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WCG - WEBCENTRAL LIMITED


colaiscute

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At today's AGM, the capital return was approved. Record Day to be 5th of February = tomorrow week.

Question will be: Sell now? Or hold and hope it won't drop by more than 54c?

 

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Arq Group, formerly known as Melbourne IT, posted half-year numbers on Thursday.

 

Experienced challenges

 

It restated its 2017 financials for the adoption of new accounting standards effective January 1, 2018. So its underlying EBITDA was up 12 per cent, but on a reported basis it was down 43.7 per cent; underlying net profit was up 18.2 per cent but the actual bottom line was a loss of $2.7 million...

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new iteration.... ARQ did not last long. Now WebCentral Group Limited (WCG)

Activist investor Merchant Group is back with a new target locked in, buying up a significant position in Webcentral, the struggling IT company formerly known as Arq Group and Melbourne IT. The business has a track record of buying into companies and orchestrating board and management overhauls, having previously done this at 1-Page and now billion-dollar-plus healthcare company PolyNovo.Merchant has acquired an 8.84 per cent stake in Webcentral, purchasing a large parcel of shares from Investors Mutual.

 

Merchant Group MD Andrew Chapman said the company had been on its radar for six months, but now was the right time to pounce because of the proposed acquisition by Web.com, owned by New York-based private equity firm Siris Capital Group.

 

When you look into the detail, there is a viable alternative out there and I do not think they have fully explored them in the domestic space. Instead they have taken the easy way out, he told The Australian Financial Review. They are throwing the baby out with the bath water without exploring domestic opportunities ... The debt piece is what needs to be negotiated on, so you need to negotiate with the domestic banks here ... but then if there's a local player that can implement change and drive business outcomes, the banks stand to win because they can recover a fair portion of their debt.

 

Webcentral was formerly known for its domain name registration business, but a few years ago it commenced a turnaround to become a digital services company, servicing large enterprise clients and small and medium-sized businesses, specialising in creating customer-facing digital products.

 

While the business recorded $83.6 million in revenue for the 2019 full year to December 31, this was a drop of more than 16 per cent on the previous year. Its loss after tax from continuing operations also ballooned to $43.7 million.

 

One of the biggest issues facing the company is its mounting debt. Webcentral has about $62 million in interest bearing loans and borrowings at the full year, but a portion of this was paid back following the sale of its enterprise services division this year.

 

A business turning over close to $100 million should be able to make money, Mr Chapman said. [The turnaround fell over] thanks to basic business stuff. They sold their core asset, went into the digital market space and they didn't have the skills, knowledge or capability to do so. ..They also spent $9 million on an office fitout, instead of paying down debt. They do not have the money to burn on that stuff.

 

.... Since May 2018, Webcentral has fallen from a share price of more than $3.60 to only 10¢, giving it a market capitalisation of $12.2 million, despite turning over close to $84 million last year.

 

In mid-2019 former CEO Martin Mercer sold more than a third of his stake to fund tax obligations when the company was still priced at $1.73.

 

Mr Chapman will need to win the support of fellow substantial shareholder Karl Siegling backed Cadence Capital for any shake up plans he wants to execute at Webcentral. Mr Siegling sits on the Webcentral board.

 

These plans include a board refresh, as well as hunting for a new, local buyer, rather than Web.com, which has offered the company 10¢ a share. Mr Chapman was confident there were Australian companies that would be interested in buying Webcental, thanks to its extensive customer base.

 

With a second wave of COVID-19 decimating the Australian economy we need to protect existing jobs more than ever, he said. The current move on Webcentral is a COVID 19 driven opportunity. Australian companies need to be protected during this period. I am getting involved because I believe in the company and I think it has a great future under new leadership.

 

https://www.afr.com/technology/activist-inv...20200810-p55k6p

 

 

 

 

 

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