MGL 0.00% 0.0¢ mercer group limited

Ann: FLLYR: MGL: Mercer Group well positioned for growth

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    • Release Date: 29/08/14 08:32
    • Summary: FLLYR: MGL: Mercer Group well positioned for growth
    • Price Sensitive: No
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    					MGL
    29/08/2014 08:32
    FLLYR
    
    REL: 0832 HRS Mercer Group Limited
    
    FLLYR: MGL: Mercer Group well positioned for growth
    
    NEWS RELEASE dated 29 August 2014
    
    Mercer Group well positioned for growth
    
    Mercer Group Limited (Mercer) announced today an after tax loss of $0.5m for
    the year ended 30 June 2014 after achieving (EBITDA) earnings of $1.0m for
    the full year*.  This result is in line with the previous market guidance for
    the year.  The Company has invested during the 2014 year in new staff and
    associated costs needed to create a platform for future growth.  The Company
    is committed to this growth strategy, but recognises it has affected
    near-term earnings.
    
    Highlights over the year include:
    
    - Signing a license agreement with a large US corporation for the S-Clave
    technology.
    - Three customer sites in North America are now running the new Titan
    equipment; all three are pleased with the performance of Titan and will be
    ordering more equipment.  New distribution partners have been signed in North
    America and Europe, and Titan has hired a General Manager, a key technical
    sales person and additional design resource.
    - Significant improvement in Health & Safety.  The company has now had over
    12 months without a Lost Time Injury.
    - Total Income growth of $2.0m, 5.2% higher than the 2013 year.
    - Improved Banking facility in place with the BNZ.
    
    Stainless Division
    
     This division comprises the fabrication workshops in Christchurch and New
    Plymouth, an operation in Nelson and a branch in Brisbane, Australia.  The
    division is a fabricator and manufacturer of equipment, predominantly in
    stainless steel for the food industry. Titan Slicers is included within this
    division. The division reported sales revenue of $27.7m, similar to the prior
    year.
    
    The business underwent some considerable change during the year, with a new
    team added into Christchurch to manage and manufacture the build of Titan
    slicers.  Additional resource has also been added into New Plymouth to allow
    for the growth of Aico packaging equipment.  In the Titan business, a General
    Manager has been appointed along with a key technical sales person and other
    support staff.
    
    The current order book is strong with good workloads into the third quarter
    and negotiations underway through until May 2015.  We have secured packages
    of work for Symons Transport, the Pahiatua dairy expansion, Synlait dryer
    project and Westland Milk Products.
    
    The progress of Titan in North America is very exciting for the company, with
    three customers now running the new Titan equipment successfully, meeting the
    production targets and surpassing customer expectations.  The company has
    orders for two slicers currently in place with a target this year to exceed
    sales of 12 slicers.
    
    Interiors Division
    
    This division manufactures in New Zealand and supplies sinks, basins, tubs,
    toilets, laminate, solid surface material and other similar products to
    joiners, merchants, fabricators and other manufacturers in New Zealand and
    via distributors into Australia.  Mercer sells the Wilsonart brand of
    laminate in the NZ market.
    
    The New Zealand business had a poor 2014 year with a change in General
    Manager and the development of the new tight radius sinks taking much longer
    to implement than had been expected.  Revenue was $8.4m versus $8.2m in the
    prior year.
    
    The Sinkware plant is now able to manufacture the new tight radius sinks
    commercially (highly sought after in the domestic kitchen market), staff
    numbers in the plant have been increased, and a new plant manager appointed.
    The sales team is fully in place, the restructure is complete and much
    improved earnings budgeted.
    
    Trading in the Australian market has been hard with a secondary distributor
    going into administration in January and only recently being replaced: this
    was compounded by a relatively strong New Zealand dollar which impacted our
    competitiveness against mainly Chinese imports.  The Australian Government
    has recently issued an anti-dumping notice, in which the Commissioner has
    determined, "there appears to be sufficient grounds for the publication of a
    dumping duty notice in respect of sinks exported to Australia from China".
    The duty is collectable from 13 August 2014, and ranges from 19% to 61%,
    depending on the supplier.  Mercer is working though our primary Australian
    distributor, Argent Australia Pty Ltd, to grow sales in that market.
    
    Mercer Medical
    
    Mercer Medical is a division supplying equipment and related products and
    services for sterilization, washing and disinfection.  Mercer has
    successfully introduced MMM equipment into New Zealand.  In addition the
    Company has secured the remaining business and assets of Med-Chem which was
    in liquidation.  For a small outlay, it has provided Mercer some more scale
    in NZ and an increased breadth of equipment to sell into the hospital sector.
     Revenue for this division was $3.6m (2013: $2.7m).
    
    Mercer Technologies (R&D)
    
    This division finalised a license agreement for its S-Clave technology with a
    large multinational company for the North American market that injected a
    $0.8m net upfront payment into Mercer. Following this injection, Mercer has
    decided to build its own capability to take S-Clave to market over the next
    two years.  The Callaghan Institute, after a thorough due diligence process,
    has committed $1m to the project.
    
    Mercer is currently increasing its S-Clave staffing and expects to invest at
    least $1m itself over the next two years into this technology. The company
    believes a significant portion of the total business value is now
    attributable to this intellectual property.
    
    The Company has other R&D projects underway, including the sale of the first
    BetaTest into USA, customer trials for a new benchtop autoclave that will
    shortly go into production, and customer discussions about the Company's
    cartonless cheese technology.
    
    Corporate
    
    During the year Mercer negotiated new banking facilities totalling $9.6m: at
    year-end the Company had headroom of $3m in its facility, albeit this can
    swing by $1.5m within a month. The Company has $1.25m of issued options that
    can be exercised in December 2014.
    
    The Company was required to revalue its land and buildings during the year:
    this has resulted in a Balance Sheet gain over previous book values.
    
    Outlook
    
    The Company was focused on improving operating performance in 2014 and fixing
    key aspects of the underlying business units.  The Company believes it made
    good progress and expects to see the benefits of this with much improved
    trading performance from its business units in 2015.
    
    At the same time, the Company invested heavily into Titan Slicers and S-Clave
    in particular, to move these two exciting growth engines forward.   Earnings
    resulting from these investments will be more immediate for Titan, whilst
    S-Clave will take a few years to provide significant earnings uplift.
    
    This coming year, the Company is anticipating improved earnings over 2014 as
    a result of continued revenue growth.  The Company is targeting revenue
    growth of at least 10% over 2014.  The Company expects to invest around $1.2m
    in plant and equipment and intangibles in FY15.  The Company does not expect
    to pay a dividend in 2015.
    
    For further information, please contact Rodger Shepherd, Group CEO on +649
    837 7540
    End CA:00254569 For:MGL    Type:FLLYR      Time:2014-08-29 08:32:24
    				
 
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