RXP Group experiences 10% full year revenue decline in face of COVID-19

RXP Group – the parent company of creative agency The Works – has posted $127m revenue, down 10%, for the full financial year ending 30 June 2020.

Underlying earnings before interest, tax, depreciation, and amortisation (EBITDA) fell 8%  to $15.4m for the full year, but the second half – $8.6m – was up 29% on the first.

The company discontinued the final stages of discussions to sell its Hong Kong operations once COVID-19 began to have an impact. Instead, the outpost was abandoned on 30 June due to the pandemic, political environment, and business confidence in the region. This decision resulted in an EBITDA loss of $900,000, including resulting redundancies.

Off the back of the results, RXP has declared a final dividend of 2.5 cents per share, fully franked, to be paid on 9 October. It also announced a dividend reinvestment plan, full underwritten, which shareholders can use for all or part of their final dividend.

“RXP experienced a strong recovery during the second half of the year, despite having to navigate the COVID-19 pandemic,” said chief executive Ross Fielding.

“Our team did a fantastic job in quickly adapting to ensure that we were able to continue [to] deliver for our clients and add value.

“We are witnessing a once in a lifetime event that will have long lasting impacts on consumer behaviour, and particularly on how companies operate and digitally evolve moving forward. COVID-19 has resulted in businesses placing greater emphasis on ‘digitisation’, which has benefitted RXP given our development and investment in digital transformation capabilities.”

RXPs results. Click to enlarge

Digital services now comprise 90% of the company’s revenue, and its net debt sits at $4m. The group was pleased with growth in Sydney and Canberra – both markets delivered in line with expectations, in the face of COVID-19 – but noted Melbourne’s “softness”.

That market experienced the deferral of a ‘significant government project’ in the first half, which has been put on hold until the first quarter of financial year 2021. A key Melbourne client also implemented 10 days’ mandatory leave in the first half, which RXP said had a $615,000 effect on its business.

“The advent of COVID-19 did have a greater impact on this region [the southern region], with a noticeable slowing in sales conversions,” said Fielding.

“We are now seeing the sales pipeline slowly building back up as businesses prioritise digital experience improvement. Tight alignment of resourcing to business wins resulted in improved utilisation during the second half.”

The company won NSW Police force during the financial year

The Sydney office won accounts like Destination NSW, Aware Super, Goodman Fielder, and Containers for Change. Other wins for the business – across offices in Sydney, Canberra, Melbourne, and Hobart – include Workplace Gender Equality Agency, the Department of Planning, Industry and Environment, Coliban Water, NSW Police, Betfair, National Vocational Education and Training, Service NSW, and Budget.

A Milsons Point lease for the Sydney office ends in October, at which point the team will relocate to the business’ Margaret Street location in Sydney’s CBD.

The business is confident it is in a strong financial position heading into the new financial year.

“Whilst we are not out the other side of the COVID-19 pandemic just yet, RXP enters FY21 with a strong financial position, a solid pipeline of work, and the right set of digital capabilities and this provides us with optimism as we look forward,” Fielding concluded.


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