By Dan Oakes
A STRUGGLING Melbourne company that paid Paris Hilton hundreds of thousands of dollars to attend a New Year's Eve party has admitted to a 2800 per cent fall in profits for the 2009 financial year.
Besieged digital marketing firm CommQuest also disclosed that the investment firm that seemingly rode to its rescue in June could pull its money out over claims CommQuest breached agreements made with another investor.
CommQuest slumped from a $1.9 million profit in 2008 to a $52.2 million loss last financial year, predominantly because of a $53.1 million write-down on intangible assets such as goodwill.
''The company's poor performance is attributable to a range of factors including poor operational execution, a challenging macroeconomic environment, the underperformance of a number of subsidiaries and an inability to service the company's debt,'' CommQuest said in a statement.
CommQuest has been in a ''restructuring'' phase since its shares were suspended in March at 1.5¢, down from a high of $1.20 shortly after it was floated in November 2007.
It sold off a number of its suite of businesses and sourced an injection of funds from Co-Investor, an investment fund that specialises in bailing out small-cap businesses.
As part of the rescue plan, chief executive and company founder William Scott agreed to step down as chief executive after the company was ''stabilised'', and then act as a consultant. Mr Scott said on Friday that he would resign from the company on September 30.
Mr Scott negotiated a deal in which Paris Hilton was flown in to adorn a New Year's Eve party held to promote CommQuest's Bongo Virus website.
CommQuest's plight worsened when investor fund manager Lazard Carnegie Wylie told the company it was taking action over $3.22 million in warranty and breach of contract claims.
Apparently Lazard is unhappy at how the nearly $6 million it has put into CommQuest has been used.
Co-Investor managing director Roger Sharp, also CommQuest's executive chairman since the June bail-out, refused to comment on Lazard's claim. However, yesterday's announcement revealed that Co-Investor has told CommQuest that if Lazard's claims are proven, CommQuest could be in default of the loan from Co-Investor.