RXP Services posts $1m loss, now "less reliant" on large contracts

RXP Services has posted a loss amid stagnant revenue as the digital consultancy shifts its business towards digital services work.

In its FY19 results (pdf) announced today, the company reported $141.1 million in revenue, unchanged from the same period in FY18, but posted a $1.3 million loss compared to a $7.8 million profit the previous year. EBITDA came in at $16.3 million, up 26 percent from $12.9 million.

Despite the loss, RXP chief executive Ross Fielding said revenue has become more predictable and resilient, and less reliant on larger consulting deals.

“We have been able to grow our digital transformation work, and this now accounts for around 80 percent of our total revenue,” Fielding said.

“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.”

Profitability was hit by a change in its impairment model, resulting in a $10.8 million write-off, as well as $1.2 million in bad debt from one client project. RXP also closed its Hong Kong operations due to underperformance, and is in talks for a potential sale.

RXP also revealed a slew of client wins during the period, including Victoria’s Department of Health and Human Services, VicRoads, Aurora Energy, The Smith Family, Sydney Bridge Climb and H&R Block.

Looking ahead, Fielding said RXP is looking forward to FY20 “with confidence” after having put in place “a solid foundation” around its digital offering.

“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.