Recording in progress.
Welcome to Rubicon Water's investor webinar to discuss the company's FY25 results. On today's webinar, we have CEO Bruce Rogerson and CFO Andrew Bendall, who will go through the presentation released on the ASX this morning. To ask a question, please submit them via the Q&A button at the bottom of the screen. We'll do our best to get through as many of those as possible. I'll now hand it over to Bruce.
Thank you, Ben, and welcome to our FY 2025 results presentation. Really proud that this year we're celebrating 30 years in business. It's been a journey over those 30 years, a journey in predominantly two parts: building the technology and automating the districts of Australia and achieving what are still world benchmarks in gravity-fed irrigation throughout that first 20–25 years. It was predominantly Australian revenues and business. We have. Australia is only a small part of the world market for us, so definitely the growth of our business now is international, and that's where we're, that's where over the last 10 years our focus has increasingly been, and proud to say that 70% of our revenue again this year, more than 70%, is international. That's where the big growth will come, and that's where the investments will be made. We're operating in 22 countries across six continents.
The metrics on the amount of irrigated land that we're automating continues to grow, as is our track record in delivering water on demand to increase agricultural productivity and water efficiencies to free up water resources. So that's what we do as a business, and proud to say we're achieving that increasingly around the world. So a brief overview of our highlights for the year. So strong cash flow, definitely a focus of us given our experience in recent years and some of the difficulties we've experienced across Asia. So AUD 5.4 million is our strongest operating cash flow inflow since FY18, and that remains a priority focus of the business. On top of that, our highest revenue year since listing in 2021 is AUD 69.1 million, up from AUD 58 million in FY24, again driven by that growth in our rest of the world segment, predominantly USA and Europe this year.
Net loss has been of seven million compared with 11 million last year, and that's on the back of some increased costs in freight and tariffs around the U.S., particularly, which we consider pretty much one-offs, as well as some continued resolution of our China strategic review this year. So 24% revenue growth in the U.S., another record year of revenues, and that is a really strong base for us now that we're building, continuing to build and see that growth continuing. Landmark projects for this year. So Mexico has. We've got quite a history of doing work in Mexico, but the contracts this year have taken a significant step forward. We also delivered LATAM's largest single project, and we've previously announced the automation project in Italy.
On the back of that, we still have a very strong pipeline of projects this year, and I've got some slides talking about how that strategic projects are focused for us has improved, and we can run you through some of those later in the presentation, so just going through where those highlights are for the year, so in the U.S., we've got a slide coming up talking about Turlock Irrigation, one of our original contracts from 2005, really now implementing TCC. Mexico, I've spoken about Costa Rica with the largest single contract in Latin America. FarmConnect continues to be a big part of us, a big part of our current and future operations. Agro Pontino in Italy is a signature project, very historic irrigation district where we're modernizing that in a large way.
In Australia, Murrumbidgee Irrigation, again, announced the completion of their automation program, but we're still very much on the journey for them for the years to come. And in India, our signature project continues to win awards and sets us up for significant growth there. If we look at, I suppose, why we're in business, before we get onto the finances a little bit, not in detail, sorry, this slide is quite a strategic one. People may have heard me talk about it before, but if you break up the world's freshwater resources every year and their consumption, about a third is used in urban and industry, and another third is used in the consumptive use of irrigated crops. The major part of the remaining third is lost in getting the water to those crops for consumptive use. So that is the space that Rubicon deals in.
That's why the opportunity around Rubicon as a business is so huge. A third of the world's water effectively is lost in getting the water to the root zones of those crops. We have the technology that makes a material difference in the efficiency of doing that, but also the timing and allowing the productivity to come from that. So that's why we're in business to reduce that third, free up that water resource, and increase agricultural productivity. One point I'd like to expand on is in our finances, and I suppose in some of our reporting, we've spoken about hardware and software. Hardware is a term that underplays what we sell when we sell products. So the smaller scale system we sell is a gate like pictured here, but that is a very smart device. At the base level, it's integrated into real-time data and connectivity for the customers.
Even without our software, that product can integrate into third-party systems and can provide data and alarming. And our customer journey typically starts with buying a few of those gates, seeing what they can do, utilizing the connectivity via the web, and then slowly building up. And we've got a couple of examples to talk about today which show that journey. The first is Turlock. So mentioned this in the introduction. You can see the map there of Turlock. So I actually commissioned the first gate in Turlock as an engineer in 2005. It was our first, one of our first gates delivered in the US. And over that period since 2005, over the last 20 years, we've delivered 239 gates for around $16 million worth of revenue. And these are predominantly what we previously called hardware. These are smart devices that Turlock is buying to improve their operations.
But over time, they all come together in an integrated solution. So in 2015, for the first time, one of their really problematic channels was historically caused them heaps of trouble, and they contracted us to expand our footprint in that region. The 2015 install shown on the graph there, and we fixed those problems and showed what our software could do. And pleasingly, in FY 2025, we won the first contract of the complete automation of their whole district. So that's the circled thing in the center there. So that's a AUD 2.8 million program of providing additional gates plus AUD 640K investment in our customizing our software for that solution. And we see this partnership now continue as we roll out those type of systems across the rest of the footprint there. So a 20-year journey, being profitable, but now starting to ramp up to automation and full system delivery.
So they're on the journey to automate and achieve the full benefits across their district. And then pleasingly, in Australia, we had Murrumbidgee Irrigation, which this year announced the completion of their dedicated long-term automation program. So over that period, we've rolled out 1,200 automated regulators. We've transitioned them from a 70% efficiency pre-modernization to a 90%+ efficiency, 2,300 irrigators getting the full benefits of our systems. So we've completed most of that automation, most of the hardware, but we're still on that journey with Murrumbidgee Irrigation. So the quote there from Brett Jones is now they've got this system in place, that they still have probably only got 10%–20% of the benefit they can get out of this system over the years to come.
We engage with our customers not just about selling the hardware and automating the systems, but on product developments and on systems and efficiencies and how we can improve their business together. So we're on that journey with Murrumbidgee Irrigation as we are with all our customers. So that's a bit of an intro to what we do, why we do it, and our long-term relationships with our customers. I might now throw to Andrew, or we'll throw to Andrew to start leading through the results of FY 2025.
Thanks, Bruce. Before I make comment in regards to the 2025 financial year results specifically, I wanted to talk briefly to this slide. It shows historically the last 15 years' performance by the business. The stacked bar chart captures the revenue based on Australia, U.S., and the rest of the regions put together. We've got the operating expense line in the red and the gross margin percentage in pink across the top, and I think the two points I wanted to make on this is it firstly captures the geographical revenue mix that has continued to an international transformation over the years. The Australian business delivers the AUD 20-odd million of revenue each year that you can see and has done so for the last seven years.
But it's the U.S. that's grown to our largest contributor, representing 46% of this year's sales, while the other regions combined also totaled close to AUD 20 million of revenue. The second point I wanted to make is that while we know there is considerable improvement still to be made, this year continues to trend in the right direction. Onto the next slide. The business was relatively pleased with the increase in revenues to AUD 69 million, up 18% on last year and the strongest top line since 2021. The gross margin percentage increased a percentage point to above 41%. This was despite being negatively impacted by large cost increases in international freight driven by global geopolitical tensions.
It was also impacted by the introduction of the U.S. tariffs in the last quarter of the year, along with a negative product mix in our India business between the FY 2024 year and the FY 2025 year. It should be noted these are not permanent impacts, and they're already being eliminated as we reprice projects in FY26. In concluding our strategic review of our China business, the decision was made to take up a AUD 2.6 million impairment as a result of the separation from our previous joint venture. The lower than expected margin combined with the impairment resulted in an underlying EBITDA loss of AUD 4.6 million. Positive foreign exchange movements, lower interest costs on lower debt, and an improved tax expense led to a AUD 7 million loss after tax being reported compared to last year's loss of AUD 11 million.
The next slide talks about the revenue performance by segment and by type. I think we've kind of covered off by segment with my earlier comments, and Bruce ran through some of the pleasing wins in other geographies throughout the year. I will say this about the Asia segment. It's the second year in a row it's been disappointing, but the China piece is all about clearing the decks for an unencumbered participation in a market we expect to return to pre-COVID activity, and while the full year India business contribution was not at historic levels, we did see some last quarter showing positive signs. Our recurring type revenues of software contracts, components, and service continues to steadily rise up 11% year-on-year. The business generated AUD 5.4 million of operating cash during the year, a AUD 12.4 million improvement on FY24.
This meant that we had operating cash flow positive for the last three halves and the best cash result since 2018. We collected almost AUD 11 million of our aged Asian debt, while just the ANZ and U.S. markets delivered AUD 55 million, all within tight commercial terms. The business maintained its moderate but important ongoing investment in R&D. We continued our strong focus on working capital and managed to reduce that by AUD 12.7 million, representing an 18% reduction. A marginal increase in intangibles throughout the year was reflective of our continued R&D investment, outstripping amortization of previous spend. Our higher net asset position was a result of the capital raising, while also having the effect of reducing our net debt from AUD 31.6 million– AUD 14.3 million as of the 30th of June this year. This also lowered our gearing down from 58%– 22% this year.
I'll now hand you back to Bruce.
Thanks, Andrew. So just moving on to our pipeline evolution and just an update on this slide, which we've been reporting for a couple of periods now. So this is the historical slide. The blue here is the Australian business, and the orange to red is the U.S. business revenues. Pleasingly, another record year of sales in the U.S. continues that trend of increasing business in what is a very important market to us. The U.S. business is 10x the opportunity that existed in Australia. The Australian business was about AUD 750 million worth of revenue for us over the lifespan of our business. And so 10x that is a really significant opportunity. The yellow arrow on the graph for Australia was the price of water in Australia during the Millennium Drought. And that's really the driver.
While a lot of the programs were government funding, it was all about returning water to the environment, and the price that was paid for that water really drove the investment that was required to create the districts of the Murray-Darling Basin in particular, all operating up around the 90% down the back of our technology. Similar dynamic in the U.S., very different water law, but prices of water continuing to increase, and we see that continuing. Clearly, there was a change of government this year in the U.S., and that has had some impact on slowing as the government readjusts to the new administration. There's been some programs that have been a bit slower than what we would have otherwise hoped, including in FY 2025, to be honest.
But we are seeing signs of those programs starting to come back online, and we're hopeful of another good year of growth in the U.S. this year. If I look at the broader sales pipeline, we started reporting last year rather than talking about everything in our customer relation, every opportunity that we have in our CRM system, really focusing on the projects in our sales pipeline that are our major focus this year. So the way we look at the business is we have sort of base business, which is combined existing sales and maintenance and spares and that sort of smaller projects that our customers, like Turlock, I explained earlier, for the last 20 years, year-on-year, they've been buying parts of our systems. The major projects are the new customers that are coming in that really open up new opportunities for us.
We started last year with 12 projects of focus, and over the course of the year, we added in a further 21. Of the initial 12 projects that came in, we moved two back to the medium term, not because they were lost, but because they, through various reasons, changes of government or changes of priority, we now determined their medium term rather than short term projects, and, pleasingly, we won nine projects totaling AUD 24 million. The total pipeline at the start of the year was AUD 160 million, so while AUD 24 million is a not bad number, it was not the scale of what the opportunity was and what we're focusing on going forward, so, pleasingly, talking about this year, we're starting the year with 22 projects of a total value of AUD 184 million.
I suppose this chart showing that without giving strict timelines, I suppose close, likely, possible, and expected next financial year, we're seeing a significant increase in those projects that we determine as a management group are close to being signed. These are the projects, like if you quick scroll through the projects we did win last year, Italy, India, and part Gila River Farms is a FarmConnect project. Also in Mexico and Argentina, these big gravity-fed irrigation areas of the world all need that solution, that 30%, that third of the water that's lost in getting the water to the crops. The whole world needs solutions for that, and that's what we're building a portfolio of markets where we're operating in that space.
So to sum up, I suppose, for this year before we start taking questions, we have that pipeline of major projects that we're really focused on this year, and that's what will give us the really significant growth as we sign those bigger projects. We have really strong market fundamentals. We're well positioned to capture the growth. Despite the stress of the last few years, we've continued to invest both in R&D and in the presence we've needed and the infrastructure we've needed around the world to be able to deliver on these opportunities. As I pointed out with that Turlock example, it's long-term relationships we have with our customers. Turlock, 20 years, many of our Australian customers for the full 30 years we've been in operation and continued revenues. We continue to support them. We continue to sell them product.
We continue to enhance our product to meet their requirements. Geographic expansion is critical for us. This last year, EMEA really, on the back of that Agro Pontino project and other opportunities in Italy particularly, really was a significant part of our growth, and we do expect that to continue in mainland Europe, but also out of our European office. We run in North Africa, so the likes of Egypt, Morocco. Also Asia, after some difficult periods working through China and India, we're very optimistic about what that segment will do for us. On farm segment growth, so on the back of last year, we spoke of the Fondomonte project, which was a first-stage implementation of a large commercial farm in Arizona and California. We also run one Gila River Farms this year, which is another large corporate farm associated with the Gila River Indian Community.
We see that FarmConnect market being an increasingly important and bigger part of our business. Point here just on India, we've had some difficulties over the last couple of years, but India is still the biggest potential market, 69 million hectares of irrigation as opposed to Australia's two. The need and the water problems there in India are just massive. Our large NLBC project continues to generate substantial interest from neighboring states and the irrigation community globally. We're optimistic about the opportunity in that market. That's summing up, I suppose, where we FY25 and a bit of a look at where we plan on getting this year. I might throw to Ben for any questions if we've got them.
Yeah, thank you, Bruce and Andrew.
Just a quick one, just a reminder, if you'd like to ask a question, please do so via the Q&A button at the bottom of the screen. First one, what was the strategic rationale behind restructuring in China, and when do you expect to see revenue contribution resume from this region?
Yeah, so with China, we had a long-term relationship with LYG, which was our previous joint venture partner. Over the period of, as we've been flagging, we've been doing a strategic review, which started in FY 2024. Over the COVID period, it was a really challenging time in China as it was elsewhere. We saw the need with our partner to introduce two things. I suppose we needed, ideally, we wanted a partner that was well connected in with government and academia in China, which is very influential.
We also needed a partner with a balance sheet that could support the growth of the business better than what we had with our existing partner. LYG was initially part of those plans and certainly were part of pulling together what was going to be a four-way joint venture between Rubicon, Tsinghua University Science Park, so Tsinghua University is the big Beijing world-class university, then investment arm from them, which looks at technology into this space. So they're a key partner with us. And a business out of Ningxia Guoxin Runa, which has the balance sheet and the project delivery capability to deliver projects on a bigger scale. What happened over the course of the year is LYG, after initially being pretty keen on that arrangement, was focused on trying to maintain the market for itself.
So it wanted to continue to be the sole representative and take the full benefit of our technology in China. That's on the back of some pretty big government announcements around proposed funding of our space. That separation, I suppose the LYG taking a step back led to a fair bit of tension in the relationship, and we got to the point where we weren't prepared. We were committed fully to our two new partners, Tsinghua University Science Park and Guoxin Runa, and LYG, after trying to force us into a situation effectively where we stayed with them, the relationship broke down to the point that we were no longer prepared to deal with LYG as a counterparty. That led to our decision to impair some of the contracts that we were delivering with LYG.
Importantly, as at the end of June 2025, there are no ongoing contracts in China through LYG. So we've impaired against those contract assets. However, we do see that we are still very optimistic about China with our new partners, and we are already in the process of moving towards recontracting some of those three contracts which we impaired against, but we'll be contracting them under the new joint venture arrangement. So we're optimistic with our new JV partners who have made a substantial commitment with us to building this market. It's the same dynamic as elsewhere. We've been dealing in China since 2008. We've got the track record, our products work, our systems deliver. We've now got a really good technology partner, a balance sheet partner, and we're confident in the growth that will come back again from that China region.
Thank you, Bruce. Next question.
You highlighted strong interest in FarmConnect across the Western U.S. Is there scope to standardize or scale this offering more broadly across the region or other markets?
Yeah, thanks, Ben. So our FarmConnect offering is very much targeted at large corporate farms. So rather than the geography of the U.S., it's really the reason we're operating and we've had the success we've had with Gila River and Fondomonte and several other large farms is that that's Southern California, Arizona, Texas. These are places where there's really significant large corporate farms. So our technology is not really aimed at the mum and dad farmer around. It's really about the big corporate farming businesses where we deliver the benefit. So at the moment, the focus is the U.S., and that's paying dividends for us. That's where we have the infrastructure to roll out and support these customers. But the plans are to take that technology to the areas of large corporate farming. Now, that's pretty broad spread around the world.
Central Asia, for instance, has the ROC base in Kazakhstan and Uzbekistan. The investment coming in there, the investment that's driving the projects in automating the canal-based infrastructure is coming from commercial farms. So there's opportunities in that, certainly in North Africa and Egypt, Morocco, as well as established markets like Chile, Mexico. So yeah, we see the evolution of our FarmConnect business to be wherever the large corporate farm investments are happening in gravity-fed irrigation around the world.
All right, thank you. Next question. If we strip out AUD 11 million of aged debtor receipts, operating cash flow would have been negative in FY25. Given the business is currently loss-making, can you explain how does Rubicon return to sustainable positive cash flow, please?
Yeah. So I think the answer to that is obviously to make money, and that's what we're in business for, and so to increase our revenues and leverage those revenues to generate profits and cash to support the business.
You know project revenue of AUD 184 million. How does this translate to revenues in FY 2026?
Yeah, so that's the value of the contracts assigned. Those big contracts will be multiple-year contracts. So yeah, depending on the mix of those contracts that are signed this financial year, and the timing of those throughout the year will dictate how much of that AUD 184 million comes into the revenues for this year. So yeah, certainly won't be. We're not here saying we're going to be recognizing AUD 184 million worth of revenue, let alone just on those 22 projects. Those projects in there range from the smallest of them is probably AUD 1.5 million– AUD 2 million. The largest of them is up around the 30– 35 million. If we're signing a AUD 35 million contract in the early part of the financial year, then the progress of that contract could see a significant part of that recognized throughout the year.
All right, thank you. I think some of this has been discussed, but referring to the call from February 25, as individual understands it, the company said AUD 60 million of revenue was break-even point for FY 2025. The company earned AUD 69 million in revenue in the year and lost AUD 7.5 million at that point. Can you explain the discrepancy?
So yeah.
But we said that AUD 67 million of revenue was the break-even point.
Yeah, sorry, 69.
Can you explain the discrepancy?
I thought you'd said AUD 60 million. I hadn't repeated that comment. AUD 67 million. Look, I think the large part of the answer lies in the fact that the gross margin at that 67–69 should be higher than what we've reported this year. So 41.4% has been depressed by those factors that we spoke about, and probably to the tune of about 2%. I think at that 43.5%, given that revenue base, given that revenue performance, and no China impairment, so no AUD 2.7 million of impairment, and then effectively we would be very close to break-even.
Thank you, Andrew. That concludes the Q&A segment of the webinar. I'll now hand back to Bruce for closing comments.
Yeah, thank you, Ben. Yeah, so we're clearly following up on those last questions. I suppose we're very focused on the metric that matters here. In the end, it's net profit after tax, and that's where we're headed as a business. To get there, we've got to make the investments in this growth. We're not planning this business to be an AUD 69 million business. It's going to be substantially bigger than that. And as we move into those higher revenues, we know the leverage we get from the gross margin as it builds.
We've made the investment in the markets, predominantly the investment we've needed to make in the markets to be able to secure the contracts of those 22 major projects we're talking about, but importantly also deliver on them and achieve the financial results that sort of we as the company and clearly our shareholders are focused on. So yeah, AUD 69 million should have been break-even, generating money. The impacts we had was the China reassessment, which we hadn't anticipated our partner not being involved with that, and the impacts we've said on freight and duties in the US, which we've now been able to price in going forward. So thank everyone for taking interest in Rubicon. We're in a unique position despite some of the challenges we've had about delivering a solution that can really make a material difference globally.
And we're excited to take another step towards that, and we hope to be or expect to be reporting back positively across this year as we deliver on the next set of results. So thank you for your time.
Thank you.