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 2017. Overall trading results (unaudited) for the underlying businesses (Healthcare services and ingenie) are expected to be broadly in line with expectations.
|Revenue (unaudited): (£’m)||2017||2016||% Chg|
* BAS was sold and Hubio was reclassified to discontinued operations in the year and therefore is not included above. 2016 amounts are presented on a consistent basis.
During 2017, we substantially completed the work to simplify and rationalise the Group involving the closure or disposal of loss making businesses and reducing the size and cost of the central overhead. The central team now comprises just three full time staff to assist Stefan Borson and Mark Williams, (the Executive directors) and the Board has been reduced in size. The full benefit of these changes will only be seen in 2018 but are expected to reduce the central costs by approximately 50%.
Overall net losses and expenses of over £6m suffered in 2017 have been extinguished as a result of the sale or closure of businesses and restructuring.
Cash and term deposits on 31 December 2017 totalled £62.8m (£67.2m as at 30 June 2017) excluding the £50.1m in escrow pending resolution or determination of the High Court claim issued by Slater and Gordon (UK) 1 Limited (“Slater and Gordon Claim”).
Taking each of the remaining operating businesses in turn:
Healthcare services consists of our Canadian ptHealth clinics business and InnoCare. This business is growing, with revenue of approximately £29.7m for the year ended 31 December 2017 an increase of 6% vs. 2016. Whilst profitability is anticipated to be slightly ahead of 2016 in our core clinic business, overall profitability will be below 2016 after taking account of the continued investment we are making in the InnoCare software and services platforms and in our clinics.
In December 2017, Alan Torrie, an experienced Canadian executive, became Non-executive Chairman of ptHealth and will work closely with its Chief Executive Officer, Heather Shantora, and the Group in guiding its future path.
Whilst revenue for the year increased to £14.4m, ingenie had a challenging end to the year as the impact of changes to the Ogden discount rate created instability in young driver motor policy pricing. Reflecting this and continued investment in its technology platform, profitability will be marginally below 2016. The impact of these factors will extend into the first half of 2018 but the team has a detailed plan to address these challenges as well as targeting more new B2B business as the ANWB programme continues to perform well, endorsing our technology and market leading approach to road safety and motor insurance pricing.
In December 2017, Selim Cavanagh joined ingenie as Chief Executive Officer from LexisNexis Risk Solutions, where he held various senior roles including VP Telematics, VP Motor Insurance and MD of its Wunelli telematics business unit, after a background in consumer insurance at AXA UK. ingenie will benefit from Selim’s 20 years of experience in delivering data, IT and research-based motor insurance solutions.
Discontinued – Hubio:
We have now completed the rationalisation, closure and sale of the Hubio businesses. We have sold Hubio Exchange in Canada and Hubio Fleet (subject to final contractual details) as well as Hubio Enterprise in Camberley.
The Slater and Gordon Claim is ongoing and we filed our defence in October 2017. Our position remains that Slater and 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, we also strengthened the provision for legal costs in relation to this claim, reflecting our determination to robustly defend the action to trial. We continue to pursue any deferred consideration due from Slater and 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.
There have been no further developments at this stage on the threatened (but not commenced) class action litigation first announced in September 2015.
The Group enters 2018 a far simpler business and we expect this year will be a period of re-focus and development for ptHealth and ingenie. Both will be encouraged to invest ambitiously but prudently without the distraction of potential corporate activity.
Central costs will be carefully managed at greatly reduced levels consistent with the unresolved legacy matters and the needs of the organisation.