By Tom Winnifrith, The Sheriff of AIM | Friday 8 January 2016
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.
Watchstone Group (WTG), formerly known as Quenron (QPP) has today sold its property services business BE Insulated and Carbon Reduction Company for just £1. The statement is telling.
Firstly we discover that in the year to 30 September 2014 these business reported profits of c£1 million but that the £4.3 million goodwill in the business was largely written off earlier this year and its sale for just £1 will save £1.5-2 million a year in ongoing losses and cashburn.
That tells you everything. Watchstone blathers on about how, since it upped its stake from 50% to 100% in March 2015 ( who authorised that?), trading has been poor and the businesses loss making. Wow quite a turnaround. Lets cut the balacca.
Quindell got into property services via a string of deals undertaken by fraudster Rob Terry. I refer you to this article from 471 days ago showing just how dodgy these transactions were. Some of those companies bought have been wound down, and others have seen their assets transferred into what was sold today. The reality is that under Terry accounting they may have been profitable thanks to numerous related party transactions. But now looked at on a stand alone basis they are loss making cash burners.
The new management team is thus binning as many of them as they can. Bulls of Watschstone reckon that the residue businesses have a real value. They are fooling themselves. Businesses such as Himex are frauds. In due course they too will be closed or sold for £1 to stem cashburn, resulting in more - material - albeit non cash writedowns as the goodwill is written off.
Watchstone is doing the right thing in jettisoning the Terry junk but this process still has a long way to go. Meanwhile I know that the SFO is looking at the string of deals that got it into this business in the first place. The arrests of Terry, Rob Fielding and others is a matter of when not if.
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