RXP Services takes profit hit amid COVID-19 impact

RXP's Ross Fielding

Publicly listed digital consultancy RXP Services has seen business activities slow down as the onset of COVID-19 pandemic took hold in the second half of FY20. 

Revenue declined 10 per cent to $126.8 million and net profit also tumbled down 44 percent to a $1.9 million loss due to a non-cash goodwill impairment of $7.5 million taken in the first half of FY20.

Earnings before tax also fell from $16.4 million in FY19 to $14 million.

Despite the losses the company still maintains a strong operating cash flow of $21.9 million and balance sheet with further debt reduction, pushing net debt down to $4 million. 

RXP Services CEO Ross Fielding said COVID-19 had a greater impact in the southern region as sales conversions began to slow. The deferral of a significant government project and a key client implementing a ‘10 days mandatory leave’ initiative also hampered results. 

“We are now seeing the sales pipeline slowly building back up as businesses prioritise digital experience improvement. Tight alignment of resourcing to business wins, resulted in improved utilisation during the second half,” he said. 

“Despite the advent of COVID-19, we were able to deliver a strong second half performance, including 29 per cent growth in EBITDA on the first half, demonstrating that we were able to adapt to the challenges the pandemic presented.”

Fielding said momentum was building up again in digital marketing services after a soft first half, winning projects with Destination NSW, Aware Super, Goodman Fielder, and Containers for Change.

“We are encouraged by the strong pipeline of opportunities in this segment and remain committed to leveraging and enhancing our capabilities in this segment,” he said. 

“RXP experienced a strong recovery during the second half of the year, despite having to navigate the COVID-19 pandemic. Our team did a fantastic job in quickly adapting to ensure we were able to continue to deliver for our clients and add value.

“We are witnessing a once in a lifetime event that will have long lasting impacts on customer behaviour, and particularly on how companies operate and digital evolve moving forward. COVID-19 has resulted in businesses placing greater emphasis on ‘digitisation’ which was benefited RXP given our development and investment in digital transformation capabilities.”

Fielding said the consultancy was entering FY21 with optimism, a strong financial position and a solid pipeline of work.

“Both our northern region and digital marketing sales services have strong sales pipelines in place, and we’re seeing momentum building in the southern region. COVID-19 has driven greater urgency for digital transformation and highlighted the need for businesses to improve their digital experience,” he said.