Rubik Financial : Half Yearly Report and Accounts

This interim report of Rubik Financial Limited is provided to the Australian Securities Exchange (ASX) under ASX Listing Rule 4.3A.

1. Reporting Period Details‌

   Current Reporting Period: Half Year Ended 31 December 2016 (H1-FY2017) Previous Corresponding Period: Half Year Ended 31 December 2015 (H1-FY2016)‌

2. Results

   Results Continuing operations	Percentage change %		H1-FY2017 31 Dec 2016 $'000	H1-FY2016 31 Dec 2015 $'000
   Revenue	Down	7%	19,445	20,825
   Underlying EBITDA*	Down	23%	2,024	2,627
   Net profit/(loss) after tax attributed to members	Up	26%	(1,662)	(2,236)
   Significant items*	N/A	N/A	255	(1,076)
   Earnings per share - basic (NPAT)	Up	35%	(0.4) cents	(0.7) cents
   Net tangible assets per share	Up	11%	(3.0) cents	(3.3) cents

   * = Non-AIFRS measure

   No interim dividend was paid or proposed for the period.

   Note:

   The information contained in this Appendix, and the attached Half Year Financial Report, do not include all the notes of the type normally included in annual financial statements. Accordingly, these reports are to be read in conjunction with the annual report for the year ended 30 June 2016 and any public announcements made by the company during the interim reporting period in accordance with the continuous disclosure requirements of the Corporations Act 2001.

   Rubik Financial Limited ABN 51 071 707 232

   GPO Box 4808 Sydney NSW 2001

   T:+61 2 9488 4000

   www.rubik.com.au

3. Summary

   Overall revenue of the Rubik Financial Ltd consolidated group ("Rubik Group" or "the Company") for H1-FY2017 was $19.4 million, a $1.4 million, or 6.6 per cent decrease from H1- FY2016.

   This is attributable to recurring revenue decreasing by $0.6 million driven mainly by Coin product. Non- recurring revenue decreased by $0.8 million mainly as a result of:

   • Service fees for Anti-Money Laundering projects related to the eLodge+ product in prior corresponding period;

   • Banking focus this period on its next generation digital platform, Rubik Model Bank; and

   • Wealth focus on building out Rubik's next generation scaled advice solution, which has required a focus on R&D effort at the expense of non-recurring revenue generation.

     Operating expenses were down $0.8 million compared to the previous corresponding period due to the impact of prior cost saving initiatives.

     The Wealth products contributed 48.1 per cent to total revenue, the Mortgages products contributed

     28.8 per cent and the Banking products contributed 23.1 per cent to total revenues.

     Recurring revenue contributed 78.5 per cent to total revenues this half year compared to 76.1 per cent in the prior corresponding period.

     The Underlying EBITDA result of the group was down 23.0 per cent to $2.0 million (H1-FY2016: $2.6 million). This is mainly due to a decrease in revenues, as discussed above.

     The reported net loss after tax for the half year ended 31 December 2016 was $1.7 million (H1-FY2016:

     $2.2 million loss). The primary drivers of the loss were depreciation and amortisation charges. This has been partially offset by the positive Underlying EBITDA result.

     The table below sets out the Company's results in more detail than is provided in the attached Half Year Financial Report and, in doing so, reconciles the AIFRS based profit results included in the Statement of Profit or Loss and Other Comprehensive Income to the Company's Underlying EBITDA measure.

     Performance ($'000)	H1-FY2017	H1-FY2016	Var %
     Recurring revenues	15,269	15,838		3.6%
     Non-recurring service revenues	4,075	4,925		17.3%
     Non-recurring license revenues	101	62		62.9%
     Total operating revenues	19,445	20,825		6.6%
     Underlying EBITDA*	2,024	2,627		23.0%
     Amortisation of intangibles+	(3,594)	(3,528)		1.9%
     Depreciation of PPE+	(304)	(162)		87.8%
     Share based payment expense+	(302)	(233)		29.6%
     EBIT before significant items *	(2,176)	(1,296)		67.9%
     FX gain/(loss)	30	35		14.3%
     Net interest expense	(302)	(136)		>100%
     Interest on unwinding of discount+	-	(528)	n/a
     Profit before tax and significant items *	(2,448)	(1,925)		27.2%
     Significant items *	-	(1,541)	n/a
     - Restructuring costs
     - M ovement in earn out provisions+	-	5,808	n/a
     - Transaction & integration costs	-	(43)	n/a
     - Onerous contract provision+	255	-	n/a
     - Impairment of M ortgages Division+	-	(5,300)	n/a
     Profit before tax	(2,193)	(3,001)		26.9%
     Income tax benefit - current year+	531	765		30.6%
     NPAT as reported	(1,662)	(2,236)		25.7%

     * = Non-AIFRS measure

     += Non-Cash items

4. Review of Operations

For the half year ended 31 December 2016, the company was operating under one segment, however revenue has been disclosed by product set, being Wealth, Banking and Mortgages. Wealth refers to the development and provision of advice software and services to the financial planning industry, Banking to the provision of software and related services to the banking sector and Mortgages to the development and provision of software solutions to the Australian mortgage broking industry.

* Financial Services is made up of Mortgages and Wealth products combined.

** Collection products is included in the Banking product set.

Wealth revenue decreased by $0.7 million, or 7.0 per cent, from $10.1 million in H1-FY2016 to $9.4 million in H1-FY2017. This is largely a result of decreased licenses related to the Coin product. Of note, one of Rubik's largest customers extended its licenses contract for its Coin wealth management solution until 31st December 2018, including the provision of scaled advice software (Provisio).

Mortgages revenue decreased marginally by $0.1 million, or 1.5 per cent, from $5.7 million in H1-FY2016 to $5.6 million in H1-FY2017. Non-recurring fees decreased by $0.4 million as a result of service fees on Anti-Money Laundering projects related to eLodge+ product included in the prior corresponding period. This has been slightly offset by increased recurring revenue of $0.3 million on various mortgage products.

Banking revenue decreased $0.6 million, or 11.6 per cent, from $5.1 million in H1-FY2016 to $4.5 million in H1-FY2017 mainly as a consequence of decreased service fees due to the focus on Rubik Model Bank build. The previous period also included service fees for clients upgrading their IVR (Interactive Voice systems) from analogue to digital.

H2 - FY2017 is looking positive with announcements in November of the first ADI (Authorised Deposit Taking Institution) client signing up with Rubik Model Bank and MyState going live with its digital transformation using Rubik's technology solution.

After Group operating expenses, the Group Underlying EBITDA revenue margin has decreased from 12.6% to 10.4%.