Management Resource Solutions closes unit after contract issues

Management Resource Solutions, the Australia-focused equipment and construction services group, has closed its consulting business after terminating its last, lossmaking contracts, with management saying they plan to take to the courts to try and recover "several million dollars" it feels are due.

The AIM-listed company's shares were suspended late last month on the board's request, due to "a number of operational and financial matters that required review", and followed close behind with the departure of chief executive Paul Morffew.

On Wednesday the company, currently led by Joe Clayton, chief executive of recently acquired SubZero, said it had uncovered "significant shortcomings in the group's contracts with PEAL in Papua New Guinea and with Aiotec in New South Wales" and by terminating these immediately it would eliminate a $1.5m annual cash drain on the group.

After taking legal advice, MRS said the amounts due from PEAL and Aiotec were yet to be determined and subject to potential counter claim "but are likely to be in the order of several million dollars before costs".

As regards the suspension of the shares, the directors said they were going over the accounts with their advisers and bankers "to identify and rectify areas of concern" and would apply for re-admission once they were satisfied these had all been identified.

"However, the directors are able to confirm that the businesses of SubZero and Bachmann are thriving and any issues impacting the group are contained within the now defunct consulting business."