TIDMWTG
RNS Number : 8481M
Watchstone Group PLC
26 May 2022
Watchstone Group plc
("Watchstone" or the "Company" or the "Group")
Preliminary results for the year ended 31 December 2021
Watchstone Group plc (WTG.L) today announces its results for the
year ended 31 December 2021.
-- Total loss after tax GBP3.6m (2020: Profit of GBP7.7m)
-- Group operating loss of GBP3.7m (2020: GBP1.4m)
-- Group net assets of GBP13.5m representing approximately 29
pence per share (2020: 37 pence per share)
-- Group cash at 31 December 2021 of GBP13.0m (31 December 2020: GBP16.7m)
-- Group cash and term deposits at 24 May 2022 of GBP11.1m not
including amounts held in escrow of GBP1.8m
The Annual Report and Accounts for the year ended 31 December
2021 will be released by 6 June 2022 and posted (where applicable)
to registered shareholders. Once published, the Annual Report and
Accounts will be available at www.watchstonegroup.com/investors
.
The 2022 Annual General Meeting ("AGM") will be held on 30 June
2022 in London.
The Notice of the AGM will be published on the Company's website
at
https://www.watchstonegroup.com/investors/shareholder-information/
.
For further information:
Watchstone Group plc Tel: 03333 448048
investor.relations@watchstonegroup.com
WH Ireland Limited, Financial Tel: 020 7220 1666
Adviser and Broker
---------------------
Chris Hardie
---------------------
Chairman and CEO's Report
During the year the Group has significantly progressed the
realisation of its litigation assets including the formal filing of
its claim against its former auditors, KPMG LLP ("KPMG"). This is
in addition to continued work in respect of the claim filed during
2020 against PricewaterhouseCoopers LLP ("PwC") and older claims
against Aviva Canada Inc. ("Aviva Canada") and HMRC.
Now all trading businesses have been disposed our plan remains
optimum resolution of legacy matters and then to return cash to
shareholders.
The ongoing impact of COVID-19 in the UK during 2021 resulted in
the target revenues of the disposed ingenie business falling short
of the required target for additional consideration. However, the
timing of the sales proved fortuitous, and the Group was spared the
financing requirement which would likely have been associated with
ownership of this business through this difficult period.
On 30 April 2021, we listed on the Aquis Stock Exchange to
continue to provide a trading facility on a regulated market. We
subsequently delisted from AIM as required by the AIM Rules.
Notification from the Serious Fraud Office ("SFO") of their
decision to cease its remaining investigation means we can
confidently now draw a line under this part of the Company's
history with no material outstanding litigation against the Group.
We move forward in a strong position to realise maximum shareholder
value from the four contingent assets we are pursuing.
During 2021, we were the target of a mandatory offer from one of
the Company's major shareholders. The offer was not hostile but the
board recommended the rejection of the offer and counteroffer, and
this was overwhelmingly supported by our shareholders. We would
like to thank our shareholders for their support and this
endorsement of our approach to obtaining value from our remaining
assets. We plan to make further returns to shareholders as, and
when, the outcome to our litigation becomes clearer and final
resolution more imminent.
Update on outstanding legacy matters
Our claim against PwC proceeds in the High Court with the trial
expected to begin in January 2023. The claim against PwC is for
damages or equitable compensation of GBP63m plus interest and
costs. Our claim against our former auditor, KPMG, in respect of
its audit of the Group's accounts for the year ended 31 December
2013 has been filed and KPMG's defence recently received. This
matter is not expected to go to trial before 2024.
Our appeal for the recovery of historic VAT paid in the ingenie
business was heard by the First Tier VAT Tribunal in December 2021
and we were notified in April 2022 of the Tribunal's judgement in
favour of HMRC. This was, of course, disappointing but having taken
advice, we are now appealing that decision to the Upper Tribunal.
Finally, our Canadian subsidiary's claim against Aviva Canada is
ongoing and is expected to go to trial in H2 2023.
2022 outlook
We will look to prosecute our remaining litigation assets for
the optimal return for shareholders. Central costs will continue to
be carefully managed at reduced levels consistent with the needs of
the organisation.
Once again, we would like to thank our shareholders for their
continuing patience whilst we work to realise optimal value from
our remaining assets.
Richard Rose, Non-executive Chairman Stefan Borson, Group Chief Executive Officer
Consolidated Income Statement
for the year ended 31 December 2021
2021 2020
Total Total
GBP'000 GBP'000
Administrative expenses (3,722) (1,361)
Group operating loss (3,722) (1,361)
Finance income - 169
Finance expense (8) (12)
Loss before taxation (3,730) (1,204)
Taxation - -
Loss after taxation for the year from
continuing operations (3,730) (1,204)
Net gain on disposal of discontinued operations - 10,268
Profit/(loss) for the year from discontinued
operations, net of taxation 135 (1,381)
(Loss)/profit after taxation for the
year (3,595) 7,683
-------------------------------------------------- -------- --------
Attributable to:
Equity holders of the parent (3,592) 7,683
Non-controlling interests (3) -
(3,595) 7,683
------------------------------------------------- -------- --------
Earnings per share (pence):
Basic (7.8) 16.7
Diluted (7.8) 16.7
-------------------------------------------- ------ ------
Loss per share from continuing operations
(pence):
Basic (8.1) (2.6)
Diluted (8.1) (2.6)
-------------------------------------------- ------ ------
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2021
2021 2020
GBP'000 GBP'000
(Loss)/profit after taxation (3,595) 7,683
Items that may be reclassified in the Consolidated
Income Statement
Exchange differences on translation of foreign
operations (18) (688)
Total comprehensive (loss)/income for the
year (3,613) 6,995
---------------------------------------------------- -------- --------
Attributable to:
Equity holders of the parent (3,610) 6,995
Non-controlling interest (3) -
(3,613) 6,995
------------------------------ -------- ------
Consolidated Statement of Financial Position
as at 31 December 2021
2021 2020
GBP'000 GBP'000
Non-current assets
Goodwill - -
Other intangible assets - -
Property, plant and equipment - -
- -
--------------------------------------- --------- ---------
Current assets
Corporation tax - 81
Trade and other receivables 1,910 2,468
Cash 12,996 16,656
Total current assets 14,906 19,205
Total assets 14,906 19,205
---------------------------------------- --------- ---------
Current liabilities
Trade and other payables (1,251) (1,808)
Provisions (129) (258)
Total current liabilities (1,380) (2,066)
---------------------------------------- --------- ---------
Non-current liabilities
Provisions - -
Deferred tax liabilities (1) (1)
(1) (1)
--------------------------------------- --------- ---------
Total liabilities (1,381) (2,067)
---------------------------------------- --------- ---------
Net assets 13,525 17,138
---------------------------------------- --------- ---------
Equity
Share capital 4,604 4,604
Other reserves 69,734 69,752
Retained earnings (60,814) (57,222)
Equity attributable to equity holders
of the parent 13,524 17,134
Non-controlling interests 1 4
Total equity 13,525 17,138
---------------------------------------- --------- ---------
Consolidated Cash Flow Statement
for the year ended 31 December 2021
2021 2020
GBP'000 GBP'000
Cash flows from operating activities
Cash used in operations, net finance expense
and tax (3,751) (6,283)
Tax received 81 -
Net cash used by operating activities (3,670) (6,283)
------------------------------------------------ -------- ---------
Cash flows from investing activities
Purchase of property, plant and equipment - (790)
Purchase of intangible fixed assets - (618)
Disposal of subsidiaries net of cash foregone - -
Investment in term deposits - (30,000)
Maturity of term deposits - 45,000
Interest income - 170
Disposal of subsidiaries - 21,617
Net cash generated from investing activities - 35,379
------------------------------------------------ -------- ---------
Cash flows from financing activities
Finance expense paid - (451)
Finance income received - 42
Return of capital - (68,916)
Dividends paid to non-controlling interests - (287)
Net cash used in financing activities - (69,612)
------------------------------------------------ -------- ---------
Net decrease in cash and cash equivalents (3,670) (40,516)
Cash and cash equivalents at the beginning
of the year 16,656 57,176
Exchange gains/(losses) on cash and cash
equivalents 10 (4)
Cash and cash equivalents at the end of
the year 12,996 16,656
------------------------------------------------ -------- ---------
The above Consolidated Cash Flow Statement includes cash flows
from both continuing and discontinued operations.
Notes:
1. Results announcement
The Financial Statements for the year ended 31 December 2021
have been prepared in accordance with UK adopted international
accounting standards in conformity with the requirements of the
Companies Act 2006. However, this announcement does not contain
sufficient information to comply with adopted IFRS. The Group will
publish its Annual Report and Financial Statements by 6 June 2022
and these will appear on the Group's website at
www.watchstonegroup.com and be posted to shareholders. The auditors
have reported on those accounts; their report was (i) unqualified;
and (ii) did not contain a statement under Section 498 (2) or (3)
of the Companies Act 2006. The financial information set out in
this announcement does not constitute the Group's statutory
accounts for the year ended 31 December 2021. Statutory accounts
for the year ended 31 December 2020 have been delivered to the
Registrar of Companies and those for the year ended 31 December
2021 will be delivered by 30 June 2022. This preliminary
announcement was approved by the Board of Directors on 25 May 2022
and these preliminary results have been extracted from the audited
results for the year ended 31 December 2021.
2. Business segments
Operating segments are reported in a manner consistent with the
internal reporting provided to the chief operating decision-maker
(the Board). The Group historically operated two segments, being
Healthcare Services and ingenie. During the year ended 31 December
2020, both of these segments were disposed of and therefore neither
form reportable segments.
3. Administrative expenses
Year ended 31 December 2021 2020
GBP'000 GBP'000
Administrative expenses include:
* Legal expenses 1,059 1,578
* Net releases of provisions for legal expenses and tax
related matters (105) (3,503)
* Legal settlements - (617)
* Restructuring - 79
954 (2,463)
-------------------------------------------------------------- -------- --------
Legal fees incurred during 2021 primarily relate to the
litigation being undertaken by the Company against
PricewaterhouseCoopers LLP ("PwC"), KPMG LLP ("KPMG").
For the year ended 31 December 2021, legal expenses primarily
relate to the costs of actual or proposed litigation where the
Group is the Claimant. No provisions are made in respect of the
costs of such actions since the Group is not obliged to continue to
pursue them.
The release of provisions for legal fees in 2021 relates to the
discontinued SFO investigation into former management of the
Company. The release during 2020 relates to the discontinued SFO
investigation into the Company and potential class action. This is
partially offset by additional provisions in respect of the First
Tier VAT Tribunal hearing.
The legal settlement credits of GBP617,000 during 2020 relate to
settlements with former management.
4. Provisions
Legal Onerous
disputes contracts Other Total
GBP'000 GBP'000 GBP'000 GBP'000
At 1 January 2020 3,803 88 275 4,166
Additional provisions - - 1,100 1,100
Unused amounts
released (3,503) (30) - (3,533)
Used during the
year (100) - (1,136) (1,236)
Disposals - - (239) (239)
At 1 January
2021 200 58 - 258
-------------------------- ----------- ------------ ------------- ----------- ---------
Unused amounts
released (187) (47) - (234)
Used during the
year (13) (11) - (24)
Additional provisions 129 - - 129
At 31 December
2021 129 - - 129
-------------------------- ----------- ------------ ------------- ----------- ---------
Split:
Non-current - - - -
Current 129 - - 129
Legal disputes and regulatory matters
It is the policy of the Group to provide for legal costs in
cases where the Group is (or would be) the defendant, defence costs
are provided as the Group is committed to defending the actions.
Such costs are provided for at the mid-range of possible
eventualities given the uncertainty of the outcome, this range is
reassessed on a continuous basis.
At 31 December 2020, the estimated costs of continuing to
support the SFO with their enquiries in to individuals with which
the Company is obliged to do were provided. During 2021 the SFO
ceased their investigation into former management, therefore
concluding all activity relating to the historic Group. The
remaining provision for fees of GBP187,000 was therefore released
to the income statement.
Additional provisions relate to the decision of the First Tier
VAT Tribunal. Following a hearing held in December 2021, on 12
April 2022, Watchstone was informed of the decision of the First
Tier Tribunal which found in favour of HMRC in respect of the
appeal by Watchstone's subsidiary WTGIL Limited ("WTGIL"). The
First Tier Tribunal found that WTGIL did not make any supplies of
telematics devices or related services in the VAT periods 07/2014
to 07/2018. Accordingly, WTGIL's appeal was dismissed. WTGIL has
consulted with its advisers and Counsel and intends to appeal to
the Upper Tax Tribunal.
In legal cases where the Group is the claimant (or counter
claimant), costs are not provided as there is no obligation to
proceed and the Group is not contractually committed to incur
costs. Similarly, in such legal cases where the Group is the
claimant and has indemnified a third party, potential future costs
associated with the indemnification are not provided for.
Onerous contracts
Where contracted income is expected to be less than the related
expected expenditure the difference is provided in full. At 31
December 2020, the provision related exclusively to the maximum
exposure remaining under onerous property leases, the lease expired
during 2021 and therefore no provision remains at 31 December
2021.
5. Contingent assets and liabilities
Litigation in relation to the historic activities of the Group
is being pursued including claims against PwC, KPMG and Aviva
Canada Inc. These give rise to contingent assets, which are not
recognised within the Financial Statements due to lack of certainty
as to the outcome, despite an inflow of economic benefit being
considered probable.
The Group routinely enters into a range of contractual
arrangements in the ordinary course of business which can give rise
to claims or potential litigation against Group companies. It is
the Group's policy to make specific provisions at the Statement of
Financial Position date for all liabilities which, in the opinion
of the Directors, are expected to result in a loss.
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END
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Watchstone (AQSE:WTG)
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