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RPMGlobal Holdings Ltd (ASX:RUL) share price falls 8% on FY18 report

Earlier today, RPMGlobal Holdings Ltd (ASX: RUL) reported its annual result for the 12 months to 30 June 2018 showing a 1.2% increase in net revenue to $67.6 million.

GeoGAS revenue grew by 43.8% to $4.6 million, advisory revenue increased by 17.2% to $23.9 million and total software revenue declined 11.2% to $44.7 million. Perpetual software license revenue declined by $9.8 million to $13.6 million, the cause was revenue attributable to one global customer being $10.3 million less than the prior year.

During FY18 RPM welcomed 25 customers who licensed RPM software for the first time, including Emeco Holdings Limited (ASX: EHL).

Pleasingly, direct costs declined by 23.8% to $6.1 million.

The company introduced a subscription pricing option to complement its existing perpetual license offering. This is generating $135,000 per month and in a five-year timeframe could mean a cumulative $8.1 of subscription income according to RPM.

Operating earnings before interest, tax, depreciation and amortisation (EBITDA) fell 4% to $4.4 million largely due to an additional $1.2 million of development expenses.

Net profit before tax fell by 25% to $624,000. However, net profit after tax (NPAT) grew by 454% to $244,000 and earnings per share (EPS) increased by 450% to 11 cents.

Total assets on the balance sheet at the end of FY18 increased by $3.4 million compared to FY17, including an additional $3 million of cash. Total liabilities declined by $0.1 million.

Net cash from operations came in at $7 million, a $10.1 million improvement compared to FY17.

FY19 Outlook

Sustained commodity price strength is giving mining companies the confidence to develop new sources of supply, so RPM is forecasting the advisory division to perform strongly in FY19.

RPM has identified that its asset maintenance products can be used in other asset intensive industries, which is something management will explore in FY19.

Management believe there will be an increase of subscription license transactions now that RPM has a better understanding of the metrics wanted.

The 25 new customers mentioned above could take up more of RPM’s offering as they become used to the total software offering.

Foolish takeaway

Investors were clearly disappointed with this result, the loss of revenue from the key customer wasn’t good. However, the rest of the business delivered solid growth and it’s trading at under 6x FY18’s earnings. I don’t invest in anything related to resources, but RPM does look cheap at today’s price.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia has recommended RungePincockMinarco Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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