Redstone restructure begins with closure of BSF division

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Redstone restructure begins with closure of BSF division

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Redstone is closing its loss-making ie4 (RIE) subsidiary that operates in the ill-fated Building Schools for the Future programme.

The integrator has novated its interest in Birmingham-based BSF managed services contracts to construction firm Bovis Lend Leased Ltd for £2m in cash and will use the funds to pay down a loan facility.

The deal, which will see 27 staff transfer to Bovis LL, also includes accelerated payments for invoiced and invoicable debtor balances of roughly £1.9m.

Bovis LL was the leader of a consortium which included Redstone, that won BSF contracts in Birmingham worth £150m over 15 years.

The decision to axe RIE was made following a strategic review by new bosses Tony Weaver and Ian Smith as they seek to turnaround Redstone by disposing and discontinuing peripheral operations, cutting costs and targeting higher margin areas.

"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," said Weaver in a statement to the London Stock Exchange.

He added that the pair had been impressed by the "operational and technical capabilities" within the group and would update the City on the revised strategy in due course.

The RIE education division recorded an operating loss of £3.9m in the year to 31 March 2010 which included a provision of £1.6m to cover bidding costs related to its BSF ICT contracts. 

"Following the novation of the contracts the activites of RIE will be discontinued by the group," Redstone stated.

It added: "The disposal will reduce Group overheads going forward and is an important first step in refocusing the Redstone business."

Smith and Weaver are no strangers to buying and building businesses in the UK channel, and Redstone will form the backbone of a roll up in the managed security services space.

The government pulled the rug from under many ICT suppliers earlier in the summer when it emerged that the BSF contracts that had not reached the tender stage would be frozen until October, while a review team looks at the various alternatives.

At the Labour conference today, Shadow Education Secretary Ed Balls said 700,000 children across the UK will no longer get the new schools they were promised under BSF. 


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