ASX-listed digital services company Arq Group says chief executive Martin Mercer will step down as its enterprise division falls far short of expectations.
Arq’s enterprise division is expected to earn between $1 million and $2.5 million this year, far less than the $12 million to $14.5 million previously forecast, the company announced on Tuesday.
Arq said it had received offers related to both its enterprise and small and midsize business division and had appointed Macquarie Capital to undertake a strategic review, “exploring all avenues for maximising shareholder value”.
The review may culminate in Arq becoming a smaller, less complex company, so Mr Mercer and the board has agreed he will be leaving “in a transitioned and orderly process,” the company said.
Chairman Andrew Reitzer thanked Mr Mercer for his leadership during his nearly six years at Arq, during which “we have grown from a team of approximately 250 people selling domains and hosting services to a team of approximately 750 people supporting businesses of all sizes in their digital transformation.”
Infoready founder Tristan Sternson, who has been with Arq since Arq acquired Infoready in 2016, has been appointed interim CEO.
Arq had announced in August that the recovery of its enterprise division, which provides digital services to large businesses like Bunnings, Eclipx and K-Mart, was a “work in progress” but there were “encouraging growth in the pipeline”.
But on Tuesday the company said growth from existing and new accounts were tracking below expectations.
“In addition, a number of existing customers are reviewing their expenditure, during which time they are pausing existing work or deferring the commencement of new work,” Arq said.
“These headwinds coincide with an increasing focus on costs across a range of sectors including banking and finance, aviation and telecommunications.”
In addition the division has an overhead structure more appropriate for a large business, although $1.2 million of those costs have been removed since June and another $1.1 million will be removed during the rest of the year, Arq said.
Arq said it expected its second-half underlying earnings to be in the range of $16.8 million to $19.3 million, down from previous guidance of $27 million to $30.5 million.
Arq said its small to midsize business division was performing to expectations, with sales of high-revenue digital marketing services doing well in recent months.
At 1342 AEST Arq Group shares were down 33.3 per cent to 36 cents, their lowest level since 2004, having fallen 82 per cent this year.
Arq Group was formerly known as Melbourne IT, a spinoff from Melbourne University in December 1999, at the height of the dot-com bubble.
It had a monopoly on selling .com.au domain names in the early days of the internet but has pivoted in recent years to selling digital services, and changed its name last year.
AAP
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