Mareterram Limited - Year End Results Announcement
Mareterram Limited (ASX: MTM) has announced that its NPAT of -$1.7m was in line or slightly better than the Prospectus forecast of -2.97m, largely as a result of assumed timing differences with the acquisition date of the Food Services Division. The results was also impacted by transaction costs associated with the proportional takeover by Sea Harvest.
Sustainable Australian agribusiness, Mareterram Limited (Mareterram ASX : MTM) today announced its financial results for the full year ended 30 June 2016 and confirmed that it had achieved its Prospectus forecast NPAT for FY2016. Mareterram listed on the ASX on 6 January 2016.
- Sales revenue of $16.30 million compared to Prospectus $20.96 million, with the variance largely driven by delay for acquisition date for the Food Services Division;
- Statutory Reported NPAT of -$1.71 million compared to Prospectus -$2.97 million;
- Underlying NPAT of -$0.42 million compared to Prospectus -$0.59 million(1);
- Results achieved despite transaction costs associated with Sea Harvest’s proportional takeover;
- First prawn harvest under Mareterram management progressing well at mid-point of season.
The results for the year ended 30 June 2016 cover the transformative period where MTM established itself as a sustainable Australian agribusiness company. The acquisitions of NorWest Seafood and the Food Services Division of the Craig Mostyn Group were completed during this period, which has resulted in a new focus and direction for the Company.
Revenue impacted by timing measures
- Prospectus sales included $3.5 million of sales in December 2015, however completion of the acquisition of Food Service Division did not occur until 18 December, which was after the majority of Christmas sales had occurred. The business sold only $0.5 million in December, leaving a gap of $3 million;
- Sales of $1 million of Shark Bay prawns, crabs and scallops were delayed until July 2016, as a result of regulatory delaying of the opening of the fishing season (with a corresponding delay in the closing of the season);
- A poor European potato harvest impacted the availability of Mydibel chips that were available for sale, with an impact of $0.3 million, and
- Sales of $0.3 million relating to low-margin product lines such as Barramundi and Reef fish, were deleted from the products the Company elected to sell.
Gross margin impacted by lower sales
The Gross Margin was below Prospectus forecasts in both dollar and percentage terms. The majority of the dollar variance was due to the lower sales as outlined above. The major reasons for the percentage variance were:
- The reallocation of indirect selling & distribution costs from Overheads to Costs of Sales in the actual results, and
- The delayed sales of Shark Bay products, which are our highest margin sales.
Lower overheads offset lower revenue
Overheads were significantly below Prospectus forecasts, to the extent that they more than offset the reduced sales and margin. The key overhead savings were:
- Reduced salaries and wages costs by hiring fewer staff than were forecast in the Prospectus, in both the Fisheries and Foods businesses.
Statutory NPAT in line with forecasts
The Statutory Reported NPAT of -$1.7 million exceeded Prospectus forecast of -$2.97m. The better NPAT result was achieved despite revenue being $4.6m (or 22%) lower than the forecast in the Prospectus.
Underlying NPAT impacted by transaction costs and gains on the value of the fishing fleet
The underlying NPAT of -$0.4 million exceeded Prospectus forecast of -$0.59 million. The underlying NPAT was impacted by transaction costs associated with the Sea Harvest proportional takeover, the value of performance rights as well as unrecognised tax losses due to the failure of the Continuity of Ownership Test and the likely failure of the Same Business Test. Countering this, there was a $3.1 million gain, reflecting a revaluation of the NorWest fishing fleet.
The acquisition and integration of the NorWest Seafood and Food Services Division businesses has gone smoothly, as reflected in the reported results.
Looking forward, MTM continues to see opportunities for expansion in the protein sector. Pricing for seafood remains strong in both the domestic and export markets.
MTM will continue to carefully consider acquisition opportunities that provide the ability for scale and leverage of the other parts of the business.
Mareterram CEO, David Lock, said “The results were encouraging, given the Company had the unexpected costs of dealing with a proportional takeover offer from Sea Harvest as well as it being the first prawn harvest under our management.
“With the Sea Harvest offer now complete and committed as a supportive shareholder, we look forward to continuing our growth strategy as a leader in the sustainable protein sector.”
(1) Underlying NPAT excludes listing costs, transaction costs relating to Sea Harvest’s proportional takeover offer, vested performance rights, key management sign on fees and options, pre-listing losses, unrecognised tax losses and a gain on bargain purchase. A detailed reconciliation is appended to this announcement.