition and measurement of assets, liabilities, income and
expenses are discussed below.
Impairment review of Sierra Leone Ferry Operations
At the balance sheet date the group recorded an asset of
approximately GBP2.7m relating to the purchase of the Sierra Queen
and set up costs of the ferry operation in West Africa. Of this
cGBP1.1m relates to the vessel purchase, and the remainder relates
to costs incurred before the commencement of service operations in
early December 2016.
- Market Background
Westminster has 19 years remaining of its 21 year contract to
operate the terminals and ferry service concession between the
airport and capital. The airport has in excess 200,000 passengers
(annualised) passing through it now, which is a substantial
improvement following the end of the Ebola crisis. A significant
portion of these passengers use ferry services to reach the
mainland and capital more quickly than the road option. The ferry
service has historically been serviced by smaller craft which do
not have the ruggedness and safety characteristics of the
Westminster fleet, which is seagoing. The existing ferry services
do not offer our luxury and safely maintained bus fleet either.
Other potential coastal services offer additional revenue
opportunities from serving regional destinations, including
non-airport related traffic passing between the airport and capital
city, and new markets such as a proposed water taxi service around
Freetown. Charters and Airport traffic has grown over the last 12
months and is now broadly back at the levels of 2013 which was
before the onset of Ebola.
- Project Status
Our period of major capital spend on this project is now
completed. Noting that this business is a start-up in 2016 in terms
of passenger handling, it is pleasing that we have already secured
3% of the market share in only three months. We believe that, given
the size of the captive market at 200,000 passengers per annum, the
superior quality of our service, our vessel safety and the numerous
local marketing initiatives we are pursuing we will continue to
grow volumes. We expect the ferry operation to become cash positive
in the financial year to 31 December 2017 and continue to grow
thereafter.
- Impairment Testing
With the planned infrastructure and ferry operations in place
there are significant operational opportunities for revenue growth,
increased margins and improved cash flows. The Group has conducted
a discounted cash flow exercise which looks at key assumptions
including adoption rates and ticket volumes, ongoing expected
costs, available ferry capacity, future airport passenger levels
and the average net revenue per ticket. A discount rate of 10% has
been used in this exercise. The scenario indicates that the net
present value of future cash flows is in excess of the current
carrying value of the asset and therefore the Board believes that
no impairment is required. The Company will continue to monitor and
review traffic levels monthly against targets to assess the ongoing
financial performance. Should these modest passenger targets not be
achieved and the operation not show a clear path to adequate cash
generation, then the carrying value of this asset could be subject
to a future impairment charge.
Impairment Review Longmoor Goodwill
This asset is carried at approximately GBP0.4m at the balance
sheet date. There are several opportunities for the delivery of
Longmoor's training and protection services which are aligned with
potential large scale opportunities in managed services. An
impairment loss is recognised for the amount by which an asset's or
cash generating unit's carrying amount exceeds its recoverable
amount. To determine the recoverable amount, management estimates
expected future cash flows from each asset or cash-generating unit
and determines a suitable discount rate in order to calculate the
present value of those cash flows. In the process of measuring
expected future cash flows management makes assumptions about
future gross profits. These assumptions relate to future events and
circumstances. The actual results may vary, and may cause
significant adjustments to the Group's assets within the next
financial year in most cases, determining the applicable discount
rate involves estimating the appropriate adjustment to market risk
and the appropriate adjustment to asset-specific risk factors.
Revalued freehold property
The freehold property is stated at fair value. A full
revaluation exercise was carried out in May 2017. The fair value is
based on market value, being the estimated amount for which a
property could be exchanged on the date of valuation between a
willing buyer and a willing seller in an arm's length transaction
after proper marketing wherein the parties had each acted
knowledgeably, prudently and without compulsion.
Consolidation of entities in which the Group holds less than 50%
of the voting rights.
Management considers that the Group has de facto control of
Westminster Sierra Leone Limited even though it has less than 50%
of the voting rights. Management does not recognise the
non-controlling interest as it does not consider it to be material
for this or other partially owned subsidiaries.
Standards in issue not yet effective
New standards, amendments and interpretations
No new standards, amendments or interpretations effective for
the first time in the financial year beginning on or after January
2016 have had a material impact on Group or parent Company.
At the date of authorisation of these financial statements, the
following amendments and interpretations to existing accounting
standards have been published but are not yet effective.
-- IFRS 9 Financial Instruments (effective date 1 January 2018)
-- IFRS 15 Revenue from Contracts with Customers (effective date1 January 2017)
-- IFRS 16 Leases (effective date 1 January 2019, but yet to be endorsed by the EU)
Management anticipate that the above pronouncements will be
adopted in the Group's accounting policies for the first period
after the effective date, but will have no material impact on the
Group.
IFRS 9 'Financial instruments' effective for periods beginning
on or after January 1, 2018. The standard removed multiple
classification and measurement models for financial assets
requirement by IAS 39 and introduces a model that has only two
classification categories: fair value and amortised cost.
Classification is driven by the business model for managing the
financial assets and the contractual cash flow characteristics of
the financial assets. The accounting and presentation for financial
liabilities and for derecognising financial instruments is
relocated from IAS 39 without any significant changes. IFRS 9
introduces additional changes relating to financial liabilities.
IFRS 9 adds new requirements to address the impairment of financial
assets and hedge accounting.
IFRS 15 'Revenue from contracts with customers'; effective for
periods beginning on or after January 1, 2018. The standard
establishes a new five-step model that will apply to revenue
arising from contacts with customers. Revenue is recognised at an
amount that reflects the consideration to which an entity expects
to be entitled in exchange for those goods or services. This is
converged standard on revenue recognition which replaces IAS 18
'Revenue', IAS 11 'Construction contracts' and related
interpretations. The Group is currently assessing the impact of the
new standard. The principles in IFRS 15 provide a more structured
approach to measuring and recognising revenue.
IFRS 16 'Leases'; effective for periods beginning on or after
January 1, 2019. Under IFRS 16, a contract is, or contains a lease
if the contact conveys the right to control the use of an
identified asset for a period of time in exchange for
consideration. The new standard eliminates the classification of
leases by lessees as either finance leases or operating leases and
instead introduces an integrated lessee accounting model. Applying
this model, lessees are required to recognise a lease liability
reflecting the obligation to make future lease payments and a
'right-of-use' asset for virtually all lease contracts.
IFRS 16 includes an optional exemption for certain short-term
leases and leases of low-value assets. The Group is currently
assessing the impact of the new standard.
3. Segment reporting
Operating segments
The Board considers the Group on a Business Unit basis. Reports
by Business Unit are used by the chief decision-maker in the Group.
The Business Units operating during the year are the four operating
companies Westminster Aviation, Westminster International,
Sovereign Ferries and Longmoor Security. This split of business
segments is based on the products and services each offer.
Managed Technology Group Managed Managed Group
Services and Services Services Total
Aviation Central Sovereign Longmoor
Ferries
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
2016
Supply of
products - 1,778 - - - 1,778
Supply and
installation
contracts - 177 - - 157 334
Maintenance
and Services 2,758 160 - - 3 2,921
Training
courses 16 - - - - 16
Ferry ticket
sales - - - 6 - 6
Intragroup
sales - (492) - - (157) (649)
----------------- ---------- ----------- --------- ----------- ---------- --------
Revenue 2,774 1,623 - 6 3 4,406
----------------- ---------- ----------- --------- ----------- ---------- --------
Segmental
underlying
EBITDA 1,280 273 (1,418) (163) 53 25
Share option
expense - - (103) - - (103)
Exceptional
items (note
4) (492) - - (585) - (1,077)
Depreciation
& amortisation (79) (16) (22) (107) (10) (234)
Apportionment
of central
overheads (1,140) (946) 2,116 - (30) -
----------------- ---------- ----------- --------- ----------- ---------- --------
Segment
operating
result (431) (689) 573 (855) 13 (1,389)
----------------- ---------- ----------- --------- ----------- ---------- --------
Finance
cost - - (566) - - (566)
Taxation
charge (7) - 53 - - 46
----------------- ---------- ----------- --------- ----------- ---------- --------
Profit/(Loss)
for the
financial
year (438) (689) 60 (855) 13 (1,909)
----------------- ---------- ----------- --------- ----------- ---------- --------
Segment
assets 1,593 641 1,523 2,618 33 6,408
----------------- ---------- ----------- --------- ----------- ---------- --------
Segment
liabilities 311 448 3,268 85 - 4,112
----------------- ---------- ----------- --------- ----------- ---------- --------
Capital
expenditure 79 42 107 408 - 636
----------------- ---------- ----------- --------- ----------- ---------- --------
Managed Technology Group and Managed Managed Services Group Total
Services Central Services Longmoor
Aviation Sovereign
Ferries
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
2015
Supply of
products - 795 - - - 795
Supply and
installation
contracts - 1,546 - - 96 1,642
Maintenance and
Services 2,450 168 - - 4 2,622
Training courses 11 1 - - - 12
Intragroup sales (812) (804) - - (96) (1,712)
----------------- ---------------- ----------- ----------------- ---------------- ----------------- ------------
Revenue 1,649 1,706 - - 4 3,359
----------------- ---------------- ----------- ----------------- ---------------- ----------------- ------------
Segmental
underlying
EBITDA 1,264 (140) (1,540) 37 19 (360)
Exceptional
items (note 4) (1,120) - 77 - - (1,043)
Depreciation &
amortisation (94) (10) (22) (37) (8) (171)
Share option
expense - - (76) - - (76)
Apportionment of
central
overheads (948) (837) 1,878 - (93) -
----------------- ---------------- ----------- ----------------- ---------------- -----------------
Segment
operating
result (898) (987) 317 - (82) (1,650)
----------------- ---------------- ----------- ----------------- ---------------- ----------------- ------------
Finance cost - - (339) - 1 (338)
Income tax
charge (7) - - - - (7)
----------------- ---------------- ----------- ----------------- ---------------- ----------------- ------------
Loss for the
financial year (905) (987) (22) - (81) (1,995)
----------------- ---------------- ----------- ----------------- ---------------- ----------------- ------------
Segment assets 1,272 149 1,565 2,454 25 5,465
----------------- ---------------- ----------- ----------------- ---------------- ----------------- ------------
Segment
liabilities 343 434 2,962 38 2 3,779
----------------- ---------------- ----------- ----------------- ---------------- ----------------- ------------
Capital
expenditure 186 - 20 2,430 33 2,669
----------------- ---------------- ----------- ----------------- ---------------- ----------------- ------------
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.
2016 2015
GBP'000 GBP'000
United Kingdom
& Europe 369 439
Africa 3,458 2,341
Middle East 104 204
Rest of the
World 475 375
4,406 3,359
======== ========
Some of the Group's assets are located outside the United
Kingdom where they are being put to operational use on specific
contracts. At 31 December 2016 fixed assets with a net book value
of GBP3,591,000 (2015: GBP2,992,000) were located in Africa.
Major customers who contributed greater than 10% of total Group
revenue
In 2016 no single customer contributed more than 10% of the
Group revenue (in 2015 no customers contributed 10% of the Group's
revenue). Approximately 60% of the Group's revenues are derived
from the contract with a West African airport operator.
4. Exceptional Items
2016 2015
GBP'000 GBP'000
Loss of margin arising from fall in
passenger numbers due to Ebola crisis 272 1,120
Middle East airport pre-contract costs 220 -
Ferry pre-launch costs 585 -
Receipt from vendors of CTAC (dispute
on acquisition consideration price) - (77)
1,077 1,043
======== ========
The ferry pre-launch costs primarily relate to costs of
preparing the Sierra Queen vessel for commercial service.
5. Finance costs
2016 2015
GBP'000 GBP'000
Interest payable on bank and other borrowings (30) (1)
Interest expenses on convertible loan notes (CLN 2018) (224) (121)
-------- --------
(254) (122)
Non-cash & amortised finance costs and other charges on convertible loan notes (312) (216)
Total finance costs (566) (338)
======== ========
6. Loss from operations
The following items have been included in arriving at the loss
for the financial year
2016 2015
GBP'000 GBP'000
Staff costs (see Note 8) 2,267 2,236
Depreciation of property, plant and equipment. 227 167
Amortisation of intangible assets 7 4
Operating lease rentals payable
Property 112 101
Plant and machinery 3 3
Other 42 60
Foreign exchange gain (22) (89)
7. Taxation
Analysis of charge in year
2016 2015
GBP'000 GBP'000
Current year
UK Corporation tax on profits in the year - -
Potential foreign corporation tax on profits in the year 7 -
7 -
2016 2015
GBP'000 GBP'000
Reconciliation of effective tax rate
Loss on ordinary activities before tax (1,955) (1,988)
======== ========
Loss on ordinary activities multiplied by the standard rate of corporation tax in the UK of
20.0% (2015: 20.0%) (391) (398)
Effects of:
(Income)/expenses not deductible for tax purposes 88 77
Capital allowances less than depreciation (203) (72)
Other short term timing differences 1 3
Recognised/unrecognised losses carried forward 512 390
Adjustment in respect of prior years (53) -
Potential Charge in Overseas Subsidiary - 7
Total tax (credit) /charge (46) 7
======== ========
Tax losses available for carry forward (subject to HMRC
agreement) were GBP11m (2015: GBP9.5m).
Changes to the UK corporation tax rates were substantively
enacted as part of the Finance Bill 2015 (on 26 October 2015) and
Finance Bill 2016 (on 7 September 2016). These include reductions
to the main rate to reduce to 19% from 1 April 2017 and to 17% from
1 April 2020. Deferred taxes at the balance sheet date have been
measured using these enacted tax rates and reflected in these
financial statements.
8. Employee costs
Employee costs for the Group during the year
2016 2015
GBP'000 GBP'000
Wages and salaries 2,007 1,999
Social security costs 157 165
2,164 2,164
Share based payments 103 72
2,267 2,236
======== ========
The Group operates a stakeholder pension scheme. The Group made
pension contributions totalling GBP10,000 during the year (2015:
GBP7,000), and pension contributions totalling GBP1,000 were
outstanding at the year-end (2015: GBP1,000).
Average monthly number of people (including Executive Directors)
employed
2016 2015
Number Number
By function
Sales 3 3
Production 209 189
Administration 22 20
Management 6 6
------- -------
240 218
======= =======
9. 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:
2016 2015
'000 '000
Issued ordinary shares
Start of year 63,455 55,145
Effect of shares issued during the year 14,261 2,029
---------------- ----------------
Weighted average basic and diluted number of shares for year 77,716 57,174
================ ================
For the year ended 31 December 2016 and 2015 the issue of
additional shares on exercise of outstanding share options,
convertible loans and warrants would decrease the basic loss per
share and there is therefore no dilutive effect. Loss per share was
2.46p (2015: 3.49p).
10. Financial instruments
Categories of financial assets and liabilities
The carrying amounts presented in the Consolidated of Financial
Position relate to the following categories of assets and
liabilities:
2016 2015
GBP'000 GBP'000
Financial assets
Loans and receivables
Trade and other receivables 814 403
Cash and cash equivalents 152 150
966 553
------------------ ------------------
Financial liabilities
Financial liabilities measured at amortised cost
Borrowings 3,059 2,587
Trade and other payables 951 981
4,010 3,568
------------------ ------------------
See note 2 for a description of the accounting policies for each
category of financial instruments. The fair values are presented in
the related notes.
Convertible Loan Notes
The Group had the following convertible loan notes outstanding
during the year the key details of which are set out below:
Secured Convertible Convertible Unsecured
Loan Notes Loan Notes ("CULN")
("CLN")
=========== ==================== ===============================
Amount GBP2.245m GBP1.2m outstanding
31 December 2016 The
GBP0.75m outstanding
at the start of the
year and the GBP0.475m
issued in the year were
fully converted during
the year. The outstanding
balance was fully converted
by April 2017.
=========== ==================== ===============================
Conversion 35p Variable see below
Price
=========== ==================== ===============================
Security Secured fixed Unsecured
and floating
subordinate
to HSBC
=========== ==================== ===============================
Redemption 19 June 2018 Conversions allowed
Date within certain market
driven parameters
=========== ==================== ===============================
Management GBP25,000 nil
Fee per annum
=========== ==================== ===============================
Coupon 10% paid quarterly nil
in arrears.
Listed on
the CISX
=========== ==================== ===============================
Conversion Company can The conversion price
Detail force conversion for these loan notes
if the share is calculated as the
price is > lesser of i) 65 pence
65p for 15 and ii) 90% of the arithmetic
working days average of the five
after 19 June lowest daily volume
2016. Company weighted average share
can make repayment price calculations per
without penalty ordinary share out of
if the share the ten trading days
price is > prior to conversion.
42p for 15
working days
after 19 June
2016
=========== ==================== ===============================
On initial recognition the conversion option in relation to the
convertible unsecured loan notes (CULN) leads to a potentially
variable number of shares, therefore the CULN is accounted for as a
host debt, (recorded initially at fair value, net of transaction
costs and subsequently valued at amortised cost) with an embedded
derivative (recorded at fair value through profit and loss and fair
valued at each reporting date).
2016 2016 2016 2015 2015 2015
GBP'000 CULN CLN Total CULN CLN Total
At 1 January 520 1,972 2,492 - 538 538
Fair value of
new loans issued 1,408 - 1,408 1,218 1,391 2,609
Fair value of
warrants included
in the issue
(note 22) (112) - (112) - - -
Amortised finance
cost 116 324 440 162 175 337
Interest paid - (225) (225) - (132) (132)
Converted in
the year (980) - (980) (860) - (860)
Closing Balance 952 2,071 3,023 520 1,972 2,492
====== ====== ============ ====== ====== ======
Analysis of movement in debt at principal value (excluding IFRS
impacts), memorandum only
2016 2016 2016 2015 2015 2015
GBP'000 CULN CLN Total CULN CLN Total
At 1 January 750 2,245 2,995 575 575
New Issue 1,675 - 1,675 1,650 1,670 3,320
Conversion (1,247) - (1,247) (900) - (900)
Financing Charge
(equity settled) 22 - 22 - - -
============== ============ ============== ============ ============ =============
Closing Balance 1,200 2,245 3,445 750 2,245 2,995
============== ============ ============== ============ ============ =============
Reconciliation on Conversion 2016 2015
GBP'000 GBP'000
Amortisation of Loan Note Interest
Cost Element (86) (40)
Carrying Value at conversion 1,066 900
-------- -----------------
Total 980 860
======== =================
The Convertible Loan Notes have been separated into two
components, the Host Debt Instrument and the Embedded Derivative on
initial recognition. The value of the Host Debt Instrument will
increase to the principal sum amount by the date of maturity. The
effective interest cost of the Notes is the sum of that increasing
value in the period and the interest paid to Noteholders. The
Derivative element will vary in value according to the market price
of the underlying Ordinary Shares and the period remaining for
conversion amongst other factors. The value of the embedded
derivative was not material at inception and at the end of the year
and is included in the fair value of the overall instrument for
disclosure.
Secured convertible loan notes (CLN) are compound financial
instruments that can be converted to share capital at the option of
the holder, and the number of shares to be issued does not vary
with changes in fair value.
Unlike convertible unsecured loan notes (CULN), this instrument
is determined to have a liability and equity component. The
liability component is initially recognised at fair value of a
similar liability without a conversion option. The equity component
is recognised initially as the difference between the fair value of
the compound financial instrument as a whole and the fair value of
the liability component. It is not subsequently remeasured. The
liability component is measured at amortised cost using the
effective interest method.
Borrowings 2016 2015
GBP'000 GBP'000
Non-current
Convertible loan note 2,071 1,972
Other 36 95
Convertible unsecured loan note 952 520
-------- --------
Total borrowings 3,059 2,587
======== ========
11. Cash flow adjustments and changes in working capital
The following non-cash flow adjustments and adjustments for
changes in working capital have been made to loss before taxation
to arrive at operating cash flow:
2016 2015
GBP'000 GBP'000
Adjustments:
Depreciation, amortisation and impairment of non-financial assets 234 171
Finance costs 566 338
Loss on disposal of non-financial assets 13 4
Share-based payment expenses 103 76
Total adjustments 916 589
-------- --------
Net changes in working capital:
(Increase)/Decrease in inventories (141) 15
Decrease/(increase) in trade and other receivables (410) 1,625
(Decrease)/increase in trade and other payables (87) (1,431)
Total changes in working capital (638) 209
-------- --------
12. Events after the reporting period
On 1 February 2017 2,228,367 ordinary shares of 10p each were
issued at a price of 13.462773 pence each pursuant to a conversion
of GBP0.3m of CULN.
On 28 February 2017 Company raised GBP0.6m (gross) of new monies
by subscription at a price of 11.625 pence per ordinary 10 pence
share and consequently issued 5,161,290 new ordinary 10 pence
shares. On the same day Darwin exercised a conversion of GBP0.4m of
CULN at 11.625 pence per share resulting in the issuance of
3,440,860 new ordinary shares.
On 4 April 2017 employees exercised 55,000 share options which
were originally granted on 5 April 2007 and had an exercise price
of 10p each.
On 18 April 2017 10m new ordinary shares were issued raising
GBP1m gross to support the development of the company. On the same
day Beaufort Securities Ltd were appointed as joint broker and
their annual fee of GBP25,000 was settled by the issue of 250,000
new ordinary shares and the issue of 100,000 detachable warrants
with an exercise price of 25p and a life of five years. As part of
the placing commissions Beaufort were issued with a further 0.5m
warrants with an exercise price of 10p and a life of five years. On
the same day the final GBP0.5m of convertible loan notes issued to
Darwin Capital Limited were converted at a price of 10p. A
condition of the placing was that Westminster agreed with Beaufort
not to enter into such an arrangement for six months from the date
of this placing.
13. Publication of Non-Statutory Accounts
The financial information set out above does not constitute the
Company's Annual Report and Financial Statements for the years
ended 31 December 2016 or 2015. The Annual Report and Financial
Statements for 2015 have been delivered to the Registrar of
Companies and those for 2016 will be delivered following the
Company's Annual General Meeting on 29 June 2017. The auditor's
reports on both the 2016 and 2015 accounts were unqualified, did
not draw attention to any matters by way of emphasis and did not
contain statements under s498(2) or (3) of the Companies Act 2006.
Whilst the financial information included in this preliminary
announcement has been computed in accordance with International
Financial Reporting Standards (IFRSs) this announcement does not
itself contain sufficient information to comply with IFRSs. Copies
of the Annual Report and Financial Statements for the year to 31
December 2016 will be posted to shareholders by 8 June 2017 and
will be obtainable from the Company's registered offices or
www.wg-plc.com when published. The information in this preliminary
announcement was approved by the Board on 5 June 2017.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR FIMITMBJMBPR
(END) Dow Jones Newswires
June 05, 2017 02:00 ET (06:00 GMT)
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