Hard-pressed B2B communications provider Coms Plc confirmed this morning it is to offload the telco arm to Timico for an initial cash splurge of £2.5m.
As exclusively revealed by us late last month, the London-listed business hired Knight Corporate Finance to manage a fire sale of the division following a failed restructuring plan to counter mounting losses.
Coms revealed it has exchanged contracts. The sale to Timico, an independent web, hosting and comms service provider, is expected to close on 31 May.
In a statement, Coms’ board said the “disposal” is in the “best interests of the company and all stockholders”. The unit comprised numerous acquisitions that hadn’t been fully integrated, it said, including Actimax.
“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,” the company added.
In unaudited financials for the six months ended 31 July, the telco unit reported net losses of £500k before allocation of head office costs on revenue of £8m. In the March trading update, the several millions of pound of losses referred to were “essentially telecoms losses”.
Under the terms of the agreement, Timico will initially cough up £2.5m in cash for the division and then up to £1m more based on the trading performance by November.
Timico, an East Midlands-based firm that employs 300 staff, will assume responsibility for key supplier arrangements but Coms will retain certain liabilities including two leasehold properties currently occupied by the telco team.
The sale funds will be used to reduce group liabilities and the overdraft facility from the current £3m level to below £2m.
The remaining business, made up by Redstone’s cabling business and Darkside Studios, is still looking for a permanent successor to Breith and a shortlist of candidates are currently being interviewed.
Non-exec chairman Frank Beechinor described Coms as a “complicated business with too many disparate operations”, adding it “did not exercise sufficient controls over the telco 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”. ®