26 May 2015 07:30
26 May 2015
Coms plc
("Coms" or the "Company" or "Group")
Disposal of business and certain assets of Coms telecoms operations
Coms (AIM: COMS) announces that on 23 May 2015 it exchanged contracts to dispose of the business and certain assets of its telecoms operations ("Telecoms") to Timico Limited ("Timico") (the "Disposal") for an initial consideration of £2.5 million payable in cash. Completion of the Disposal is expected to take place on 31 May 2015 ("Completion"). Following the Disposal the Group will comprise its infrastructure business, Redstone and Darkside Studios.
The consideration for the Disposal comprises an initial cash payment of £2.5 million and deferred consideration of up to a further £1 million, payable in cash, based on the trading performance of Telecoms in the period to 30 November 2015. Coms will retain the benefit of its trade debtors. Timico will assume responsibility for all key supplier arrangements in respect of trading following Completion but Coms will retain certain liabilities, including the two leasehold properties occupied by Telecoms. Under a transitional services agreement, Coms is required to retain the Stokenchurch offices for up to six months post Completion.
The Board of Coms plc believes that the Disposal is in the best interests of the Company and all stakeholders. In particular, the Telecoms customers will benefit from the extensive product delivery capability that Timico can offer. Coms management will assist in the handover process to ensure a smooth transition to the new owners is achieved.
Timico is a privately-owned, independent internet, hosting and communications service provider, delivering Network Management, Voice and Hosted solutions for the UK business and corporate markets. It employs approximately 300 staff and is headquartered in the East Midlands with regional offices in London, Milton Keynes and Fareham.
Telecoms consisted of a number of acquisitions that had never been fully integrated. Despite attempts to restructure the business, trading losses continued and the overhead structure was such that the Board concluded it would take significant further investment and considerable management focus for the business to achieve profitability.
In the unaudited results for the six months ended 31 July 2014 Coms reported Telecoms net losses of £0.5 million before allocation of head office costs on revenue of £8 million. The losses continued such that when Coms issued its trading update at the beginning of March 2015, referring to losses of several million pounds, these losses were essentially Telecoms losses. Further asset write-downs will be required in the results for the year ended 31 January 2015 and in the calculation of the profit or loss on disposal. Further details will be provided in the audited accounts for the year ended 31 January 2015 which are not likely to be released until the end of July.
The sale proceeds will be applied to reduce the Group's liabilities and to reduce the Group's overdraft facility from the current £3 million level to below £2 million.
Frank Beechinor, Non-Executive Chairman, commented:
"The Disposal is a good solution for Coms and the Telecoms customers. It will remove loss making businesses and enable the management team to focus on growing our core infrastructure business, Redstone. We plan to develop Redstone's leading Smart Buildings product offering and expand further its successful managed services business. The Board intends to capitalise on accelerating growth in the construction industry and, in particular, the fast growing Smart Buildings sector where Redstone has already delivered strong referenceable solutions to a number of landmark projects. The potential in these markets as they go through both structural and technological change is enormous. Redstone is well positioned to service this opportunity and our focus is to develop this capability through a combination of product development, organic growth and acquisitions.
I appreciate there has been no communication from the board since early March 2015 as we reviewed the Group and its strategy. Coms was a complicated business with too many disparate operations and it did not exercise sufficient control over the Telecoms business. As a result it took us longer than expected to effect this transaction. The Telecoms disposal now draws "a line in the sand' with the past, enabling the Group to operate with clarity and focus going forward.
The process to identify a Group Chief Executive has been underway for a period of time and we are currently engaged with a number of shortlisted candidates. The Board expects to make further announcements relating to this and other matters in the near future. "
For further information, please contact:
Coms plc
Frank Beechinor (Chairman) +44 (0) 207 138 3204
Charles Stanley Securities +44 (0) 207 149 6000
(Nominated Adviser and Broker)
Karri Vuori / Philip Davies