15th Jun 2006 11:51
Watermark Group PLC15 June 2006 15 June 2006 Watermark Group plc ("Watermark", or "the Group") Statement regarding Trading Update of 18 May 2006 and Profit forecast for the year ending 31 December 2006 On 31 March 2006, Watermark went into an offer period. Under the City Code onTakeovers and Mergers (the "Code"), any profit forecast made during an offerperiod is required to be reported on. On 18 May 2006, in order to comply with the requirements of the UKLA ListingRules, the Board of Watermark stated that "the result for the financial yearended 31 December 2006 could be some 15% below what was indicated in thePreliminary Results announcement on 31 March 2006" ("the Statement"). At thattime it was agreed with the Executive of the Panel on Takeovers and Mergers thatthe Statement would be reported upon as soon as possible. In making the Statement, the Directors of Watermark believed it was appropriateto do so on a basis consistent with previous trading updates. The basis forcalculating "the result" in the Statement was therefore consolidated profitbefore tax, before exceptional items and before taking account of certainaccounting treatments required under International Financial Reporting Standards("IFRS"). As Watermark Group's 2006 Annual Report will be prepared under IFRS, it is notpossible for the Statement to be reported upon because it was prepared on adifferent basis. The Directors are therefore now forecasting profit before taxfor the financial year ending 31 December 2006 on a post-exceptional basis andafter application of the IFRS accounting treatments which will be used inWatermark Group's 2006 Annual Report (the "Profit Forecast"). This is set out inPart A below and is reported on, as required by the Code, below. In Part B of this announcement, there is a reconfirmation by the Directors ofthe Statement which is not reported upon for the reasons detailed above. PART A Profit forecast for the year ending 31 December 2006 The Directors forecast that using the assumptions set out below, profit beforetax will be in the region of £5.8 million for the financial year ending 31December 2006. This represents an increase in profit before tax of 16% for thecurrent financial year compared with profit before tax of £5.0 million for theprevious financial year ended 31 December 2005. Assumptions relating to the Profit Forecast • Taking into account lead times on new contracts in the Products division and therefore the scope to generate revenues within the current financial year, there are currently sufficient identified additional new business opportunities to secure the remainder of forecast 2006 sales for the Products division. • Based on contracted sales revenue within the Services division together with sales revenue expected to be generated from existing supply agreements and new commitments, there is currently sufficient visibility to secure the remainder of forecast 2006 sales for the Services division. This is in line with the historical revenue profile for the Services division. The sales cycle and lead time for Services contracts is such that any new business opportunities being progressed at present are unlikely to generate revenues or profits in the current financial year. • Based on identified but still to be contracted commission and fee income, and current new business opportunities, the Board expects to achieve forecast 2006 sales revenue for commission and fee income by the end of the financial year. The figure for fees and commissions has been revised to some 53% of the previous year's figure in the light of current expectations. • Overhead savings are expected to be achieved during the rest of the financial year. • No share options are granted which would result in a charge to the income statement in respect of share based payments under IFRS 2. • Foreign currency transactions already in place will allow US Dollar denominated transactions to be translated at an average rate of US$1.79 to £1. • There are no further acquisitions or disposals within the current financial year. • The Offer Period will not cause changes in the commercial behaviour of clients, suppliers or competitors and that key staff are not adversely impacted or do not leave the Watermark Group as a result. • There will be no fundamental changes in the political and/or economic environments or natural disasters in the major territories in which the Watermark Group operates that would materially affect the Watermark Group. • There will be no major business interruptions that materially affect the Watermark Group, or its principal suppliers, distributors or clients in any of its major markets. • There will be no material changes in interest rates, taxes, regulation or legislation that have a material impact on the Watermark Group. • There will be no material change in the way that the Watermark Group is managed or conducted, notwithstanding any change in control of the Watermark Group. Letter from Grant Thornton UK LLP in relation to the Profit Forecast The Directors Grant Thornton UK LLPWatermark Group plc Manor CourtThe Encompass Centre Barnes Wallis RoadInternational Avenue SegensworthHeston HampshireMiddlesex PO15 6GTTW5 9NJand Cavendish Corporate Finance Limited40 Portland PlaceLondonW1B 1NB 15 June 2006 Dear Sirs watermark group plc - REPORT ON A PROFIT FORECAST We report on the profit forecast comprising the forecast profit before tax ofWatermark Group plc (the Company) and its subsidiaries (together the Group) forthe year ending 31 December 2006 (the Profit Forecast). The Profit Forecast, andthe material assumptions upon which it is based, are set out in Part A of thisannouncement issued by the Company dated 15 June 2006. This report is requiredby Rule 28.3(b) of the City Code on Takeovers and Mergers (the Code) and isgiven for the purpose of complying with that rule and for no other purpose.Accordingly, we assume no responsibility in respect of this report to any personwho is seeking or may in future seek to acquire control of the Company (anOfferor) or to any other persons connected to, or acting in concert with, anOfferor. Responsibilities It is the responsibility of the Directors of the Group to prepare the ProfitForecast in accordance with the requirements of Rule 28 of the Code. It is our responsibility to form an opinion as required by Rule 28.3(b) of theCode as to the proper compilation of the Profit Forecast and to report thatopinion to you. Save for any responsibility arising under Rule 28.3(b) of the Code to any personas and to the extent there provided, and save for any responsibility that wehave expressly agreed in writing to assume, to the fullest extent permitted bylaw we do not assume any responsibility and will not accept any liability to anyother person for any loss suffered by any such other person as a result of,arising out of, or in connection with this report or our statement, required byand given solely for the purposes of complying with Rule 28.3(b) of the Codeconsenting to its inclusion in Part A of this announcement. Basis of Preparation of the Profit Forecast The Profit Forecast has been prepared on the basis stated in Part A of thisannouncement and is based on the forecast to 31 December 2006. The ProfitForecast is required to be presented on a basis consistent with the accountingpolicies of the Group. Basis of opinion We conducted our work in accordance with the Standards for Investment Reportingissued by the Auditing Practices Board in the United Kingdom. Our work includedconsidering whether the Profit Forecast has been accurately computed based uponthe disclosed assumptions and the accounting policies of the Group. Whilst theassumptions upon which the Profit Forecast are based are solely theresponsibility of the Directors, we considered whether anything came to ourattention to indicate that any of the assumptions adopted by the Directorswhich, in our opinion, are necessary for a proper understanding of the ProfitForecast have not been disclosed and whether any material assumption made by theDirectors appears to us to be unrealistic. We planned and performed our work so as to obtain the information andexplanations we considered necessary in order to provide us with reasonableassurance that the Profit Forecast has been properly compiled on the basisstated. Since the Profit Forecast and the assumptions on which it is based relate to thefuture and may therefore be affected by unforeseen events, we can express noopinion as to whether the actual results reported will correspond to those shownin the Profit Forecast and differences may be material. Our work has not been carried out in accordance with auditing or other standardsand practices generally accepted in the United States of America and accordinglyshould not be relied upon as if it had been carried out in accordance with thosestandard and practices. Opinion In our opinion, the Profit Forecast has been properly compiled on the basis ofthe assumptions made by the Directors and the basis of accounting used isconsistent with the accounting policies of the Group. Declaration For the purposes of Rule 28.3(b) of the Code we are responsible for this reportas part of Part A of this announcement and declare that we have taken allreasonable care to ensure that the information contained in this report is, tothe best of our knowledge, in accordance with the facts and contains no omissionlikely to affect its import. This declaration is included in Part A of thisannouncement in compliance with Rule 28.3(b) of the Code. Yours faithfully GRANT THORNTON UK LLP Letter from Cavendish Corporate Finance Limited in relation to the ProfitForecast 15 June 2006 The DirectorsWatermark Group plcThe Encompass CentreInternational AvenueHestonMiddlesexTW5 9NJ Dear Sirs We have discussed with you as Directors of Watermark Group plc, the profitforecast comprising the forecast profit before tax of Watermark Group plc forthe year ending 31 December 2006 (the "Profit Forecast") and the bases andassumptions set out in Part A on which it has been prepared. We have alsodiscussed the accounting policies and basis of calculation for the ProfitForecast with Grant Thornton UK LLP, Watermark Group plc's auditors, and we haveconsidered their letter of today's date addressed to both yourselves andourselves on this matter. On the basis of the foregoing, we consider that the Profit Forecast for whichyou as Directors of Watermark Group plc are solely responsible, has beencompiled with due care and consideration. This letter is provided to you solely in connection with Rule 28.3(b) of theCity Code on Takeovers and Mergers and for no other purpose. Yours faithfully, Cavendish Corporate Finance Limited Grant Thornton UK LLP has given and not withdrawn its written consent to thepublication in this announcement of its report in the form and context in whichit appears. Cavendish Corporate Finance Limited has given and not withdrawn its writtenconsent to the publication in this announcement of its report in the form andcontext in which it appears. PART B Adjusted profit forecast for the year ending 31 December 2006 and posting of circular to Watermark share owners ("the Circular") The Board of Watermark has considered and re-confirms the statement made in thetrading update given on 18 May 2006 that "the result for the financial yearended 31 December 2006 could be some 15% below what was indicated in thePreliminary Results announcement on 31 March 2006" (the "Statement"). The Statement is consistent with the Directors' adjusted profit forecast that,in the absence of unforeseen circumstances and on the bases and assumptions setout in this announcement, the adjusted profit before tax for the year ending 31December 2006 will be in the region of £6.2 million (the "Adjusted ProfitForecast"). Bases of Forecasting Adjusted Profits • The Adjusted Profit Forecast has been prepared on a basis consistent with the accounting policies that are expected to be used in Watermark Group's 2006 Annual Report. • The Adjusted Profit Forecast is based on a forecast for the year ending 31 December 2006 reviewed with reference to the unaudited management accounts for the three months to 31 March 2006. • Adjusted profit before tax is calculated before deducting exceptional items. • The basis for calculating "the result" in the Statement was profit before tax, gross of exceptional items and certain accounting treatments required under International Financial Reporting Standards ("IFRS"). These IFRS accounting treatments will be used in Watermark Group's 2006 Annual Report, but in view of the significance of these treatments in 2005, the Directors believed it necessary to remove the distorting effect when preparing the Statement. Taking into account the net effect of the assumptions set out above, theDirectors forecast that the adjusted profit before tax, gross of exceptionalitems and certain accounting treatments required under IFRS will be in theregion of £6.2 million for the financial year ending 31 December 2006. Theresult, as described in the Statement, is 15% below what was indicated in thePreliminary Results announcement on 31 March 2006. Circular Details of the matters referred to in this announcement are set out in theCircular which is being posted to Watermark share owners and copies of whichwill be available for collection at the offices of Watermark. Copies of theCircular are being submitted to the Financial Services Authority and willshortly be available for inspection at the Financial Services Authority DocumentViewing Facility, which is situated at 25 The North Colonnade, Canary Wharf,London E14 5HS (Tel: +44 (0)20 7676 1000). For further information contact:Crispin Quail Jeremy CareyWatermark Group plc Tavistock CommunicationsTel: 020 8606 1300 Tel: 020 7920 [email protected] [email protected] This announcement contains statements that are or may be forward-looking withrespect to the financial condition, results of operations and businesses ofWatermark. These forward-looking statements include risk and uncertainty becausethey relate to events and depend on circumstances that will occur in the future.There are a number of factors which could cause or may cause actual results ordevelopments to differ materially from those expressed or implied by suchforward-looking statements. Dealing Disclosure Requirements Under the provisions of Rule 8.3 of the Code, if any person is, or becomes,"interested" (directly or indirectly) in one per cent. or more of any class of"relevant securities" of Watermark, all "dealings" in any "relevant securities"of that company (including by means of an option in respect of, or a derivativereferenced to, any such "relevant securities") must be publicly disclosed by nolater than 3.30 pm (London time) on the London business day following the dateof the relevant transaction. This requirement will continue until the date onwhich the offer becomes, or is declared, unconditional as to acceptances, lapsesor is otherwise withdrawn or on which the "offer period" otherwise ends. If twoor more persons act together pursuant to an agreement or understanding, whetherformal or informal, to acquire an "interest" in "relevant securities" ofWatermark, they will be deemed to be a single person for the purpose of Rule8.3. Under the provisions of Rule 8.1 of the Code, all "dealings" in "relevantsecurities" of Watermark by Watermark, or by any of their respective"associates", must be disclosed by no later than 12.00 noon (London time) on theLondon business day following the date of the relevant transaction. A disclosure table, giving details of the companies in whose "relevantsecurities" "dealings" should be disclosed, and the number of such securities inissue, can be found on the Takeover Panel's ("the Panel") website atwww.thetakeoverpanel.org.uk. "Interests in securities" arise, in summary, when a person has long economicexposure, whether conditional or absolute, to changes in the price ofsecurities. In particular, a person will be treated as having an "interest" byvirtue of the ownership or control of securities, or by virtue of any option inrespect of, or derivative referenced to, securities. Terms in quotation marks are defined in the Code, which can also be found on thePanel's website. If you are in any doubt as to whether or not you are requiredto disclose a "dealing" under Rule 8, you should consult the Panel. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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