Rivers Of Gold

In The Spotlight: Rubicon Water Ltd (ASX: RWL)

The Rubicon River in Victoria's Northeast rises on the western slopes of the state’s Alpine region and flows into the Goulburn River. For decades, it has held a special place in the hearts of trout anglers across the nation.

In 1995, its name was chosen from more than 40 Victorian river names jotted on a whiteboard in a Melbourne office by the five founders of a business they called Rubicon Water.

“The added attraction was that sort of historical link to “Crossing the Rubicon” in forming a business,” now says co-founder and chief executive, Bruce Rodgerson of the centuries old phrase which colloquially means going beyond the point of no return.

Today Rubicon’s technology solutions accurately measure and account for water, and improve the reliability, flexibility, timeliness and accuracy of water supplies to farms across the world.

Over nearly 30 years Rubicon has delivered over $1 billion in projects and services across 22 countries, but is best known for its Murray Darling irrigation system in Australia, where its automated measurement and control system has delivered significant water savings for irrigators.¹

Rodgerson, who has been CEO since 2010, describes the secret sauce of the business as its vertically integrated approach, making it the sole end-to-end technology provider in the gravity irrigation space.

“We have to build the technology ourselves so we have a very heavy focus on Research and Development.  The instrumentation has been designed and built in house.  We have also had very strong academic relationships, especially with the University of Melbourne.  The university still quote us as being one of their most successful industry collaborations,” he says.

Chairman Gordon Dickinson, a former UBS Australasia chairman who has spent 20 years on the Rubicon board, describes the entrepreneurial culture of the firm as “part work, part campus-like”.

“A very high percentage of the people who have joined the firm have been engineering graduates, usually with some post graduate qualification, people who are intellectually interested in the problems we solve.”

Rodgerson has had technology in his blood since the days he was a young engineer at Victoria's Rural Water Corporation, where he worked on automation technology to cut waste in irrigation in the mid-1990s before then Premier Jeff Kennett abolished the agency.

The decision spawned the birth of Rubicon Water.

He says water has been one of the last utilities in the world to welcome technology because for usually conservative farmers, change is difficult.

Dickinson, who studied at agricultural college and has always owned farming properties during his decades working in the finance sector, puts it another way.

“You are going from something which was physically, manually controlled where somebody would go and open a valve or a gate with their hands,” he says.

“Yes, it was not particularly accurate and it gave you no data that you could use for other purposes. But you have been swapping from that to something in the cloud on socially important infrastructure. So it's a slow decision process for a lot of people.”

But this is where the opportunity lies for Rubicon beyond its Australian roots, especially in many developing parts of the world where inefficiencies in the water supply chain remain and governments are wanting to invest to bring their systems up to world class standards.

Rubicon has increased its presence overseas over the past decade to a point where international revenues now account for more than 70 per cent of the total, but opportunities still remain in North America, Europe, North Africa, Central Asia, India and China.

In the United States alone, in the past financial year Rubicon achieved a remarkable 200 per cent increase in orders. 130 separate orders from 77 different customers included a notable A$4.5 million contract for its FarmConnect™ solution, which marked its largest on-farm project to date.¹

Rodgerson says the growth reflects the strong demand for Rubicon’s irrigation automation technology and the positive outlook for both the on-farm and off-farm segments in the US.

In Europe, where Spain, France and Italy are the most advanced markets, Rodgerson has just returned from two weeks in North Africa and Spain where he saw four customers who have deployed Rubicon technology, which has made a significant difference to their operations.

He says there is also a massive opportunity in Egypt, which is looking to irrigate 3 million hectares of desert land. The so-called “New Delta” is considered the largest in the history of Egyptian agricultural projects.

“We have a technical base out of Europe that can support these developing markets in North Africa,” he says.

Rubicon is also learning from the bets it made in India and China, that were cruelled by the COVID pandemic.  

A strategic review of the latter market is close to being finalised.

“What China taught us is that you don’t want to be too comfortable in a business that is delivering interim results. You have to be continually aware of the risks as things go forward. But China will still be part of our future. I'm still positive about our future in China in a restructured form,” Rodgerson declares.

“But we can't go into a place like China and do what we did in Australia. We need local partners, and we need to China-ise our products and systems there.”

In India, which also needs technology to solve massive water resource problems, he says the firm plans to lessen its exposure to working capital and payment risks going forward.

In August this year Rubicon completed a $16 million capital raising, which received strong support from new and existing institutional and high net worth investors, including commitments from the board and key management personnel.

“All the people that have been on the journey understand the proposition and can see the opportunity if we execute properly,” Gordon Dickinson says.

Co-founders Gino Ciaverella, Dave Aughton and Tony Oakes, and a handful of early backers remain investors in the business.

The funds from the raising are being strategically allocated to reduce existing bank debt and repay director loan facilities, as well supporting the working capital needs to execute significant international projects.

Dickinson says the group has been investing in growth since its IPO in September 2021, resisting the temptation to cut costs for short term gain.

“So we've held the line on the investment, which we think was the right thing to have done. The proof will be as we announce contracts. But its taken us a year longer than we might have thought to convert that investment into material extra revenue,” he says.

This has impacted the share price over the past year, but it has recovered strongly over the past month.

“With the share price, we understand as well as anybody the frustrations of 12 months slower progress than expected. We can talk to people about all the things that we can see coming towards us, but ultimately people will need proof of that.”

Rodgerson says he has a close working relationship with his chairman and the board.  

He and Dickinson speak 2-3 times per week and enjoy what he terms “an excellent communication flow”.

Looking ahead, he says the great opportunity for Rubicon lies in the 300 million hectares of irrigated land globally which is still managed incredibly poorly.

“There is such a huge opportunity there to apply technology and achieve the water savings and the increased agricultural productivity that our technology can do,” he says.

“My vision for the future of this business is that we will become the technology partner of choice to manage the infrastructure that runs more than 40 per cent of the world's fresh water deliveries every year.”

About the Company

Rubicon Water Ltd (ASX: RWL)

Rubicon Water Limited designs, manufactures, installs, and maintains irrigation automation software and hardware in Australia, New Zealand, Asia, and internationally. The company offers network control solutions, such as total channel control, low energy pipeline, site management, and water and energy efficiency solutions; flow, water level, and climate measurement solutions; and operations software solutions. It also provides surface irrigation, irrigation automation, and precise irrigation scheduling solutions. Rubicon Water Limited "was founded in 1995 and is headquartered in Melbourne, Australia."

Board of Directors & Management

• Mr. Gordon William Dickinson, (Chairman)
• Mr. Bruce Rodgerson, (Chief Executive Officer)
• Mr. David John Aughton, (Executive Director)
• Ms. Lynda Kathryn Elfriede O’Grady, (Independent Non-Executive Director)
• Mr. Anthony Thomas Morganti, (Independent Non-Executive Director)
• Mr. Iven Mareels, (Independent Non-Executive Director)

Footnotes

1. For more details, visit source here.