Sealegs Corporation (NZX:SLG) today announced an unaudited operating profit of $642 thousand for the year ended 31 March 2010. This represents a 174% improvement when compared to the $869 thousand loss in the previous year.
Sealegs CEO, David McKee Wright, says he was elated with the company’s maiden profit result. He said “when you consider the difficult worldwide economic conditions and the destruction within the worldwide marine market, Sealegs has done extremely well. The company’s performance in spite of the economic environment demonstrates the potential of Sealegs in coming years.”
When asked about why the company had performed so well he said the result was attributable to the changes in sales strategy and a reduction in expenses.
Sales strategy during the year was widened and defined to target the amphibious boat opportunity in both the recreational and commercial market segment. Recreational sales continued to perform well, however it was the commercial sector success that validated the new sales strategy.
The focus on commercial sales revealed a significant opportunity in the first responder and rescue market. Worldwide events such as flooding in the Philippines, USA, UK and Malaysia have highlighted a need by governments around the world for a rapid response amphibious rescue vehicle. This opportunity has resulted in excess of $2 million of new revenue from the sale of rescue boats and a twenty fold growth rate.
He went on to say “Sealegs is patented technology which means we do not have any direct competition. Because of this when the company is engaged in a government purchasing cycle we’re assured a strong chance of success.” He said whilst the sales cycles were long and subject to political changes, the strategy was right.
The company is currently engaged in sales processes with the Malaysian Ministry of Defence, Malaysian Fire Department, Indian Police Department Royal, Thai Navy and the Bangkok City Council.
Mr McKee Wright said “US Coast Guard compliance and the commercial sales options which include, all wheel drive and extended run time, has made the product well suited for commercial and government application.” He went on to say “as a result of success to date we have engaged in a specific and targeted sales strategy at the thousands of marine enabled fire departments in the US. The results of this effort will take time but it should be significant.”
He also went on to say “the commercial sales strategy sheltered Sealegs from the devastation within the marine market as a result of the economic environment. Where most companies involved in the marine market have seen drastically reduced revenue results and restructuring, Sealegs has been able to grow market sectors and more importantly become profitable.”
In addition to the commercial sales strategies Sealegs reduced its expenses. Operating and cash expenses were reduced 15% or $795 thousand from $5.216 million to $4.421 million and non cash expenses were down 95% or $4.656 million to $235 thousand. The cumulative effect of both these reductions saw expenses reduced by $5,451 thousand and a positive net result of $406 thousand compared to a prior year loss of $5.7 million.
The net result of $406 thousand was not subject to tax as Sealegs has in excess of $20 million in bought forward tax losses, as at 31 March 2009.
Mr McKee Wright commented on the expense reductions and said “whilst it was difficult to govern the company with reduced resources the benefit from responding to the economic environment is evident in our maiden profit. Now that the company has demonstrated profitability and has a reduced expense base we hope to resume some development projects in order to respond to market demand in the commercial sector.”
Total revenue for the period of $11.4 million, was comparable to the $11.5 million recorded last year. Mr McKee Wright said Sealegs revenue performance was well above the overall marine sector’s performance and demonstrated some very good financial indicators.
Firstly the average unit selling price of the boats improved 3% as a result of government sales and new options targeted at the commercial sector.
Secondly and more importantly gross margin grew from $4.347 million to $5.063 million an increase of $716 thousand. As a percentage of sales, gross margins increased from 37% to 42%. The increase is a direct result of greater in-house manufacturing capability and a consolidation of resources. Sealegs could benefit from further margin improvements through bulk purchasing and offshore production. Both are good options and will be investigated over the course of the coming year.”
The company generated an operating cash flow for the year of $518K. This represented a 152% increase or an improvement of $1.523 million. At balance date the Sealegs had $2.7 million in cash and $1.1 million in receivables.
In April, Sealegs moved to a single manufacturing site to further enhance production efficiencies.
Sealegs Corporation Limited
Results for announcement to the market
Reporting Period Year ended 31 March 2010
Previous Reporting Period Year ended 31 March 2009
Amount (000s) Percentage change
Revenue from ordinary activities NZ$ 11,375 (0.02%)
Profit (loss) from ordinary activities after tax attributable to security holder. NZ$ 407 107%
Net profit (loss) attributable to security holders.
NZ$ 407 107%
Interim/Final Dividend Amount per security Imputed amount per security N/A N/A N/A
Record Date N/A
Dividend Payment Date N/A
Comments: This report is based on un-audited financial statements.