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Auditors raise concerns over financial health of GrowthOps and Pureprofile

Online survey company Pureprofile and AJF Partnership’s parent company GrowthOps have both released auditors’ warnings that their futures are uncertain as going concerns.

The updates from both companies came on Friday evening after the ASX had closed for the weekend. In both cases, the information was included in statements from the auditors accompanying the companies’ accounts for the last financial year.

GrowthOps “material uncertainty”

GrowthOps, originally known at Trimantium GrowthOps or TGO,  only floated on the ASX 18 months ago, in a move masterminded by entrepreneur Phillip Kingston.

The TGO float raised $70m, which was used to buy Melbourne creative agency AJF Partnership, Brisbane creative agency Khemistry, Canberra branding agency Voodoo Creative along with other digital service providers. The other companies were IT consultant Digital Moshi, software provider 3wks, app developer jtribe, Kingston’s technology supplier KDIS and coaching business Institute of Executive Coaching and Leadership.

Kingston ended up owning about 20% of the company’s shares.

Since the float, GrowthOps also took control of Asia Pacific Digital, in a deal which saw it swap owners’ equity in APD for shares in TGO, and take on the company’s debt too. Friday’s update revealed that the value of this takeover has since been written down by $22.5m.

The update revealed that alongside the company’s reported loss of $65m for the financial year, it had been through nearly $14m in cash. The statement from TGO’s auditors Deloitte said:

“For the year ended 30 June 2019 the group recorded a net loss of $65,010,000 and used net cash in operating, investing and financing activities of $13,717,000.

“The conditions… indicate that a material uncertainty exists that may cast significant doubt on the Group’s ability to continue as a going concern.”

As of June 30, the company had $8m left in the bank, compared to $22m at the same point a year ago. It owes Westpac $14m, which becomes due next November.

Meanwhile the company’s share price has slumped, from a high point of $1.35 to 24c when the market closed on Friday.

TGO directors, from left, Paul Mansfield, Dominique Fisher and Phillip Kingston

Friday night’s update also revealed that there had been a number of related party transactions involving TGO’s directors.

TGO has been lending money to the Phillip Kingston-aligned super company Sargon Capital. It said it had made loans of $6m and $3.5m to Sargon’s Certitude Financial.

And TGO also paid rent of $156,000 to the Sargon-controlled Hong Kong Trust Company.

In other related party activity, TGO said it had spent $100,000 on what it described as “services” from job software company Paddl. TGO’s chair Dominique Fisher has a controlling interest and is CEO of Paddl.

Mumbrella does not suggest there was anything untoward about the related party transactions.

Despite the warning, GrowthOps is optimistic about its prospects this financial year, with Fisher telling Mumbrella: “In a year of challenging external conditions, which have impacted our clients’ industries and our own, GrowthOps has achieved ambitious milestones to integrate the entities brought together in the IPO and launched GrowthOps as a credible challenger to traditional creative agencies and consulting firms. We are confident that the investments we made in our people and new capabilities in FY19 position the company for success.”

Pureprofile facing $20m+ debt

And Friday’s update from Pureprofile also included a warning from the company’s auditors which in this case was Grant Thornton. The statement said:

“The group incurred a net loss of $14,460,042 during the year ended 30 June 2019, and as of that date, the Group’s current liabilities exceed its current assets by $20,139,244.

“These events… indicate that a material uncertainty exists that may cast doubt on the Group’s ability to continue as a going concern.”

Pureprofile has been loaned $20m by Lucerne whose head of funds management Aaryn Nania has joined the company board. It follows the exit of CEO Nic Jones a month ago.

Pureprofile has been approached for further comment.

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