RMG Limited Set For Profitability
ASX / MEDIA STATEMENT
17 August 2001
All figures $A.
Leading listed receivables management group, RMG Limited, reported today that it is set to return to profitability after absorbing a restructuring provision of $6.4 million, and an asset revaluation in its accounts to 30 June 2001 amounting to $2.5 million which resulted in a loss for the period of $10.7 million after tax. The restructuring provision and the asset revaluation had been foreshadowed in the announcement related to the restructuring in July.
The company has said no dividend will be payable.
(Note: The reported result is for the six months to 30 June to bring the company in line for a June annual result in future).
RMG’s EBITDA for the period (excluding restructuring costs) was $200,000 on revenue of $32.3 million for the six months to 30 June, 2001 compared to revenue of $30.8 million for the previous six months.
Deputy Chairman and CEO James Boult, who took up his position in late May 2001, said that the company’s trading performance in the period had been below expectation.
“A pleasing aspect of the company’s operations, however, is the continuing strength of the revenue base after a period of great change in bringing together 22 companies across Australia and New Zealand under the one umbrella and the subsequent restructuring.
“It became clear, however, after a review of the June quarter result that RMG’s cost structure was considerably higher than could be sustained. The EBITDA margin in May and June was well below expectation. In addition, it also became apparent that some costs incurred earlier in the half only came to account in May and June.
“The Board has also carefully reviewed RMG’s internal systems and is now satisfied that the company’s results, as they are reported on an ongoing monthly basis capture all costs,” he said.
“As a result, RMG’s “Project One” restructuring program, which had been developed during June, was implemented immediately. The effect of “Project One” and earlier initiatives has been to lower the on-going cost structure of RMG by at least $10 million per annum,” he said.
Mr Boult went on to say that the company had also critically examined the balance sheet values of all assets prior to the determination of the results and took to account recent restructuring costs incurred as part of Project One.
Mr Boult said the details of the 30 June adjustments were as follows:
- Personnel costs related to restructuring $1.8m
- Property and office closures $4.6m
- Write down of value of investments $2.5m (asset revaluation)
- Making a total of $8.9 million.
“The principal item in the investment adjustment ($1.6m) is the oil and gas assets which are the only remaining Frontier Petroleum assets still held. Until June 2000 RMG operated as “Frontier Petroleum”. RMG is currently negotiating the sale of these assets. Various proposals are before RMG but the company will only conclude a transaction when it is satisfied that the sale will achieve market value.
“The carried forward asset values are a conservative representation of the company’s position,” Mr Boult said.
Mr Boult said for the coming financial year the company is projecting sales revenue in the range of $65-70 million. RMG expects to report profitability for the period to 31 December 2001 but a clear picture of the ongoing performance will be apparent from the 30 June 2002 result. July 2001 revenue was in line with budget.
“As reported last month when we released the details of “Project One’, operationally we are now trading profitably, but we had to absorb substantial initial costs in implementing the new RMG structure which will enable us to improve customer service and boost future profitability.
Mr Boult said that implementation of the Project One restructure was at an advanced stage and going well.
“The hard decisions have been taken and implemented and we will now start to enjoy the economies of scale RMG expected.
“Our new 223 seat call centre in King Street, Melbourne becomes fully operational next Monday 20 August.
“Over the next six months the operational capability of our offices in country Victoria, South Australia, Western Australia and Queensland will transfer to Melbourne but RMG will ensure that a strong sales, marketing and customer relations presence remains in those areas.
“While there is more finetuning of our operating structure to be done which will result in further savings down the track there are no more significant restructuring costs to come.
“For example, the majority of staff made redundant are still on our pay roll but will progressively depart over the next two to three months.
“There is no doubt the restructure will benefit shareholders, customers and remaining staff who all appreciate the potential for a further strengthening of sales, marketing and customer relationships.
“At the end of last month, we announced the significant appointment of Mr Adrian Mitri to the newly created position of Chief Operating Officer. He takes up his position on 17 September.
“Our successful capital raising of $8.8 million in June 2001 helped considerably in debt reduction, and we now have a much stronger balance sheet.
“RMG has had a hard look at its business and its asset values. The structure is now right and the revenue stream is strong. We are well positioned on a go forward basis to enter a period of growth and business building,” Mr Boult said.