Prague floods deepen Redbus woes

The hosting company has received an undisclosed insurance payout after the torrential rain experienced across the continent last July and August spoilt Redbus' plans for Prague, where it had just opened a datacentre.

The datacentre was promptly shut down pending the insurance payout and repairs, but Redbus wants to use the settlement as working capital, rather than to start up again in Prague.

This involves the termination of leases, which have 13 years to run, at a cost of £1.2m. It said the savings made over the long term will far outweigh the termination fee, while simultaneously paring costs, as the company will not have to pay rents totalling about £633,000 per year to its landlords.

Redbus intends to call an EGM to seek shareholder support for the move, as well as their approval on a rights issue, to raise much needed cash, and a move to AIM, as announced last week.

Rival IXEurope expressed surprise with regards to the timing of the decision to close the Prague facility.

"The difficult point to understand is that the termination deal is not an attractive option and the timing is very poor given Redbus' current cash position," said IXEurope VP of international sales and marketing, Michael Winterson.

"This is a deal that should have been done long ago or scheduled to occur post rights issue, not prior. Redbus' current predicament is the result of the management weakness exhibited during the boardroom battle of 2002."

Redbus was the subject of a power struggle during 2002 as founder Cliff Stanford attempted to gain control of the company.

The bid failed, but chairman John Porter, who Stanford wanted to remove, has since announced that he will leave the company at the end of the month. He is to be replaced by sales and marketing director Michael Tobin from 1 April, who becomes CEO.



6 August 2002:

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