INTERIM REPORT FOR THE SIX MONTH PERIOD ENDED 30 SEPTEMBER ... · PDF fileFOR THE SIX MONTH...

INTERIM REPORT

FOR THE SIX MONTH PERIOD ENDED

30 SEPTEMBER 2016

Contents

1

4

Interim Condensed Consolidated Statement of Changes in Equity 5

Interim Condensed Consolidated Statement of Financial Position 7

Interim Condensed Consolidated Statement of Cash Flows 8

Notes to the Interim Condensed Consolidated Financial Statements 9

G3 GROUP LIMITED AND SUBSIDIARIES

Interim Condensed Consolidated Statement of Profit or Loss and

Other Comprehensive Income

Group Chief Executive Summary

1

G3 GROUP LIMITED

Financial Highlights

Commentary G3 Group is pleased to report a strong trading result for the 6 months ending 30 September, 2016. Highlights for G3’s trading performance for the period include:

Actual EBITDA improved 48.3% to $3.141m compared to the corresponding period the previous year. Underlying EBITDA performance before one-off and abnormal expenses improved 24.9%

Gross profit increased 30.4% to $6.940m from $5.323m

Actual NPAT improved 44.8% to $1.672m compared to the corresponding period the previous year. Underlying NPAT performance before one-off and abnormal expenses improved 16.1%

Total sales for the 6 months increased 37% compared to the previous corresponding period, from $21.8m to $29.9m.

Corporate overheads decreased to $1.050m from $1.458m in the previous corresponding period last year which included $396k of non-recurring costs derived from the NXT listing and acquisition expenses.

Divisional Performance DOCUMENT MANAGEMENT NZ and AUS The New Zealand and Australia based document management businesses have performed well during the

half year period with organic growth, market share gains and increased operating margins.

During August 2016 we acquired Tidy Files, a small document management business based in Melbourne

Australia. Tidy Files has been successfully integrated into our existing Formfile business and has performed

well to date. The acquisition of Tidy Files has been consistent with G3’s strategy to expand its document

management services into Australia leveraging the Formfile service base.

G3 will support these businesses with increased sales investment and future acquisitions as and when they arise.

NZ$'000 Sep 16 Half

Year Result

Sep 15 Half

Year Result

Actual change Abnormal and

one off items

Underlying

Trading Result

Underlying

change

Sep 15

Note: (i)

Revenue 29,887 21,787 37.2% 21,788 37.2%

Gross Margin 6,940 5,323 30.4% 5,323 30.4%

% of revenue 23.2% 24.4% 24.4%

EBITDA (ii) 3,141 2,118 48.3% 396 2,514 24.9%

NPBT 2,217 1,477 50.1% 396 1,873 18.4%

NPAT 1,672 1,155 44.8% 285 1,440 16.1%

(i) Abnormal items in the period to 30 September 2015 relate to one-off costs relating to NXT Listing, acquisition expenses and

business restructure.

(ii) EBITDA is defined as profit before income tax, net finance costs, depreciation, amortisation and ESOP costs.

2

TOURIST COLLATERAL UK The UK division experienced softer sales during the peak UK summer tourist season. However, demand for our tourist collateral product remains sound. In the later part of the UK summer, new business activity has been up on the prior year. Our UK division completed the acquisition of the Inverness based ‘Small World Scotland’ business on 8th December 2016 for an undisclosed amount. Small World Scotland specialises in high value tourist merchandise for distribution to retailers across Scotland and the wider UK. We are very excited by the growth and expansion opportunities that Small World Scotland brings, with its strategic and complementary product offering to our established UK business. We continue to look to diversify the UK business with new products and expanding geographic area. MAIL NZ The New Zealand based business mail brands of NZ Mail, Pete’s Post and Fastway Post performed very well during the period. Increased sales were driven in part by G3 winning substantial new business mail volume in New Zealand and some customers stockpiling prepaid product prior to a postage rate increase by network provider NZ Post on 1st July 2016. This stockpiling had the effect of bringing some sales forward from the 2nd half year into the 1st half. The NZ mail businesses continue to secure new customers and market share gains. RocketMail, a small Auckland based mailhouse and data management business was acquired on 1 April 2016. RocketMail adds a service that is strategic and complementary to our mail-related businesses as well as providing it with an additional high margin market channel that includes the digital delivery of customer invoicing, marketing and reporting communications. We are very excited by the growth and expansion opportunities that RocketMail brings. Since acquisition RocketMail has performed well against expectations. Group Operating Cash Flows Operational cash flows are expected to remain strong throughout the remainder of the FY17 financial year. Dividend No dividend has been declared while the business looks to increase its cash reserves for future acquisitions. Business Outlook Operates in three principal business divisions:

• Document management operations NZ and Australia • Tourist collateral operations UK • Business mail operations NZ

Since the initial start-up phase of our New Zealand based business mail operations 12 years ago, G3 has

grown to over $50m of annual revenue and branched out with unique document management products and

commenced transformational digital workflow services in New Zealand and Australia.

Our progress over the 6-month period to September 30 2016 has been pleasing with notable financial and

strategic highlights. The business continues to do what it said it would do — achieved growth targets for the

period, leveraged its traditional businesses, and successfully expanded via acquisition into document and

data management, and into Australia.

3

Our new Digital Office service suite launched in Australia earlier this year sees us leveraging infrastructure and know-how to diversify into digital data management operations on the back of evolving technologies. At the same time our traditional document management and business mail divisions are proving resilient albeit we experienced a slower than anticipated start to the UK summer tourist season. There is continued and healthy customer demand for these traditional services and we continue to experience margin and market share gains. We continue to develop a solid platform for future growth in our chosen markets. The experienced,

energetic and engaged team at G3 is focussed on executing strategic and leveraged growth for its

shareholders, and has a proven ability to deliver continuous innovation to customers around their business

communication and document management needs.

NXT Waiver

NZX Regulation has granted G3 Group Limited a waiver from Clause 2, Schedule 1A of the NXT Market Rules

in respect of its ordinary shares until 30 June 2017, being approximately 24 months from initial quotation, to

allow G3 Group Limited to have at least 50 shareholders who are members of the public holding separate

parcels of shares of at least a minimum holding, that together represent less than 25% of the shares on

issue.

The waiver was provided on the condition that for the period of the waiver, G3 Group Limited has at least

50 shareholders who are members of the public holding separate parcels of shares of at least a minimum

holding, that together represent at least 23.5% of the shares on issue.

We look forward to further updating our shareholders on our progress and success.

G3’s leadership team;

Directors- Rob Campbell - Independent Non-Executive Chairman Steve Phillips - Independent Non-Executive Director Evan Christian - Non-Executive Director Jason Butler - Non-Executive Director

Executive Team- Mark Brightwell - Group Chief Executive Officer Rob Alker - Chief Operating Officer Les Harvey - Chief Financial Officer

For further information, please contact Mark Brightwell, CEO telephone +64 27 290 2244 or email [email protected]

Mark Brightwell

CEO

22 December 2016


For the Six Months Ended 30 September 2016

30 September

2016 unaudited

30 September

2015 unaudited

Note $’000 $’000

Revenue 1 29,834 21,787

Other income 53 1

Expenditure 2 (27,326) (19,987)

Net finance costs 3 (344) (324)

Finance income 6 4

Finance expenses (350) (328)

Profit before income tax 2,217 1,477

Income tax expense 5 (545) (321)

Profit after taxation 1,672 1,155

Other comprehensive income

Items that may be reclassified to profit or loss:

Translation of foreign operations (232) (116)

Other comprehensive income, net of

income tax(232) (116)

Total comprehensive income 1,440 1,039

Earnings per share

Basic & diluted earnings per share $0.03 $0.03

- 4 -

Interim Condensed Consolidated Statement of Profit or Loss

and Other Comprehensive Income

The above statements should be read in conjunction with the notes to and forming part of the financial

statements


Interim Condensed Consolidated Statement of Changes in Equity


Share capital

Share based

payment

reserve

Foreign

currency

translation

reserve

Retained

earnings Total equity

Note $'000 $'000 $'000 $'000 $'000

unaudited unaudited unaudited unaudited unaudited

Balance at 1 April 2015 5,401 - (30) 4,569 9,940

Total comprehensive income

Profit 1,155 1,155

Translation of foreign

operations(116) (116)

Total comprehensive income - - (116) 1,155 1,039

Transactions with owners of the company in their capacity as owners

Share based payment 138 138

Dividends Paid 7 (430) (430)

Total transactions with

owners of the company- 138 - (430) (292)

Balance at 30 September

2015 (unaudited)5,401 138 (146) 5,294 10,686

- 5 -

______________________________________________________________________________________________________________________

The above statements should be read in conjunction with the notes to and forming part of the financial statements


Interim Condensed Consolidated Statement of Changes in Equity (continued)


Share capital

Share based

payment

reserve

Foreign

currency

translation

reserve

Retained

earnings Total equity

Note $'000 $'000 $'000 $'000 $'000

Balance at 1 April 2016 6,033 345 (123) 6,280 12,535

Total comprehensive income

Profit 1,672 1,672

Translation of foreign

operations(232) (232)

Total comprehensive income - - (232) 1,672 1,440

Transactions with owners of the company in their capacity as owners

Share based payment 207 207

Total transactions with

owners of the company- 207 - - 207

Balance at 30 September

2016 (unaudited)6,033 552 (355) 7,953 14,183

Check against final B/S 5,501

- 6 -


______________________________________________________________________________________________________________________


Interim Condensed Consolidated Statement of Financial Position

As at 30 September 2016

30 September

2016 unaudited

31 March 2016

audited

Note $’000 $’000

ASSETS

Non-current assets

Property, plant and equipment 1,473 1,452

Intangible assets and goodwill 22,498 22,643

Total non-current assets 23,972 24,095

Current assets

Inventories 5,392 1,747

Receivables and prepayments 5,656 6,309

Cash and cash equivalents 563 1,089

Total current assets 11,611 9,145

Total assets 35,583 33,240

EQUITY AND LIABILITIES

EQUITY

Share capital 6 6,033 6,033

Other reserves 197 222

Retained earnings 7,953 6,280Total equity 14,183 12,535

LIABILITIES

Non-current liabilities

Interest-bearing loans and borrowings 8 9,180 9,095

Other payables - 277

Deferred Tax 1,005 929

Total non-current liabilities 10,185 10,301

Current liabilities

Trade and other payables 4,770 7,434

Taxation payable 5 870 674

Employee benefits 423 415

Interest-bearing loans and borrowings 8 5,152 1,881

Total current liabilities 11,215 10,404

Total liabilities 21,400 20,705

Total equity and liabilities 35,583 33,240

- 7 -



Interim Condensed Consolidated Statement of Cash Flows


30 September

2016 unaudited

30 September

2015 unaudited

Note $’000 $’000

Cash flows from operating activities

Cash receipts from customers 31,051 22,080

Cash paid to suppliers and employees (34,216) (19,848)

Income taxes paid (284) (314)

Net cash outflow from operating activities (3,449) 1,919

Cash flows from investing activities

Payment of contingent purchase consideration (486)

Purchase of property, plant and equipment (135) (142)

Purchase of intangibles (115) -

Interest received 6 40

Dividends received 1

Advances repaid 23

Net cash outflow from investing activities (244) (564)

Cash flows from financing activities

Proceeds from borrowings 15,300 3,750

Repayment of borrowings - bank (11,819) (4,000)

Repayment of borrowings - shareholders (145)

Dividend paid - (430)

Interest paid (270) (354)

Net cash inflow from financing activities 3,211 (1,179)

Net (decrease)/increase in cash and cash equivalents (482) 176

Effect of exchange rate fluctuations on cash held (44) (127)

Cash and cash equivalents at beginning of period 1,089 815

Cash and cash equivalents at end of period 563 864

- 8 -



Notes to the Interim Condensed Consolidated Financial Statements


- 9 -

These condensed interim financial statements for the Group are for the six months ended 30 September 2016.

Reporting Entity

G3 Group Limited is a provider of business mail services in New Zealand, sales of tourism collateral in the

United Kingdom and document management services in New Zealand and Australia.

The interim condensed consolidated financial statements have been prepared in accordance with NZ IAS 34

Interim Financial Reporting and IAS 34 Interim Financial Reporting. They do not include all disclosures that

would otherwise be required in a complete set of financial statements and should be read in conjunction with

the annual report for the year ended 31 March 2016.

The interim condensed consolidated financial statements of the Group have been prepared in accordance with

the requirements of the Financial Reporting Act 2013 and Companies Act 1993.

Comparative Figures

The comparative figures are for the six month period to 30 September 2015, except in the Interim Condensed

Consolidated Statement of Financial Position where the comparative figures are for the end of the preceding

financial year ended 31 March 2016.

Accounting policies

All entities within the Group, except for Universal Mail United Kingdom Limited and the entites associated

with the investment in the Formfile Records Management Group Unit Trust (the "Formfile" entities), are

companies incorporated and domiciled in New Zealand and are registered under the Companies Act 1993.

Universal Mail United Kingdom Limited is a company incorporated and domiciled in the United Kingdom. The

Formfile entities are incorporated in Australia.

Basis of Preparation

The accounting policies adopted are consistent with those of the previous year. No new standards and

amendments to standards were applied during the current reporting period.




1 REVENUE 2016 2015

$’000 $’000

Operating revenue

Sales of products 29,118 20,947

Facilities management income 716 840

29,834 21,787

2 EXPENDITURE 2016 2015

Note $’000 $’000

Purchases of finished goods, services and

consumables 25,973 15,840

Change in inventories of finished goods and

consumables(3,648) 88

Facility management costs 397 536

Delivery and freight costs 172 91 Amortisation of brands/trademarks 266 147 Depreciation 108 32 Consultancy 452 549 Salaries and wages (includes directors remuneration) 2,318 1,401 Share-based payment expense 207 138 Property operating lease and rental costs 333 108 Other expenses 749 1,057

27,326 19,987

3 NET FINANCE COSTS

Recognised in profit or loss Note 2016 2015

$’000 $’000

Interest revenue 6 4

Interest expense on liabilities at amortised cost:

- Bank funding (357) (318)

Foreign exchange (loss)/gain 7 (10)

Net finance costs (344) (324)

_____________________________________________________________________________________________

- 10 -




4 SEGMENT INFORMATION

Basis of segmentation

a. nature of the products and services

The Group's reportable segments are:

6 months ended 30 September 2016

unauditedMail NZ

Tourism

UK

Documents

NZ

Documents

AUTotal

$’000 $’000 $’000 $’000 $’000

External revenue 23,570 2,789 2,045 1,482 29,887

Total segment revenue from operations 23,570 2,789 2,045 1,482 29,887

Segment profit/(loss) before income tax 1,675 948 656 (14) 3,266

Specific Segment other income

Other income/ (expenditure)

Net corporate expenditure (1,049)

Group profit before tax 2,217

c. type or class of customer for their products and services

d. methods used to distribute their products or provide their services

Documents NZ: Provision of document management services in New Zealand

Documents AU: Provision of document management services in Australia

- 11 -

Tourism UK: Provision of tourist collateral for retail purposes in the United Kingdom

Mail NZ: Provision of tailored postal services to New Zealand businesses

e. nature of the regulatory environment

b. nature of production process

(3) segments are similar in each of the following respects:

_____________________________________________________________________________________________

The Group's operating segments have primarily been determined with reference to differences in primary

markets and reflect the structure and internal reporting used by the Board, as the major operating

decision maker, and to assist strategic decision-making and allocation of resources.

Operating segments have been aggregated for reporting purposes where the following criteria have been

met:

(1) aggregation is consistent with the core principle of NZ IFRS 8 Operating Segments

(2) segments have similar economic characteristics




4 SEGMENT INFORMATION (continued)

6 months ended 30 September 2015

unauditedMail NZ

Tourism

UK

Documents

NZ

Documents

AUTotal

$’000 $’000 $’000 $’000 $’000

External revenue 16,485 3,393 1,910 - 21,787

Total segment revenue from operations 16,485 3,393 1,910 - 21,787

Segment profit/(loss) before income tax 1,065 1,450 421 - 2,935

Specific Segment other income -

Other income/ (expenditure) -

Net corporate expenditure (1,458)

Group profit before tax 1,477

5 TAX

- 12 -

_____________________________________________________________________________________________

Tax is charged at 28% for NZ operations, 20% for UK operations, and 30% for Australian

operations for the six months ended 30 September 2016 (30 September 2015: NZ 28%, UK 20%,

Australian N/A) representing the best estimate of the average annual effective tax rate

expected to apply for the full year, applied to the pre-tax income for the six month period.




6 EQUITY

Ordinary Share Capital

Foreign currency translation reserve

7

2016 2015

$’000 $’000

No dividends were paid during the period (2015: 0.9

cents per ordinary share) - 430

- 430

DIVIDEND

- 13 -

The foreign currency translation reserve is used to record the exchange differences from the translation

of the financial statements of foreign subsidiaries where their functional currency differs from the

Group's presentation currency.

_____________________________________________________________________________________________

At 30 September 2016, share capital comprised 54,499,395 authorised and issued ordinary shares (31

March 2016: 54,499,395). All issued shares are fully paid and have no par value.

All ordinary shares rank equally with regard to the company's residual assets. Holders of ordinary shares

are entitled to dividends as declared from time to time and are entitled to one vote per share at

meetings of the company.




8

30 September

2016 unaudited

31 March 2016

audited

Note $’000 $’000

Current

5,132 1,865

20 16

5,152 1,881

Non-current

30 September

2016 unaudited

31 March 2016

audited

Note $’000 $’000

9,149 9,087

31 8

9,180 9,095

Total interest-bearing loans and borrowings 14,332 10,976

The face values of loans and borrowings are not significantly different to their carrying amounts.

- 14 -

restricted to an amount of $4.0 million plus interest, costs and other amounts each

undertakings (including goodwill) of all group entites.

• Registered first ranking general security over all present and future assets and

________________________________________________________________________________________

BORROWINGS

Secured bank loans

Other secured loans

• Guarantee and indemnity of the obligations of G3 Group Limited by two of its directors

Other secured loans

Filecorp NZ Limited and G3 Group Limited

Limited by Universal Mail United Kingdom Limited

Secured bank loans

The Group has repaid current bank loans amounting to $11.8 million and received loans

amounting to $15.3 million in the period to 30 September 2016. The Australian dollar loan facility

was revalued due to exchange rate movements resulting in a $152k reduction in the value of the

liability.

The bank loans are secured by the following:

• Cross guarantee and indemnity agreements between New Zealand Mail Limited,

• Guarantee and indemnity of all obligations of New Zealand Mail Limited and G3 Group

• Guarantee and indemnity of all obligations of G3 Group Limited from Formfile

Entities and Letter Box Channel Limited.



For the Six Months Ended 30 September 2016 Remuneration

9

2016 2015

Note $’000 $’000

Related party transactions

Key management personnel compensation

- Short term employment benefits 566 413

- Share based payment expense 136 92

Total 702 505

Directors remuneration is included in salaries and wages in Note 2.

Related party balances

The amounts outstanding with related parties at the reporting date were:

30 September

2016 unaudited

31 March 2016

audited

$’000 $’000

Other related parties

- Loans receivable 17 22

Total balances for other related parties 17 22

- 15 -

________________________________________________________________________________________

RELATED PARTY TRANSACTIONS

During the six months ended 30 September 2016 group companies entered into the following

transactions with related parties who are not members of the Group:

Other related parties are entities in which directors or their immediate family have a significant or

controlling interest.

Evan Christian and Jason Butler are directors of the Group. They have provided guarantees of

certain facilities provided by the ANZ Bank.




10

Carrying amount versus fair value

- Trade receivables

- Trade payables

- Cash and cash equivalents

- Loans and borrowings

11 SEASONAL BUSINESS

12 CAPITAL COMMITMENTS

There are no material capital commitments at 30 September 2016 (31 March 2016: NIL).

13

There are no contingent liabilities at 30 September 2016 (31 March 2016: NIL).

14

- 16 -

The United Kingdom business is seasonal with the bulk of the business occurring during the warmer northern

hemisphere summer months. Approximately 60% of profits for the full year are realised during the reporting

period. The New Zealand operations are also seasonal, with approximately 55% of profit for the full year

reported during the current reporting period.

CONTINGENT LIABILITIES

EVENTS OCCURRING AFTER THE REPORTING DATE

There have been no material events occuring after the reporting date.

________________________________________________________________________________________

FINANCIAL INSTRUMENTS

The Group considers that the carrying amount of the following financial assets and

financial liabilities are a reasonable approximation of their fair value because they

are short term and subject to impairment assessment or attract market interest

rates:

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