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Westminster Group happy to continue pursuing high-risk/high-reward opportunities

Given the markets in which it operates, nothing is ever straight-forward for Westminster but the board believes the group is set to benefit from unprecedented growth opportunities, particularly with its airport security operations
US and Iranian flag
The best laid plans can be knocked off course by political machinations

Westminster Group PLC (LON:WSG), the technology-based security solutions provider, expects to post positive underlying earnings this year.

In a statement released ahead of the group’s annual general meeting, chief executive Peter Fowler said the group was now in a better position than it had been for some time in terms of management, structure, revenues and prospects.

READ: Westminster Group still hopeful over Iran airport security deal

Both of its divisions - Managed Services and Technology - are performing well and trading for the first five months of this financial year has been broadly in line with the board's expectations.

The Technology division has been quick out of the blocks this year, securing a number of contracts around the world, including the US$4.5mln security project in the Middle East announced in March, the bulk of which will be delivered this financial year.

Meanwhile, the Managed Services division, which includes the group’s airport security operations, experienced a strong start to the year with passenger numbers in January the second highest on record, although prolonged elections in Sierra Leone put a slight dent in passenger numbers in March and April.

Westminster Group expects to see continued growth over the full year with new carriers, such as Turkish Airlines, having now begun services.

"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,” Fowler was set to tell shareholders at the AGM.

As previously announced, the group is working towards signing at least one other long-term managed services contract during 2018, although as alluded to above, it can be difficult to accurately estimate how long negotiations will take on contracts such as these.

READ: Westminster puts Iran airport contract on hold after US withdraws from nuclear pact​

The group’s transformational security contract for one of Iran’s 60 airports is a good example of how snags can arise; after a considerable number of legal and commercial negotiations over a couple of years, the deal looked done and dusted until President Trump’s announcement on May 8 that the US was unilaterally withdrawing from the Joint Comprehensive Plan of Action (JCPOA) agreement and re-imposing sanctions on Iran.

Although none of Westminster's proposed equipment or services is subject to any existing or proposed sanctions, the US action has made life difficult and for now the project has been put on hold by the board of Westminster while it seeks clarification on the US withdrawal from the JCPOA and the implications for the company's business relations in Iran.

“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,” Fowler’s AGM statement said.

Westminster’s client in Iran is keen to start the project as soon as possible but understands Westminster’s position.

The potential rewards from operating in Iran and other emerging markets are enormous​

“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,” Fowler's statement said.

The board acknowledges that Westminster works in markets that carry a higher risk of delays and disruption but it believes 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 statement concluded.

Shares in Westminster Group were down three-eighths of a penny at 12p ahead of the AGM.

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