14 Aug 2009 14:27
REDSTONE PLC
14 August 2009
Redstone plc
("Redstone"; the "Group")
Disposal of telecommunications division
Redstone, the provider of integrated IT solutions, has entered into an agreement to sell its telecoms and mobile divisions ("Redstone Telecom"; the "Business") to Daisy Telecoms Limited, a wholly owned subsidiary of Daisy Group plc ("Daisy") for £17.0 million (before costs) in cash (the "Transaction"). The Transaction focuses Redstone on delivering ICT services to mid-market and enterprise clients including Building Schools for the Future.
Daisy has agreed, subject to the completion of a TUPE consultation process, to acquire Redstone Telecom, which comprises the assets of the Group's fixed line business and the shares of Anglia Telecom Centres Limited and Symphony Telecom Limited which largely comprises the mobile service provider and distribution business. As part of the Transaction, an agreement has been reached for the supply of fixed line and mobile services to the Group. In the year to 31 March 2009, Redstone Telecom's unaudited turnover was £74.7 million (2008 reported: £83.2 million) and unaudited adjusted EBITDA* of £3.1 million (2008 reported: £6.6 million). The unaudited EBIT** during the period was a loss of £13.7 million (2008 reported: profit of £2.0 million).
The unaudited net assets of Redstone Telecom were £27.9 million at 31 March 2009 (2008 reported: £41.5 million).
Redstone Telecom is being acquired by Daisy on a debt free and cash free basis for £17.0 million in cash, subject to any working capital adjustment capped at £500,000 (upwards or downwards). There is a retention fund of £500,000 which will be released six months from completion. The Transaction is expected to complete on 28 August 2009. The disposal is a Substantial Transaction under the AIM Rules of the London Stock Exchange.
The sale proceeds will be used to reduce the Group's bank debt. It is expected that bank debt after completion of the Transaction will be approximately £14 million and the Group's net debt will be approximately £17 million (assuming full release of the retention fund). Notwithstanding the significant reduction in Group indebtedness following the Transaction, the Group still needs to resolve its long term financing position and it continues to negotiate with Barclays Bank PLC.
The Group is currently exploring potential ways to further reduce indebtedness to a more sustainable level which the Board expects to achieve through a combination of further asset disposals, cost reductions and/or potentially raising new funds. A further announcement is expected to be made in this regard shortly.
The Company expects to publish its results for the year ending 31 March 2009 by the end of September 2009.
Commenting on the disposal, Alan Coppin, Chairman of Redstone said:
"The Transaction enables Redstone to focus around its core ICT services operations and results in a significant reduction in Group indebtedness. I believe that the cash price achieved for the telecommunications division is compelling and I wish Daisy well with the purchase moving forward. We remain committed to securing the long term future of Redstone as a leading player in the UK ICT services mid-market and enterprise clients including Building Schools for the Future."
*earnings and operating costs before net finance costs, tax, depreciation, amortisation, exceptional items and share based payment charges and after apportionment of central costs
**earnings and operating costs before net finance costs, tax and after apportionment of central costs
Contacts:
Redstone plc
Tel: +44 (0) 845 2033943 Tim Perks, Chief Financial Officer
ICIS Limited Tel: +44 (0) 20 7651 8688 Tom Moriaty Bob Huxford