Sealegs turns to full-year profit

Sealegs [NZX: SLG], the amphibious vehicle maker, turned to an annual profit after adopting a new strategy, lifting its sales and profit margin.

Net profit was $507,576 in the year ended March 31, from a loss of $2.4 million a year earlier, the Auckland-based company said in a statement.

The company's newly adopted original equipment manufacturer (OEM) hull strategy, where Sealegs makes a hull fitted with its own technology which is then used by another company, lets it use an existing manufacturer's scale to reduce fixed costs, it said.

Annual revenue rose 7% to $18.6 million as gross profit margin increased to 28% from 19%, though the company sold 98 craft, slightly fewer than 101 in 2015. Of those, 14 were OEM hulls fitted with Sealegs technology, compared to one in 2015, while the company also sold 13 amphibious enablement kits, up from eight a year earlier.

Sealegs received more than $2.5 million in orders from boat manufacturers in the six months to September 2015, it said in October when it announced a plan to focus on hull manufacturers in the US and Europe.

"The success of the OEM hull strategy has created a wider sales demand for amphibious boats and paved the way for similar strategies in other countries, which in time should produce the same result – reduced fixed costs and increased sales demand," chief executive David McKee Wright said.

In November 2014, Sealegs turned to founder Mr McKee Wright to fill the void left by then-chief executive David Glen. Mr McKee Wright took up the job on an interim basis and also re-joined the company's board.

"The result is especially pleasing as it demonstrates the ability for the company to generate positive cashflows, fund its development and, most importantly, make a profit," McKee Wright said. "After the 10-year journey of amphibious boating, being able to deliver both a profit and our 1000th craft in the same year is a great achievement"

The cost of sales fell 3.4% to $13.3 million, while administrative, distribution and marketing expenses all dropped. The company's chairman Eric Series said the board had taken "tough but necessary restructuring actions" in the year.

The board did not declare a dividend. The shares gained 4.6% to 11.5c and are unchanged this year.

(BusinessDesk)

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