Watchstone Group plc
(“Watchstone” or the “Company” or the “Group”)
Watchstone (LON:WTG) announces that as part of a programme of actions to strategically focus the Group on its key growth areas, it has disposed of the Group’s property and maintenance services businesses. The Company’s subsidiary Brand Extension (UK) Limited (“BEL”) has entered into an agreement to dispose of the entire issued share capital of B.E. Insulated (UK) Limited (“BEI”) and Carbon Reduction Company (UK) Limited (“CRC”) for a nominal consideration of £1 to The BE Smart Group Limited (a company owned by Ben Williams, a statutory director of BEI and CRC) (“Agreement”). Following the completion of this Agreement, the Group will cease to operate directly in the property and maintenance services sector.
BEI is predominantly a property insulation supply and installation business and CRC is a provider of property maintenance services. Since acquisition, the performance of both BEI and CRC has been below expectations due to recent unforeseeable changes to the market and, as a result, have been loss making. The businesses operate in markets where unexpected changes to government legislation in the funding of green, solar and other initiatives have substantially impacted trading and, in the view of the Board, the likely ongoing performance and prospects of the businesses.
The terms of the Agreement reflect the on-going cash losses and investment requirements of BEI and CRC. In deciding to dispose of these businesses for nominal consideration over closing them, the Directors were mindful, in particular, of BEI and CRC’s 62 employees, its creditors and other liabilities.
The Board believes that the disposal will save the Company between £1.5 million to £2.0 million on an annualised basis. For BEI and CRC and their staff, it will allow the businesses to operate under a more appropriate ownership structure.
Taking all these factors into account, the Directors have concluded that the disposal is in the best interests of all stakeholders.
The Agreement is a related party transaction pursuant to the AIM Rules for Companies as Ben Williams is a director of BEI and CRC.
For the period ended 30 September 2014, the profits of BEI and CRC were approximately £1 million. BEL acquired the 50% of the issued share capital it did not own in BEI and the entire issued share capital of CRC from Ben Williams in March 2015.
The Directors consider, having consulted with the Company’s nominated adviser, Peel Hunt LLP, that the terms of the Agreement are fair and reasonable insofar as the Company’s shareholders are concerned. The Agreement does not impact the historic warranties and indemnities given by Ben Williams in March 2015 in respect of the acquisition of 50% of BEI and the entire share capital of CRC.
The Group is expected to recognise an overall loss on disposal of approximately £4.2 million for the year ended 31 December 2015, some £4.3 million of this will comprise goodwill which has already been impaired in the first half of 2015 with the balance of approximately £0.1 million representing a small net profit on disposal of the remaining net assets disposed of.
Indro Mukerjee, Group Chief Executive Officer, said: “The strong focus on quickly addressing losses is central to our work and we’ve been making good progress overall. We’ve acted with integrity and speed to realise significant cost savings, while removing liabilities and enabling us to continue with the further work on the transformation of Watchstone”