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Share Name Share Symbol Market Type Share ISIN Share Description
Watchstone Group Plc LSE:WTG London Ordinary Share GB00BYNBFN51 ORD 10P
  Price Change % Change Share Price Bid Price Offer Price High Price Low Price Open Price Shares Traded Last Trade
  -1.60 -2.5% 62.50 61.00 64.00 66.00 60.00 60.00 206,818 16:35:10
Industry Sector Turnover (m) Profit (m) EPS - Basic PE Ratio Market Cap (m)
Software & Computer Services 7.3 -6.6 67.1 0.9 29

Watchstone Group PLC Further Return of Cash, Accounts & Notice of AGM

29/05/2020 7:00am

UK Regulatory (RNS & others)


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RNS Number : 2918O

Watchstone Group PLC

29 May 2020

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF ARTICLE 7 OF EU REGULATION 596/2014.

Watchstone Group plc

( " Watchstone " or the "Company")

Report and Accounts for the year ended 31 December 2019 AND NOTICE OF ANNUAL GENERAL MEETING

PROPOSED FURTHER SHARE PREMIUM REDUCTION AND RETURN OF CASH

Watchstone Group plc (LON:WTG) announces today that it has published its Annual Report and Accounts for the year ended 31 December 2019 on the Group's website at www.watchstonegroup.com/investors .

The Company has also published a notice of the 2020 Annual General Meeting ("AGM") and an explanatory circular for shareholders of the Company ("Notice of AGM") inviting shareholders to approve resolutions including those to authorise a proposed further reduction of the Company's share premium account ("Second Share Premium Reduction") and a proposed return of cash to shareholders ("Second Return of Cash").

The AGM will be held at 1.00 pm on 24 June 2020 at Herbert Smith Freehills LLP, Exchange House, Primrose Street, London, EC2A 2EG. The Annual Report and Accounts for the year ended 31 December 2019 and the Notice of AGM have been posted to registered shareholders who have so elected.

The Second Share Premium Reduction and Second Return of Cash is in addition to the share premium reduction and return of cash announced on 9 April 2020 and subsequently approved by shareholders on 27 April 2020 ("First Return"). The Court hearing to confirm the First Return will take place on 9 June 2020 and, if so approved, the First Return will be completed on or around 30 June 2020.

-- The proposed Second Return of Cash to shareholders in July 2020 will be approximately GBP18.4m million in aggregate subject to shareholder and Court approval.

-- The effect of the proposed Second Share Premium Reduction and Second Return of Cash will be that for every fully paid ordinary share of 10 pence each held at the relevant Record Date (as defined in the Notice of AGM), a shareholder will receive 40 pence in cash.

-- If approved by shareholders and the Court, trading in Ordinary Shares ex-entitlement to the Second Return of Cash is expected to commence on 23 July 2020 with the expected dispatch of cheques to shareholders or crediting of shareholders' CREST accounts (as appropriate) in respect of Second Return of Cash entitlements, on or around 31 July 2020.

In view of the UK Government placing restrictions on travel and other matters because of the COVID-19 situation ("Stay at Home Measures"), shareholders will not be permitted to attend the AGM in person. Details of how shareholders can access the AGM by electronic means may be obtained by emailing info@watchstonegroup.com , however please note that remote participation will be for information purposes only and will not be a formal part of the meeting. Shareholders are also invited to submit any questions via email to info@watchstonegroup.com by 10.00 a.m. on 24 June 2020. The impact of COVID-19 on the AGM is explained further below.

The Notice of AGM has also been made available on the Company's website at www.watchstonegroup.com .

The Notice of AGM provides shareholders with information about the background to, and reasons for, each of the Second Share Premium Reduction and the Second Return of Cash and explains why the Directors of the Company ("Board") consider these to be in the best interests of the shareholders and the Company as a whole and why the Board unanimously recommend that shareholders vote in favour of the requisite resolutions at the AGM, as they intend to do in respect of their beneficial holdings. The Notice of AGM also contains details of the requisite Court approval process relating to the Second Share Premium Reduction.

Expected Timetable of Events

 
 Latest time and date for completion or receipt         1.00 p.m. on 22 June 
  of Forms of Proxy                                                     2020 
 Annual General Meeting                                 1.00 p.m. on 24 June 
                                                                        2020 
 Court Hearing to confirm the Second Share                      21 July 2020 
  Premium Reduction 
 Record Date relating to the Second Return                      22 July 2020 
  of Cash 
 Ordinary Shares commence trading ex-entitlement        8.00 a.m. on 23 July 
  to the Second Return of Cash                                          2020 
 Registration of Court Order and Effective                      23 July 2020 
  Date of the Second Return of Cash 
 Dispatch of cheques to shareholders or shareholders'   On or around 31 July 
  CREST accounts credited (as appropriate)                              2020 
  in respect of the Second Return of Cash 
  entitlements 
 

Notes

These dates (except those for the completion or receipt of Forms of Proxy and of the AGM) are estimates only, being subject to agreement of hearing dates with the Court. The timetable assumes that the AGM will not be adjourned as a result of there being no quorum, or for any other reason. If there is an adjournment, all subsequent dates are likely to be later than those shown. Any changes will be notified to shareholders by an announcement on the Regulatory News Service of the London Stock Exchange.

All references to time in this announcement are to London time.

 
 Watchstone Group plc                                     Tel: 03333 44804 
 
   WH Ireland Limited , Nominated Adviser               Tel: 020 7220 1666 
   and broker 
 Chris Hardie 
  Lydia Zychowska 
 

FURTHER INFORMATION

PART 1

   1.           Introduction 

The Board today announces the process and anticipated timetable for the payment of approximately GBP18.4 million in aggregate to shareholders by way of the Second Return of Cash.

This announcement explains the background to the proposals and how the Second Return of Cash is proposed to be effected. The effect of the proposed Second Return of Cash will be that for every fully paid Ordinary Share held at the relevant Record Date, a shareholder will receive 40 pence in cash. The expected date for the Second Return of Cash through dispatch of cheques to shareholders or crediting of shareholders' CREST accounts (as appropriate) is on or around 31 July 2020.

The purpose of this announcement is to provide you with information about the background to, and reasons for, the Second Return of Cash, to explain why the Board considers the Second Return of Cash is in the best interests of the Company and the shareholders as a whole. Shareholders should note that, unless the relevant resolution is approved at the AGM (and the Court approves the Second Share Premium Reduction), the Second Share Premium Reduction and the Second Return of Cash will not take place.

   2.           Impact of COVID-19 on the AGM 

In view of the UK Government placing restrictions on travel and other matters because of the COVID-19 situation, shareholders will not be permitted to attend the AGM in person. Details of how shareholders can access the AGM by electronic means may be obtained by emailing info@watchstonegroup.com , however please note that remote participation will be for information purposes only and will not be a formal part of the meeting.

The evolving COVID-19 situation and the related Government restrictions will clearly impact the ability of shareholders to attend the AGM in person. In normal circumstances, the Board greatly values the opportunity to meet shareholders in person. However, it fully supports the recent Stay at Home Measures, and takes seriously the Company's responsibility to slow the spread of COVID-19. The Stay at Home Measures prohibit public gatherings of more than two people. The only exceptions to this are where the gathering is of people who live together or where the gathering is 'essential for work purposes' (noting that workers should try to minimise all gatherings). Attendance at a general meeting by a shareholder (other than as specifically required to form the quorum for that meeting) is not 'essential for work purposes'.

On this basis, the Board intends to conduct the AGM in a reasonable manner with the fewest possible participants. The AGM will be convened with the minimum necessary quorum of two shareholders (as arranged by the Company) in order to conduct the business of the meeting.

Therefore, in view of the Stay at Home Measures, the Board has concluded that shareholders will not be permitted to attend the AGM in person. To do so would be inconsistent with current Government guidance in relation to COVID-19 and the Stay at Home Measures. Our advisers and other guests have also been asked not to attend.

Instead of attending the AGM, shareholders are please asked to exercise their votes by submitting their proxy electronically using www.signalshares.com, in accordance with the procedures set out in the notes to the Notice of the AGM.

shareholders should appoint the Chair of the meeting as their proxy. As a result of the Stay at Home Measures, if a shareholder appoints someone else as its proxy, that proxy will not be able to attend the meeting in order to cast the shareholder's vote.

The AGM will be purely functional in format to comply with the relevant legal requirements. There will be no presentations.

It is our current intention to live-stream the AGM so that shareholders will be able to follow the meeting remotely. However, this will be kept under review and subject to the Government guidance in place at the time of the AGM. For further details of how to access the AGM remotely, please email info@watchstonegroup.com . As mentioned above, the web facility will be provided for information purposes only and shareholders will not be able to actively participate in the meeting.

In addition, should a shareholder have a question that they wish to raise at the AGM, we ask that they send it by email to info@watchstonegroup.com , to be received no later than 10.00 a.m. on 24 June 2020. We will endeavour to answer questions received in advance, either by publishing responses on our website following the AGM or at the AGM itself.

3. Background to and reasons for the Second Share Premium Reduction and the Second Return of Cash

The Company proposes to return excess capital to shareholders as the opportunities to re-invest its cash deposits are limited and earn little or no interest. In addition to the ordinary business of this year's AGM, and following the general meeting on 27 April 2020 in which shareholders approved the First Return, a further share premium deduction and return of cash is now proposed.

The effect of the proposed Second Share Premium Reduction and Second Return of Cash will be that for every fully paid Ordinary Share held at the relevant Record Date, a shareholder will receive 40 pence in cash. The Second Share Premium Reduction and the Second Return of Cash is conditional upon, amongst other things, shareholder approval being obtained at the AGM. The resolution proposing the Second Share Premium Reduction and Second Return of Cash, is a special resolution, meaning that for it to be passed 75% or more of the votes must be cast in favour.

The Company believes that the working capital to be retained by the Company following the Second Return of Cash will be sufficient to fund future expenditure. In respect of the First Return, the Company had maintained a GBP20 million cash 'buffer' for any penalties or fines arising from the SFO investigation. In light of the SFO informing the Company on 27 April 2020 that it would not be subject to criminal prosecution in respect of those matters which are the subject of the SFO Investigation, maintaining the GBP20 million cash buffer is no longer considered necessary by the Board. The Board has also considered the impact of the ongoing COVID-19 outbreak and has concluded that the COVID-19 outbreak does not materially affect the cash needs of the Company.

The proposed Second Share Premium Reduction will enable the Company to make the Second Return of Cash to shareholders of approximately GBP18.4 million in aggregate. As at 30 April 2020, the Company had cash of GBP89.0 million. Following the Second Return of Cash, the Company will continue to hold its remaining cash in major UK regulated banks.

Further, and as detailed in Part 3 of this announcement, the Company notes that the proposed Second Return of Cash involves a legal process to be undertaken which ensures shareholders and creditors (including contingent creditors) of the Company are adequately protected.

   4.           The Second Share Premium Reduction 

Under the Companies Act 2006, a company may, with the sanction of a special resolution and the confirmation of the Court, reduce or cancel its existing share premium. It may apply the sums resulting from such reduction in repaying holders of the relevant shares the amount which is reduced or cancelled. This is the mechanism by which shareholders holding fully paid Ordinary Shares will receive 40 pence for each Ordinary Share which they hold upon the Second Return of Cash taking place.

In seeking the Court's approval of the Second Share Premium Reduction and the Second Return of Cash, the Court will need to be satisfied that the interests of the creditors (including contingent creditors) of the Company, whose debts remain outstanding on the date on which the Court Order is registered, will not be prejudiced by the proposed Second Share Premium Reduction. The Company will put in place such arrangements as the Court considers appropriate to satisfy the Court in this regard.

Shareholders should note that if, for any reason, the Court declines to approve the Second Share Premium Reduction, then the Second Return of Cash will not take place.

Further details of the proposed Second Share Premium Reduction can be found in Part 3 of this announcement.

   5.           Taxation 

For information regarding the tax position of the proposed Second Share Premium Reduction, please see Part 4 of this announcement.

   6.           Non-United Kingdom shareholders 

Shareholders who are not resident in the United Kingdom or who are citizens, residents or nationals of other countries should consult their professional advisers to ascertain whether the Second Return of Cash will be subject to any restrictions or require compliance with any formalities imposed by the laws or regulations of, or anybody or authority located in, the jurisdiction in which they are resident or to which they are subject. In particular, it is the responsibility of any shareholder not resident in the United Kingdom or a citizen, resident or national of another country to satisfy himself as to full observance of the laws of each relevant jurisdiction in connection with the proposed Second Share Premium Reduction , including the obtaining of any government, exchange control or other consent which may be required, or the compliance with other necessary formalities needing to be observed and the payment of any issue, transfer or other taxes or duties in such jurisdiction.

The distribution of this announcement in certain jurisdictions may be restricted by law. Persons into whose possession this announcement comes should inform themselves about and observe any such restrictions.

Shareholders who are not resident in the United Kingdom should note that they should satisfy themselves that they have fully observed any applicable legal requirements under the laws of their relevant jurisdiction in relation to the Second Share Premium Reduction or the Second Return of Cash.

Part 2: DEFINITIONS

The following definitions and technical terms apply throughout this announcement, unless the context otherwise requires:

"AIM" the AIM market, being a market of that name and operated by the London Stock Exchange;

"Annual General Meeting" or "AGM" the annual general meeting of the Company to be held at Herbert Smith Freehills LLP, Exchange House, Primrose Street, London, EC2A 2EG, at 1.00 p.m. on 24 June 2020;

   "Board" or "Directors"                      the board of directors of the Company; 
   "CGT"                                                taxation of chargeable gains; 
   "Chapter 1 ITA 2007"                       Chapter 1 of Part 13 of the Income Tax Act 2007; 
   "Court"                                               the High Court of England and Wales; 

"Court Hearing" the hearing of the Company's claim for the confirmation by the Court of the Second Share Premium Reduction and the Second Return of Cash;

   "CTA 2010"                                        the Corporation Tax Act 2010; 

"First Return" the ongoing reduction of the Company's share premium account by GBP50.6 million and subsequent payment to shareholders pro rata to their shareholding;

   "Form of Proxy"                                the form of proxy available on www.signalshares.com; 

"Group" the Company and its subsidiaries and subsidiary undertakings;

   "HMRC"                                             Her Majesty's Revenue and Customs; 
   "Notice"                                              the notice convening the AGM; 

"Ordinary Shares" ordinary shares of 10 pence each in the capital of the Company;

"Record Date" record date in relation to the Second Share Premium Reduction, being 6.00pm on the 22 July 2020;

"Second Share Premium Reduction" the proposed reduction of the Company's share premium account by GBP18,370,268.40;

"Second Return of Cash" the proposed payment to shareholders pro rata to their shareholding following the proposed Second Share Premium Reduction;

   "SFO"                                                 the Serious Fraud Office; 

"SFO Investigation" an investigation by the SFO opened in August 2015 and closed in April 2020 relating to past business and accounting practices at the Company;

"Stay at Home Measures" the measures passed into law in England and Wales, with immediate effect, in statutory instruments (2020/350 in England and 2020/353 in Wales) made pursuant to the Public Health (Control of Disease) Act 1984; and

   "Watchstone" or "Company"             Watchstone Group plc. 

Part 3: Further Details of the proposed SECOND Return of Cash

The Second Share Premium Reduction

In seeking the Court's approval for the Second Share Premium Reduction, the Court is required to consider the protection of creditors (including contingent creditors) of the Company, whose debts (or contingent debts) remain outstanding on the date that the Second Share Premium Reduction becomes effective, to ensure that they are protected. Any such creditor protection may include seeking the consent of the Company's creditors to the Second Share Premium Reduction or the provision by the Company to the Court of an undertaking to deposit a sum of money into a blocked account created for the purpose of discharging the non-consenting creditors of the Company.

In view of the Court's considerations in giving its approval and in consultation with professional advisors, the Board has undertaken a thorough and extensive review of the Company's liabilities (including contingent liabilities) and the potential liabilities of the Company. The Board considers that the Company will be able to satisfy the Court that, as at the date on which the Court Order relating to the Second Share Premium Reduction becomes effective, the Company's creditors (including contingent creditors) will be sufficiently protected.

The Company intends that an application will be made for the Court to approve the Second Share Premium Reduction promptly after the AGM provided that the relevant resolution has been passed.

The First Return

As discussed above, the First Return is currently on going. The directions hearing in respect of the First Return took place on 20 May 2020, at which the Court was satisfied that there was no real likelihood that the First Return would result in the Company being unable to discharge its debts or the claims of its creditors as they fell due. The final hearing in respect of the First Return is scheduled for 9 June 2020, after which, subject to approval from the Court, the Company shall return GBP1.10 per issued share to relevant shareholders on or around 30 June 2020.

SFO Update

On 28 April 2020, the Company announced that it had been informed by the SFO that it will not be prosecuted for criminal offences in respect of those matters which were the subject of the SFO's investigation into the Company. Therefore, the Board no longer considers it necessary to maintain the GBP20 million cash buffer for any penalties or fines arising from the SFO investigation.

Expected Timetable of Events

 
 Latest time and date for completion or receipt         1.00 p.m. on 22 
  of Forms of Proxy                                           June 2020 
 Annual General Meeting                                 1.00 p.m. on 24 
                                                              June 2020 
 Court Hearing to confirm the Second Share                 21 July 2020 
  Premium Reduction 
 Record Date relating to the Second Return                 22 July 2020 
  of Cash 
 Ordinary Shares commence trading ex-entitlement        8.00 a.m. on 23 
  to Second Return of Cash                                    July 2020 
 Registration of Court Order and Effective                 23 July 2020 
  Date of Second Return of Cash 
 Dispatch of cheques to shareholders or shareholders'   On or around 31 
  CREST accounts credited (as appropriate)                    July 2020 
  in respect of Second Return of Cash entitlements 
 

These dates (except those for the completion or receipt of Forms of Proxy and of the AGM) are estimates only, being subject to agreement of hearing dates with the Court. The timetable assumes that the AGM will not be adjourned as a result of there being no quorum, or for any other reason. If there is an adjournment, all subsequent dates are likely to be later than those shown. Any changes will be notified to shareholders by an announcement on the Regulatory News Service of the London Stock Exchange. All references to time in this announcement are to London time.

part 4: Taxation

The following comments are intended as a general guide only and are based on current UK legislation and HMRC practice as at the date of this announcement. These comments deal only with shareholders who are resident or ordinarily resident for taxation purposes in the United Kingdom, who are the absolute beneficial owners of fully paid Ordinary Shares and who hold them as an investment. They do not deal with the position of certain classes of shareholders, such as dealers in securities, persons holding unpaid Ordinary Shares, or persons regarded as having obtained their Ordinary Shares by reason of employment. Therefore, any such shareholders are advised to satisfy themselves as to the tax consequences for them of their ownership of Ordinary Shares in the Company.

Second Return of Cash

Subject to the comments below, and obtaining HMRC clearance, we would expect the Second Return of Cash to qualify as a repayment of capital on the Ordinary Shares under section 1000(1)(B)(a) of the CTA 2010 and therefore would not expect any part of the proceeds received by a shareholder on the Second Return of Cash to be an income distribution in the shareholder's hands.

Part 15 CTA 2010 and Chapter 1 ITA 2007 are anti-avoidance provisions which might be applied to the Second Return of Cash so as to treat all or part of the receipt as income in the hands of shareholders within the charge to UK corporation tax and within the charge to income tax respectively. The Company would not expect Part 15 CTA 2010 or Chapter 1 ITA 2007 to apply.

The Company has applied for clearance from HMRC under the sections above.

The Second Return of Cash on cancellation may give rise to a liability to CGT depending on the shareholder's individual circumstances (including the availability of exemptions, reliefs or allowable losses).

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

END

NOAEANSPASFEEFA

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