The future of hosting services company Arq Group is hanging by a thread as it becomes entirely reliant on money from lenders to continue operations.
The beleaguered company -- formerly known as Melbourne IT -- closed the 2020 half year ending 31 December with a loss of $129 million and an earnings loss of up to $31 million.
In its annual report, the publicly listed company warned shareholders it may end up in breach of financial covenants with its lenders, which could lead to banks withdrawing funding at 60 days notice.
Therefore, the group is dependent on “the ongoing support of its lenders to continue to provide the existing facilities and any required additional facilities to be able to continue as a going concern,” Arq Group reported.
The company is planning to execute a strategic review and potentially sell its small- and medium-sized business (SMB) -- its last remaining unit.
However, if financial support is withdrawn, Arq will be required to seek additional short-term funding.
The results come off the back of a difficult year for Arq, starting with the sale of its TPP Wholesale Reseller arm, the resignation of CEO Martin Mercer in September, and finally the sale of its enterprise services business, which closed last month.
Revenue for the remaining operations -- its SMB Indirect and Direct businesses -- meanwhile slipped down from $100 million to $83.6 million year-on-year.
Its board has now elected to reduce the number of directors from six to four, while those remaining will receive 50 per cent less in fees after the enterprise service arm sale closes on 2 March.
Despite its dwindling fortunes, the company’s release to shareholders still plugs the company as “[managing] innovative channels to market for many of the country’s largest enterprises, whilst simultaneously supporting half a million small businesses throughout their online journey”.