Marketmaker - thanks for your thoughts. A couple of things. I...

Marketmaker - thanks for your thoughts. A couple of things.

I know it is subjective in relation to classifying Expensed vs Capitalised R&D, but there has to be a reason for Expensing approx 65% and a reason for capitalising 35% (otherwise it just results in pure accounting manipulation). The auditors would not have much of a clue, but at a minimum they would require some decent representation from Management for this adopted allocation (i.e. 65% of time is spent on ongoing client  software maintenance (expensed) and 35% spent on new products development (capitalised)).

If it is expensed, it is expensed for a reason (i.e. maintaining client's revenues), and should be accounted for above EBITDA. The 65% proportion, i agree is conservative, but remains reasonably consistent with what happened in FY13 (62%) ("Rubik has invested $4.8m in software R&D during FY2014, of which $3.1m was expensed (FY2013: $2.1m of which $1.3m was expensed)".

More importantly:
- When RFL reported their underlying EBITDA last year, it was NOT pre expensed R&D [you will note that RFL is now actually reporting a far higher FY13 EBITDA as a comparative ($6.6m + $0.5m bonus = $7.1m), than that which was actually reported last year ($5.8m) because they have decided to include R&D below the line (=$1.3m variance, being the expensed R&D in FY13].
- Then, when RFL gave their initial guidance of $8m EBITDA (at the same time as reporting their FY13 EBITDA not adjusting for R&D), there was NO mention of the $8m being pre expensed R&D.

To me, it looks like Management are being too tricky for their own good, almost deceptive in my view.

Finally on this, if a company has to spend $5m (17% of revenues) on R&D, it does question how sustainable the products are.

Also, what is with the $2.4m in DD costs? I know good process is important, but surely with this so called high powered Management team, paying external advisers these amounts seems crazily high. To me, looks like the ex- Management consultants running the show now are tying to pass the buck to yet moreconsultants.

There are so many other areas I could rant on about RFL, but i'll leave it there......