IDE Group: 'Three long years' of turning the business around are now behind us
'Highly probable' sale of Connect business means shareholders can look forward to a positive future, MSP claims
IDE Group says its shareholders can "look forward to a positive and rewarding future" for the first time in three years amid the expected sale of its loss-making Connect business.
The Bournemouth-based MSP announced earlier this week that it is in "advanced discussions" to sell its networking and connectivity subsidiary for £250,000, and in its financial results for the first half of 2021 said the sale is "highly probable".
Revenue from operations for the six months to 30 June was £13.9m, up from £12.4m in the same period last year, while gross profit increased to £4.1m from £3.1m.
Adjusted EBITDA stood at £1.5m, up from £0.4 million, but loss after tax for the period was recorded at £1.3m which compared with a £3.6m loss in the first half of last year.
Revenues from continuing operations, which exclude IDE's Connect business, were £7.6m for the six-month period, up from £6.8m last year, while adjusted EBITDA was £2.1m, up from £500,000 the previous year.
IDE said its Connect division "continued to struggle in H1" due to "a lack of scale" and claims it was left with the choice of "investing by way of acquisition to enable scale or selling the business to someone else".
"It has taken three long years to turn this company around, but I am truly delighted to say that at last, with the expected sale of Connect, we have a meaningfully profitable company with excellent prospects," non-executive chairman Andy Parker said.
"The efforts of all staff involved in this turnaround cannot be underestimated. Some incredibly tough decisions have been made along the way which has seen good people leave the business because the company neither had the scale or resources to keep them.
"This, thankfully, is now in the past and with the company entirely focused on its partner revenues through Manage, we have an exciting future ahead of us."
The financial results showed its Connect business had sales of £6.3m for the first half of 2021 but made an operating loss of £1.4m, compared with a £2m operating profit for its Manage division. IDE said it "was clear that further investment" in its Manage division "would be beneficial" when weighing up which to focus on.
IDE first announced it was considering the sale of its Connect business in its full year results for 2020, which were published in July, after it showed the subsidiary had lost more than £18m.
The IDE business, formerlly called Coretx, was in dire straights three years ago, with executive director Ian Smith lambasting its previous management in September of 2018 for putting the firm in danger of insolvancy through its poor acquisition strategy.
For the six months ending 30 June 2018, revenue fell by £1m to £29m, while adjusted EBITDA plummeted by 89.6 per cent to £250,000.
In its latest results, the group added that a "combination of continuing churn and longer-term onerous contracts" had made an "elongated sale process an unrealistic option" which it said is demonstrated in the reported sale price.
"The company is now seriously looking at options to remove the debt overhang and is liaising with the debtholders to ascertain the best way to resolve this and finally allow the company to prosper for all shareholders," it added.
"This day has been a long time coming but for the first time in three years we can confidently look forward to a positive and rewarding future for IDE shareholders."