Westminster Group PLC (AIM: WSG), supplier of systems and products to the security, defence, fire protection and safety markets worldwide, announced the acquisition of CTAC Ltd, paying up to £1.82 million depending on future performance.
CTAC provides ‘high end’ security systems and services to a blue chip client base including Brinks, DeBeers LV and Seven Trent Water who operate in operationally critical, high value and high profile fields such as cash handling, bullion storage, jewellery and diamond merchants, chemical storage and utilities.
A key strength of the business is its 24 hour Alarm Receiving Centre (NYSE:ARC) which is built, operated and certificated to the National Security Inspectorate (NSI) Gold standard, the highest level of such certification in the UK. The ARC operates as a 24/7 control & command centre and monitors alarm and video signals from over 1,000 systems across the UK, producing a strong recurring revenue stream.
Founded in 2004, CTAC operates from premises in Kidderminster, UK, supporting clients primarily within the UK but with a growing interest and significant market potential internationally, Westminster said.
Westminster has built a considerable global presence operating through established agents in 45 countries, offering a niche portfolio of security, defence, fire and safety products and services. The addition of CTAC to the group continues Westminster’s expansion through the integration of complementary services.
CTAC’s 24 hour Control & Command facility and Alarm Receiving Centre is a major enhancement to the group’s service operations, presenting cross selling opportunities to other group companies and international clients operating across international time zones.
The acquisition gives Westminster the opportunity to add new services such as 24 hour travel advice, emergency medical & hostile extraction services to overseas travellers and third party remote monitoring & call centre services as well as providing it with a ready built nationwide service team and infrastructure to serve Westminster’s increasing UK customer base.
Having secured the CTAC service team, Westminster will now not have to expend capital to set one up from scratch for fulfilling the recently announced contract with the Ministry of Justice covering 139 prisons in England and Wales.
Westminster’s RMS installation business should also get a substantial boost from the new addition to the group, as CTAC until now typically subcontracted the installation of monitoring and alarm systems at client sites.
The business will be of particular benefit to its Close Protection business, Longmoor, which will use the ARC for monitoring and management of operations and for intelligence gathering for client travel advice and emergency extraction services, the group said.
The centre’s capacity is also expandable without requiring much capital cost, which should be of benefit in case Westminster acquires more providers of security services, chief executive Peter Fowler said.
Excluding exceptional costs, CTAC’s operating profit for 2009 was £204,683. The first three trading months of 2010 indicate an underlying trading profit of £89,000 and a strong recurring revenue base.
CTAC’s vendor and managing director Adrian Johnson will remain with the business as a consultant for a period of 24 months.
Westminster will pay an initial £825,000, of which £500,000 in cash and the balance of £325,000 by the issue of 792,683 new Westminster shares at 41p on the date of completion. A further maximum £1 million performance based payment will be made in two parts, calculated on 40 percent of net profit in each of the two years following completion.
CEO Fowler commented: “I believe CTAC is at an exciting stage with tremendous growth prospects and by joining our group we can now provide the investment and marketing infrastructure to help achieve that growth. The company is an excellent fit for our business, broadening our scope of services and offering additional synergistic opportunities to our other group companies. CTAC is an excellent fit with our RMS business and a clear benefit is for the two businesses to share resources and technologies as well as cross selling services.
“The acquisition of CTAC, with its large UK customer base and sizeable recurring revenue stream, is also in line with our current strategy of enhancing our operations in the UK and Europe and in significantly growing high margin recurring revenue,” Fowler said.
Westminster's principal activity is the design, supply and ongoing support of advanced technology security solutions, risk assessments and close protection services. These can range from product only assignments, such as the supply of specialised scanners, to the design and implementation of an integrated system solution such as a border detection and surveillance system. The majority of its customer base, by value, comprises governments and government agencies, non-governmental organisations and blue chip commercial organisations.
Westminster announced in the same statement that it has raised further working capital through a subscription of 1,250,000 new ordinary shares at 41p, raising £512,500 before expenses from new investors. The shares for the acquisition and the subscription carry a good premium over Westminster’s share price yesterday of around 34.5 pence.
In a separate statement, the group announced it has added three more institutional shareholders to its register. Westminster has placed 747,000 new ordinary shares at 33.5p to raise £250,245 before expenses to supplement working capital requirements. The CEO said the investors are venture capital trusts which have agreed a three-year lock-in, and added: “The growth and the prospects of our business have attracted attention, both within our industry and the financial markets. It is pleasing therefore to see institutions actively investing in Westminster."
The shares issued for the CTAC acquisition and the subscription are expected to be admitted to AIM on April 22, with the shares for the VCT investment to be admitted on April 21.
Disclosure: The author holds no positions in the company