React Group expects loss as it closes subsidiary

Cleaning and decontamination service provider React Group warned it expects to make a loss for the year as it closes its bio-recovery and environmental management subsidiary EPUK after seven months of ownership.

The AIM-listed company is to close EPUK, which it bought in April for £10,000, as it “failed to deliver the level of profitable business, or cross-selling to other group customers” despite “efforts made to integrate the business”.

The company believes that the subsidiary “has limited prospects of generating an acceptable return, given the significant diversion of management time and the likely costs involved to address the situation”.

It now expects to make a loss between £250,000 and £300,000 for the year ended 30 September, of which about £180,000 relates to EPUK for liabilities and trading losses since the acquisition.

No further consideration is expected to be paid under the original agreement of the acquisition.

The remaining losses are related to the costs associated with integration of other new subsidiaries.

Chief executive Grahame Rummery said: "EPUK has been a very disappointing situation for the company. By closing the business the management team is now able to concentrate its attention and efforts on the rest of the React Group to raise sales and to improve margins for the group."