Redstone cuts losses in H1 fiscal 2011

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Redstone cuts losses in H1 fiscal 2011

Microscope contributor

The divestment programme of peripheral operations kicked off by Redstone's management helped stem losses in the first half of fiscal 2011, the firm said today.

After a board restructure in September, the integrator novated BSF contracts and closed its education unit, selling certain assets of Marcom, cashing in the Irish reselling arm and offloading the security business to realise £7.25m of cash.

Unaudited results for continuing operations in the six months to 30 September show Redstone made EBITDA of £562,000, on the back of a 12.2% decline in sales to £32.4m.

Operating losses fell 84% to £500,000 and total losses for the period were £1.3m. Losses from divested units were £1.7m.

The drop in sales was attributed to Redstone Converged Solutions (RCS) which declined 18.5% to £26.4m that Chairman Ian Smith attributed to "deferred or cancelled ICT contracting business reflecting difficult market conditions."

Conversely, the Managed Solutions division connectivity revenues rose by one third to £6m as the contracted revenues base climbed 22% and a 61% growth in managed services.

As revealed by MicroScope earlier this week, Redstone is turning its attentions to consolidating the remaining businesses into a single trading entity with redundancies expected, while RCS managing director and sales director Rick Marshall and Richard Bell have resigned as a result of the organisational overhaul.

"In conjunction with the consolidation process we will move quickly to re-align the residual cost base to reflect the restructured activities of the group and delivery of strategic goals," said Smith, adding it aimed to conclude the process within fiscal Q4.

The group made its first acquisition of Fujin Systems last month and plans to bolt on further additions in the coming year ahead, which is predicted to be another challenging year for the sector.

"Macro economic recovery continues to be fragile, with consumer confidence likely to be further eroded by the impact of government spending cuts and imminent increases in VAT and income tax," said Smith.

"Following our substantial refinancing of the business and the realisation of up to £7.25m of cash from our divestment programme the Group is well placed to build and consolidate the residual business, and taken advantage of any appropriate opportunities in the ICT sector which many arise from the economic fallout," he said.


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