Segment profits to revenue ratio decreased from 27% to 21% so...

Segment profits to revenue ratio decreased from 27% to 21% so underlying operating EBITDA remained flat at $8.2M meaning negative operating leverage. To achieve this result they spent $5M on restructuring and integration costs. Expensed R &D leaves it with $5M underlying EBITDA. Rubic has a habit of reporting underlying EBITDA then has numerous other expenses that come out every year so that the underlying EBITDA figure is never achieved. I thought HI16 may show a glimmer of hope but would suggest another 12 months is needed. They don't seem to be able to contain costs as they grow revenue and given they have had a full year from the mortgage business now I'm wondering where the revenue growth is going to come from given they won't be acquiring businesses at the moment - they need to pay for what they have bought first !

Would suggest $40M revenue/$9M operating EBITDA/$6M underlying EBITDA after R&D expensed then a question mark about what else they deduct from this figure (ignore non cash amortization and depreciation) With interest and say another $1M on restructering /integration (they said they is more to come in H116) a figure of $4.5M NPBT cash profit would a guesstimate as the very best result . On that basis if they report this and that IF they reported this figure with low organic growth , ie. 5% / 10% at best and lack of proof of operating leverage I would subscribe a metric of 8 times NPBT cashflow i.e $31.5M MC- they don't deserve anything more than this given managements and the board's track record to date. Reported NPAT with D & A would be a lot lower ie. break even/loss.

What are they worth as a trade sale ? If they could show a clean $6M EBITDA (i.e. no add on deductions like significant, transaction, restrusturing ) with net cash / debt around zero and future earn outs around $7M then on 8 to 10 times = $60M less $7M or $48M less $7M. ie. $41M > $53M. Avoid until full years
cash flow prove the possible outcome with a margin of safety if you take the plunge prior.