LONDON (Alliance News) - Cloud and managed IT services firm IDE Group PLC said Friday its interim loss ballooned on impairments in what the sole executive director described as the "worst" set of results he had seen.
Shares in IDE were 20% lower at 2.94 pence on Friday. The stock is down 72% in the past three months.
For the six months ended June, pretax loss widened to GBP39.4 million from GBP1.6 million the year prior.
Revenue slipped to GBP28.7 million from GBP29.6 million the year before, but what really hit profit performance was a GBP27.5 million impairment of goodwill and intangibles. This related to IDE's acquisitions of Selection Services and 365 ITMS Ltd and was to reflect the "true and current values of these businesses".
IDE bought Selection Services for GBP34.8 million in 2016. In 2017, it then acquired 365 ITMS for GBP4.6 million.
"I can safely say these are the worst set of results I have ever had to provide commentary for and there is nothing positive to point to," IDE Executive Director Ian Smith said. "As can be seen from the numbers reported, we have seen fit to provide for numerous onerous contracts, revisit the capitalisation of staff costs and classification of exceptional items, and adjust goodwill on the balance sheet to reflect the board's assessment of the value of the acquired businesses, resulting in significant losses for shareholders."
Smith joined the firm in May. He represents the largest shareholder of IDE, MXC Capital Ltd.
"I strongly believe that the strategy pursued by previous management, if allowed to continue, would have seen the company become insolvent. For example, many onerous contracts were signed that created little or no value to the company, including a single outsourced service contract that is costing the company more than GBP1.0 million a year and which has only generated net cost savings of GBP50,000."
"Furthermore, generally when completing a 'Buy and Build', which was IDE's stated strategy, synergies are part and parcel of the business case," Smith added. "One would reasonably expect that as a result of putting together the three companies that now comprise the group, there would be a smaller number of staff than would have existed across the three companies at the time of acquisition."
"I can tell you that this is clearly not the case: at the time of the acquisitions there were a combined 440 members of staff across all three companies and as at 31 December 2017 the group had 550 members of staff, an increase of over 100 heads for which there was little or no incremental revenue gain. This number has since been reduced to under 400," Smith said.
"In summary, during the last four months we have worked fast and hard to get to the group to stable position," Smith explained. "The coming months will see further change in order to create a profitable trading company for shareholders and I look forward to updating the market to this effect."