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Citel

  • BY: Andrew Hore |
  • POSTED: 02/05/2008 |

Citel is selling its trading operations and returning the remaining cash to shareholders. 

Citel floated on Aim on 7 July 2006. A placing at 95p a share raised £8.2m (£7.4m net of expenses) and valued the company at £20.6m. It developed and sold Voice over Internet Protocol (VoIP) solutions for businesses. The flotation cash was used to pay off debt and boost marketing.

Tortel USA is paying $2.3m for the business. This may be adjusted up or down based on the value of stocks and work in progress. Citel is retaining its debtors. The bulk of the payment will be made on 31 May and the remaining $450,000 on 30 September. Tortel is a distributor of telecommunications equipment. It specialises in Nortel equipment. Citel’s VoIP products should fit well with the rest of the business.

Shareholders have to agree to the sale and the subsequent change of name to DietBrown.

Revenues rose 5% to $4.68m in the year to March 2008. The trading statement on 18 April that revealed the revenue figure also said that there was $162,000 in cash in the bank at the end of March 2008. Citel expected to burn $225,000 of cash over the subsequent three months and admitted it needed to raise more cash.

The sale of the business is an alternative to a fundraising, which presumably wasn’t well received in the current market conditions.

The assets being bought by Tortel are in the books at £2.5m, so they are being sold for about £1.35m below their book value. 

Management estimates that after it has paid its creditors and collected debts it should have $500,000 left at the end of September 2008. The cash will be returned via a members’ voluntary liquidation.

The sale was announced after the market closed. The shares were unchanged at 1.25p - the bid/offer spread is 1p-1.5p. That values the company at £270,000, compared with the potential cash of £250,000. 

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