WTG.L Regulatory News (WTG)

Watchstone Group plc

("Watchstone" or the "Group")

Pre-close update

Watchstone Group plc (LON:WTG) today issues a pre-close update ahead of its results for the year ended 31 December 2019.

During 2019, the Board continued its work to simplify the Group, resolve legacy issues, reduce costs and to commence the process for returning further capital to shareholders.

As announced on 7 February 2020, our Healthcare Services division in Canada was sold for an initial cash consideration of Canadian $36.2m (£20.8m) on a cash and debt free basis with up to a further C$0.8m (£0.5m) conditional on the business generating target revenues in the first year after its acquisition.

A number of commercial disputes were resolved in the year, the most significant of which was the High Court claim issued by Slater and Gordon (UK) 1 Limited ("S&G"). As announced on 21 October 2019, the settlement provided for £11m of the £50m held in escrow to be released to S&G with the balance of £39m and accrued interest being released to Watchstone.

Cash and term deposits on 31 December 2019 (excluding cash within businesses classified as held for sale) totalled £71.6m. Total cash following completion of the sale of the Healthcare Services division, is approximately £90m representing approximately 195 pence per share.

Capital return

Watchstone will now proceed with plans for a further Court approved, capital repayment to shareholders and further details will be announced in due course. Subject to shareholder approval, completion of the necessary working capital and creditor analysis (including contingent creditors) and the Court timetable, the current plan is to return at least £50m (representing at least 110p per share) before the end of June 2020. The timetable is anticipated to be slightly longer than usual given the need to complete the audit in advance of the return.

As further matters are resolved, the Company will seek to return additional cash to shareholders.

ingenie

Following the sale of the Healthcare Services division, Watchstone now retains one remaining operating business, ingenie. Consistent with our announcement at the half year, ingenie's retail business continued to face difficult market conditions in 2019, but significant changes have been made to increase competitiveness which are now bearing fruit with daily new policy sales at their highest levels for a number of years.

In November 2019, ingenie successfully launched its new self-fit proposition making its offering ever more competitive.

Legacy matters

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

Whilst we understand that the previously threatened class action litigation first announced in September 2015 has been abandoned, a firm purporting to act for a group of twelve individuals (some of whom participated in the original threatened litigation) has recently written a "Notice of intended claim" to the Company ("Notice"). The Notice relates to potential pursuit of a claim arising under section 90A and Schedule 10A of the Financial Services and Markets Act 2000. However, it provides no information to support the validity or valuation of the individual prospective claimants' claims, which they would be required to prove in due course in any litigation. The Company will vigorously defend all such claims if so brought.

2020 outlook

The Group's stated strategy remains to ultimately divest of its operating businesses, resolve all legacy issues and return as much capital as possible to shareholders.

The Board hopes that 2020 will see significant further progress to the final resolution of the Group's historic matters and a substantial return of capital to shareholders in at least one distribution (as referred to above).

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