That's not an entirely unfair comment. There's a difference...

That's not an entirely unfair comment. There's a difference between paying commissions to the software sales team and/or distributors - that's their job and if they sell, they should earn, just like any other commission-based role - and appropriately incentivising senior management. $3m in short-term bonus payments have been triggered for senior management this year, and this is linked to "adjusted EBIT" with targets set by the board - the issues i see with this are:

1) The targets set by the board appear to be too low - to trigger $3m short-term incentives for senior management on $4.6m operating EBITDA fails the reasonableness smell test. The implication is that pre-bonus EBITDA was $7.6m, and assuming FY17 D&A was ~$2m (in line with FY16), then pre-bonus EBIT was ~$5.6m. So management have, in effect, eaten >50% of FY17's EBIT in short-term bonus payments - that just fails the smell test.

2) The hurdle is "adjusted EBIT" which means management can take various expenses below the line to hit their bonus target. In addition, RUL capitalises part of its software R&D expense which could potentially lead to an inflated view of "adjusted EBIT" relative to cash performance of the business (although the capitalised cost should roughly equal the amortisation charge over time and wash through).

Interesting business at an apparent positive inflection point, although the board needs to rethink short-term incentive structures.