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Dogged by several years of scandal and controversy, including the credibility and / or honesty over founder Rob Terry and his opaque financial engineering that undermined investor and City confidence, has the former Quindell, now renamed Watchstone Group (WTG) ended it’s multi-year annus horribilis? Back to a year ago, and following Terry’s departure the incumbent board confirmed it was satisfied with trading, and confirmed that sufficient resources were in place to deliver on plans. The long-promised sale of the Professional Services Division to Slater and Gordon for £637m (plus further contingent cash considerations) took place following approval from the Solicitors Regulation Authority (SRA) and Financial Conduct Authority (FCA).
The protracted review by PwC identified ‘aggressive’ accounting practices and, along with the 2014 results, a series of corrections, additional information and clarifications to historic regulatory and other announcements. Led by Chairman Richard Rose, new CEO Indro Mukerjee was appointed to head up the new Board and promised to deliver the highest standards of corporate governance with a focus on shareholder value.
Following the sale of the Professional Services Division to Slater and Gordon, the Group continues with a solid technology base underlying a series of insurance solutions businesses and established revenues. These span the market from innovative usage based insurance (UBI) solutions from Himex to award winning policy and claims solutions from QETS and QSI through to Ingenie which was awarded Telematics Champion of the year by the Insurance Times as part of its Tech awards.
For the embattled shareholders of the group (including myself), the company promised to return 90p per share to shareholders on Dec 31 2015, followed by a further 10p in Dec 2016 from the £50m warranty escrow put in place as part of the disposal of the Professional Services Division. Watchstone has also undertaken a share consolidation of 10 to 1, resulting in 45,822,708 share in issue (none in treasury) as the basis for calculating the value in the ongoing businesses.
Today, the newly consolidated shares have made an impressive debut, and is article this is published, they currently stand 108% higher at 175p, giving the group a market cap c£80m. Clearly, the company still has some way to go to convince former Quindell holders that the new entity is an investable proposition, but I take the view that since Rob Terry’s departure, the Watchstone board have taken a belt and braces approach in dealing with legacy issues, return of capital to shareholders and building a platform from which to move the new company forward.
Added to this, after the market close today it was announced that CEO Indro Mukerjee purchased 50,550 shares at 196p, FD Mark Williams purchased 50,550 shares at 196p and Senior Non-Exec Lord Howard of Lympne purchased 12,608 shares at 196p.
I for one will not be selling my holding anytime soon.