Prime Active’s CEO Peter Lynch steps down during lender talks

Peter Lynch has resigned as chief executive of Prime Active Capital, a private equity firm listed on London's AIM market and Dublin's IEX exchange.

A former Eircom finance director, Mr Lynch announced his resignation as the company said it was in discussions with its principal lender and was looking at selling some or all of its 56 American mobile phone retail stores.

Mr Lynch had been in “advanced” talks to sell part of the business but, the company said, “this did not complete as expected”.

“The directors now expect that a further period will be required in which to advance the disposal process,” the company said.

In a background note to investors, Prime Active Capital said it borrowed £1 million (€1.225 million) in May 2013 for one year from Mosaic Print Management Ltd, a UK company owned by Anthony Gill and Steve Smith.

Mr Gill is Prime Active Capital’s largest shareholder, owning 22 per cent of its stock.

Working capital shortfall Mosaic loaned Prime Active Capital the money to address its working capital requirements, but the company said it “struggled to adjust to changes in the sector”.

Prime Active Capital said it was now in “discussions” with Mosaic “in relation to the one-year secured loan facility made available to PAC in May 2013 and that it is now seeking to advance the disposal of part or all of its 56 stores”.

“With the decision to make these disposals, Peter Lynch has tendered his resignation from the board and stepped down from an executive capacity,” the company added.

Prime Active Capital grew out of the former Oakhill, a listed print and packaging company of which Mr Lynch took control in 2006 after leaving Eircom.

Mr Lynch sold the printing business and bought mobile phone shops instead, as well as making a loss-making investment in a London marketing consultancy.

In its statement yesterday, Prime Active Capital said its mobile phone shops business remained under pressure despite efforts to keep reinventing it.

“The emergence and increasing prevalence of more expensive smart-phones and of subsidies to customers to sign contracts resulted in a dramatic fall in gross margin for sales agents such as PAC, together with an increased investment in inventory,” Prime Active Capital said.

Falling sales

It said the launch of two new businesses selling recycled devices and providing replacement devices and other services to customers had helped “counteract” falling sales and profits but “progress on these business activities has not been sufficient to compensate for further changes to the core business”.

“Other than the Mosaic loan facility, there are no additional material loans outstanding in the PAC Group,” it said.

“It is not considered likely that any other facilities will be available to the group to refinance the Mosaic loan facility prior to its current maturity date.

“The company has accordingly entered into discussions with Mosaic in respect of the Mosaic loan facility and these discussions are continuing,” it said.

“In parallel, the company has been engaged in discussions with a number of parties with respect to a disposal of part or all of its stores, with the intention of applying the proceeds of any such disposal to the repayment in full of the Mosaic loan facility as well as a further potential distribution to shareholders,” Prime Active Capital added.

Besides selling some or all of the business, it said: “A range of other remedial actions with respect to the Mosaic loan facility are also being considered, including but not limited to an extension of the term of that facility, a restructuring of the facility and/or an issue of equity.

“The immediate priority of the board is to seek clarity from Mosaic as to its intentions in relation to the Mosaic loan facility.”