Rubicor show improved second quarter performance
Statutory NPAT (net profit after tax) attributable to equity holders was $84.4 million, as compared to a net loss of $24.4 million in the previous corresponding period (pcp). This result included a gain on debt forgiveness of $88.6 million, arising from the restructure of the Group’s debt facilities in July 2013. An underlying NPAT loss of $1.0 million was reported, which was a 71% or $2.4 million improvement on the pcp.
Kevin Levine, CEO of Rubicor, stated “Over the last eighteen months, Rubicor has achieved underlying stability and demonstrated improving trends, with gross margin and underlying EBITDA growing sequentially over each of the last three half year periods. Following the debt and operational restructure, the Group has positioned itself to execute the business strategy, continue to grow its footprint and deliver on expectations over the medium term”.
“The result was driven by improved temp margins, increased perm revenue in the second half and cost reduction across all categories. The Group re-invested back into the business, adding to consultant numbers and entering new markets and sectors experiencing growth, in order to drive our medium-term growth strategies”. Kevin Levine commented
($m) 1,3 84.4 (24.4)
Underlying ($m) 2,4,5 (1.0) (3.4) 70.6%
Earnings per share
The Group’s second half performance was stronger than the first half. Volatility in economic and business conditions, primarily in the first half plus client inactivity associated with the federal budget, leading to an abnormally soft May contributed to a 16.7% reduction in year-on-year revenue. Despite this, NDR only reduced by 6.5% year-on-year largely driven by continued uplift in temp margins, an increase in other revenue, and growth in permanent recruitment in the second half. NDR in the second half was up 1.6% over the first half and up 3.3% over the second half of the prior year.
Underlying EBITDA of $1.3 million was recorded, down 18.8% on the prior corresponding period. Underlying EBITDA in the second half was up 16.7% over the first half and up 133.3% over the second half of the prior year. These results were as a result of higher NDR, and cost reduction across all cost categories.
A reduction in employee benefits expense, rental and other expenses, amounting to $2.7 million or 7% over the prior year was a direct result of the operational restructure, achieved through the streamlining of operations, improved operational efficiencies and a reduction in corporate and support staff.
Capital Management and Debt Refinancing
In July 2013 the Company restructured its debt facilities. As a result, all debt obligations in respect of the Loan facilities (Term and Subordinated facility) and Bank Overdraft facility, which in aggregate amounted to $95.6 million at settlement, have been extinguished in full, in exchange for $7.0 million. This resulted in a gain of $88.6 million. The Company secured new funding in the form of a debtor finance facility with an initial limit of $15 million.
Other facilities (rental guarantees) in the amount of $2.1 million have been cash backed by funds drawn from the debtor finance facility. Operating cash flow was an outflow of $5.8 million, a direct result of outstanding payments deferred, pending the debt restructure. Operating cash flow for the second half was an outflow of $0.7 million. Vendor earn-out exit payments of $0.04 million were paid in the period and the remaining vendor earn-out payments are estimated at $0.8 million.
FINANCIAL SUMMARY H2 FY14 H1 FY14 H2 FY13 H1 FY13
“Following a significant period in the Group’s history, as demonstrated with the debt forgiveness, this
year we focused on ensuring we achieved the necessary stability to position us for medium-term
sustainable growth and profitability. We committed to delivering on a number of strategic outcomes
and have subsequently positioned the business well for the future.” Mr Levine said.
Increasing consultant headcount continues to be a primary objective for Rubicor, with a net growth of
11 consultants (6% up on June 13) achieved throughout the year. This investment is essential to both
fill gaps and direct energies into areas of potential development and opportunity. Despite the
additional headcount, employee benefits expense reduced by $0.9 million or 3.5%, as illustrated
Further rental reductions were realised as a result of additional office co-locations and exiting
premises in exchange for improved premises with more space at a lower expense. This reduced
rental expense by $0.8 million or 20% over the prior period. The Company will continue to optimise
rental space and expense where opportunities exist.
Continuing to pursue growth opportunities, both within our current landscape and overseas remains
fundamental to the Group’s strategy, and over the course of the year we sought to identify such
opportunities in strong sectors. Ensure Health was established in the latter end of the second half to
provide recruitment services in four key areas of the robust and increasing healthcare market
doctors, nurses, allied health and pharmaceutical.
Rubicor continued to invest in our Singapore operation. Having seconded the Xpand Group
Managing Director to Singapore at the start of the second half, the operation has experienced
improved results, which has facilitated further opportunities across Asia, including signing several
client agreements covering Singapore and Hong Kong. In line with this development, Rubicor is
committed to growing its Asian footprint and has plans to open a second Asian office in the coming
Greater demand in the human capital solution sector, has led to expansion of the Locher OD
business nationally. In addition to its base in Adelaide, personnel were added in Sydney in July, with
further growth planned in eastern states.
As part of the strategic focus articulated last year, it remains paramount to implement a robust
operating platform to facilitate and enhance a culture of collaboration to unlock the full value and
synergies across the Group’s specialist brands. Such collaboration is being evidenced through
enhanced client and candidate visibility, and increased instances of cross-selling across our network
of brands. The implementation of an enterprise level, common database platform is currently in
development and scheduled to roll out in the second half of FY15 which will significantly enhance all
Mr Levine said, “While we still have a way to go in achieving sustainable growth for the business, this
year Rubicor has restructured its debt, reduced operating costs, shown improvement in margins and
bottom line trends, grown headcount and continued plans for Asian expansion.”
“While economic and structural change continues to have an ongoing effect on the recruitment
industry and on our operations, the Group has continued to refine a niche in our specialist markets
which is enabled and enhanced through our trusted client relationships, industry knowledge, deep
networks and reputation”. Mr Levine stated.
Commenting on the near term outlook, Mr Levine said, “The improved conditions, albeit minimal,
coming off a low base, that we saw in the second half of the year are expected to continue.
Irrespective of the market, the focus of the Group is to execute our strategies, improve bottom line
results and increase shareholder value. We are well placed with the necessary stability and
operational depth to take full advantage of the opportunities in the markets in which we operate.”