Photon Group wipes out debts by selling field marketing and retail division for $146.5m

Photon Group appears to have completed one of the corporate survival miracles of the decade and emerged from under its mountain of debt.

The company told the ASX this morning that it had sold its field marketing and retail sales division of $146.5m, leaving the company effectively clear of its debts.

The deal leaves Photon a much smaller company, but retaining the crown jewels of its agency portfolio including BMF, Naked Communications and BWM.

The slash-and-burn rescue by CEO Jeremy Philips has seen Photon go from a $450m debt-laden holding group of 45 disparate companies facing massive earnout commitments, to just 17 agencies but with $15m still in the bank. This will be used to cover its renegotiated earnout commitments over the next couple of years.

Philips arrived at the company 18 months ago as chairman Tim Hughes and former CEO Matt Bailey moved on. It quickly emerged that the company was in serious trouble. A recapitalisation virtually wiped out the share price.

Prior to today’s deal – with Asian private equity firm Navis Capital Partners – the company’s market capitalisation was stuck at around $66m.

In the ASX announcement, Photon said it now planned to focus on organic growth rather than acquisitions.

Companies sold include Demonstration Plus, Powerforce, Club Sales & Marketing, Ausrep, REL, Artel and Retail Insight. Craig Hart, who led the division for Photon, will become the CEO of the business under its new owner.

Photon chairman Brian Bickmore said: ‘The CEO and his management team have achieved a dramatic turnaround in the past year from the company’s previous unsustainable debt load.”

Philips said: “We have now turned Photon into an unleveraged, focused, transparent company.”

However, on its own the deal will do little to help Photon deliver bigger profits in the future. The businesses sold contributed 35% of Photon’s revenue and 39% of its profit.

Th announcement also carried an update on trading revealing that in the last quarter, Photon’s profits were down 28% compared to the same time a year before. It said that this was in part because of BWM losing the Telstra account.


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