The bad news for Rubicor shareholders continues to roll on unabated.
The only recent good news, announced to coincide with the Rubicor AGM on 30 November, was the resignation of CEO, David Hutchison, after presiding over three and half years of disastrous results. Unfortunately there was only bad news to follow.
Firstly, Hutchison wasn’t going far; he’s remaining as Executive Chairman of the Rubicor board and secondly, current COO, Shard Loomba was promoted into the CEO’s role.
Talk about moving deckchairs on the Titanic.
The screamingly obvious thing the company needs is fresh blood on the board and an external CEO. Although given how few resources are left in the company’s coffers it’s hardly an enticing opportunity for an appropriately competent person to take on.
Bad news truly does come in threes for Rubicor shareholders as last week, three business days after the AGM, Rubicor Government (formerly Gel Government Group) was terminated from the Western Australian Government Temporary Personnel Services supplier panel. Officially confirmed through an update to the contract issued last Wednesday, taking effect on 7 January 2019 from which date no new business can be conducted with Rubicor but existing temps may continue in their existing assignments. The reasons for the termination were not publicly disclosed although I have had Rubicor-supplied temps contact me to say the payment of their superannuation is not up-to-date and they are concerned that Rubicor’s financial state leaves them vulnerable.
Undoubtedly the company’s executives would have known about the contract termination before the AGM was held, yet no mention was made of it in the CEO’s AGM presentation.
It’s highly unusual for a supplier to be terminated in advance of the contract conclusion (November 2019). Typically a termination is as the result of a serious breach of the contract terms or a notified issue has not been resolved by the supplier to the client’s satisfaction. Regardless of the cause, this termination is yet another reason for Rubicor shareholders to wonder what the hell is going on at their company.
Why was the company AGM held in Brisbane when the company’s headquarters is in Sydney and all the company’s executives live in Sydney? Surely it wasn’t to minimise attendance and the potential for awkward questions from shareholders, the media and other interested parties?
Why did CFO Jay Adcock suddenly depart, immediately before the AGM, after only 16 months in the role? No explanation from the board was forthcoming, with the one-sentence announcement of Adcock’s exit buried within the announcement of Loomba’s promotion.
More gloom was to come in the CEO’s AGM presentation as the biggest current joke in the Australian recruitment industry; Rubicor’s magical candidate database pudding, scored yet another ‘it’s definitely coming, people’ mention.
This is the project that Hutchison and Loomba have wasted vast amounts of time and money on over the past three years, for zero commercial results.
Currently under development, the platform will allow us to examine large amounts of data, extrapolating meaningful results that we can pass on to clients in easily understood formats, adding value to our service and creating an additional revenue stream. Once completed this platform will place the group at the forefront of the recruitment-tech industry and become a key value proposition to our clients. (Rubicor Group, 2018 AGM CEO Presentation, pages 2 & 3).
The idea of deriving more value from the Rubicor candidate database by flogging off ‘access’ and ‘insights’ to interested third parties was first flagged publicly by Hutchison at the 2015 Rubicor AGM. Since then it’s been nothing but a string of endless progress updates.
Instead of wasting time on this thought bubble of an idea what if Rubicor had, instead, invested the same amount of money employing staff for the sole job of ringing through the database(s) to check on the availability of highly rated already-registered candidates?
I predict Rubicor would have re-activated hundreds of candidates across the company and placed at least 25% of them each, generating, at least $100k per month in additional fees. This equates to more than $3 million in potential additional revenue not realised in the three years since the 2015 Rubicor AGM.
The odds of the current ‘candidate platform project’ producing anything like that amount of revenue in its whole lifetime equate to the odds of David Bowie and Freddie Mercury performing a live duet at next year’s Grammy Awards.
Am I being too critical of the current Rubicor board?
Well, I’m only holding the current board accountable to the standards that they set for themselves back in June 2015 when launched what amounted to a hostile takeover (ShortList subscriber link) of the previous board.
Let’s look at what was said (ShortList subscriber linlk) by the shareholders responsible for booting out the previous Rubicor board (Cashel Capital Partners Fund 1 Pte Ltd) in order to install their own men (Angus Mason and David Hutchison) to run the company instead.
A major shareholder has called for two Rubicor directors to resign, claiming they have overseen a period of declining shareholder value and failed to reduce their remuneration appropriately.
“Cashel has concerns with the management of the company by its current board of directors,” it said in an explanatory statement.
“Under the current management… the company’s market capitalisation and shareholder value has declined from in excess of $103 million in or about July 2007 to a current market capitalisation of approximately $6.5 million.”
The current non-executive directors have not reduced their remuneration to levels that reflect the size of the business, said Cashel, which holds 8.21% of Rubicor’s stock. (ShortList 22 June 2015)
What’s happened under the current board’s watch after Cashel got their way with the installation of both Mason and Hutchison?
The raw facts are that Rubicor’s market capitalisation has dropped a further 60 per cent in three and a half years and, what’s much worse, the three directors increased their combined remuneration and consulting fees from $766k in the 2017 financial year to $1.38 million in the 2018 financial year. This was a year in which Rubicor reported, in a booming recruitment market, decreases in all the key financial metrics accompanied by a share price slump of 35% across the same 12 month period.
Oh, and if that wasn’t enough, let me remind you of what the Rubicor auditors documented in the Rubicor 2018 Annual Report: “These conditions (the avalanche of poor financial metrics) give rise to a material uncertainty which cast doubt about the Group’s ability to continue as a going concern”.
The backers of the current board accused the previous board of not delivering on their promises and presiding over diminishing shareholder value, all the while extracting too much money for themselves from the company.
At the 2015 AGM, their first as Rubicor directors, David Hutchison spoke about the importance of transparency and accountability. Angus Mason then spoke about the importance of governance, building trust, building performance and aligning the interests of all the Rubicor stakeholders.
Cashel and their board representatives have demonstrably failed by the standards they clearly and publicly set for themselves in mid-2015 when they took over the leadership of Rubicor. It’s no disgrace to have failed but to not hold yourself accountable to the standards to which you held others in the same roles, and committed to pubicly, is another thing altogether.
Until such time as they fall on their swords the Rubicor directors stand as gigantic hypocrites with no moral authority to lead any of the committed consultants and their leaders at Rubicor.