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Mail operator G3's profit margins above target, volumes fall

Two acquisitions made.

Sophie Boot
Thu, 28 Apr 2016

NXT-listed mail operations and document manager G3 Group [NXT: GGL] held its profit margins above target in the fourth quarter of the financial year, made two acquisitions and lifted volumes by 29%.

The company processed 16.7 million items in the three months ended March 31, up from 12.9 million in the December quarter. It reported a gross margin of 21.5% and an operating margin of 19.4%, both slightly lower than in December.

However, its year-to-date gross margin of 22.9 % and operating margin of 20.8% were both above G3's annual target of 21.9% and 20.1% respectively.

G3 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.

The company processed 58.5 million items in the year, having previously said it wouldn't reach its annual target of 62.1 million items. Its inventory turnover was 20.9 days in the quarter and year-to-date, faster than 22 days targeted for the 2016 year.

"Our continued focus on financial margin and stock control saw the company perform well against the planned gross margin and inventory KOMs (key operating metrics) for the quarter," G3 says.

"This increase (in items processed) has been due to major new customer gains in the New Zealand business mail division and strong operating performances from both the UK tourist and New Zealand document management divisions."

G3 was the first to join the new NXT market in June last year, listing its 53.8 million shares at 75c apiece. The stock recently 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. It entered document management agreements with brands Filecorp and Eureka in October last year and is chaired by Rob Campbell.

G3 completed the acquisition of Melbourne-based Formfile Records Management at the beginning of the fourth quarter, and will launch Formfile's Digital Office, an electronic document sharing service, in New Zealand in the 2017 financial year.

It also acquired Auckland-based Rocket Mail, a data management and mailing house operation, in the period. As that was completed on April 1, it did not have an impact on G3's fourth-quarter results.

"Rocket Mail adds a strategic and complementary service to our mail-related business as well as providing it with an additional market channel that includes the digital delivery of customer invoicing, marketing and reporting communications," the company says.


Sophie Boot
Thu, 28 Apr 2016
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Mail operator G3's profit margins above target, volumes fall