10th Feb 2020 09:59
(Alliance News) - Watchstone Group PLC said Monday it continued to resolve legacy issues, reduce costs, and return capital to shareholders in 2019.
In 2019, Watchstone sold its Canadian Healthcare services business for CAD36.2 million, around GBP21 million.
The firm also settled a "significant" long-running legal dispute with Australian law firm Slater & Gordon Ltd. Watchstone and Slater & Gordon (UK) 1 Ltd agreed a settlement which will see Slater & Gordon receive GBP11 million from cash held in escrow with the remaining GBP39 million being distributed to Watchstone, arising from a dispute over the GBP637 million sale of Watchstone's professional service division to Slater & Gordon in 2015.
In June 2017, Slater & Gordon made a claim of GBP637 million related to its 2015 acquisition of the professional services arm of Watchstone. The law firm claimed that Watchstone - then known as Quindell PLC - had fraudulently misrepresented the unit during the sale.
Shortly after the deal, Slater & Gordon booked a GBP880 million impairment related to the acquired business after the UK Serious Fraud Office opened an investigation into the unit over past accounting practices.
The SFO investigation is still ongoing and Watchstone said it is "cooperating fully". Watchstone noted the class action lawsuit has been abandoned but said a firm "purporting to act for a group of twelve individuals (some of whom participated in the original threatened litigation)" have filed a notice of intended claim.
"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," Watchstone said.
Due to these two outcomes, Watchstone said, it will now proceed with plans for a capital repayment to shareholders. The company said its current plan is to return GBP50 million, about 110 pence per share, before the end of June.
Shares in Watchstone were 3.8% higher in London on Monday morning at 154.12 pence each, giving the company a GBP71.0 million market capitalisation.
"As further matters are resolved, the company will seek to return additional cash to shareholders," Watchstone added.
Following the sale of its Canadian subsidiary, Watchstone now operates one business, Ingenie - which offers car insurance for learners and young drivers.
Watchstone said the unit faced "difficult market conditions" in 2019, but the company made "significant changes" to increase its competitiveness. Watchstone said these changes are "bearing fruit" with Ingenie seeing daily new policy sales at their highest levels for "a number of years".
Looking ahead, Watchstone said its strategy will remain the same in 2020, when it hopes to divest 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," Watchstone added.
By Paul McGowan; [email protected]
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