Ann: Trading Update, page-26

from Kalkine equities:

Lowering of full year guidance: RXP Services recently released a trading update for FY2018 and expects that revenue for FY18 will be in the range of $145 million to $146 million and underlying Earnings Before Interest Tax and Depreciation and Amortisation (EBITDA) will in the range of $15.8 million to $16.1 million. This is below the previously stated guidance of circa $150 million of revenue with underlying EBITDA margin of 13.3%. Delayed start and ramp-up of a number of important client projects in H2, along with the deferral of associated digital product sales into FY19, impacted H2 FY18 performance. The uptake of RXP’s digital services continues to grow and is expected to strengthen over the coming 12 months.


Revenue Outlook for H2 (Source: Company Reports)

Despite the delayed client projects underway, and margin pressure, RXP’s operational results of the past 6 weeks were encouraging and with a high number of billable staff along with high utilisation, a strong Q4 is expected. RXP’s Q4 FY18 is on track to deliver revenue of circa $40 million with an EBITDA margin circa 14% which is considered a more representative quarter for the business moving forward. The Company remains committed to a transition in work mix that ensures one can take advantage of the digital evolution occurring across all of its businesses. In line with its integrated business model, the Group maintains its focus on positioning itself so that it can best serve its clients and continue to take advantage of the move to digital occurring across all businesses.

The stock was down by 22.97 per cent in last six months, followed by a rise of 8.57 per cent in last one month. Just after the release of the trading update, the stock fell by 13.15 per cent as on 17 May 2018. We give a “Hold” recommendation at the current market price of $0.495, in view of the mixed update while the stock trades at low multiples.