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Westminster Group – “pleased to announce” an acquisition… but isn’t it short of cash?

By Steve Moore | Thursday 8 November 2018


Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.


Westminster Group (WSG) “is pleased to announce the acquisition of security and risk management company Keyguard UK Ltd”. But wait a minute; isn’t Westminster itself short of cash?

It states “the total consideration payable is expected to be a maximum of £200,000. Expected net asset value of £18,224 was paid in cash on completion and the balance estimated to be a maximum of £181,776 will be payable in cash as an earn out based on certain debt collection over the next 24 months”, but “Westminster will also provide working capital for expansion and to fund new contracts”.

Westminster emphasised in its results for the first half of 2018 “reduction of adjusted EBITDA loss to £0.4m (H1 2017: loss £0.6m)” and “cash balance of £0.3m at 30 June 2018 and £0.8m at 14 September 2018”. However, even with the stated cash position, a loss at even the ‘adjusted EBITDA’ level ain’t good.

That is with adjusted EBITDA being adjusted bullshit earnings – the actual overall loss was £1.2 million and on a continuing operations basis the EBITDA loss and overall loss both actually INCREASED. Indeed, the spin extended to the noted cash – with there also £2.2 million of borrowings at the half year! There was also a swing to a £0.1 million net current liabilities position and indeed a £0.5 million total net tangible liabilities position!

Since the half-year the company has been “pleased to announce” the raising of £0.2 million via convertible loan notes and of £0.5 million via a placing at 10p per share - hence the increased cash at 14th September! Though still it was stated in the results announcement; “Plans are in place to raise further funds to support the Iranian contract and the other expected new Managed Services airport contract and we expect to complete this exercise in Q4” (doesn’t it mean ‘to keep the lights on’?).

So it’s further attempted dilution ahoy – though the equity margin of error for this is now very little – the nominal value of the shares 10p and the share price currently 10.25p! The Iran contract was emphasised as demonstrating Managed Services business “potential to deliver transformational growth”, but the company is now having “to work with our Iranian customer and the EU authorities in order to address the challenges created by the US unilateral withdrawal from the JCPOA and with a view to commencing the project at the earliest opportunity once the remaining issues have been resolved”.

It argued overall “on track to deliver an EBITDA positive result for the full year to 31 December 2018”, but we’ll see on that and I suggest if it was also on track for net cash flow positive it would have said so. The results ‘Outlook’ concluded “we thank our shareholders and other stakeholders for their continued support” - I suggest it’s going to need this further just to keep the show on the road. Currently, natch, the stance is sell.


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