Tech: Arq Group stays in the wars following earnings downgrade
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The share price for internet domain company Arq Group (ASX: ARQ) remains under the pressure after the company released a subdued earnings outlook this morning.
The company said underlying earnings are now expected to be in a range between $15.5m to $18.5m — a sharp decline from previous estimates of around $24m.
Arq also said it remains committed to its 18-month transformation program, now 12 months complete.
As part of the shift, the company is introducing a “flattening and broadening” of the current leadership structure, which has resulted in two senior executives leaving the business.
Shares in the company fell more than 30 per cent in morning trade to 82 cents, down from around $3.50 12 months ago.
The decline in Arq’s share price commenced in earnest after the company announced the possible loss of a major customer in August 2018.
In today’s announcement, the company said the “quantum and timing of the loss” was “still uncertain” as recently as February this year.
As part of its transformation, Arq reduced the number of reporting segments to just two groups so its numbers will be easier to interpret. The company split its operations by customer size, categorised as mid-tier to larger companies and a small business segment.
Within its core business — internet domain registrations and online services — Arq said the small business division has exceeded expectations, with EBITDA of around $10m forecast for the 2019 financial year.
However, its larger enterprise division has fallen well short of the mark, with forecast core earnings of between $12m to $14.5m this year, well down from previous estimates of more than $20m.
Due to lower than expected earnings, the group announced it will not pay an interim dividend, with its full-year dividend policy to be reassessed in December.
Speaking of trading updates, it was the opposite story for Dreamscape Networks Limited (ASX:DN8) which rose by more than 25 per cent after the company booked its best ever monthly result in April. Dreamscape said full-year net profits are now expected to be in a range between $4.7m – $5.1m, up from $4.3m – $4.9 in its previous guidance.
Shares in Spirit Telecom (ASX: ST1) edged higher after the company announced it had signed off on a new $8m debt facility from Commonwealth Bank. Interest payable on the loan is set at 3.85 per cent above the bank bill swap rate. Spirit said the funds will provide more flexibility as the company assesses a “pipeline of potential acquisitions” in the works.
And Afterpay (ASX: APT) has responded to AUSTRAC’s demands to bring in external auditor to assess its anti money laundering measures. APT announced it has provided “details of three candidates for conducting the external audit in line with the AUSTRAC Notice”.
The company also said it will defer a $30m share purchase plan to retail shareholders pending the results of the audit. Shares in APT were up three per cent at $26.50.