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G3 ahead of margin targets in 3Q but lags on inventory turnover, eyes further acquisitions

Monday 30th January 2017

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G3 Group, the NXT-listed mail operations and document manager, was ahead of its annual margin targets in the third quarter of its financial year, though it remains behind on its inventory turnover target.

The Auckland-based company reported gross margin of 26.5 percent and an operating margin of 23.8 percent in the three months ended Dec. 31. The NXT-listed firm provides quarterly updates on particular operating measures relevant to its business under the NXT market's disclosure regime, which is less onerous than for the NZX's main board. That took year-to-date gross margin to 24.2 percent, and the operating margin to 22 percent, both above G3's annual target of 22 percent and 20.2 percent respectively.

"As in Q2, margins in Q3 are strong due to the favourable mix of higher margin document management revenues vs lower margin business mail," G3 said. "We expect to meet all key operating milestone (KOM) targets for the year ended March 31, 2017."

G3's inventory turnover, its third KOM, was 43.1 days in the quarter, an improvement from the second quarter's 63.5 days. For the year to date, sales are taking 34.8 days, slower than the 22 days targeted for the 2017 year.

In the six months to Sept. 30, 2016, G3 reported net profit rose 45 percent to $1.7 million, on a 37 percent lift in sales to $29.9 million. 

The company was the first to join the new NXT market in June 2015, listing its 53.8 million shares at 75 cents, and has since expanded via acquisitions. It entered document management agreements with brands Filecorp and Eureka in October 2015, completed the acquisition of Melbourne-based Formfile Records Management at the beginning of its fourth quarter that year and acquired Rocket Mail, an Auckland-based data management and mailing house operation, in a transaction that settled on April 1, 2016. Also in 2016, it bought Tidy Files, a small document management business based in Melbourne, in August, and acquired Small World Scotland, a tourist collateral business, in December.

"We continue to be well pleased with the operating and financial performance of the various business divisions of the group year to date," the company said. "As outlined previously, we continue to investigate opportunities to expand core operations via the acquisition of both complementary and digital-based businesses. The group will pursue such growth opportunities when it makes sound commercial sense to do so."

The stock recently traded at 62 cents and has fallen 25 percent in the past year.

 

BusinessDesk.co.nz

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