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Setting-up costs hurt RMG first quarter

By Phil Boeyen, ShareChat Business News Editor

Wednesday 15th November 2000

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Australasian credit and receivables group, RMG, has released details of its first quarter sales and says its profits are showing potential but have been hit by one-off merger and transaction costs.

The company, which listed at the end of June, says sales for the first quarter were A$15 million. This figure compares with a forecasted full year sales figure of $A57.5 million, with earnings before interest and tax for the same period predicted to be $A10.9 million.

However since those figures were released at the time of listing, RMG has announced a number of further acquisitions, including the purchase of Credit Solutions Australia.

At the time of that announcement RMG said the acquisition would provide additional revenues of approximately
$A10 million, and would push the company's annual revenue to over $A70 million for the year to the end of June, 2001.

Based on that figure the first quarter sales of $15 million appears to be lagging company projections.

While the company has not detailed first quarter profits it says a number of the synergy benefits forecast in the prospectus have been achieved, with 80% of the office rationalisations completed, new solicitor arrangements in place, and re-negotiated supply contracts for key consumables in place.

Staff numbers have also dropped from 657 at the start of July to 601 at the end of September, but the company says it is likely these numbers will grow as the high volume of work in progress flows through to the new collections environments.

CEO Paul Cooney says collection work on hand currently totals more than A$2 billion, and the prospects for the sector for the coming year appear consistent with the early forecasts.

The company has also acquired another New Zealand business, Auckland-based collection company Task Force Limited, which it says enjoyed a transferable government contract which was strategic to the development of Receivables Management (NZ) Limited.

Despite pre-listing hype, which at one stage affected the share price of competitor New Zealand-based Baycorp, RMG shares have not made much of an impact on the market since listing.

Most investors have been waiting to see if the company can manage to pull off the difficult task of unifying 16 separate business -- plus a series of new acquisitions - into a cohesive and profitable company.

However those details are not likely to emerge until RMG releases full financial results for the period to December 31 early in the New Year.

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