Ross pledges cost of Cosalt’s legal action against Melville brothers

THE multi-millionaire co-founder of Carphone Warehouse, David Ross, has provided a £300,000 personal guarantee to cover costs in a company’s legal action against Scottish businessmen Calum and Stuart Melville.

The disclosure came as Cosalt, the debt-laden company he now chairs, announced that Ross has made an approach to buy the struggling safety and workwear business which is in litigation against the Melville brothers over an alleged fraud at the Aberdeen-based arm of the company.

Calum, the ex-Dundee FC director, and his brother joined the company after Cosalt bought their family business in 2007 but both left last year and have strenuously denied any wrongdoing.

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Ross, who is chairman of Cosalt, has made an offer of just 0.1p per share for the company, valuing it at just over £400,000 compared to the market value of £1.85 million before the offer was made public.

He has said he believes that the company may be in a better position to move forward as a private business than as one with a stock market listing.

Ross and his family have been involved in the Grimsby-based group for more than 50 years. He is currently providing debt funding to the company alongside Cosalt’s banks and has indicated that if a formal offer was successful he would provide additional capital investment to expand the group’s existing businesses.

A committee of independent directors is now considering Ross’s approach but the company stressed there can be no certainty that any offer will be made and that shareholders of Cosalt should take no action at this stage.

The firm also yesterday published an interim management statement for the period since 1 July during which it has completed the delayed sale of its marine division to Survitec. Cosalt has already flagged that trading for the full year is expected to be significantly lower than the board’s previous expectations.

In yesterday’s update it said “pressure has continued on the group’s cashflows and financial position”.

The group currently has net debts of £12.3m and it now believes it may well utilise all of its available facilities of £14.9m before the end of the current financial year.

Although it said trading conditions in the group’s Aberdeen-based offshore division and its workwear markets continue to improve, pressure on working capital meant it hadn’t been able to fully capitalise on the improvement.

Announcing its interim results in September, Cosalt said its Aberdeen business had achieved sales of £16.4m in the first half of 2011, up from £14.6m in the same period last year although the development of a wind energy business had contributed to an operating loss of £400,000 compared with a profit of £900,000 in 2010.

At the time Ross said that the Cosalt board was committed to seeing proceedings against the Melvilles “through to completion”. Cosalt originally listed in 1971 and developed interests including caravans and school uniform distribution before focusing on the safety and workwear sectors.

In recent years it grew quickly through a series of acquisitions including the Melvilles’ Aberdeen-based marine services business, GTC which it purchased in 2007 in a cash-and-shares deal worth up to £30m depending on performance. Shares in Cosalt closed down 0.3p, or 38.7 per cent, at 0.47p.