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