A2 shares touch record-high as investors buy into growth story

Thursday 29th August 2013

A2 Corp shares touched a record high 77 cents in trading today after the company boosted sales 51 percent and improved its underlying earnings.

The Sydney-based company, which markets milk products with a protein variant claimed to have health benefits, lifted sales to $94.3 million in the 12 months ended June 30 from $62.5 million, and more than doubled operating earnings before interest, tax depreciation and amortisation to $10.6 million.

Net profit slipped 6.5 percent to $4.12 million, as the company wore losses associated with setting up its British joint venture and year earlier gains from a tax asset and legal settlement rolled off.

The shares recently traded at 74 cents, up 2.8 percent on the day, and have climbed 36 percent this year.

"It's been a very good growth stock, and if they can manage the sales growth they want, it looks like a very good New Zealand success story," said Grant Williamson, director at Hamilton Hindin Greene. "We are starting to see brokerage houses come out with research on the stock now, and more retailer investors are interested in the stock."

Managing director Geoff Babidge said his board is "delighted with the continuing standout performance of the Australian business and encouraged with the development of the new initiatives in the UK and China."

"The prospects of the company's business units are in aggregate consistent with the revenue projections contained in the 2012 private placement memorandum with additional product and market opportunities being pursued," he said.

The board didn't declare a dividend, and is considering whether to dual list the stock on the Australian Securities Exchange.

This month A2 agreed to simply its arrangements with cornerstone shareholder Freedom Foods Group, ending the Australian company's anti-dilution rights in exchange for 400,000 shares, and giving Freedom Foods until March 31 next year to pay up its partly paid shares.

A2's Australian business boosted sales 48 percent to $92.5 million, and reported an 8.1 percent fall in segment profit to $3.63 million. The UK unit contributed a segment loss of $207,000.

The New Zealand unit boosted sales 54 percent to $2.22 million, while segment profit jumped to $6.63 million from $1.23 million a year earlier. A2 is in talks with the sole non-exclusive licensee, whose licence ends in May 2017, for its branded milk in New Zealand as it seeks to become more active in the local market.

A2 made its first shipment of infant formula into China in June, and expects to being selling to consumers from November.

BusinessDesk.co.nz

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