Digital media firm Swish Group collapses

Melbourne-based digital media firm Swish Group has been placed in the hands of administrators after being unable to shore up the financial support needed to get it through its “commercial difficulties”.

The group, which is run by former commercial lawyer managing director Cary Stynes, called in Richard Cauchi and David Lofthouse of CJL Partners after striking commercial difficulties late last week.

“The company has, in the last six months, been actively engaged in the process of restructuring its digital media businesses to reduce the losses being incurred in those businesses in the current difficult economic climate for media, technology and advertising companies,” Swish said in a statement.

“The difficult economic environment for raising capital and obtaining appropriate debt facilities for the continued operation of the business has further contributed to the company’s recent difficulties.”

The administrators are now expected to conduct a review of the company’s position.

The company’s shares were suspended on 25 August, and have more than halved over the last 12 months.

Attempts to contact Cary Stynes before publication were unsuccessful, while the administrators were unavailable for comment at the time of publication.

Swish has five main business divisions: a digital signage business; a digital music business called AmpHead; a Bollywood film distribution company called Swish MG Productions; a film production business; and a sales and marketing services company called Torque.

The company reported a loss of $1.2 million in the six months to 31 December, 2008, on revenue of $7.8 million. However, management gave the impression the firm was weathering the downturn relatively well.

“While the company does not believe many of its businesses are likely to be particularly susceptible to current economic conditions due to their nature and the ongoing rapid growth in digital media, it is continuing to closely monitor each of its businesses, both in terms of revenues and expenses,” it said in a statement.

By June 30, the company’s position had worsened. It had net cash outflows of $535,000 during the June quarter, and had -$12,000 in the bank at 30 June, although this improved to a positive position of $96,000 at 30 July. Even as this stage, Swish was confident, claiming cashflow and earnings before interest, tax, deprecation and amortisation would be positive in 2009-10.

While investors and directors of Swish are no doubt reeling from the company’s collapse, spare a thought for Mark and Paul Ainsworth, the owners of sales and marketing companies VBS Australia and WeConnect Group.

Swish acquired these companies in March, giving the Ainsworths an initial payment of 12 million Swish shares, with the promise of cash and more shares to be paid over 2010, 2011 and 2012.

Incredibly, this is the second time in nine years that Swish has been in administration. Stynes bought the company from its previous administrators in April 2002.