Westminster Group PLC (LON:WSG), the supplier of managed services and security solutions, has seen a significant year-on-year rise in earnings this year.
The company said the first four months of 2016 have shown a continuing improvement in the profitability and cash generation of the aviation division, which was loss-making in the same period in 2015 due to the Ebola crisis.
Revenues in the company's airport security operation have increased by over 85% as traffic has returned to more normal levels.
The company took swift action during the Ebola crisis to streamline resources and so the recovery in revenues, combined with operational leverage, has led to “a very significant improvement” in the underlying earnings (EBITDA) performance of the group compared to the same period of 2015.
Westminster said that on average the monthly EBITDA loss this year has been around £40,000 a month, whereas in the first half of 2015 it had been around £155,000.
Breaking performance down on a divisional basis, the Westminster Aviation Security Services (WASS) division has benefited from the post-Ebola increase in passenger footfall, with traffic in the first four months of 2016 up 82.7% year-on-year, while April's numbers were 87.3% higher.
Interest in the group's airport security solutions remains strong, resulting in the signing of another new Memorandum of Understanding (MoU) for a long term (25-year) airport security programme for an international airport in the Middle East. It is the second MoU signed for airports in the Middle East within the last two months.
WASS has now signed seven MoUs, some of which are now at contract discussion stages, with various governments and airport authorities around the world, serving around 10.6mln embarking passengers annually.
A number of other irons in the fire with other airport operators, the group revealed.
In the first four months of 2016, the Technology division's run rate revenues were £304k, down from £880k in the same period of 2015, though this included around £500k from larger solution contracts.
Westminster said the division's revenues are typically lumpy in nature and so month-on-month comparatives are not an accurate measure, as larger scale solutions contracts can occur at any time. The division currently has several such prospects under discussion, Westminster revealed, and continues to secure contracts for a wide range of products and services from a broad spectrum of clients globally.
Unfortunately, the division's trading has been hit by a few project delays.
The collapse in the oil price has led to delays in funding from the government concerned in the previously announced Americas consultancy project, and it is now unlikely that material revenues from the project will be recognised by the end of 2016.
“Whilst this means that it is now unlikely that material revenues will be recognised by the end of 2016, there remains a pressing security need and there is now an opportunity to pursue the airport project previously discussed under Westminster's Build-Operate-Transfer (BOT) programme and active discussions in this regard are also under way,” the company said.
The much smaller US bridge project has kicked off and initial revenues have been received, but the main contractor has informed the company the project is facing delays.
Westminster expects to have more information for shareholders on this in its annual results statement, which is normally released in June.
Meanwhile, the bad luck that has dogged the group's Sierra Leone ferry project has been well documented, and the company is still waiting for the slip to be available so that repairs can be made to the Sierra Queen vessel.
The group clearly remains high on the prospects for this business, as it has a second vessel, the Sierra Princess, en route to Sierra Leone, which will give the operation a second string to its bow.
The optimism is backed up by the fact that passenger numbers are recovering strongly from the low levels during the Ebola period. In the first four months of 2016 a total of more than 60,000 passengers passed through the airport, the vast majority of whom need to cross the estuary, so even a conservative 50% take-up of the service could generate significant monthly revenues and contribution, the company observed.
Despite the general upturn in the company's trading performance, the project delays and the need to spend money on repairs to the Sierra Queen means the company is likely to need additional financing in the near term.
The board is currently exploring a number of potential financing options, which include directors' support and investment by strategic investors, including a substantial strategic investment fund that is interested in joint venture arrangements relating to Westminster's aviation security business, Westminster Aviation Security Services.
Shares in Westminster Group closed at 9.3p on Wednesday night, which is below the nominal value of the shares. UK listed companies are unable to issue new shares at less than the nominal price, so the company plans to implement a capital restructuring that will reduce the nominal value of the shares from 10p to 1p, subject to the approval of shareholders.
“The last couple of years have been a challenging period for our group with the Ebola crisis lasting longer and becoming more destructive than anyone had anticipated, coupled with the delays in the commencement of our ferry project in Sierra Leone, and the significant drop in oil prices having a knock-on delaying factor with several of our key project opportunities,” said Peter Fowler, chief executive of Westminster Group.
"Despite these challenges, we have continued to expand our international presence and large scale project opportunities, particularly in our increasingly core focus airport security business, have the potential to transform the business.
"Whilst many of the issues faced have been beyond the company's control, we have taken a critical look at our operations, learnt lessons with the benefit of hindsight, and are therefore undertaking a strategic review of our business to streamline operations and to ensure maximum shareholder benefit is achieved from the numerous large scale, long term and high margin opportunities we are developing and which we remain excited about," he added.