TIDMWTG
RNS Number : 5563U
Watchstone Group PLC
19 January 2017
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
2016.
The Board announces that for the year ended 31 December 2016
overall trading results (unaudited) are expected to be in line with
expectations (1) . Underlying EBITDA for 2017 is not expected to be
positive due to the need for continued investment in new products
and business lines as further discussed below.
Group cash and deposits stood at GBP81.3m at 31 December 2016
(2) .
Revenue (unaudited):
Revenue GBP'm 2016 2015 (restated*) % Chg
--------------------- ----- ----------------- ------
Healthcare services 28.1 25.1 12%
--------------------- ----- ----------------- ------
Hubio 15.0 14.4 4%
--------------------- ----- ----------------- ------
Ingenie 13.9 12.5 11%
--------------------- ----- ----------------- ------
BAS 3.7 2.8 32%
--------------------- ----- ----------------- ------
Total Underlying* 60.7 54.9 11%
--------------------- ----- ----------------- ------
Non-underlying 3.1 3.9 (21%)
--------------------- ----- ----------------- ------
Total Group 63.8 58.8 9%
--------------------- ----- ----------------- ------
* Maine Finance and Road Angel were closed during the year and
have consequently been reclassified as Non-underlying including
2015.
2016 saw continued significant change for the Group, with
management activities focussed on the operational objectives
outlined to shareholders at the beginning of 2016: to deal with the
Group's losses and to establish a platform to create shareholder
value from the Group's businesses.
The sale or closure of non-core assets and restructuring
resulted in the elimination of losses of over GBP14m on an
annualised basis. Property Services and Quintica were sold, Maine
Finance and Road Angel closed and a significant restructuring of
Hubio was executed.
ptHealth and ingenie are now both profitable and growing.
Building on the strategy outlined in January 2016, a plan of
action was created and is being executed for each of the
businesses. In 2016, we launched Hubio, Hubio Fleet, InnoCare, BAS
Corporate and developed ingenie's B2B technology platform.
Taking each of the operating businesses in turn:
Healthcare services:
ptHealth treated a record number of patients in 2016 and
conducted a record number of patient assessments up 6% vs. 2015.
All clinics that were loss making in 2015 have either been sold or
were profitable during 2016.
InnoCare launched in Q2 2016 and has since been developing
momentum, including growth in the network to 167 clinics from 152
clinics. From September 2016, investment in sales and business
development has resulted in a substantial growth in its sales
pipeline. InnoCare Charting, a market leading software tool to help
clinicians be more efficient and so treat more patients was
launched in November 2016. Whilst early signs are positive, it is
too early to say how quickly sales will be delivered. The required
investment in the InnoCare product and associated marketing will
impact its earnings for the immediate future.
Hubio:
The Hubio brand was launched in January 2016 to bring together
the insurance software parts of the Group and has since become a
recognised brand in its sectors. By pulling three previously
separate companies together under common management, we were able
to better assess our capabilities and address our opportunities and
challenges.
As previously outlined, the development of the usage based
insurance (UBI) business has been disappointing and 2016 was a year
of intensive work externally to understand and to better qualify
market opportunities and internally to optimise and focus
resources. As a result, we start 2017 with a significantly
streamlined organisation and plan to launch an updated UBI
proposition by the end of Q1 2017 which will combine the best
elements of Hubio and ingenie's technology, intellectual property
and business process capabilities.
Hubio Fleet was launched in September 2016 and has made an
encouraging start successfully signing up customers on multi-year
contracts. Investment in sales, operations and development means
the business comes into 2017 with a strong pipeline of
opportunities and an expectation of profitable growth during
2017.
Hubio EIS, our enterprise insurance solutions business, was
restructured during 2016 resulting in this unit returning to
profitability by Q3 2016. Hubio EIS's solutions continue to receive
industry and customer acclaim but the key focus remains new
business and to this end, the sales pipeline is now at its
strongest level in its history.
The Hubio business in Canada is re-focussing on its Iter8
insurance software platform. An exciting partnership with Guidewire
Inc was announced in November 2016 and this has already resulted in
a strong uplift in opportunities. The Farm Portal, which launched
in 2016, has a solid pipeline which is expected to result in at
least 2 new deals in 2017.
As noted in the results for the six months ended 30 June 2016,
in respect of Hubio the Board determined that, in line with
accounting standards and the practice of peers, all internal
development expenditure will be expensed rather than capitalised
until profitable product and service delivery is expected to be
feasible and probable. This results in approximately GBP1.5m of
additional expense included within EBITDA on an ongoing basis.
While significant progress has been made in dealing with the
various opportunities and challenges across the Hubio businesses,
it will be 2018 before we see profits or positive cash flows.
However, the Board remains confident in the underlying technologies
in Hubio, the associated significant market opportunities and the
ability to see growth in 2017.
ingenie:
2016 was another successful year for ingenie with a 17% year on
year increase in new business sales and a 22% increase of in force
policies. Significant improvements were also achieved in customer
retention during the year. The business remains profitable and is
expected to grow revenue further during 2017 through new product
initiatives.
As previously detailed, our technology has been used to create a
white label proposition which can be licensed to third party
brands/insurers who wish to create their own telematics based
offering. ingenie is looking to find further high quality partners
like ANWB for this product offering.
BAS:
In 2016, BAS launched a division targeting larger corporate
opportunities in addition to its traditional SME customers. The
first major corporate customer was won (providing energy
procurement services for Suffolk County Council) and a further
pipeline has been developed. Total new business sales were a record
and up approximately 30% vs. 2015 resulting in the revenue growth
seen above. 2017 will be a year to build on the foundations laid
during 2016.
Central overheads and cash:
Group cash and deposits stood at GBP81.3m at 31 December 2016
(2) . Net cash outflows during the year of GBP21.9m have been kept
below expectations with several matters being favourably resolved.
Excluding restructuring and other non-recurring items, operating
businesses consumed a net GBP3.3m. Also excluding non-recurring
items, central spend (not including movements on creditors and
provisions) was GBP9.5m. Overall spend on restructuring and other
non-recurring items including businesses sold or closed and net of
receipts was GBP9.1m. There remain material provisions, primarily
related to taxation, which are expected to be substantially
resolved and settled during 2017.
2017 Outlook:
2017 will be another year of significant development for the
Group. The continued reduction of losses and cash outflow will
continue and the Board remains committed to maximise shareholder
value and seek returns for these businesses in the most effective
way and the Board will consider disposals where appropriate.
ptHealth and ingenie both continue to grow profitably. BAS is
now demonstrating its capacity to be profitable and cash
generative. Central costs will continue to be managed carefully at
reduced levels consistent with the unresolved legacy matters and
the needs of the organisation. The initiatives, restructuring and
new launches in Hubio will now mean it will be 2018 before we see
profits or positive cash flows for both Hubio and the Group as a
whole.
Indro Mukerjee, Group Chief Executive Officer said:
"We have made good progress in dealing with losses and those
businesses that were not viable or non-core as well as developing
profitable platforms in ptHealth, ingenie and BAS. Hubio, will take
longer and we have restructured the businesses in that division
appropriately. Our offerings remain relevant in segments that will
see substantial growth in the next few years and we are focussed on
building propositions for growing markets."
For further information:
Watchstone Group plc Tel: 03333 448048
Peel Hunt LLP, Nominated Adviser Tel: 020 7418
and broker 8900
Dan Webster
1. Market expectations for the year ended 31 December 2016 were
minimum revenues of GBP55.5m and a maximum EBITDA loss of
GBP14.9m.
2. Group cash and deposits do not include the GBP50.0m that
remains, as announced on 29 November 2016, in escrow pending
resolution or determination of purported warranty claims by Slater
& Gordon Limited ("S&G") in respect of its purchase of the
Professional Services Division. At this stage, no proceedings have
been commenced by S&G.
TSTLFFEFLLITLID
(END) Dow Jones Newswires
January 19, 2017 02:00 ET (07:00 GMT)
Watchstone (LSE:WTG)
Historical Stock Chart
From Apr 2024 to May 2024
Watchstone (LSE:WTG)
Historical Stock Chart
From May 2023 to May 2024