We haven’t collapsed, says CommQuest founder
Thursday, April 30, 2009/
Entrepreneur William Scott lashed out this morning at reports that his PR marketing and advertising company CommQuest had collapsed. Scott says the story on The Age website contained “factual errors” and the company is still trading.
“We are still alive and kicking and fighting, and it would have been good in the interests of fairness to have been contacted by the journalist before he wrote that,” he says. “We are trying to do the best in a very difficult market and are recapitalising and divesting assets.”
Scott says he is still confident he will not have to call in administrators. “Two major parties are looking at different options,” he says, but would not elaborate as the business is in a trading halt. He says he is reducing head count, letting 50 people go and taking his employee number to 650.
He has also sold the SMS question/answer service Bongo Virus for $2.3 million.
He says he is also closing the unprofitable parts of the business, in the PR and advertising areas. “It is a difficult thing to do, but must be done quickly as we can’t have them draining the good assets.”
However he also notes that closing down businesses and letting people go is “costly”. Businesses in those areas include Boiler Room, Shack, and ThinkCreative.
How much time does he think he has? “I don’t know, but the underlying businesses are still profitable.”
CommQuest reported a $46.4 million loss for the December half. Shares, which were issued at $1 when the company floated in 2007 and raised $70 million, were trading around 1.5 cents when the company went into a trading halt on 21 March.
The ANZ has agreed to limited financial support for CommQuest subject to a number of conditions, and Scott says the bank has been “understanding and supportive. We have engaged KPMG to manage the divestment process.
“We are disappointed at where we are sitting at the moment, but all I can say to shareholders is we are working as hard as we can to get a good outcome.”
Scott also denied the company paid Paris and Nicky Hilton $1 million to appear at a party to launch the SMS service Bongo held in Sydney on New Year’s Eve. “It was a third of that,” he says. “We were trying to launch into an international market and targeting Gen-Ys, so there is no better name to do it with. We had 700,000 web pages linked to her name in eight weeks, and we doubled the profit of the business.”
He also says The Age article says investment banker John Wylie spent $6 million buying a 20% stake. “They put in close to $3.5 million.” He also says he never met Wylie as the story suggests. “I’ve never heard from him. He deals through an investment group. We manage all shareholders on the same basis.”
Scott, who has just turned 30, says he has always tried to do the right thing. “When we floated we put 70% of our allocation of profit into shares, and we bought new shares along the way.”
But he does admit to one mistake. “We have been under pressure carrying too much debt in a difficult environment. The market changed quickly and we didn’t get a chance to recapitalise… but hindsight is an amazing thing.”