The Works’ parent RXP to restructure after market disappointment

RXP Services, parent company of The Works, is to restructure following an earnings warning that saw the company’s stock drop nearly 8% last week.

In its trading update, RXP announced it was revising its revenue estimate for financial year 2018 down from $150 million to between $145 and 146 million. The news follows The Works being dropped from the Optus roster in March.

RXP CEO Ross Fielding: “The Works continue to deliver in line with our expectations.”

Digital services holding company RXP acquired The Works last August to extend its product offerings and expand the Melbourne based company’s NSW operation.

RXP’s management blamed the downgrade on the delayed start of client projects in the last half of last year along with the deferral of digital product sales into the next financial year.

In response to the news, the company announced a board review to “identify and implement the necessary structural, organisational and functional changes to drive sustainable business performance and improve shareholder value.” The review is expected to be complete in six weeks.

Ross Fielding, CEO and managing director, said in the statement: “While we are disappointed with the performance over the last 12 months, the Company remains committed to a transition in work mix that ensures we can take advantage of the digital evolution occurring across all businesses.

“We recognise the need to address and make changes to the cost base of our traditional business as we transition the work mix. Also, with our digital work growing, we will be focused on improving our ability to forecast this type of work and make better resource allocation decisions.”

Fielding emphasised The Works is performing to RXP”s forecasts, saying: “The Works continue to deliver in line with our expectations. In addition to The Works, we have added significant capability to our team over the past few months, expanding our digital platform expertise across a number of our Practices as well as adding new content and production capabilities within The Works.”

The Works last month opened content agency Daresay, having picked up parts of the former King Content business.

In a statement to Mumbrella, an RXP spokesperson claimed: “The conclusion of The Works’ three year relationship with Optus has not effected revenue projections for the business. The Works is performing in line with our expectations and the integration with RXP is progressing well. We have been working on a number of projects together for some time and continue to identify opportunities for closer collaboration.

“The review will identify and implement structural, organisational and functional changes to the business. This will include all areas, but will focus on our traditional business.

“The Works expansion to Victoria continues as planned. It recently started work on a new piece of business in Melbourne.”

The fall in the RXP share price – which is currently at its lowest in nearly three years – is the second big drop for the ASX company after it disappointed the market with its half yearly financial results in February.


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