Coms reaps benefit of M&A drive as profit returns in FY14

New Redstone owner publishes upbeat numbers, but share price suffers as impact of reorg cost is forecasted

Redstone's new owner Coms plc returned to profitability during its 2014 fiscal year, but the firm's share price has taken a knock after it forecast restructuring charges will hurt its finances in the new year's first half.

The City-based firm published its annual final results this morning, which showed sales for the year to 31 January stood at £14m, up from just £1.6m in the prior year. The firm posted a pre-tax profit of more than £1.2m, compared with a loss of £936,415 in the previous 12 months. Coms' net cash reserves were also on the up in FY14, growing from £171,962 to £998,947 over the course of the year.

In November 2013 Coms bought the bulk of Redstone's remaining business and in Dave Breith's chief executive's statement today, he outlines that "the true impact of the... acquisition is yet to be realised in financial terms".

"This acquisition will be earnings-enhancing, provides a significant increase in income generation to fund the group, and also establishes a sound infrastructure, which allows Coms to provide an integrated service for our customers," he adds.

During the 2014 fiscal year Coms "made 10 acquisitions of varying size" as part of "a comprehensive M&A strategy" implemented by Breith upon his arrival at the start of the year.

Following the completion of FY14, Coms was back in M&A action again, snapping up comms VAR CloudXL (formerly Actimax). The deals – particularly Redstone and CloudXL – have "ensured an ever-increasing revenue base which will provide the funding required to build a sustainable long-term business", claims Breith.

"Whilst Redstone continues to operate as a subsidiary of Coms plc, we have already gained significant commercial synergies and cost savings by bringing these two businesses together under the Coms umbrella," he adds.

"As a result, in 2014/15 and beyond we will achieve a significant uplift in gross profit, access to European markets currently served by Redstone and a significant 'value-add' to customers of both businesses. This acquisition fundamentally changed the dynamics of our business and positioned us for the next phase of growth."

In worse news for the AIM-listed firm, it announced today that a "carry-over of one-off reorganisation costs" will hurt its performance in the ongoing first half of FY15, although it stressed that it "remains confident that the current... estimates for full-year revenue and profit before tax remain valid".

It predicted that any impact will be "fully recovered" during the year's second half. However, the market seems to have reacted negatively to today's news, with the share price currently almost 10 per cent down on its opening price of 6.78p to 6.12p at the time of publication.