Stiff trek towards a profit for RMG

Listed debt collector RMG - the offspring of Eric Watson and defunct sharebroker DF Mainland - has lost A$110 million ($120 million) in 4 1/2 years since rolling together 22 companies in Australia and New Zealand.

RMG's market capitalisation yesterday was A$31 million.

Talking of the company's losses since 2000, executive chairman Don Bourke said RMG "took 22 cottage industries and tried to get them to fit together, which was bordering on mission impossible".

He said the latest bottom line loss of A$6.5 million for the six months to December was "unacceptable" but the company was making significant progress towards a turnaround.

RMG is listed on the Australian and NZ stock exchanges and more than 40 per cent of its shares are held by NZ investors.

Cullen Investments, the vehicle of the London-based Watson, is the biggest shareholder.

The latest loss was a 70 per cent increase on the previous corresponding period.

The figure - and a revenue rise of 10 per cent to A$16.3 million - was flagged four weeks ago in an update for investors looking at taking part in a rights issue.

Bourke's target remains a bottom line profit in the fourth quarter of this financial year, from April to June.

One of RMG's institutional shareholders is Perennial Growth Management, of Australia.

Quizzed on the latest result, Perennial partner Adrian Mulcahy said his firm had faith in the new management team - Bourke took over last September - and "it's all going in the right direction".

The company blamed most of the increased loss over the six months on costs associated with buying debt books to boost revenue.

That is because RMG borrowed money to buy the books - leading to higher interest costs - and the increase in the size of the firm's debt portfolio leads to bigger writedowns under amortisation policies.

The company said: "As collections increase over a more efficient cost base, our returns should increase and interest will also reduce."

The company's bottom line losses for the past 2 1/2 years total A$22 million. The single biggest hit was a A$72 million loss in 2001-02, including a A$59.8 million write-off.

In a nutshell

From mid-2000, RMG consolidated 22 debt collection companies.

It has never made a profit.

It aims to get into the black in the April-to-June quarter.