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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Watchstone Group Plc | AQSE:WTG | Aquis Stock Exchange | Ordinary Share | GB00BYNBFN51 | Ordinary Shares 10p |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 1.00 | 10.53% | 10.50 | 6.00 | 14.00 | 11.00 | 8.05 | 8.05 | 163 | 16:29:58 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From May 2022 to May 2024
TIDMWTG
RNS Number : 8421W
Watchstone Group PLC
23 August 2022
Watchstone Group plc
("Watchstone" or the "Company" or the "Group")
Results for the six months ended 30 June 2022
Watchstone today announces its results for the six months ended 30 June 2022.
-- Operating loss of GBP2.1m (2021: loss of GBP1.8m) -- Group net assets of GBP11.4m at 30 June 2022 (as at 31 December 2021: GBP13.5m)
-- Group cash and term deposits at 30 June 2022 of GBP10.6m and GBP1.8m held in escrow (as at 31 December 2021: GBP13.0m and GBP1.8m respectively)
-- As at 19 August 2022, the Group had cash and term deposits of GBP10.2m and GBP1.8m held in escrow
For further information:
Hot Features
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Watchstone Group plc Tel: 03333 448048
WH Ireland Limited, Adviser and broker Tel: 020 7220
Chris Hardie 1666
------------------
Update
A full summary of actions and issues was presented in our Annual Report published in May 2022.
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 GBP63.0m 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 January 2024.
Financial update
The costs of pursuing our litigation assets are expensed as incurred. No associated income from settlement or otherwise is recognised due to the inherent uncertainty in the outcome and timing of the legal cases. GBP1.0m of external legal fees were incurred in the six months ended 30 June 2022 (six months ended 30 June 2021: GBP0.6m).
Since litigation in favour of the Group is pursued at the discretion of the Group, no provision for legal expenses is made. As a result of the decision of the First Tier VAT Tribunal finding in favour of HMRC, a provision for the costs of the defence incurred by HMRC had been provided at 31 December 2021, the Group is appealing this decision.
In response to increases in market interest rates, the Group has placed a proportion of its cash holding into short term deposits, but for prudence, these are with household name UK banks.
The net assets of the Group at 30 June 2022 were GBP11.4m (31 December 2021: GBP13.5m). This primarily comprises cash and term deposits of GBP10.6m (31 December 2021: GBP13.0m) and amounts placed in escrow by the Group as security for costs in respect of certain of its litigation assets, included within Other Receivables of GBP1.8m (31 December 2021: GBP1.8m).
Any value attributable to litigation in favour of the Group represents contingent assets and is therefore not recognised in the Condensed Consolidated Statement of Financial position due to the inherent uncertainty in respect of their outcome, value and timing.
As at 19 August 2022, the Group had cash and term deposits of GBP10.2m and GBP1.8m held in escrow.
Principal risks and uncertainties
The principal risks and uncertainties to which the Group is exposed remain broadly as set out in section 4 of the Strategic Report included within the Annual Report and Financial Statements for the year ended 31 December 2021.
Outlook
We remain focussed on realising the Group's remaining litigation assets as efficiently as possible and are confident of returning further cash sums to shareholders in due course.
Directors' Responsibility Statement
Responsibility statement of the Directors in respect of this interim report.
We confirm that to the best of our knowledge:
-- the set of condensed consolidated financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting, as adopted for use in the UK;
-- the interim management report includes a fair review of the information required by:
a) DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the set of condensed consolidated financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and
b) DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last annual report that could do so.
Stefan Borson
Group Chief Executive Officer
On behalf of the Directors
Condensed Consolidated Income Statement
for the period ended 30 June 2022
Six months Six months
ended ended
30 June 30 June
2022 2021
Note GBP'000 GBP'000
Administrative expenses 4 (2,117) (1,834)
Group operating loss (2,117) (1,834)
Finance income 90 16
Loss before taxation 4 (2,027) (1,818)
Taxation - -
Loss after taxation for the period from
continuing operations (2,027) (1,818)
(Loss)/profit for the period from discontinued
operations 8 (26) 118
Loss after taxation for the period (2,053) (1,700)
Attributable to:
Equity holders of the parent (2,053) (1,700)
Non-controlling interests - -
(2,053) (1,700)
------------------------------------------------ ----------- -----------
Loss per share (pence):
Basic (4.5) (3.7)
Diluted (4.5) (3.7)
------------------------------------------------ ----------- -----------
Loss per share from continuing activities
(pence):
Basic (4.4) (3.9)
Diluted (4.4) (3.9)
------------------------------------------------ ----------- -----------
Condensed Consolidated Statement of Comprehensive Income
for the period ended 30 June 2022
Six months Six months
ended 30 ended 30
June 2022 June 2021
GBP'000 GBP'000
Loss after taxation (2,053) (1,700)
Items that may be reclassified in the Consolidated
Income Statement
Exchange differences on translation of foreign
operations (47) (22)
Total comprehensive (loss)/profit for the
period (2,100) (1,722)
---------------------------------------------------- ----------- -----------
Attributable to:
Equity holders of the parent (2,100) (1,722)
Non-controlling interests - -
(2,100) (1,722)
------------------------------ -------------------- --------
Condensed Consolidated Statement of Financial Position
as at 30 June 2022
At 30 June At 31 December
2022 2021
Note GBP'000 GBP'000
Current assets
Trade and other receivables 5 1,874 1,910
Term deposits 8,013 -
Cash 2,630 12,996
Total current assets 12,517 14,906
------------------------------- ----- ----------- ---------------
Total assets 12,517 14,906
------------------------------- ----- ----------- ---------------
Current liabilities
Trade and other payables 6 (962) (1,251)
Provisions 7 (129) (129)
------------------------------- ----- ----------- ---------------
Total current liabilities (1,091) (1,380)
------------------------------- ----- ----------- ---------------
Non-current liabilities
Deferred tax liabilities (1) (1)
Total non-current liabilities (1) (1)
------------------------------- ----- ----------- ---------------
Total liabilities (1,092) (1,381)
------------------------------- ----- ----------- --------------- Net assets 11,425 13,525 ------------------------------- ----- ----------- --------------- Equity Share capital 10 4,604 4,604 Other reserves 69,687 69,734 Retained earnings (62,867) (60,814) ------------------------------- ----- ----------- --------------- Equity attributable to equity holders of the parent 11,424 13,524 Non-controlling interests 1 1 Total equity 11,425 13,525 ------------------------------- ----- ----------- ---------------
Condensed Consolidated Cash Flow Statement
for the period ended 30 June 2022
Six months Six months
ended ended
30 June 30 June
Note 2022 2021
GBP'000 GBP'000
Cash flows from operating activities
Cash used in operations before net finance
expense and tax 11 (2,373) (2,309)
--------------------------------------------- ----- ----------- -----------
Corporation tax received - -
Net cash used by operating activities (2,373) (2,309)
--------------------------------------------- ----- ----------- -----------
Cash flows from investing activities
Investment in term deposits (8,000) -
Maturity of term deposits - -
Interest income - -
Net cash used by investing activities (8,000) -
--------------------------------------------- ----- ----------- -----------
Cash flows from financing activities
Dividends to minority interests - -
Return of capital - -
Net cash used by financing activities - -
--------------------------------------------- ----- ----------- -----------
Net decrease in cash and cash equivalents (10,373) (2,309)
Cash and cash equivalents at the beginning
of the period 12,996 16,656
Exchange gains on cash and cash equivalents 7 1
Cash and cash equivalents at the end
of the period 2,630 14,348
--------------------------------------------- ----- ----------- -----------
Notes to the Interim Statements
1. Preparation of the condensed consolidated financial information
Basis of preparation
The condensed consolidated financial statements for the six months ended 30 June 2022 have been prepared in accordance with the AQSE Growth Market Rules and the r ecognition and measurement requirements of IFRSs as adopted for use in the UK . The interim financial information should be read in conjunction with the Group's Annual Report and Financial Statements for the year ended 31 December 2021, which were prepared in accordance with IFRSs as adopted for use in the UK.
The comparative figures for the financial year ended 31 December 2021 are not the company's statutory accounts for that financial year. Those accounts have been reported on by the company's auditor and delivered to the registrar of companies. The report of the auditor was (i) unqualified, and (ii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.
The Group's business activities together with the factors that are likely to affect its future developments, performance and position are set out in the Update. The condensed consolidated financial statements were approved by the Board of Directors on 22 August 2022.
Going Concern
The Group holds appropriate cash reserves and no debt. The Group has concluded that its cash reserves will be sufficient to fund the Group's ongoing running costs together with any future investment in litigation required.
On this basis, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. The Directors have not identified any material uncertainties that would cast significant doubt on the ability of the Group to continue as a going concern. Therefore, the Directors continue to adopt the Going Concern basis of accounting in the preparation of the condensed consolidated financial statements.
Statement of Directors' responsibilities
The Directors confirm that, to the best of their knowledge, this set of condensed consolidated financial statements have been prepared in accordance with the AQSE Growth Market Rules.
Significant Accounting Policies
The accounting policies applied by the Group in this set of condensed consolidated financial statements are the same as those applied by the Group in its consolidated financial statements for the year ended 31 December 2021, except for the adoption of new standards and interpretations as of 1 January 2022. None of these standards have any significant impact on the accounting policies, financial position or performance of the Group, as noted below:
-- Amendment to IFRS 1 and IAS 12, relating to deferred tax assets and liabilities arising from a single transaction.
-- Amendment to IFRS 16 relating to COVID-19 rent concessions. -- Taxonomy changes to various standards and 2020 general improvements cycle. -- Amendments to IAS 1, "Disclosure of Accounting Policies". -- Amendment to IAS 8, "Definition of Accounting Estimates".
The Group has not early adopted any other standard, interpretation or amendment that has been issued but is not yet effective.
2. Critical accounting judgements and key sources of estimation uncertainty
In the process of applying the Group's accounting policies, management has made a number of judgements, and the preparation of condensed consolidated financial statements requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Although these estimates are based on management's best knowledge of the amount, event or actions, actual results ultimately may differ from those estimates.
The key management judgements together with assumptions concerning the future and other key sources of estimation uncertainty at 30 June 2022 that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities during the current financial year are discussed below.
Estimate and judgement: Legal cases
The Group is involved with a number of actual or potential legal cases which, if successful, could result in material cash inflows to the Group. The relative merits of these cases and the assessment of their likely outcome is highly judgemental by nature. Similarly, management recognise the hurdle set by accounting standards to recognise an asset or disclose a contingent asset is very high and therefore neither is recognised or disclosed within these condensed consolidated financial statements.
Judgement: Recognition of liabilities arising under the Distribution Incentive Scheme
As discussed in the Directors' Remuneration Report on pages 16 to 18 of the 2021 Annual Report and Financial Statements the Group Chief Executive Officer is entitled to 5.43% of any distribution over and above a prescribed distribution hurdle ("DIS Hurdle") which was first and permanently exceeded during 2020. No amounts have been recognised in these condensed consolidated financial statements in respect of any future payments as it is the judgement of management that the liability does not crystallise, and is materially uncertain, until Court approval has been obtained for the related capital reduction and cash return and furthermore, any distribution (and therefore incentive payment) is made at the discretion of the Group. The impact of this judgement is 5.43% of any future amounts distributed.
3. Key performance indicators
Year ended 31 December Six months Six months
ended 30 June ended 30
2022 June 2021
GBP'000 GBP'000
Cash returned to shareholders - -
------------------------------- --------------- -----------
Group operating loss (2,117) (1,834)
-------------------------------- --------------- -----------
Group net assets 11,425 13,525*
-------------------------------- --------------- -----------
Cash and term deposits 10,643 12,996*
-------------------------------- --------------- -----------
Basic loss (pence per share)
- continuing operations (4.4) (3.9)
-------------------------------- --------------- -----------
*At 31 December 2021
4. Administrative expenses
Six months Six months
ended 30 June ended 30
2022 June
2021
GBP'000 GBP'000
Administrative expenses include:
* Legal expenses 978 560
* Tax related matters 8 63
986 623
---------------------------------- --------------- -----------
Legal expenses and tax related matters primarily relate to the costs of legal cases where the Group is the claimant or counter claimant.
5. Trade and other receivables
30 June 31 December
2022 2021
GBP'000 GBP'000
Other receivables 1,814 1,880
Prepayments 60 30
1,874 1,910
------------------- -------- ------------
6. Trade and other payables
30 June 31 December
2022 2021
GBP'000 GBP'000
Current liabilities
Trade payables 292 46
Payroll and other taxes including social
security 32 47
Accruals 638 1,158
962 1,251
------------------------------------------ -------- ------------
7. Provisions
Legal Onerous
disputes contracts Other Total
GBP'000 GBP'000 GBP'000 GBP'000
At 1 January 2021 200 58 - 258
Unused amounts released - (47) - (47)
Used during the period (12) (11) - (23)
At 30 June 2021 188 - - 188
------------------------------- ---------- ------------- -------- ----------
At 1 January 2022 129 - - 129
At 30 June 2022 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.
Provisions at 1 January 2022 and 30 June 2022 relate to the decision of the First Tier VAT Tribunal which found against the Group and that Watchstone' s subsidiary WTGIL Limited ("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. The Group has since appealed this decision.
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.
8. Discontinued operations and disposals
(Loss)/profit for the period from discontinued operations:
2022 2021
GBP'000 GBP'000
Ingenie (16) 65
Hubio (10) 53
(Loss)/profit for the period from discontinued
operations net of tax (26) 118
------------------------------------------------ -------- --------
9. Contingent assets and liabilities
Litigation in relation to the historic activities of the Group is being pursued including claims against PricewaterhouseCoopers LLP, KPMG LLP and Aviva Canada Inc. These give rise to contingent assets, which are not recognised within the Condensed 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 Condensed Statement of Financial Position date for all liabilities which, in the opinion of the Directors, are expected to result in a loss.
10. Share capital
Number Nominal Nominal Nominal
value fully value unpaid value total
paid
000's GBP'000 GBP'000 GBP'000
at 31 December 2021 and
30 June 2022 46,038 4,593 11 4,604
------------------------- ------- ------------- -------------- -------------
11. Cash flow from operating activities
Six months Six months
ended 30 ended 30
June 2022 June 2021
Loss after tax (2,053) (1,700)
Tax - -
Finance expense - -
Finance income (90) (16)
Operating (loss)/profit (2,143) (1,716)
Operating cash flows before movements in
working capital and provisions (2,143) (1,716)
Decrease in inventories - -
Decrease in trade and other receivables 59 31
(Decrease) in trade and other payables (289) (624)
Cash outflows from operations before exceptional
and non-underlying items, net finance expense
and tax (2,373) (2,309)
-------------------------------------------------- ----------- -----------
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