News blog
Redstone / Eckoh
- BY: Andrew Hore |
- POSTED: 24/08/2010 |
Communications services provider Redstone is raising £6.5m at 0.5p a share to help it rebuild its balance sheet.
Another £1.5m will come into the company through a subscription for convertible loan notes. There will then be £4.5m worth of loan notes in issue and they will all be converted into shares at the placing price.
Unsurprisingly the share price has halved. At 0.93p a share, Redstone is valued at £1.35m which shows how dilutive the share issues will be.
Without the cash Redstone would probably not be able to continue to trade. Redstone lost money in the year to March 2010 but has not released the figures and it believes it has lost business because of its weak financial state. Further cash could come from the sale of non-core assets.
Five of the 38 schools covered by the Birmingham Building Schools for the Future contract have reached financial closure and eight more may also reach that point. It is unclear whether any of the other projects will go ahead.
Even so, management believes that Redstone is well placed to be a consolidator – again.
Ian Smith and Tony Weaver, who left Avisen following a board room bust up, will become executive chairman and chief executive respectively. Stephen Yapp will resign as executive chairman.
Smith and Weaver have agreed to subscribe for a further 100m shares at the placing price before the end of 2010.
Redstone owes £2.9m to speech recognition services provider Eckoh, which relates to the acquisition of a business in 2006. Subject to shareholder approval, Eckoh has agreed to accept a settlement fee of £500,000 and 200m shares worth £1m at the placing price. Eckoh will sell 100m shares for 0.5p each to Smith and Weaver and has to keep the other 100m shares for at least 12 months. This will provide £1m in cash immediately plus more cash if the other shares are sold in the future.
At 4.875p a share, Eckoh is valued at £9.74m. Eckoh had cash of £2.07m at the end of March 2010. The settlement will effectively reduce its NAV by at least £1.4m – assuming the remaining shares are worth 0.5p each.
Smith will not give 100% of his time to Redstone because he is also a director of cash shell Accumuli, formerly NetServices. He intends to focus Accumuli’s acquisitions on the managed security services sector.
Download the August edition of AIM Journal at http://www.hubinvest.com/AIMPDFAugust2010_11.pdf
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