Mercer first-half loss widens; plans to split remaining businesses

Monday 29th February 2016

Mercer Group, the stainless steel fabricator and manufacturer, reported a wider first-half loss as it restructured the business and sold unprofitable units, and plans to split up its remaining two divisions.

The Auckland-based company posted a net loss after minorities of $4.5 million, or 1.43 cents per share, in the six months ended Dec. 31, from $36,000, or 0.01 cents, a year earlier, it said in a statement. The latest loss included a $2.1 million restructuring cost and a $1.5 million deficit from the medical and interiors divisions, leaving it with a stainless steel fabrication unit and a technologies segment aiming to bring its S-Clave sterilisation product to market.

Mercer now wants to split those two remaining divisions into separate entities, saying they have different capital and resource requirements.

"We are currently exploring options for both business units with a view to maximising shareholder value and allowing the businesses to execute on their own potential," the company said. "Options being considered include the sale of the S-Clave into a new entity with new capital being raised to fund it, potentially in Australia, and the possible sale of the stainless steel division."

The shares dropped 13 percent, or 0.6 of a cent, to 4 cents, valuing the company at $12.5 million.

The directors noted there was a "material uncertainty" as to Mercer's ability to continue as a going concern over whether Bank of New Zealand will continue to provide the required funding.

Splitting the businesses is expected to release capital to reduce its current debt, with $2.7 million overdrawn bank account and $8.5 million of borrowings as at Dec. 31. That includes $1 million owed to substantial shareholder Humphrey Rolleston's Gresham Finance, which comes due in July this year.

"In the short-term we continue to have the support of the BNZ and Gresham Finance," Mercer said.

The company is also considering its options for two properties worth $5.7 million, one of which is subject to a material earthquake claim expected to be completed within the next three months, it said.

Mr Maurice Greenough, an Investment Adviser at Equity Investment Advisers ltd said “It is difficult for any advisor to recommend this stock when a loan is due in July and there is no obvious method of payment at this time . Most advisors would wait and see how matters develop ."

BusinessDesk.co.nz

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