Struggling Adcorp to bid adieu to the ASX

Struggling Adcorp to bid adieu to the ASX

The ad agency has long been propped up by majority shareholder and chairman Ian Rodwell, but soon it will free itself from the ASX shackles to restructure. 

After more than two decades on the stock exchange struggling with challenging market conditions, specialist advertising agency Adcorp (ASX: AAU) will de-list on 20 December.

Since it started trading at around $1.20 per share in November 1999, AAU shares have fallen steadily over time and today they are trading at less than one cent each.

This gives the company a market capitalisation of $4.1 million, and in mid-October the board reached the conclusion it was hard to justify the related costs of listing given the low level of spread and negative assets.

The decision came 12 months after an entitlement offer to raise capital saw a lack of support from shareholders other than MCO Nominees, which is owned by chairman Ian Rodwell and a majority shareholder in the business.

In October, the company emphasised it had been totally dependent on Rodwell's financial support and had been operating on a negative cash flow basis for a considerable time.

Adcorp recorded a loss of $849,772 for the first half of FY19, following a $2.08 million loss for FY18.

"Given AAU's current financial circumstances, the only way that AAU can survive long term is for it to restructure," the group said.

"This necessitates that AAU delist and convert to a proprietary company where any restructure options are subject to lesser regulatory involvement and therefore can achieve a favourable result for shareholders in a more efficacious and timely manner."

The date for de-listing was confirmed yesterday after shareholders passed a special resolution for the matter on 20 November.

"There will be no processes in place after the company is removed from the official list to allow shareholders to dispose of their holdings," Adcorp said.

At the company's AGM on 22 November, CEO David Morrison said Adcorp's financial performance in its traditional sectors of recruitment and residential property marketing had been affected by deteriorating economic conditions and a lack of consumer confidence.

"The new focus of the agency business on strategic consulting services and higher margin work was consolidated with a re-branding across Australia and New Zealand to NeonLogic; a change that was launched to market in Quarter 4," he said.

"This provides the opportunity to have conversations with existing clients about new services and enter new markets. It also allows for the market differentiation of Adcorp's businesses and investments that are now starting to make a larger contribution to overall company performance."

He added expense management and the removal of corporate overhead costs continued to be a priority to try and turn the business' fortunes around.

"These conditions saw the company require an increase in the loan facility from Millenium Company Pty Ltd that was announced to the market on 11 October," he said.

"We do anticipate increased contributions to the Company's revenues from our investments in both Showrunner and Shootsta, although these businesses continue to require investment in order to reach their full potential."

The company has a 15 per cent holding in video production business Shootsta, which has undertaken overseas expansion that sees it now having representation in the UK, US, Singapore and Hong Kong.

"Recognising the significant costs of such global expansion, we are now starting to see sales growth in these regions," Morrison said.

"An additional area of focus has been on investing in new services and improving technology platforms to further enhance the brand and service experience."

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