Troubled Azzurri Comms offloaded to AIM-listed Maintel

AIM-listed comms and networking integrator Maintel has conditionally agreed to slurp struggling rival Azzurri Comms for £48.5m - a company that is twice its size.

At the same time, the London-based Maintel confirmed it is also to place Ordinary Shares on the market at 700 pence each with the aim of generating roughly £24m to help fund the buy, and it is also taking debt facilities with Royal Bank of Scotland.

The agreement confirmed to the LSE today is billed as “transformational” for Maintel, giving the business over £100m worth of additional revenues in telephony, mobile services, document solutions, security, Unified comms-as-a-service and managed services, 77 per cent of the revenue stream is recurring.

“The acquisition will accelerate Maintel’s shift into Hosted, Cloud and Data,” said Eddie Buxton, CEO at Maintel. “In addition, it will build scale in managed services, continuing the shift in business mix.”

He said the buy will let it “target larger and more complex contracts” and as is customary in these situations, the buyer has identified some £4.6m of “cost synergies” that it intends to wring out by the end of next year.

This includes £3.8m in operating expenditure savings, and £800,000 in cost of sales savings.

Azzurri CEO Chris Janusz, who should be commended for helping to stabilise falling revenues after a torrid time for the organisation, pitched in with some comments.

“We believe this pairing will significantly enhance our impact in the market and increase opportunities for employees.”

Back in February, Azzurri filed results for the year ended June 2015 with sales down three per cent to £101.2m - but this represented progress based on steeper declines in the past half a decade.

Overheads went up, including exceptional costs of restructuring, amortisation and higher admin expenses, leaving an operating loss of £2.2m versus £1.5m in the prior year.

The sale will bring an end to the investment misery suffered by Azzurri’s syndicate of banks that back that business, the majority of which took a hit when they wrote down the integrator’s debts by more than £280m in recent years.

The syndicate bankrolled an acquisition spree by the previous management team and debts spiralled to the point that debt repayments became unmanageable when results started to dip.

Azzurri had been on the watch list of credit people working in the tech supply chain amid fears the business would go pop, but the balance sheet clean up by the banks put paid to those fears.

El Chan commented when writing the most recent results that we believed Azzurri could see this as the right time to seek a buyer. Doubles all round.

Maintel also pushed out some results today for calendar 2015 - revenue jumped 21 per cent year-on-year to £50.6m, aided in no small part by the acquisition of Proximity.

Gross profit bounced on last year from £19.05m from £15.59m, and after intangibles amortisation, exceptional costs and admin expenses, operating profit was £4.411m up from £3.94m.

Maintel, which acquired Datapoint in 2013, also sells services to around 40 channel customers. ®