At the end of October, PhotonStar had warned investors that trading conditions for the subsidiary “continued to be very challenging” and that it was weighing up its options, which included a distressed sale.
A shareholder meeting was held yesterday (Monday), where it was decided that liquidation was the most suitable option.
“John Cullen of Menzies LLP, who is acting as liquidator to PhotonStar LED, will now seek to realise value in PhotonStar LED's assets for the benefit of its creditors,” read a brief statement on Tuesday.
The PhotonStar LED subsidiary generated the majority of the group's revenues, accounting for £1.15mln of the group's revenues of £1.33mln in the first half of 2018 but it also incurred the majority of the group's trading losses.
The group's trade finance facility borrowing was with the subsidiary, so its debts should be significantly reduced as a result of the unit going into administration.
Funding options being considered
The directors believe that the assets and the vast majority of the liabilities of PhotonStar LED are ring-fenced from the group's other operations.
Nevertheless, the losses run up by the struggling LED business mean the company will need to raise additional funds in the medium-term to keep the PhotonStar Technology subsidiary on the road.
“The group's directors are still considering both funding and strategic options for the group's remaining subsidiary PhotonStar Technology Limited.”
Shares fell by 16.7% to 0.05p on Tuesday afternoon.