The AIM-listed PLC, then named Grafenia, sold its Works Manchester operation to Rymack Sign Solutions, which trades as PFI Group, in May 2022.
However, after making three small payments PFI did not make the first of the four larger annual payments that had been agreed as part of the deal. The £514,223 that was due on 31 May remains unpaid, almost six months on.
PFI Group CEO Darren McMurray had not commented at the time of writing.
Software Circle wrote off £805,000 over the summer because of the situation and has now taken its total impairment relating to the sale to more than £2.2m by writing off a further £1.42m.
“Despite ongoing discussions, in the absence of a resolution to date, confidence in receiving payment in full has been further reduced,” Software Circle stated.
The hit was revealed in its interim results for the six months to 30 September, announced today (27 November).
The group, which is now focused on acquiring niche software businesses, posted sales up 66% at £8.25m, boosted by its recent buys.
EBITDA was £1.61m compared with a £53,000 EBITDA loss the prior year.
However, the Works Manchester writedown, along with depreciation and amortisation of nearly £1.8m, and £979,000 in financial expenses resulted in a pre-tax loss for the period of £1.87m.
Chairman Jan Mohr and CEO Gavin Cockerill said that its acquisitions had generated sales of £3.75m and were “tracking ahead of valuation expectations”.
However, sales at its Graphic and Ecommerce division were impacted by a reduction in business confidence.
Sales at Nettl Systems slipped by 9.5% to £4.5m.
“The drop in revenue has been driven primarily by a downturn in products our partners buy at wholesale prices – like signage, printing and promo goods. Sales of outdoor event materials during June-August, were particularly hard hit,” the duo stated.
In September the group raised just over £23m to help fuel its growth plans and it had cash of £18.71m at the half-year.
Further buys are in the pipeline as the business looks to “quickly, but effectively, deploy the funds from our recent fundraise on acquisitions that meet our criteria”.
“We currently are in exclusive discussions with acquisition targets with a collective turnover of approximately £3.6m and an adjusted EBITDA of £1.2m. These are progressing through the due diligence process. We will continue to update the market as our acquisition strategy progresses,” Mohr and Cockerill stated.
