The Company that owns Spin Communications, Max Australia and Spectrum Communications all PR Companies that handle major technology clients has reported a $4 million dollar loss with directors now admitting that the Company Bluefreeway is up for sale.
Shares in the Holding Company have crashed over 40% on news the group recorded losses of $4.048 million in the first half of the current financial year. Currently suspended the Company that has Greg Daniels the former CEO of Clemenger on their board is desperately looking for a white knight.
Blufreeway claims that it has entered into exclusive due diligence with a potential suitor. It has also been revealed that the Company is looking to sell off recently acquired assets. Among the technology PR clients who could be affected if Bluefreeway does engage in a fire sale of assets are Telstra Bigpond, Acer, Blackberry, iBurst, Gizmo, Intel, pba (Personal Broadband Australia), MessageLabs, Orbi, and Blur-ray Disc.
According to ADNews A spokesperson for Bluefreeway confirmed “a number of parties” had expressed interest in acquiring the company over the past few weeks, with shares in Bluefreeway languishing well below its listing price despite the group more than doubling in size over the past 16 months.
Bluefreeway co-founder and interim executive chairman Greg Daniel said the company had retained Merrill Lynch and Bluestone Capital to assess the offers.
Bluefreeway would not provide a timeline on the due diligence currently under way, nor details of any of the group’s suitors.
“While this approach is indicative and non-binding, and may not translate into an offer, the board felt it was necessary to notify shareholders. The Bluefreeway board will act in the best interests of shareholders and keep the market fully informed,” said Daniel.
Bluefreeway posted first half losses of $4.048 million late on Friday (29 February) while the company’s shares were in a trading halt pending the release of today’s announcement. Within hours of the trading halt lifting today, Bluefreeway’s shares had plummeted over 40% to $0.35.
Bluefreeway management was at pains to point out the company’s recent poor performance was not a reflection of the profitability and growth of the group’s 25 portfolio companies. In the six months to 31 December 2007, Bluefreeway recorded revenue of $35.3 million and gross profit of $23.8 million. These profits, however, were eaten away by blown out corporate costs.
“This disappointing and unacceptable result can largely be put down to a high level of corporate spending, accompanied by a lack of corporate sales,” said Daniels.
Between October and December 2007, Bluefreeway’s previous management team, working under ex-CEO Richard Webb, employed 28 additional executives across six countries.
“When the board became fully aware of these unsustainable corporate costs in December, we engaged PricewaterhouseCoopers to perform a review. The findings of this review, the extent of the corporate costs and the speed at which they were accrued in late 2007, confirms that the board’s decision to change management and refocus the company was correct.”
Daniel said the Blu portal would not be scrapped as part of the new management’s corporate cost cutting exercise, although future expansion of the portal would take place from a sustainable cost base and in an evolutionary fashion.
“As a result of the corrective action taken by the board, coupled with a growth in sector, we believe that our earnings for the next financial year will return to a more acceptable level,” he said.
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