Watchstone Group PLC

Earnings Release • Apr 24, 2024

National Storage Mechanism | Additional information

RNS Number : 7738L

Watchstone Group PLC

24 April 2024

Watchstone Group plc

("Watchstone" or the "Company" or the "Group")

Preliminary results for the year ended 31 December 2023

Watchstone Group plc (WTG.L) today announces its results for the year ended 31 December 2023.

·    Total loss after tax £7.1m (2022: £nil).

·    Group operating loss of £7.4m (2022: Loss of £0.2m).

·    Group net assets of £6.5m representing approximately 14 pence per share (2022: 29 pence per share).

·    Group cash and term deposits at 31 December 2023 of £7.3m (31 December 2022: £13.8m).

·    Group cash and term deposits at 31 March 2024 of £6.5m.

The Annual Report and Accounts for the year ended 31 December 2023 will be released in due course and posted (where applicable) to registered shareholders. Once published, the Annual Report and Accounts will be available at  www.watchstonegroup.com/investors .

The 2024 Annual General Meeting ("AGM") will be held on 29 May 2024 at 10.00am in London. At the AGM the Company will propose a reduction of the share premium account and a subsequent return of cash of approximately 8p per share to shareholders.

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 [email protected]	Tel: 03333 448048
WH Ireland Limited, Financial Adviser and Broker Antonio Bossi / James Bavister	Tel: 020 7220 1666

Chairman and CEO's Report

During 2023, the Group concluded action in relation to two of the three litigation assets which were outstanding at the start of the year.

The claim against PricewaterhouseCoopers LLP ("PwC") was heard in the early part of the year and disappointingly the court found in favour of the defendant with leave to appeal refused.

In November 2023, the Upper Tier Tax Tribunal ("UTT") heard our appeal against the decision of the First Tier Tax Tribunal in respect of our claim against HMRC.  Subsequent to the year end, in March 2024, the Group was informed of the decision of the UTT which found in favour of HMRC.  The Group has been granted permission to appeal the decision of the UTT to the Court of Appeal.

Finally in December 2023, a settlement in favour of the Group was reached with Aviva Canada Inc ("Aviva Canada"). Whilst the settlement was at a lower level than previously hoped, given the litigation risk and the position of the Group in respect of other matters, it was considered the best commercial outcome available.

Following the conclusion of the PwC trial, costs were further rationalised, with the Board being reduced to a single executive and a single non-executive officer with no other employees being retained.

2024 outlook

​ We now look to conclude the final litigation asset and return the assets of the Group to shareholders in due course. We would like to thank our shareholders for their support during 2023 and patience whilst we work to realise maximum value from our remaining assets.

Richard Rose Non-executive Chairman	Stefan Borson Chief Executive Officer

Consolidated Income Statement

for the year ended 31 December 2023

		2023	2022
		Total	Total
		£'000	£'000
Other income		178	4,950
Administrative expenses		(7,544)	(5,101)
Group operating loss		(7,366)	(151)
Finance income		305	111
Finance expense		(19)	-
Loss before taxation		(7,080)	(40)
Taxation		-	-
Loss after taxation for the year from continuing operations		(7,080)	(40)
(Loss)/profit for the year from discontinued operations, net of taxation		(28)	77
(Loss)/profit after taxation for the year		(7,108)	37
Attributable to:
Equity holders of the parent		(7,108)	37
Non-controlling interests		-	-
		(7,108)	37

(Loss)/earnings per share (pence):
Basic		(15.4)	0.1
Diluted		(15.4)	0.1
Loss per share from continuing operations (pence):
Basic		(15.4)	(0.1)
Diluted		(15.4)	(0.1)

Consolidated Statement of Comprehensive Income

for the year ended 31 December 2023

	2023	2022
	£'000	£'000
(Loss)/profit after taxation	(7,108)	37
Items that may be reclassified in the Consolidated Income Statement
Exchange differences on translation of foreign operations	16	(15)
Total comprehensive (loss)/income for the year	(7,092)	22

Attributable to:
Equity holders of the parent	(7,092)	22
Non-controlling interest	-	-
	(7,092)	22

Consolidated Statement of Financial Position

as at 31 December 2023

		2023	2022
		£'000	£'000
Current assets
Trade and other receivables		119	1,711
Term deposits		6,000	12,000
Cash		1,343	1,768
Total current assets		7,462	15,479
Total assets		7,462	15,479
Current liabilities
Trade and other payables		(807)	(1,803)
Provisions		(200)	(129)
Total current liabilities		(1,007)	(1,932)
Total liabilities		(1,007)	(1,923)
Net assets		6,455	13,547
Equity
Share capital		4,604	4,604
Other reserves		69,735	69,719
Retained earnings		(67,885)	(60,777)
Equity attributable to equity holders of the parent		6,454	13,546
Non-controlling interests		1	1
Total equity		6,455	13,547

Consolidated Cash Flow Statement

for the year ended 31 December 2023

		2023	2022
		£'000	£'000
Cash flows from operating activities
Cash generated from/(used by) operations, net finance expense and tax		(6,657)	683
Net cash generated from/(used by) operating activities		(6,657)	683
Cash flows from investing activities
Investment in term deposits		(14,000)	(26,000)
Maturity of term deposits		20,000	14,000
Interest income		240	86
Net cash generated from/(used by) investing activities		6,240	(11,914)
Net decrease in cash and cash equivalents		(417)	(11,231)
Cash and cash equivalents at the beginning of the year		1,768	12,996
Exchange (losses)/gains on cash and cash equivalents		(8)	3
Cash and cash equivalents at the end of the year		1,343	1,768

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 2023 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 in due course 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 2023. Statutory accounts for the year ended 31 December 2022 have been delivered to the Registrar of Companies and those for the year ended 31 December 2023 will be delivered by 30 June 2024. This preliminary announcement was approved by the Board of Directors on 23 April 2024 and these preliminary results have been extracted from the audited results for the year ended 31 December 2023.

1. Administrative expenses

Year ended 31 December	2023	2022
	£'000	£'000
Administrative expenses include:
-      Legal expenses	2,610	2,139
-      Settlement of defendants' legal fees	2,677	-
-      Provisions in respect of legal fees	71	-
	5,358	2,139

Legal fees incurred during 2023 primarily relate to the litigation undertaken by the Company against PwC and Aviva Canada.  Legal fees incurred during 2022 also included fees in relation to the litigation against KPMG, both now concluded.  During 2023, the court found in favour of PwC.

Since the Group is (or was) the Claimant, no provisions are made in respect of the costs of such actions since the Group is (or was) not obliged to continue to pursue them. 

Following a hearing in November 2023, in March 2024, Watchstone was informed of the decision of the Upper Tax Tribunal which found in favour of HMRC.  Accordingly, the appeal was dismissed and the Group has provided for an estimate of the costs incurred by HMRC.  The Group has been granted permission to appeal the decision of the UTT to the Court of Appeal.

3. Provisions

										Legal disputes
										£'000
At 1 January 2022										129
At 1 January 2023										129
Additional provisions										71
At 31 December 2023										200

Split:

Non-current					-
Current					200

Legal disputes and regulatory matters

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 and that the Group had not made any supplies of telematics devices or related services in the VAT periods 07/2014 to 07/2018. Accordingly, the appeal was dismissed and the Group has provided for the costs incurred by HMRC. An appeal with the Upper Tax Tribunal was heard in November 2023. In March 2024, Watchstone was informed of the decision of the Upper Tax Tribunal which found in favour of HMRC.  Accordingly, the appeal was dismissed and the Group has additionally provided for an estimate of the costs incurred by HMRC at the Upper Tax Tribunal.  The Group has been granted permission to appeal the decision of the UTT to the Court of Appeal.

This represents the entirety of the provisions held by the Group at 31 December 2022 and 31 December 2023.

4. Contingent assets and liabilities

The Company routinely enters into a range of contractual arrangements in the ordinary course of events which can give rise to claims or potential litigation against Group companies.  It is the Company'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 significant loss. 

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