Morning and welcome to Rubicon Water's investor webinar to discuss the company's FY 2023 results. Presenting today, we have the company's CEO, Bruce Rodgerson, and CFO, Andrew Bendall, who will go through the presentation released today on the ASX. To ask a question, please submit them via the Q&A button at the bottom of the screen, and 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 everyone to our FY 2023 results presentation. So at Rubicon, for those that don't know us, we're a company that's dedicated to addressing water scarcity by working with governments, water utilities, and farmers to optimize the systems they use to deliver water to their farms. We do that by increasing water availability and saving water through the precise management in the delivery systems and agricultural productivity by giving those farmers the water precisely at the time they need it to make their farms as productive as possible. We have advanced technology across hardware and software, and we've got a demonstrated track record of delivering unparalleled efficiency and control. So across over our 27 years, we've got 250 customers globally and growing it year on year.
35,000 of the gate control products that you can see in the background of this slide across 17 countries now, as we build out into the markets, and we've got a few slides describing that as well around where we are in the world and the markets. We have 300 staff globally, and increasingly we're targeting those staff in our growth markets. Importantly, our technology is involved in the delivery of irrigation water to 2 million hectares globally. Over 27 years, our technology across that 2 million hectares has generated approximately AUD 1 billion worth of revenue. Our assessment of our addressable market in the years to come is 140 million hectares. So AUD 1 billion across 2 million hectares and then a realistically addressable market of 140 million hectares, given the requirement for our technology around the world is the market we are chasing.
With a bit of an overview of where we are or where we got to in FY 2023, revenue of AUD 55 million and an underlying EBITDA loss of AUD 8.8 million. Clearly a challenging year on the back of contract delays, predominantly with the key customer. On the positive side, though, in the second half of FY 2023, we generated AUD 5.6 million of positive cash flow, and that's underpinned by a concentrated effort of ours to push our inventory levels lower. Inventory built up for us over COVID with the delayed extensive lead times on the supply chain and also the delays in contracts. So unwinding those inventory levels and unwinding the debtors in our Asia segment predominantly has allowed us to have positive cash flow, which we see continuing. We did make a conscious decision, despite the challenging year, to continue to invest in the growth of the business.
Critical for us is that pipeline of works, that opportunity, that 140 million hectares of irrigation around the world that's going to need technology like ours. As we flagged in our June market update, recent signings in Asia provide for a solid start for us for FY 2024, and we'll talk a bit in the presentation today about our pipeline progress. Importantly for us, there are several projects in our pipeline which have the potential to be transformational, not just for our customers, but also for us in our business, and that's not just in Asia; that is increasingly spreading opportunities around the world. Really importantly as well, which Andrew will go to, is we've just renewed our finance facilities with HSBC. That's happened post June 30, and we expect to return to profitability in FY 2024, be cash flow positive, and achieve sustainable growth moving forward.
So with that, I might introduce our new CFO, Andrew Bendall. Andrew's been with the company now for a few months, but took over as CFO on the 1st of July. So I'll get Andrew to talk to the numbers.
Terrific. Thanks, Bruce. Yes, disappointingly, with the revenue down 15% to AUD 55 million, we see the great majority of that AUD 10 million shortfall flow straight down into our gross margin. As at this stage, a large portion of our operational labor remains fixed. You mentioned earlier our underlying EBITDA of AUD 8.8 million was just within the range or at the better end of the range that was given on guidance on the 3rd of July, but our loss before tax at AUD 13.2 million was AUD 12 million lower than last year and was impacted also along with the shortfall in the EBITDA with increased interest based on the increasing interest costs, and we've also seen that the Australian dollar hasn't depreciated as much in the last year as it had in the previous year, which also helps us.
In terms of the revenue performance, we were down across each of our geographical segments. Ironically, the Asian segment was probably the least of the shortfalls, but the greatest difference to what we're expecting. In terms of ANZ, some of our larger customers' orders were down year on year, which can happen from year to year, and in the rest of the world segment, our Chile sales were down. In terms of the revenue type, we saw a bit of a mixed shift here where we saw our non-hardware sales were actually up year on year by AUD 4.7 million, while our hardware sales were down on the back of the delayed contracts. From a cash flow perspective, the story for FY 2023 is relatively better.
Unwinding of high inventory levels from the previous year, along with some improved debtor collections throughout the year, saw operating cash inflows of AUD 5.6 million in the second half. Even from a full year perspective, while we saw an outflow of AUD 1.4 million, this was a significant improvement year on year. The balance sheet remained strong with total assets at AUD 112 million and net assets of AUD 66 million. Our net debt level at the 30th of June was AUD 20.5 million, which represented a gearing level of 24%. As Bruce mentioned earlier, we were able to secure a new funding line with HSBC just in the last couple of weeks, which we think will serve the business well in terms of the way it's structured and the associated covenants for it moving forward. Thank you.
Thanks, Andrew. So I'll go to talk a bit about the business and where we are. The slide we have here is from the U.S. Geological Survey, so the U.S. government. It's actually an interactive map that is quite impressive in the way you can drill down to any part of the world and see the breakup between rain-fed croplands and irrigated croplands. So from a Rubicon perspective, our markets are where the green is. So predominantly over the last 27 years, our revenues and our business has come from here in Australia, and you can see Australia's 2.6 million hectares, so it's only a small portion of the globe, which is why we have X, why our future is in moving to the large irrigation areas of the world.
So I do like this map, and you can drill down, which I'll do in a second, but you can see why we're in India, why we're in China, about 70 million hectares in both of these, why we're in Europe and North Africa, particularly South America, and why we're in America. So having a look at California here, the main markets for us are the Central Valley in the west of the U.S., is the Central Valley, California, and this little bit down here, which is one of the most productive agricultural areas in the world, the Imperial Irrigation District and the Colorado River of the states. And as I say, it's a big productive area. The water stress is just these are just articles here from recent weeks around the crisis facing the west of the U.S.
The shortage of water in Lake Mead and the Colorado has led to the Biden administration allocating $4 billion to water efficiency programs in the Colorado River alone. This is importantly for us. Our business in the U.S., which we've been in since 2005, has really lacked that government investment in water savings technology across the irrigation districts. So it's a good business for us. It's been built up on local business cases, working with irrigation districts predominantly about what our tech can do, funded on basically the availability of water and the resale of that water. We are now seeing a bit of a milestone in, for the first time, substantial funding coming from the federal and various state governments for programs around the modernization of irrigation and the freeing up of water resources to keep water higher up in the catchments and the storages.
So we see that as a real growth area for us going forward. Another key area for us into the future will be Central Asia. The Aral Sea Basin is under severe water stress. We have been operating here for the last few years with signature sort of pilot projects in both Uzbekistan and Kazakhstan. Uzbekistan, as we announced some time ago, we've signed an MOU with the Uzbekistan government around our technologies plans for the whole of water management in Uzbekistan. And in Kazakhstan, the government there has just released a roadmap for agricultural water efficiency and productivity, which is very much aligned with the use of technology such as ours to automate these regions. We have an excellent partner in this area, and we see this as a future growth for us. The water stress is immense.
As I can see again from recent weeks, Central Asia's water crisis. Uzbekistan, just the crisis that's hitting all this area here. The big water user is irrigation. It just has to be managed better, and we are really well placed with our feet on the ground here. Then if we go into Europe, so our business is based in the Ebro Basin here in Spain. And a big part of our potential, though, is in the Po River Valley, particularly in Italy. So we have some signature projects here. We've got a good pipeline of projects coming through, some signings late last year and this year to date here in projects that are making a massive difference through here. That Po River Valley is one of the most intensive area of canal-fed irrigation in the world.
Also in Morocco, we have some really exciting opportunities as we do develop. Also have opportunities developing in Egypt. So again, the water stress from recent weeks, just a snapshot of the challenges across all those markets. Again, irrigation water is by far the biggest water user, and the efficiencies are poor, and the opportunity is huge. So for us, just recapping, Australia here is where we're at the majority of our historical revenues have come, but the future revenues are going to come from these large areas of gravity-fed irrigation around the world where we have the infrastructure in place and the water stress is there. So we can see now the investment we're making in these places.
So here, over the last few years, we've had a big ramp up in our markets where we're self-performing, so the U.S. and Chile, South America predominantly, and also in these growth markets where we're investing in. So big ramp up in Europe on the back of the funding that's starting to come through, particularly in Italy and North Africa. And importantly here, not just our own staff, but in Morocco and Egypt, we have some really fantastic partners which are on board with us and bidding for substantial work. Likewise, our Central Asia approach, whilst we have a couple of our staff on the ground, it's really based around our partner relationships and building the project delivery capacity through them in Central Asia.
Interestingly, in China, our model there has changed from a self-delivery model where Rubicon signing contracts to really working with our Chinese partners, particularly our partner LGY in Ningxia. And so that's led to a reduction in our staff. The numbers here are based around our production facilities, but our commercial staff and technical staff has backed off as we are working behind our partner. In India, clearly a massive opportunity for us, really significant projects delivering massive benefits in the projects we've delivered to date. So we're continuing to ramp up our presence there, both in terms of project delivery, commercial, and also we're building a software development hub in Delhi.
If I have a quick look to our pipeline, we've had modest growth in the overall pipeline, but our focus has really been around pushing through our sales funnel from the early engagement around potential business cases to really developing solid business cases to seek funding, and then through to pricing and contracting. Obviously, the end of this funnel is the contract sales. We've really seen good progress, which is our internal assessments. Importantly, in the near-term work, we've also seen a bigger spread. It's not as Asia-dominated as it has been as we're seeing these opportunities, particularly the U.S. with the government funding coming through Europe, North Africa, Central Asia. We're seeing a really good mix of a broader mix of the areas in which we've invested in those regions.
So the other part of our investments is that 140 million hectares, which is our addressable target market. How do we deliver? How do we not just win those contracts, but deliver? So historically, our supply chain and our manufacturing has all been out of Australia, and until relatively recently, we've exported to everywhere around the world. Over recent years, we've developed a supply chain out of China, which is a Rubicon-owned supply chain. So we're contracted for the supply, and then we have a manufacturing facility or two manufacturing facilities, Ningxia and Gansu, where we supply the components in and can build locally. And we also have our JV facility where the supply chain there is contracted to our JV facility with Medha Servo Drives based out of Hyderabad, and so we can produce out of there.
So the next slide's a bit busy, but it shows what the future looks like. So out of Australia, now we can still produce finished goods, but out of Australia, we will have the custom projects, which are typically custom products. Every project's got some specials or anything, and we've got the technology here and the system, so we see a healthy future for Australia delivering the special gates. The standard products more and more will come out of India and China and in local production facilities. So we've got the U.S. up and running now. And the U.S. here, as it builds products, it can take the IP from Australia, so the high-value instrumentation, electronics, and tech out of Australia. It'll take components and subassemblies out of predominantly India, but also can from China.
And then, for its local market, we're building locally close to the markets. We can deliver quickly and more cost-effectively. If the market continues to grow, we expect Chile to be the next assembly and production facility. And then, as each of the markets around the world grow, we can have U.S.-type facilities close to the markets supplied from components from either Australia, India, or China. And the key thing here is volume. So, we don't have machine centers anymore that are capacity limited by what we can produce. We've got our componentry now coming from predominantly the automotive industry type supply chain in India and China. So, our volumes are unlimited in terms of being able to meet the demand going forward. The other part, the key part of our business is software, and we have continued to invest in our software.
That's a big part of our capital commitment now and moving to newer frameworks, web-based deployments that allow us to move to a SaaS-type offering where we can get into customers that may not have had the capital or the infrastructure to have heavy deployments on premises. And this investment will continue. We're not through the full investment in upgrading our full software suite, but that has seen us over the last 12 months have a record year in new software deployments, predominantly across the U.S. as our software is getting into these customers. So we've seen that in some of the recurrent funding. It's not a importantly, software is a great entry point. Our software stands on its own, and we can get our software into these districts and deliver benefits.
But every time we deploy our software, then that is a foot in the door for us being able to offer our customers value from broader solutions-type offerings that lead to further software and hardware sales as we automate the districts in which our software is present. So we see this as a key building block for the future. So just summarizing before we throw to questions, clearly FY 2023 did not roll out as we had planned. It was challenging, and it was predominantly on the back of heavily impacted by delayed contract signings. Our customers are governments and government-funded projects with irrigation districts, as we've flagged previously. Hard to predict the timing, and that impacted us last year. Despite that, we made a really conscious decision to continue the investments in sales, in market, in our globalization project, in our product developments, the foundations of future success for us.
As we flagged, the SaaS pipeline has made progress, particularly in the moving towards contracting of our sales opportunities. And importantly, our cash flow, we've turned that around from some of the difficulties COVID-related and the buildup of inventory as a result of the excessive lead times and the difficulty in acquiring products. And also, importantly, unwinding the debtors in our Asia segment, which we do expect to continue. HSBC, our bank, has been a key partner for the business, fantastic bank to work with. And importantly, our new facility there is fit for purpose. It's structured around the position we are as a business where we have signing these large projects, and our facilities now are predominantly working capital-based, which really do work for us as we contract and deliver on these large projects going forward.
HSBC continues to be a key partner for us, and we signed this new facility in August. As we flagged in our market update in June, orders across China and India are 15.5, underpins our start to FY 2024. And the further large contract signings coming are going to give us the result we're expecting this financial year. Over time, the realization of pipeline opportunities is the key for us across multiple districts. These large multi-year programs are going to allow us to give greater earnings stability, which I know everyone's looking for. So I'll probably then throw back to you to take questions on any of that.
Thank you, Bruce and Andrew. Just a reminder, if you'd like to ask a question, please do so by the Q&A button at the bottom of the screen. A question: You look well-resourced across the globe now. Outside of India and China, what are the key two or three regions to help the company deliver strong growth going forward?
Yeah, clearly, the U.S. is a massive market. So we've been well-established there. It's a key part of our business. But as I described, the missing piece has been the severe water stress that has led to substantial government funding to get water resources back into the storages rather than being wasted through the poorly managed irrigation. The equivalent of really the Murray-Darling Basin here in Australia, government invested in technology with the big water users, the irrigation districts, to tighten up their operations and improve water efficiency. So that is now happening in the U.S.
So while the U.S. is a really solid part of our business in that core part, there is now investment coming through, as I said, the Biden Colorado River alone, $4 billion U.S. have allocated for water efficiencies in the Colorado Basin. The other part of the U.S. is our on-farm business. So our new product suite we've released to date, we've only released that in the U.S. and in Australia. But the big corporate farms, particularly in that Central Valley and Southern California, Arizona area, again, there's a lot of funding coming from irrigation efficiencies there, and we see a big growth in our on-farm there. The other parts are in India and China, clearly Europe, Europe's slow market in terms of turning projects around, but we've been there long enough that pipeline's moving through the stages to contracting.
But it's the North Africa stuff that's, I think, will underpin the business in these big multi-year programs. Morocco, we're well engaged there and several projects which we expect to contract in the coming years. And one of those particularly is a really significant one that's in that near-term pipeline. Also, Egypt, the scale of the irrigation development that's happening in Egypt is just mind-boggling. I've just returned from there. I've met the minister. We have an office there now in Cairo. We're working in a partnership with an Egyptian company, and we have several projects in the pipeline there. The scale of the investment in Egypt is mind-boggling at the moment in terms of water resources. The other one I'd say is Central Asia, but I've already spoken about that.
There's multiple places around the world where there's substantial multi-year large projects, the likes of which we've had in India and China in the pipeline.
Thank you, Bruce. Next question. In context of pipeline comments and the AUD 15 million of India and China contracts to commence the new year, what does the mix of hardware, software look like in FY 2024 revenue in percentage terms compared to FY 2023?
With that, being able to give specific numbers, the mix will go back to hardware. Clearly, we had last year saw a lower project revenue. Clearly, if the services-type contract around support and design of systems became a larger portion. The project signings this year and those signings we spoke about in the Asia segment in late last financial year is predominantly hardware, the hardware component of system solutions.
So we will see this year the delivery of product dominating in percentage terms, but we see the software continuing to grow healthily. And the important thing with the software is its recurrent revenues, and it's the entry point for the larger solutions. So it can be an entry point for the larger solution sales. Thank you, Bruce. Next question. How reliant is Rubicon's business model on ongoing government initiatives? Will lagging governments without water-efficient strategies negatively impact your target market? Yeah, I mean, the signing of new large projects is dependent predominantly on government funding. The scale of the investment made by these irrigation districts typically around the world is, well, I suppose the point is irrigation water supply around the world is typically a subsidized business. So outside Australia and the U.S., there's really not a user-pays philosophy for the supply of irrigation water.
So it is reliant on government funding. But what does happen is, once we have very long-term relationships with our customers. So as we build that base of projects and system solutions, there's a natural continual rollout of those programs, which is less dependent on the big allocations from customers. And there's ongoing revenues from maintenance support and software in each of the customers as we build out that contract book. I think we saw that in Australia last year. ANZ it was down. But that's the evolution of the business there. The big project work, we've been straight, and it was in our prospectus. The big project work in Australia is really coming to an end because our technology is pretty much across the major customers. There's still some substantial project work to come.
But we're still all those customers are still then turned to recurrent revenues in terms of support contracts, product renewals, and system upgrades. So yeah, so certainly the growth of the business on these large projects is dependent on governments putting money in to fund large-scale reform projects.
Well, thank you, Bruce. That concludes the Q&A segment of this webinar. I'll now hand back to Bruce for closing remarks.
Yeah, so thank you, everyone, particularly our existing investors. I thank you for your patience. Clearly, last year was not what we wanted to deliver. But I and our business are very confident on where we're going. The role we're going to play with our technology throughout these systems is very clear to us, and the opportunity has never been bigger.
I understand from an investor point of view, we need to start delivering, and we will return to profitability this year, and we're very focused on funding the business to deliver on the future growth ahead, so I thank you for your time.