Essensys founder explores takeover as company woes continue
Essensys founder Mark Furness is exploring a potential takeover of the company, as it continues to run into financial challenges.
Furness, who founded the software and technology company in 2006, has submitted a preliminary proposal to fully acquire the company, which would bring it back into private ownership just six years after completing its London Stock Exchange listing.
The former chief executive has floated an all cash offer of 20 pence per share for the entire issued share capital, and while discussions are in the early stages, he has until 26 December to confirm a firm intention of an offer.
Furness’ interest comes as the company has suffered from deteriorating market conditions and financial uncertainty, leading the share price to plummet 50.9 per cent this year to date.
Following the news of the potential takeover, the share price continued to fall by 3.1 per cent to 15p.
Dan Coatsworth, head of markets at AJ Bell, said: “Companies float on a stock exchange to access capital markets, but Essensys has struggled to win over the investment community.
“There is no support for the stock, with the shares having fallen by 90% since IPO. When a business is struggling in this way, and dishing out yet another profit warning, it’s inevitable that a different path must be followed.
“The founder offering to take the business private ultimately suggests that they don’t see any reason to stay listed.
“Sometimes a troubled business is better off being out of the public spotlight, so they can focus on navigating challenges and rebuilding.”
Dropped expectations
Revenue for the first quarter of the financial year hit £4.1m, broadly in line with management expectations, and primarily driven by the performance of its Essensys platform, which provides wifi and intelligence services.
The group also blamed the “macroeconomic environment” for the slow sale completions and adoption rate of its new product Elumo, a booking and access control platform, and expects this to damage full year sales.
However it expects customer interest in the product to pick up in the medium term, as the flexible working space market continues to recover due to more workers returning to the office.
But the AIM listed company expects one of its customers will not be renewing its Essensys platform contract in December, which has caused the company to anticipates its full year results to “be materially below” expectations, as the contract generates £0.9m in annual revenue.
Boosting financial performance
The group has shifted its focus towards boosting financial performance, including through hiking Elumo sales and improving customer experiences on the Essensys platform.
The Board is in active discussions to secure a debt facility, where a company borrows money from a lender, to be repaid over an agreed upon period with interest, to give the company the capital and capacity needed to pursue further growth.
Essensys has also completed the process of shutting down 10 data centres, which the group expects to total £1.5m in cost reductions.