Listed IT conglomerate Iocom has decided to close its recently acquired distribution company MUA after running into financial difficulties.
Sydney-based MUA distribution was a division of the MUA Group - which also ran services and training arms - purchased by Iocom in a stock and script trade valued at around $1.5 million in March 2000. MUA Distribution Group handled IBM and Hewlett Packard server hardware; a range of Unix and Citrix software and in 1999 was employing around 70 staff. Now it's remaining nine staff will be retrenched and the business will be closed by the end of March.
After nearly spending itself into debt when purchasing the under-performing distribution company, Iocom has absorbed the other divisions of the former MUA group (MUA services and training), but has decided to "wind down" the distribution business, an Iocom statement said.
Chief Financial Officer Sam Saboune said Iocom kept those assets and staff from MUA that integrated nicely with the Iocom business, and has discarded the rest.
"The [distribution] business was unprofitable, it didn't have the right volumes for us to persist with it," he said. "It was not a situation we wanted to carry on with."
Saboune admitted the previous Iocom management that ran the company before a recent restructure had been over-ambitious, with a flurry of acquisitions last year.
"It comes down to making acquisitions too quickly after one another," he said. "You really need to integrate one before you acquire the next, it takes time to absorb. But these acquisitions were all happening within months of each other. It is really draining on management time - you take your aim off the main game for a while."
On announcing poor financial results and the MUA distribution closure, Iocom director and chief executive officer Peter Singer has resigned. The company claimed he was leaving for personal reasons in a statement to the Australian Stock Exchange.
Iocom has announced to he ASX a whopping $7.54 million loss on the back of $5.4 million in revenues. The directors have written off $3.1 million of this loss due to "abnormal expenses", writing off capitalised intellectual property, capitalised research and development and goodwill on discontinued and non-revenue generating businesses.
Iocom's directors claim the company can still be cash flow positive before the end of the year by focusing on its core business of SME outsourcing and systems integration. It will sell part of its equity in a CTI business launched with Dell and Microsoft, and is attempting to raise up to half a million dollars via a stock placement.
"We will focus on our current business, and skinny down our costs," Saboune said.