Westminster Group PLC AGM Statement (5060S)

TIDMWSG

RNS Number : 5060S

Westminster Group PLC

26 June 2018

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF ARTICLE 7 OF EU REGULATION 596/2014

Westminster Group Plc

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

AGM Statement

Westminster Group Plc (AIM: WSG), a leading supplier of managed services and technology-based security solutions worldwide, will hold its Annual General Meeting today at 11am at the offices of Moore Stephens LLP, 150 Aldersgate Street, London, EC1A 4AB. At the meeting, Westminster's Chief Executive Peter Fowler will provide shareholders with the following update:

"In our 2017 Annual Report I was pleased to report that the Group is now in a better position than it has been for some time in terms of management, structure, revenues and prospects. Both our Managed Services and Technology divisions are performing well. Trading for the first five months of this financial year has been broadly in line with the Board's expectations and excluding the impact of any new major contracts, we expect to be EBITDA positive this year.

Technology Division

"Our Technology Division has had a strong start to the year securing a number of contracts for products and services around the world including the $4.5m USD contract announced in March 2018. That project is underway, and we expect it to be largely delivered this financial year.

Managed Services Division

"Our Managed Services Division experienced a strong start to the year with January passenger numbers being the second highest on record and despite a minor downturn in passenger numbers during March and April, due to prolonged elections in Sierra Leone, we expect to see continued growth over the full year with new carriers, such as Turkish Airlines, having now commenced services. Cargo screening services revenues are ahead of budget but remain minor as we await the airport authority's development of an effective cargo hub. This, together with the country's export potential, should generate additional cargo traffic. New airlines are also likely to create additional demand.

"So far in 2018 we have secured important new contracts to assist airport authorities with their equipment and training needs at a number of international airports in our target markets and we are expanding our training team to meet the demand for our services in this area.

"We continue to process our large scale managed services prospects around the world although, due in part to the confidential nature of such projects and commercial sensitivity, we are no longer announcing or commenting on any individual Memorandums of Understanding or Letters of Intent as this can lead to speculation particularly as negotiations can ebb and flow over prolonged periods and take some time to reach a final outcome. We will of course update the market on material developments as appropriate and in accordance with our regulatory responsibilities. We are however, as previously announced, working towards signing at least one other long term Managed Services contract during 2018, although with projects of this scale and complexity there can never be certainty as to outcome or timing.

Iran Projects

"A defining achievement for the Company so far in 2018 was the formal signing on 7 May of a long term (15 year) contract for equipment and services at one of the 60+ airports in Iran. The contract, with initial annual revenues in excess of EUR24 million Euros, was the culmination of over two years complex and intensive negotiations and planning.

"During the latter part of 2015, with the Joint Comprehensive Plan of Action (JCPOA) implementation date of 16 January 2016 approaching, we identified Iran as potentially one of the world's most exciting emerging markets, a view shared by leading analysists. Iran's economy is the second-largest in the Middle East and North Africa region after Saudi Arabia. It is larger than Australia's and approaching those of Turkey and Spain. It has a population of close to 80 million people, with a median age of 28, with strong aspirations to travel and engage with the rest of the world. Iran has a strong economy, an educated populace and a diaspora of over 4 million.

"The country is recognised as a significant potential global aviation market after almost four decades of isolation and with over 60 airports in need of expansion and upgrading is potentially one of the world's fastest growing aviation opportunities. It is also strategically and geographically positioned to potentially be a major cargo and passenger transport hub between East and West.

"We signed a Memorandum of Understanding with the airport authorities in March 2016 and received a formal Letter of Intent in May 2016. Over the past two years we have been involved in wide ranging and complex negotiations with commercial and political bodies with meetings in various jurisdictions. To be in a position to undertake this transformational project we have had to put in place a complex supply chain and invest in our corporate infrastructure, including the establishment of operations in Germany. We also dealt with a constantly changing scope of works as the client prioritised its requirements. In addition, given the sensitivities around operating in Iran, we had to overcome numerous challenges including banking, financing and strict compliance with international sanctions involving detailed due diligence and considerable professional advice from across Europe and the United States (US). Throughout the process we have received and continue to receive, valuable support from the UK government at the highest levels.

"On 22 December 2017 we announced we had finalised legal and commercial negotiations apart from a few minor commercial and contractual issues. On 28 March 2018 we announced that the outstanding commercial and contractual issues has been agreed and that we were awaiting the client's internal approval process to complete. On 7 May 2018 the client finalised its approval process and the contract was signed. The contract is structured so that the effective date commences on the exchange of formal board letters between us and the client, which was expected to take place within 8 weeks of contract signing. The purpose of the exchange of letters is to allow both parties time to ensure everything is in place before commencing operations whilst giving both parties comfort that the contract was finalised, and terms could not be changed.

"Unfortunately, on 8 May 2018 President Trump made an announcement that the US was unilaterally withdrawing from the JCPOA agreement and re-imposing sanctions. Whilst none of Westminster's proposed equipment or services is subject to any existing or proposed sanctions, the US action has implications for finance and banking and has created uncertainty in the international business community.

"The other signatories to the JCPOA agreement, being China, Russia, Germany, France and the UK, have all stated their continued support for the agreement, as have the European Union (EU), the United Nations, the International Atomic Energy Agency and most other leading countries around the world. Germany, France and the United Kingdom have jointly vowed to uphold the JCPOA agreement and on 4 June 2018 wrote to the US Treasury Secretary Steven Mnuchin and Secretary of State Mike Pompeo, regarding exemptions for EU businesses and certain banking issues. Also, as widely reported, the EU is considering putting measures in place to protect and support European companies against US extraterritorial actions, which is expected to be in place before 6 August 2018.

"Given the initial uncertainty, and following discussions with our customer and commercial partners, the Board made the decision to place the project on hold whilst it seeks clarification on the impact of the US withdrawal from the JCPOA and the implications for the Company's banking, finance, insurance, its supply chain and the possible impact on the Company's other business and therefore to date there has been no formal exchange of board letters to make the contract effective. We have also placed on hold a second smaller contract in Iran for EUR2.65 million Euros signed at the same time for the same reasons. This decision, which we hope will be temporary, was prudent and sensible as it would have been irresponsible for the Company to commence these projects until such time as we are certain that issues emanating from the US withdrawal would not prevent a successful implementation.

"Whilst some multi-national corporations with large exposure to and trade links with the US have announced a withdrawal from Iranian activities we are encouraged that others such as Renault have publicly stated they are committed to continuing business with Iran. Whilst our client is keen to commence the project as soon as practically possible they are cognisant of and understand our position and are actively working with us to explore various solutions to the challenges posed by the US action. We have engaged with our US lawyers based in Washington who have confirmed that our activities are not covered by direct or indirect sanctions provided that our equipment and services have less than 10% US content. For additional comfort we are exploring the possibility of getting a letter of assurance from the US Treasury which would be helpful. We are in discussions with all relevant parties including our bankers, financial bodies, advisors and supply chain to find a way forward. Our German subsidiary has been critical in this respect and we are making progress, although not all issues have yet been resolved and we believe it is likely we will have to make changes to our banking and some equipment suppliers. Securing this major contract was a momentous achievement and we remain hopeful that the solutions we are seeking, together with the measures being put in place by the EU, will enable this and other potential projects in Iran to proceed in due course.

Ferry Operations

"As previously announced we exited the ferry operations in September 2017 in a manner that would not adversely affect airport passenger transfer to and from the mainland, which is important for our airport operations - this was one of the initial drivers for our involvement in the ferry service. We consequently entered into a formal agreement to transfer the operation to Sea Coach Express, the largest ferry operator in Sierra Leone, which has now been completed. We will continue to operate and manage the ferry terminals in accordance with our 21-year agreement and will receive a share of revenues on ticket sales made through our own operations, together with a payment for all passengers travelling to and from our terminals although we do not expect these revenues to be material in the near term.

"We currently still own the Sierra Queen, which was written down to nil value at December 2017 and is subject to only minor ongoing security and maintenance costs. We are exploring options for disposal including a sale at the earliest opportunity.

Board and Senior Management

"Our business is set to benefit from unprecedented growth opportunities, particularly with our airport security operations, and it is essential we have the right strategies, people, processes and systems in place to successfully deliver such growth. In recent months we have made some important new appointments to the Board and senior management and additional appointments to further broaden our range of experience and expertise are planned in the coming months.

Outlook

"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.

"Whilst operating in emerging markets does carry a higher risk of delays and disruption, is time consuming and involves a greater degree of frustration and bureaucracy, with perseverance and diligence the potential rewards are substantial.

"Over the next few months and years we have an opportunity to achieve unprecedented growth from the prospects we are pursuing around the world, and I believe we are closer now than we have ever been in delivering on our vision. The Board and I remain committed to delivering on this potential and we thank our shareholders and other stakeholders for their continued support."

For further information, please contact:

 
Westminster Group Plc                                Media enquiries via Walbrook PR 
Rt. Hon. Sir Tony Baldry - Chairman 
Peter Fowler - Chief Executive Officer 
Martin Boden - Chief Financial Officer 
 
S. P. Angel Corporate Finance LLP (NOMAD & Broker) 
Stuart Gledhill                                      020 3470 0470 
Lindsay Mair 
Caroline Rowe 
 
Walbrook (Investor Relations) 
Tom Cooper                                           020 7933 8780 
Paul Vann                                            0797 122 1972 
                                                     [e-mail] 
 

Notes:

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

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

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact [e-mail] or visit www.rns.com.

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June 26, 2018 02:00 ET (06:00 GMT)