Webcentral officially bows out of Cirrus Networks takeover bid, offloads stake for $5.5 million

Webcentral has announced it has agreed to sell its 18.5 percent stake in Cirrus Networks for $5.5 million, officially bowing out of any further plans to take the Perth MSP over.

The hosting services provider last year, offered to acquire Cirrus for 3.2 cents per share for a total consideration of around $26 million. Cirrus’ shareholders voted against Webcentral’s bid in October 2021. 

In an ASX announcement today, Webcentral said the proceeds of the sale would be used to fund potential acquisitions, stock buy-backs and debt reduction.

“At this stage, we have decided to not pursue the acquisition of Cirrus Networks, we agitated for change, more accountability and improved performance and we can see that slowly taking place,” Webcentral managing director Joe Demase said.

"The enterprise hardware space is challenging with tight margins, that coupled with hardware constraints makes the turnaround road a bit tougher for Cirrus Networks.”

Cirrus Networks posted both revenue and profit decline in its half-year results posted in February, attributing the result to chip shortages and Webcentral's takeover attempt. Its revenue dropped 17 percent year over year for the period to $44.5 million from $53.8 million last year.

Webcentral also announced its 2022 financial year results today, posting a $24.7 million post-tax loss.

The company attributed its 322 percent year over year losses to several costs and expenditures. 

This included “a non-cash goodwill impairment expense of $11.49 million”, $3.71 million in costs associated with Webcentral’s merger with telecommunications services company 5G Networks in November last year, and non-operating items such as share-based payments expense of $8.83 million.

Webcentral’s revenue grew 5.5 percent year-over-year to $96.73 million during the 2022 financial year, against $91.69 million in the last financial year.

The company said the revenue took a hit from hardware fulfilment delays, which also impacted some managed services projects.

Some of the growth areas included its cloud hosting business, driven by growth in domains, and the network business, driven by its dark fibre and CloudPort offerings.

Looking ahead, Webcentral forecasts revenue of between $108 million to $118 million for FY2023, and earnings of between $23 million to $27 million.