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Sealegs, amphibious boatmaker, sails on to first ever profit; shares soar

Tuesday 11th May 2010

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Sealegs Corporation, the amphibious boatmaker, announced its first-ever operating profit since listing on the NZX in 1994. The shares surged 29%. The Auckland-headquartered manufacturer and marketer of aluminium hulled boats capable of 10 kilometres an hour on land and 60kph on water said it has turned the corner with a $642,000 profit in the year ended March 31, from a year-earlier loss of $869,000 loss.

The company has a patented system of hydraulically motorised, steerable and retractable wheels for its boats. Sealegs chief executive David McKee Wright said the profit turnaround, achieved on similar sales to last year of about $11.4 million, was attributable to changes in sales strategy and a reduction in expenses.

The shares advanced 5 cents to 22 cents on the NZX today, the highest since late January. The stock topped 50 cents in May 2008.

“When you consider the difficult worldwide economic conditions and the destruction within the worldwide marine market, Sealegs has done extremely well,” McKee Wright said. “While most marine market companies have seen drastically reduced revenue results and restructuring, Sealegs has been able to grow market sectors and more importantly become profitable.”

The company’s sales strategy now encompasses both the recreational and commercial market segment, with the latter market revealing significant opportunities in the first responder and rescue market. Recent flooding events in the Philippines, the US, UK and Malaysia have highlighted government needs for a rapid response amphibious rescue vehicle, resulting in over $2 million of new revenue and a 20-fold growth rate he said.

Sealegs’ operating and cash expenses, combined with non-cash expenses reduced by $5.45 million to a net positive $406,000, compared to last year’s loss of $5.7 million. At the same time the boats’ average selling price improved 3% as a result of government sales and commercial sector options McKee Wright said.

Overall, gross margin grew to $5.06 million from $4.35 million, which as a percentage of sales was a lift to 42% from 37%.

“The increase is a direct result of greater in-house manufacturing capability and a consolidation of resources,” he said. “Sealegs could benefit from further margin improvements through bulk purchasing and offshore production,” both of which will be investigated over the coming year.

In April, Sealegs moved to a single manufacturing site on the North Shore. At its end of March balance date Sealegs had $2.7 million in cash and $1.1 million in receivables.

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