RXP’s EBITDA falls 29% as consultancy work declines ‘faster than anticipated’

Digital services consultancy RXP Services has seen its earnings before interest, tax, depreciation and amortisation (EBITDA) fall 29% for the 2018 financial year.

The consultancy, which bought The Works in August last year, said while the creative agency was able to help grow its digital work, this was offset by a decline in traditional consulting revenue.

The Works Co-founders Douglas Nicol, Kevin Macmillan, Damian Pincus

RXP said the decline in traditional consulting work from two major clients was faster than anticipated.

EBITDA dropped from $18.25m to $12.98m, but there was a slight 3% increase in revenue, up to $144.94m from $140.5m.

RXP Services earned a net profit after tax of $7.83m for the year, which was down from last year’s $11.64m.

At the time of RXP’s acquisition of The Works it was announced it could be paying up to $33m for the creative agency. This year, the three founders of the ad agency – Douglas Nicol, Kevin Macmillan and Damian Pincus – made $373,000 in cash as part of their earn out.

RXP’s revenue and underlying EBITDA for FY17 and FY18 

However, on July 31 the owners were paid an additional $7.5m.

RXP has so far spent $17.5m on its acquisition of The Works.

The first deferred earn-out payment is payable in the first quarter of FY19 and will cost $13.5m. It will be funded by a mix of cash and debt.

Ross Fielding, RXP CEO, said in a statement: “Although our result was impacted by a faster than anticipated decline in traditional consulting work, particularly in the first eight months across two major clients, we were able to successfully position the business to take advantage of the promising growth in our digital work.

“As we previously disclosed, reduction in traditional consulting work in the first eight months of the year across two major clients significantly impacted our financial results.

“This has now been effectively managed, through rebalancing of resources and exiting commercially unviable work.”

RXP’s financials

Fielding made $721,709 for the financial year, which increased from last year’s total performance-related salary of $553,760.

The Works forms part of a group of 15 other business’ acquired by RXP including 10 collectiveZenith Solutions and Insight.


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