G3 cuts mail processing target 12% on delayed start for new business

G3 Group [NXT: GGL], the mail operations and document management company which is the only listed company on the new small-cap NXT exchange, has cut its annual mail and document processing target by 12%, due to a delay in rolling out a new business.

The Auckland-based group now expects to process 62.1 million units of mail and documents in the year ending June 30, 2016 down from a previous forecast of 73.5 million, it said in a quarterly key operating metrics (KOM) update. In the three months ended September 30, it processed 14.7 million units, compared to 13.3 million units in the June quarter.

"This reduction is due to a delay in the new business rollout from a major New Zealand-based mail customer to enable the previous supplier inventories to be run down," the company said in a statement. "While this delay will impact on units processed in the next [third] quarter, volumes are expected to pick up in the last quarter and into the next financial year."

G3 said gross margin as a percentage of revenue was 23.7% in the September quarter, ahead of its targeted 21.9%. Operating margin, as a percentage of revenue, was 21.8%, ahead of the full year target of 20.1%, and inventory turnover was 17.5 days, compared to the annual target of 22 days.

The NZX's new NXT platform comes with a less onerous disclosure regime than for NZX-listed companies, requiring regular operating metrics updates rather than the continuous disclosure on the main board. NXT will ultimately replace the decade-old secondary board, the NZ Alternative Index (NZAX), which has languished from a lack of investor interest.

G3 was the first to join the new market on June 18, listing its 53.8 million shares at 75c apiece, giving it an implied market value of $40.4 million but will not issue any new shares. G3 shares last traded at 83c.

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, and is chaired by Rob Campbell.

Today G3 said it continued to investigate possible acquisitions to "diversify its core operations" and would make the purchases "as and when it makes sense to do so."

In 2014 the company reported earnings before interest, tax, depreciation and amortisation of about $3.5 million on sales of $30 million, according to the website.

G3 is largely owned by family trusts associated with Evan Christian and Jason Butler.

(BusinessDesk)