Watchstone Group PLC Pre-close trading update (6093O)

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RNS Number : 6093O

Watchstone Group PLC

31 January 2019

Watchstone Group plc

("Watchstone" or the "Group")

Pre-close trading update

Watchstone Group plc (LON:WTG) today issues a pre-close trading update ahead of its results for the year ended 31 December 2018.

 
 Revenue (unaudited):             2018                 2017 
  year ended 31 December 
 Healthcare services       GBP30.0m (C$51.8m)   GBP30.5m (C$51.1m) 
                          -------------------  ------------------- 
 ingenie                        GBP7.7m              GBP14.4m 
                          -------------------  ------------------- 
 Total                          GBP37.7m             GBP44.9m 
                          -------------------  ------------------- 
 

Cash and term deposits on 31 December 2018 totalled GBP50.1m (GBP58.4m as at 30 June 2018) excluding the GBP50.2m in escrow pending resolution or determination of the claim issued by Slater & Gordon (UK) 1 Limited ("Slater & Gordon Claim").

Healthcare services:

Healthcare services consists of our Canadian ptHealth clinics business and InnoCare, our clinic software, referral network and managed services business. In the year, the Healthcare services division grew revenues in local currency despite the sale and conversion to a managed service offering of one of its underperforming clinics. However, adverse movements in the Canadian Dollar relative to Sterling has resulted in lower revenues being recorded overall in Sterling.

During the second half of 2018, ptHealth was appointed as the Canadian Arthritis Society's national physiotherapy provider and also became the first physiotherapy provider officially certified as a Great Place to Work(R) by the Great Place to Work(R) Institute Canada.

As anticipated, a significant proportion (39%, C$4.23m (approximately GBP2.5m)) of the preference shares in the business have been redeemed in the year. Profitability is expected to be broadly flat relative to 2017 however a significant restructuring of the clinic business has been completed in the year which more closely aligns costs to revenues and should create more optimal conditions for profitable growth.

ingenie:

As previously described, challenging trading conditions have continued to further impact retail volumes. A number of initiatives have been undertaken to address these issues including the recent broadening of underwriting partnerships and this has seen positive, albeit early, trends. Further structural changes to the business continue which are anticipated to revive the retail competitiveness of the offering during H1 2019.

The ANWB programme is performing well and underlines the credibility and relevance of ingenie's business to business offering. ingenie's B2B pipeline is strong with a variety of opportunities being pursued with vigour.

Central costs and overall results:

Central costs were rationalised at the end of 2017 and this is reflected in materially lower expenditure during 2018.

Legacy matters:

The Slater & Gordon Claim is ongoing and the disclosure process commenced in December 2018. Our position remains that Slater & Gordon's allegations of deceit and the associated breach of warranty claim are wholly without merit and should never have been advanced. During the year, significant costs have been incurred in defence of this claim and we continue to bolster the provision for legal costs in anticipation of a trial commencing in October 2019. In parallel, we continue to pursue any deferred consideration due from Slater & Gordon in respect of the disposal of the PSD.

The SFO investigation continues and we are cooperating fully. It remains the only regulatory inquiry to which the Group is subject.

2019 outlook:

2019 will be an important year for the Group both in terms of growing its operating businesses and dealing with the Group's legacy issues as efficiently as possible.

For further information:

 
 Watchstone Group plc                            Tel: [phone] 
 
   Peel Hunt LLP, Nominated Adviser and Broker     Tel: [phone] 
 Dan Webster 
 

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January 31, 2019 02:01 ET (07:01 GMT)