The latest Trading Update from Westminster Group (LON:WSG) the managed services and security business indicates a slowing down.
For the year to the end of December the group has seen slippage in a multi-million Technology project that has caused guidance to be somewhat lower than had been anticipated a couple of months ago.
That coincides with a number of contracts that were being progressed for commitment being delayed in their signing.
However, not all is gloom and doom
The big MENA project is expected to be awarded before the end of the year, meaning that any revenue will now be pushed into next year.
The level of enquiries has continued to be very healthy, while the management expects to have enough cash at hand to see it through to the end of 2023.
If any new large contracts are committed next year, then they will be financed appropriately.
Encouragingly the group’s international revenues are in US$.
Analyst’s opinion – shares are a Buy up to 6p
Even though guidance has been reduced, brokers analysts Colin Smith and Lauren Baker Iguaz, at Arden Partners, retain their Buy recommendation on the group’s shares.
They are looking for 6p a share as their price aim.
For the current year end they see £9.1m (£7.1m) sales and an adjusted pre-tax loss of just £0.9m (£1.9m), easing earnings from a 0.6p loss to just 0.3p loss for this year.
Going into the coming year the brokers have £17.1m of sales estimated, to produce £1.2m of profits, worth 0.4p per share in earnings.
Conclusion – shares could easily double in 2023
That revenue increase actually shows very clearly the effect of additional sales to the group’s bottom line.
With the management sounding confident of more business wins over the next year the scalability of its numbers shine through very clearly.
The £5m group’s shares eased 0.42p on the Update, to just 1.48p, at which level I still consider that patient investors will be well rewarded within the next year.