LONDON (Alliance News) - Coms PLC Monday said Chief Executive David Breith resigned with immediate effect over the weekend and withdrew his call for a general meeting to consider removing two members of the company's board, although the company still wants to keep him as a consultant and it will be able to use the software owned by him.
Shares in Coms had plunged last Wednesday after it said it would report a "substantial loss" for the financial year that just ended, and as Breith requisitioned a general meeting to consider removing two board members including Non-Executive Chairman Frank Beechinor, and appoint others to the board.
Breith was proposing the meeting to consider the removal of Beechinor and Non-Executive Diana Dyer Bartlett, and the appointment of Neil Taylor and Brendan Loughrey.
On Monday, the company said Breith had withdrawn the requisition request and had resigned his role.
"It is the board's intention to agree terms with Mr Breith regarding a consultancy arrangement whereby the company will continue to have the benefit of Mr Breith's knowledge and expertise of Coms. Mr Breith has also granted, subject to formal documentation, a free of charge, 3-year licence for the AskMerlin software used by Coms and owned by Mr Breith," it said.
Coms said its board also intends to make senior appointments to the company's executive management team "as soon as practicable and has commenced discussions with several suitable experienced candidates". It also wants to strength the board of directors, and is "currently in discussions regarding the potential appointment of two new non-executive directors".
"I am very pleased that the board has been able to reach agreement with Dave and that he has agreed to maintain his involvement with Coms. There are a number of challenges facing Coms but I believe that the appointment of a senior experienced management team, supported by staff and Dave as a major shareholder, will help us with the next phase of Coms," Beechinor said in a statement.
"I have really enjoyed my time as CEO and look forward to working with Coms as a consultant and providing my continued support to the company. It was a very hard decision for me but it is for the best of the company, its staff and its shareholders," Breith said in the statement.
The cloud-based telephony services provider said last week it expects to report a substantial loss for the financial year ended January 31, 2015 of at least several million pounds, citing lower gross margins in the second half of the year than in the first half after it failed to achieved the level of cost savings from its recent restructuring process than it had hoped for.
"In light of this very disappointing financial performance, the board is reviewing the company's strategy with the aim of ensuring that improved returns will be delivered across the businesses and to shareholders," it had said.
The company has had a difficult few months. In the wake of a profit restatement last June and the departure of the chairman and CFO in July, Coms put out a trading statement in October that said it was confident of meeting market expectations for the current financial year thanks to new contract wins and the results of its restructuring.
Just weeks later it said its pretax loss widened in the first half of the year due to the restructuring costs and because a recent acquisition, CloudXL, was running at a loss. However, revenue increased significantly due to acquisitions it has made and the new contract wins. It then issued the profit warning last week.
In another twist, the company also said last week that its board was notified a week previously that Breith had bought 20,000 shares in the company last July. It said it has sought clarification on the details of the dealing, including why no prior permission to deal was sought from the board, and said no clarification has been forthcoming to date.
Brieth told Alliance News at the time that the situation with the dealing was a "genuine mistake", and attributed it to a "fat finger error."
"With regards to the share purchases made in July 2014, Mr Breith has informed the board that the purchase was made in error and although an immediate attempt was made to cancel out the purchase, this was not successful. Mr Breith has explained that he only became aware that he held the additional shares on 18 February 2015 and has now confirmed that the purchase was carried out a price of 4.239 pence per share," Coms said Monday. "Mr Breith has stated that he did not seek prior permission to deal in Coms' shares as it had not been his intention to do so."
Breith is interested in nearly 138.9 million Coms shares, a 14.27% stake in the company.
By Steve McGrath; stevemcgrath@alliancenews.com; @stevemcgrath1
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