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Mercer Group records strong revenue and earnings growth

Tuesday 25th August 2020

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Highlights for the 12 months to 30 June 2020:

• Revenue of $51.6m, an increase of 35% over the prior year

• Automation 81% of group sales revenue vs 61% for the prior year

• Automation revenue increased 79%

• EBITDA $2.4m a 199% increase on the prior year’s EBITDA of $0.8m

• After tax profit was $0.9m, an increase of $1.9m on the prior year.

• Milmeq acquisition completed for a value of $50,000 and the repayment of the $1m interest free vendor financing

Overview

The 2020 financial year was a positive year for the Mercer Group, with increased revenue, a more diversified business and a return to profitability. The acquisition of the Milmeq Chilling and Freezing business has performed very well with strong sales and profitability, and has also given the Group access to the Australian red meat sector for the H&C automation capability and put more volume through the Mercer Stainless workshops.

We have continued to progress our strategy of transitioning Mercer Group towards a technology and automation led future. The majority of our business today is the design and supply of automated systems to the food sector globally. This has seen our business grow by over 80% in the past two years and return to profitability.

The S-Clave continues to be a focus for development, albeit slower than anticipated. We continue to make positive progress towards the commercialisation of this exciting sterilisation system.

Financial Performance

In the 2020 financial year, revenue increased 35% to $51.6m, driven by a $18.5m revenue increase in the Automation business. The Automation business reported revenue of $41.8m, which was 81% of total group revenue.

The full year contribution of Milmeq products was a key driver to the year on year growth, which aligns with our stated strategy of being an automation lead business. This also changed our revenue profile to be more Australasian domiciled. This increasing diversification of products and markets is another strategic goal that we continue to work on.

The Stainless business had a difficult year with several customers delaying investment decisions due to the uncertainty from the pandemic, and revenue reduced by $5m.

EBITDA of $2.4m, was a $1.6m improvement on the prior year with a strong contribution from the Automation business. We continue to drive initiatives to improve EBITDA margins, which will be a focus over the next period.

Finance costs (excluding finance costs for leases) were $0.287m down from $0.319m which continues the trend in lower average drawn debt levels and the positive cash flows from operations.

The after-tax profit for the year was $0.93m, which was an improvement of the prior year’s $1.0m loss.

Closing net debt (excluding lease liabilities) was $1.27m which continues the trend of lower average drawn debt for the year. The closing net debt reflects the repayment of the Milmeq vendor financing advance of $1m during the year.

Our banking facilities have been renewed and in line with our improving performance the facilities have been extended for two years to September 2022.

Outlook. A period of consolidation and performance

Having nearly doubled the Groups size in the past two years, for the 2021 financial year we are seeking to consolidate our growth and profitability to position the Group for the next phase of our growth.

We have good wokflows today across the H&C, Milmeq and Mercer Stainless businesses and our forward sales pipelines remain robust. Due to COVID-19, we are having to adjust the ways in which we deliver and sell our solutions offshore. This is being done through increasing the technology involvement in the sale process, as well as the appointment of a sales agent in the US. We have appointed Scan American Corporation (Scan AM) to represent us in the North American meat processing and pharmaceutical sectors. Scan AM have over 40 years’ experience in selling solutions into these sectors and will allow us to retain and grow the momentum we have in these new industries. We will continue to sell into the cheese sector directly.

We are confident that a drive for automation in the sectors we target will continue. There is increasing demand for innovative automated solutions in the food processing industry that allow businesses to be more efficient in the delivery of their products. This is what we aim to do through the design and delivery of products that increase food safety, improve health & safety and meet return hurdles. COVID-19 has changed the conversation to a positive degree as businesses are seeing the value in automated systems that can continue to operate in such environments.

Source: Mercer Group 



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