RMG finance hot seat proves too hot for most

By Nick Stride

Friday 23rd August 2002

Receivables management company RMG is once again searching for a chief financial officer after a loss that almost wiped out its shareholders' funds.

The company, created two years ago to aggregate 22 Australian and New Zealand receivables management firms, lost CFO Paul Wilkinson on May 2.

His replacement, Theo Sathananthan, resigned on August 7 and executive chairman Jim Boult said Gary Spreckley would take the job on.

Announcing a $A72 million ($84 million) loss last week, Mr Boult said Mr Spreckley would not now be taking up the position "due to a change in personal circumstances."

Peter Everett would now be the CFO "on an interim basis."

The biggest contributor to RMG's loss was the decision to write off $A60.6 million ($70 million) of goodwill acquired during the roll-up effort.

To comply with Australian accounting standards RMG is also writing back future income tax benefits worth $A19.2 million.

At the ebitda (earnings before interest, tax, depreciation and amortisation) level, RMG made a $A1.4 million ($1.7 million) profit compared with a $A7.2 million loss a year ago.

Analysts said the finance department bodycount appeared to be connected with RMG's integration problems and specifically with its information technology platform.

It now uses the Collect collection software but it has decided to write off its $A1.3 million book value.

It will now introduce Australian developer Debtor Software Solutions' Wincollect Enterprise software.

Along with the financial result, RMG announced it would seek fresh capital through an issue of one option for every two shares held at 2Ac an option.

The options will convert to shares in October 2004 by payment of a further 3Ac.

If fully subscribed the issue will raise $A6.6 million ($7.7 million).

The company raised $A5.6 million through share placements to institutions at 18Ac in March and $A5 million from the same source last September.

The shares are now trading at around 4Ac.

The company's troubles have been a blow for investor Eric Watson, whose Cullen Group owns 19.4%.

Cullen recently appointed two directors to RMG's board to sort out the company's problems.

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