Investors continue to shun troubled IT company ARQ Group (ASX:ARQ) after another negative trading update combined with some changes in the executive team.

The company said that underlying earnings for the second half of FY19 will now come it at a range between $16.8m and $19.3m — almost half the $27m to $30m previously flagged.

It pointed to ongoing troubles in the enterprise division, where growth in new accounts is still “tracking below expectations”.

The company also announced that incumbent CEO Martin Mercer would step down. ARQ’s board has now commissioned a strategic review of the business and flagged potential asset sales.

In what’s shaping up as a horror 2019, ARQ shares plunged again this morning to 36c after starting the year above $2.

Growing doubts

In highlighting the problems in its enterprise division — which provides IT services to larger customers — ARQ said the pipeline of new and existing work was looking increasingly empty.

“A number of existing customers are reviewing their expenditure, during which time they are pausing existing work or deferring the commencement of new work,” the company said.

At the same time, the division is running overhead costs that are more appropriate for a “larger business”. ARQ said it had cut $1.2m in costs out of the business since June, and flagged another $1.1m of savings to be achieved by the end of the year.

Core half-year earnings from the division are now expected to be just $1m-$2m, down from the previous forecast above $12m.

In light of those troubles, ARQ said it had appointed Macquarie Capital to carry out a “strategic review” of the business, “exploring all avenues for maximising shareholder value”.

Those avenues may well include asset sales, which will result in a “smaller, less complex” business. And in connection with that process, Mercer agreed with the board that he would step down as CEO.

An interim CEO, Tristan Sternson, has been appointed from within the business as the ARQ board begins a “transitioned and orderly” search process.

 

In other ASX tech news today:

Shares in payments company iSignthis (ASX:ISX) fell by 10 per cent in morning trade, after a report in the AFR which showed a Danish bank flagged multiple company transactions as suspicious in June 2018, just prior to the deadline for performance hurdles which — when met — saw the company’s executive team issued with 336m performance shares. The bank, Københavns Andelskasse, was taken over by Danish regulators in September last year amid a string of money-laundering allegations.

And clean tech company Fluence Corporation (ASX:FLC) had some positive China news. The company has signed a deal with a local company Liaoning Huahong in the city of Panjin, Xinglongtai District, to be Liaoning’s preferred supplier of wastewater treatment equipment. Shares in Fluence rose over 10 per cent to climb back above 50c.

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