RXP Group reports 26.2% growth in FY19, but will close underperforming Hong Kong operation

RXP Group – the digital services consultancy which owns creative agency The Works – has reported a 26.2% jump in earnings before interest, tax, depreciation and amortisation (EBITDA) to $16.4m in FY19, following on from 2018’s $13m result. However, it will be closing its Hong Kong operations due to underperformance, with a sale option in progress.

In addition, the results revealed that RXP didn’t have to pay a final earn-out to the founders of The Works – likely due to the loss of the Optus account.

FY19’s highlights (Click to enlarge)


“With the stretch target not being achieved by The Works in FY19, no final earn-out payment was payable,” the results said.

The consultancy has a three-year $25m interest-only loan facility, of which $22m has been drawn. $9m of that related to the acquisition of The Works in Q1 of the financial year, in which a mix of cash and debt was used.

“Over the past 12 months we have focused on improving the quality of our revenue, which is now more predictable and more resilient. We have been able to grow our digital transformation work, and this now accounts for around 80% of our total revenue. Pleasingly, this means we now have less reliance on large consulting agreements,” said CEO Ross Fielding.

“In addition, we successfully invested in our sales capabilities to enhance our digital services offering to meet the current demand for our solutions, and we are seeing the benefits of this through significant new client wins, such as DHHS, Vic Roads, Aurora Energy, The Smith Family, Sydney Bridge Climb and H&R Block.

“The growth in digital, combined with an organisational realignment that has improved operational leverage in the business, has meant we have been able to achieve our earnings guidance and deliver strong growth in underlying earnings, as well as deliver improved margins and strong staff utilisation levels.”

Underlying EBITDA is up 10.4% to $16.7m, with revenue of $141.1m and operating cash flow of $13.6m. Fielding said RXP Group expects double-digital growth for FY20.

(Click to enlarge)

“Having put in place a solid foundation around our digital offering, we look forward to FY20 with confidence,” he said.

“We expect the investment we have made in digital to continue to drive higher-quality revenue and higher margins, and are forecasting both revenue and earnings growth over FY20, with expectations to achieve double-digit earnings growth.”

RXP Group also took the opportunity to highlight its “robust client diversity”, with existing clients as a source of strong growth, paired with growth in a variety of sectors such as state and local government, telco and media, banking and finance, retail, and health and education.

A breakdown of RXP Group’s active clients (Click to enlarge)

“In terms of our clients, we continue to maintain a strong client mix with a good spread across industries,” Fielding added.

“The longevity of our customer partnerships remains strong, and pleasingly, we are also seeing more of these clients adopting our full-breadth of digital services capabilities.”


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