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.
https://youtu.be/inSZ7nmq4jc
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.
What do Pure Profile do?
User ID not verified.
In a sea of mediocrity and poor governance, Pureprofile remains an excellent market research and customer intelligence business. Poor judgement on past acquisitions shouldn’t detract from the fundamentals of the business. It’s tech is market leading, and there’s more to come.
User ID not verified.
Pureprofile is clear only surviving on debt and hopefully all shareholders are properly informed as to their impending doom.
They simply cannot pay back all their loans by the maturity date of late next year so I would expect they are delisted from the ASX and sold off.
They don’t have a CEO at the moment either; their finance lead is running it. All this info is publicly available BTW. In other words their company is being managed by an accountant. This story doesn’t end well for anyone.
User ID not verified.
Same old story, related party trading draining a distressed business of its liquidity. How on earth could the three smart AJFs have been talked into this. AJF is an excellent agency with highly principled and highly talented people doing outstanding work. I hope they can extract themselves from this nightmare without too much pain.
User ID not verified.
The answer @thecynic is that the 3 smart AJFs took 50% out of the deal in cash at the time of the float. So, they’ll be fine.
User ID not verified.
Give GrowthOPs 1 year before they get sold!
User ID not verified.
Can’t believe I’ve watched 4 complete seasons of this disaster in 6 months. Hanging for season 5 although rumour has it that it will be the finale.
User ID not verified.
It took an auditor to figure this out? If you looked at the full accounts released only a month ago it was in plain sight it’s a sinking ship.
User ID not verified.
Dear Ms.Fisher and Mr.Kingston,
Could you please explain;
1) why a business that’s just posted a $65m loss decided to enter the money-lending business?
(And for the recipient of that money-lending to be Sargon, a company controlled by Phillip Kingston).
2) what services and value does Paddl (a company Dominique Fisher is CEO) bring that justifies TGO paying them. $100K?
3) how do you explain the $22.5m write down of APD, a company whose purchase you both so proudly heralded just 12 months ago?
User ID not verified.
Do you think GrowthOps was a bit of an ambitious name for the venture? Maybe they should have gone for something a little more attainable like MoneyOffTheTableOpps.
Is there something to be investigated here about how they managed to raise money from their off-shore investor with no track record of having done this before and little chance of making good on their commitments. Is the big investor concerned or did they have other motives of getting money in to the country and we’re not concerned about losing their investment?
User ID not verified.
Wouldn’t that mean they sold for 50% what the market value was? Kinda not so smart IMO…
User ID not verified.
The 50% cash in the deal just covers the tax bill. They are heavily underwater on the value of the shares.
User ID not verified.
As to why TGO bought APD – I think it was [Edited under Mumbrella’s comment moderation policy] some money.
User ID not verified.
On the one hand, I’ve never thought that a cyclical industry like advertising has any business going public – it’s just asking for trouble.
On the other, I think judging any business too harshly in its first year of existence is really shortsighted.
Let’s all just take a breath and see where it goes from here, yeah?
User ID not verified.
Fourth biggest shareholder is “Pattani Private Capital Pty Ltd”.
Did a search. No website.
Found one employee on Linkedin – a Director by the name of Nina Thaicharoen.
Looked at her Linkedin profile and her last job was Admin Assistant at… Phil Kingston’s Trimantium. Prior to that she was a photographer at the Henley Club.
So a photographer/admin assistant is the director of the fourth biggest shareholder in TGO. I don’t know what that means… but it’s interesting.
User ID not verified.
Thanks Monica.
So now we have TGO loaning money to Kingston’s Sargon,
paying Fisher’s Paddl $100K for who knows what
and the possibility of a former photographer and TGO Admin Assistant being TGO’s 4th largest shareholder.
No doubt there’s a perfectly good explanation for all the above.
I look forward to hearing it.
User ID not verified.
Did you take a look at the second largest shareholder behind Phillip Kingston?
It’s a company called “Asia Selangor Investments Pty Ltd” which is also run by one of his ex-employees, Managing Director Vonny Tjhin, who was previously General Manager of his company KDIS…
User ID not verified.
I would not be encouraging the Senior Secured Creditor to play that game!!
User ID not verified.
The mismanagement of cash has been happening in both these organisations for a very long time!
Both companies have big offices in the cbd with hefty leases…GrowthOps are paying for two other buildings!
I think the real mismanagement from GrowthOps really stems from the top…the CFO must [Edited under Mumbrella’s comment moderation policy]
User ID not verified.
Yeh you’re right. I mean i only just lost $10M that fell off a cliff in less than 12 months. But yeh you right. I gotta chill… We just all gotta chill! 😐
User ID not verified.
Down to 19c.
Imagine what it would be worth without AJF?
No doubt Dominque Fisher and Phillip Kingston can provide a perfectly good explanation.
User ID not verified.
I’d be fascinated to understand more of the behind-the-scenes on all this and it seems to me Steve Jones is just the person to dig deeper.
I’d be particularly interested to know more about where Phillip Kingston has come from and what this tangled web of companies, transactions and related interests really means.
I’ve had a quick look online at Kingston’s track record, his previous ‘deals’, interviews and statements and frankly can’t make sense of any of it. As an active stock-market investor and regular reader of the financial pages, I find it all rather baffling.
Perhaps Kingston commands a corporate intellect and financial literacy so far beyond my own (and of other ASX-listed CEO’s who I seem to understand just fine) that I’m simply incapable of comprehending his genius. Or perhaps not.
User ID not verified.
I am not sure if he is in the Steve Jobs mould, more a Billy McFarland or Elizabeth Holmes style operator.
User ID not verified.
Could make a great Netflix special one day…
User ID not verified.
Share price down to 17 cents!
User ID not verified.
17c! Another new low.
Dominque Fisher and Phillip Kingston have some explaining to do.
I can’t wait to hear how they spin this one.
Maybe they’ll loan more money to the Kingston-related Sargon?
Who knows, they might make enough money to pay for some more services from the Fisher-related Paddl?
User ID not verified.
AJF would’ve taken about $24m up front but since then …..
Probably very little if any dividends
Probably on the bottom end of normalized salaries
Probably zero access to AJF cash when a quick bridging loan needed
(Imagine how much the AJF guys must love paying the TGO their salaries!)
So, let’s say the 4 x partners end up with $30m in total.
That’s $7.5m each.
Then pay the ATO their share.
Maybe get $5.5m each after tax.
Sounds good, but a lot less than what they could’ve ended up with if they’d just stayed independent, or sold to someone who could help grow them as opposed to lean on them.
User ID not verified.
Hi Really,
What follows is slightly back-of-the envelope because I have to draw the info from a few different places on the ASX, but I think your guesstimates are possibly a tad low.
In total, the vendors of all the companies purchased as part of the float received $47.8m in cash, and the promise of a further 47.8m shares (Half after one year, another 25% a year later and the final 25% a year after that.) At the time these preference shares were issued, the shares were valued at $1, although the share price has of course since fallen to 17c.
Based on the number of shares the four AJF partners currently hold after the one year anniversary – about 16m shares – this implies that they’ll perhaps get 32m shares in total after the third anniversary is up. It also implies that they were paid up to $32m in cash for the first tranche.
So between them, about $8m each upfront, pre-tax.
If the share price falls no further (an optimistic call, I know) the partners would see their shares worth a further $5m.
Was $37m a fair price for AJF? You tell me…
Cheers,
Tim – Mumbrella
You’re talking about AJF…have a look at APD!
Why GrowthOps bought that business astounds me. Those who were part of the APD sale must be sitting back and laughing!
20 million for that …
User ID not verified.
Any news on what’s happening, share price now 15c or 1/10 of the listing price.
User ID not verified.
Good one Tim. Other things to consider.. AJF have to date had various restrictions preventing them from buying back shares (e.g. share buy back in the ASX announcements, the normal insider trading blackouts I assume would be in place). Best case they can sell 50% of their shares for (now) 10% of the original value. Importantly though .. unless AJF have found a new tax loophole .. they’ll already have paid (cash) tax on the full $1 value of all their shares. Finally, keep in mind no one is buying shares, so they can’t sell them. Certainly not in those volumes.
User ID not verified.