Watchstone Group PLC - Final Results
Announcement provided by
Watchstone Group PLC · WTG26/05/2022 07:00
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
· Group operating loss of
· Group net assets of
· Group cash at 31 December 2021 of
· Group cash and term deposits at 24 May 2022 of
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
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 investor.relations@watchstonegroup.com |
Tel: 03333 448048 |
WH Ireland Limited, Financial Adviser and Broker |
Tel: 020 7220 1666 |
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
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
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 |
|
|
£'000 |
£'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 |
|
£'000 |
£'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 |
|
|
£'000 |
£'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 |
|
|
£'000 |
£'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
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 |
|
£'000 |
£'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
4. Provisions
|
|
Legal disputes |
Onerous contracts |
Other |
Total |
|||||
|
|
£'000 |
£'000 |
£'000 |
£'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
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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