G3 delays planned capital raise

NXT-listed mail operations and document manager G3 Group [NXT: GGL] is delaying an equity raising through the Snowball Effect because its first-quarter margins are tracking below target because of stockpiling ahead of a planned price hike.

Earlier this month the Auckland-based company said it planned to raise capital to help fund its growth, but now says it has shelved that plan, without providing details.

"At this time, we have decided to defer the equity raise initiative that was previously announced," G3 Group says .

The announcement was included in G3's first-quarter update, which shows gross margins were 19.7% and operating margins 18.3% in the three months ended June 30, tracking below the 22% and 20.2% full-year targets respectively.

"Consistent with previous years' price increase announcements some customers forward bought postal stock leading up to the price increase," the company says.

"As postal product is at a lower margin to other G3 products and services, this pre-purchasing has had the effect of lowering the group's overall gross and operating margins."

The price hike also pushed out G3's inventory turnover, another key operating metric (KOM), which at 34.6 days was longer than the 22-day target.

As an NXT-listed company, G3 faces less onerous disclosure rules than companies on the NZX main board and gives quarterly updates of some key metrics. It still anticipates meeting those targets for the 2017 financial year, it says.

The group says document management in New Zealand and Australia performed well, though its UK tourist collateral business went through a slow start to the summer.

"We are pleased with the operating performance of the various business divisions across the group against KOMs, although we show caution in our expectation of the UK business performance during this summer season," it says.

"We will continue to investigate opportunities to expand the core operations via the acquisition of both complementary and digital-based businesses."

The NXT-listed shares last traded at 81c and have dropped 2.4% so far this year.

(BusinessDesk)

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