Business mail firm kept margins up in third quarter but volume lagged

NXT-listed business mail and document manager G3 held its margins above target in the third quarter of the financial year, while delays from a new bulk mail customer and a December lull left processing volumes below expectations.

The Auckland-based company processed 12.9 million items and reported a gross margin of 21.9% and an operating margin of 19.8% in the three months ended December 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 23.5%, and the operating margin to 21.5%, both above G3's annual target of 21.9% and 20.1% respectively.

The company processed 41.8 million items in the first nine months of the financial year and has previously said it won't reach its annual target, instead expecting 58.5 million units. Its inventory turnover was 18.3 days in the quarter and year-to-date, faster the 22 days targeted for the 2016 year.

"The ongoing focus on margins and stock control saw the company perform well against the planned gross margin and inventory KOMs (key operating metrics) for the quarter," G3 said. "However, the number of items processed was less than expected following a further deferral by a new major low-margin bulk mail business customer, together with a relatively quiet December month."

G3 was the first to join the new NXT market in June last year, listing its 53.8 million shares at 75 cents apiece. The stock recently traded at 83 cents.

The company is made up of New Zealand Mail, Send, Pete's Post and Fastway Post, which provide business mail services, and Universal Mail, a UK-based tourist stamp operation. The company entered document management agreements with brands Filecorp and Eureka in October last year. It is chaired by Rob Campbell.

This week G3 completed the acquisition of Australian records management firm Formfile, and the company today said it's investigating "a number of opportunities to diversify its core operations via the acquisition of complementary businesses."

(BusinessDesk)