WCG - Webcentral Limited

[So_Cynical]

(Jul 28, 2015) Yep still holding, pretty good timing on my part, i really like the way MLB treat their holders, my kind of stock.

Was thinking about selling down this week with the 1.90 high, this stock does tend to go up and down a bit...looking at the 1 year chart - it's a very steep rise, unsustainable i would think.
~

2 Years on and that rise ^ was unsustainable, took a breather for 18 months and then climbed again.

Through $3 today - really happy with the last capital raising, rights issue that was ex on the day of announcement and no extra shares could be applied for, thats how you value your share holders.
~

 

[System]

On June 1st, 2018, Melbourne IT Limited (MLB) changed its name and ASX code to ARQ Group Limited (ARQ).

 

[greggles]

Rebound today for ARQ Group after a miserable 12 months that saw its share price decline from a high of $3.72 to a low of $1.63.

Today saw the release of its 2018 Full Year Financial Results and a subsequent 14.04% share price gain to $1.95. They didn't seem that impressive to me so I can only assume that the market was expecting something much worse.

Underlying EBITDA, EPS and NPAT all down. On the bright side, gross revenue was up. The start of a turnaround perhaps?

 

[Ann]

Rebound today for ARQ Group after a miserable 12 months that saw its share price decline from a high of $3.72 to a low of $1.63.

I haven't got today's price spike (delayed data) but there looks to be some almighty selling pressure about to cut in from around 2.10 to 3.20.

This is an EquiVolume chart which shows selling pressure where there are fat blocks of colour for those not familiar with this sort of chart.

 

[So_Cynical]

Pulled up a 10 year chart for some longer term perspective, ARQ (old Melb IT) on or just below the long term upward trend line, fundamentally the numbers are all ok without
being spectacular, a yield of over 4% should be sustainable into the future - seems decent value at around this price level with MC and total revenue both around 200M.
~

 

[So_Cynical]

Hammered today down 38% due to an updated earnings outlook and cancellation of the approaching interim dividend, closed at 80c wow...would seem a little over done.

 

[jbocker]

Not sure the followers have appreciated or understand their consolidation strategy since implementation and it seems that have had a few stumbles in delivering on that transformation. They are two thirds along their delivery timeline.
I had made some good dividend money over the years and stopping that has certainly belted their SP as So_Cynical has mentioned.

Ever since it has changed its name from MLB to ARQ I have been yelling something that rhymes with arq every time I see their SP.

Watching for the bleeding to stop and then I will relook at buying them.

 

[greggles]

Huge downgrade from Arq Group today. CEO Martin Mercer steps down.

Revised Guidance

Market conditions in the Company’s Enterprise division have softened markedly and it has become clear that forecast revenue growth for the second half of 2019 will not be achieved. Cost reduction initiatives will be insufficient to offset the revenue shortfall.

As a result, Group underlying EBITDA is expected to be in the range of $16.8m to $19.3m (compared to previous guidance for the Group of $27.0m to $30.5m).

ARQ share price has been smashed following the announcement, reaching a low of 30c but currently trading at 36c, down 33.33%.

$51.6 million in net debt at the end of July. It's all starting to look very grim. This is definitely one to avoid for the foreseeable future.

 

[barney]

Huge downgrade from Arq Group today. CEO Martin Mercer steps down.

Always hate to see Stocks get smashed like this …… Someone is likely losing their shirt

 

[sptrawler]

It reminds me of an IT company I was involved in years ago, called Candle, later became Clarius, started out at around $3 paid a dividend really well run, slowly ground down to nothing. Really sad from memory.

 

[jbocker]

It reminds me of an IT company I was involved in years ago, called Candle, later became Clarius, started out at around $3 paid a dividend really well run, slowly ground down to nothing. Really sad from memory.

It is very sad for holders.
Mercer has been stood aside, (lets say outside). New CEO search is on. Macquarie Capital (Australia) Limited to undertake a strategic review. Are those vultures I can see on the horizon?

Ever since it has changed its name from MLB to ARQ I have been yelling something that rhymes with arq every time I see their SP.

You should have heard me today!!!

 

[barney]

It reminds me of an IT company I was involved in years ago, called Candle, later became Clarius, started out at around $3 paid a dividend really well run, slowly ground down to nothing. Really sad from memory.

Yep … I've been on the wrong end of some sharp trading halt/suspension situations over the years which means you can't even escape if you wanted to …… Every time I see a massive fall in anything it brings back bad memories …..

 

[So_Cynical]

The selling was accompanied by big volume - someone dumping, an incredible decline, 3.70 to 30c in under 2 years with no fraud or any kind of funny business.

 

[barney]

The selling was accompanied by big volume - someone dumping, an incredible decline, 3.70 to 30c in under 2 years with no fraud or any kind of funny business.

Yeah, its about as ugly as a chart can get. I had a quick glance through their recent reports.

So market cap is about $40 million …… Cash and cash equivalents held is about $7 million.

They have about $51 million in debt. Projected earning to be flat for 2nd half of 2019 but anticipated improvement by 2nd half 2020.

I assume dividends of any sort will be terminated??

Assuming all the above is close to being correct, can anyone with better fundamental understanding than me hazard a guess as to whether they can bring it back to life?

If it goes low enough, is there enough value for it be a takeover target? They seem to be going ok in some parts of the business but bad in others.

I note the current CEO is transitioning out …. That is never a great look tough days ahead it seems.

 

[System]

On June 26th, 2020, ARQ Group Limited (ARQ) changed its name and ASX code to Webcentral Group Limited (WCG).

 

[Dona Ferentes]

things are afoot at Webcentral

https://www.afr.com/technology/acti...p-targets-webcentral-shake-up-20200810-p55k6p

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. 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...

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.

 

[Dona Ferentes]

and.... another outfit interested in WCG.

• 5GN has acquired a 10.2% strategic interest in Webcentral Group Limited (WCG)
• 5GN plans to leverage 5GNs expertise and asset base to improve the profitability of WCG
• 5GN has previously undertaken detailed due diligence on WCG as part of their recent strategic review process
• 5GN intends to use the proceeds of the capital raising to fund a potential acquisition of WCG and refinancing WCG’soutstanding debt

Webcentral 1 year chart

 

[Dona Ferentes]

Webcentral has received a non-binding indicative proposal from 5GN to acquire all of the shares in Webcentral.

The key features of the 5GN Proposal include:
 The transaction would be conducted as an off-market takeover bid.
 The pre-conditions to the takeover bid are the negotiation and entry into a bid implementation agreement between 5GN and Webcentral and a unanimous Webcentral board recommendation.
 The consideration under the takeover bid would be 1 5GN share for every 12 Webcentral shares.
 The only proposed defeating conditions to the takeover bid are
(a) a 50.1% minimum acceptance condition,
(b) a no ‘prescribed occurrences’ condition and
(c) a no material adverse change condition.
5GN will declare the offers under its takeover bid wholly unconditional upon obtaining a relevant interest in at least 50.1% of Webcentral shares (assuming no other defeating condition has been breached before 5GN obtains such a relevant interest).
 5GN proposes to provide a loan to Webcentral to allow Webcentral to pay its existing financiers the full amount outstanding under its existing debt facilities.
 The 5GN Proposal is not conditional on 5GN raising further financing or undertaking due diligence.

 

[Dona Ferentes]

50% up ... very generous

 

[frugal.rock]

Making a comeback for my ARQ entry in the yearly comp.
Long way to go to break even on the entry figure though...