29 Sep 2010 14:53
29 September 2010
Redstone plc
("Redstone", "the Company" or "the Group")
Novation of Building Schools for the Future ("BSF") ICT Contracts in Birmingham for £4.2m
Redstone plc (AIM:RED.L) announces that the Group has agreed to novate its interest in the BSF ICT Contracts in Birmingham to Bovis Lend Lease Limited following the initial findings of the operational review being conducted by the Board of Directors. This will be completed for a cash consideration of £2 million along with an accelerated payment for invoiced and invoiceable debtor balances of approximately £1.9 million (excluding VAT), resulting in a net cash inflow of £4.2 million to the Group (including VAT).
As a result of the novation, 27 Group employees will transfer to Bovis Lend Lease Limited in accordance with TUPE regulations, following a period of consultation.
In the year to 31 March 2010, RIE reported an operating loss of £3.9 million, including a provision of £1.6 million made in respect of the uncertain recoverability of deferred costs incurred up to 31 March 2010 in relation to the BSF ICT contracts in Birmingham. Further detail on the division will be disclosed in the Company's results for the year ended 31 March 2010 which will be released on Thursday 30 September 2010. Following the novation of the contracts the activities of RIE will be discontinued by the Group.
Under the terms of Redstone's banking facilities £2.0 million of the proceeds from the novation will be utilised in mandatory prepayment of the Group's term loan facility.
The novation is in line with the Group's revised strategy of disposing and discontinuing certain non-core assets, delivering cost savings and focussing on higher margin revenue streams. The disposal will reduce Group overheads going forward and is an important first step in refocusing the Redstone business.
Tony Weaver, Chief Executive of Redstone, commented: "We are pleased to have completed the first part of our strategy of refocusing Redstone's operating activities within the sphere of its core competencies. Since our appointments, both Ian and I have been impressed with the operational and technical capabilities within the Group and look forward to updating further on our operational review and the implementation of our revised strategy."
Further Details of the Novation and Settlement Deed
Redstone together with its subsidiary Redstone i4e Limited ("RIE"), the provider of ICT solutions to the UK education sector, has signed a Novation and Settlement Deed (the "Deed") in relation to the transfer of Birmingham BSF ICT contracts from RIE to Bovis Lend Lease Limited ("BLL") for a consideration of £2 million and BLL has agreed to settle all outstanding amounts owed to Redstone.
Under the Deed, BLL assumes all obligations and liabilities on the part of RIE under the ICT managed services contract between RIE and Birmingham LEP Company Limited ("LEP") the local education partnership, established in respect of Birmingham City Council, pursuant to the BSF program ("Managed Service Contract"). In addition all obligations under the Active ICT Implementation contract with Bovis Lend Lease will be terminated. The LEP has released and discharged RIE from all obligations and liabilities under the Managed Services Contract.
Related Party Transaction
Redstone was advised on the disposal by MXC Capital Limited, the ICT specialist financial advisory boutique controlled by Ian Smith and Tony Weaver (Executive Chairman and Chief Executive Officer respectively of Redstone). The fees charged in connection with the corporate finance advice given were equal to 1.5 per cent of the disposal value (equalling £30,000) and are deemed, under the AiM Rules to constitute a related party transaction. The independent Directors of Redstone (being Tim Sherwood and David Payne) consider, having consulted with finnCap Limited, that the terms of the transaction are fair and reasonable insofar as shareholders of Redstone are concerned.
ENQUIRIES:
| Redstone plc | Tel. +44 (0)845 203 3903 |
| Peter Hallett, Chief Financial Officer |
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| FinnCap | Tel. +44 (0)20 7600 1658 |
| Marc Young, Charlotte Stranner |
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| Hansard Communications Justine James | Tel. +44 (0)20 7245 1100 +44 (0) 7525 324431 |
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