G3 delays planned capital raise

Wednesday 27 July 2016 10:06 AM

G3 delays planned capital raise, says first-quarter margins running below target

By Paul McBeth

July 27 (BusinessDesk) - G3 Group, the NXT-listed mail operations and document manager, has delayed a planned equity raising that would have been done through the Snowball Effect crowdfunding platform and says first-quarter margins are tracking below target due to stockpiling ahead of a planned price hike.

Earlier this month the Auckland-based company said it planned to raise capital through the Snowball platform to help fund its growth, but today said it has shelved that plan, without providing details.

"At this time, we have decided to defer the equity raise initiative that was previously announced," it said.

That statement was included in G3's first-quarter update, which showed gross margins were 19.7 percent and operating margins 18.3 percent in the three months ended June 30, tracking below the 22 percent and 20.2 percent full-year targets respectively.

"Consistent with previous year's price increase announcements, the last being 2014, some customers forward bought postal stock leading up to the price increase," the company said. "As postal product is at a lower margin to other G3 products and services, this pre-purchasing has had the effect of lowering G3's overall gross and operating margins."

The price hike also pushed out G3's inventory turnover, another key operating metric (KOM), which at 34.6 days was longer than the 22-day target.

As an NXT-listed company, G3 faces less onerous disclosure rules than companies on the NZX main board and gives quarterly updates of some key metrics. It still anticipates meeting those targets for the 2017 financial year, it said.

G3 said document management in New Zealand and Australia performed well, though its UK tourist collateral business went through a slow start to the summer.

"We are pleased with the operating performance of the various business divisions across the group against KOMs, although we show caution in our expectation of the UK business performance during this summer season," it said. "We will continue to investigate opportunities to expand the core operations via the acquisition of both complementary and digital-based businesses."

The NXT-listed shares last traded at 81 cents and have decreased 2.4 percent so far this year.

(BusinessDesk)

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