Belmont-based mineral sampling equipment manufacturer Essa Australia Ltd has increased its net profit by 79 per cent to $3.2 million, slightly exceeding the company's earlier guidance.
Belmont-based mineral sampling equipment manufacturer Essa Australia Ltd has increased its net profit by 79 per cent to $3.2 million, slightly exceeding the company's earlier guidance.
The full text of a company announcement is pasted below
Essa Australia Limited ("Essa" or the "Company") is pleased to announce a record net profit after tax of $3.252 million for the year ended 30 June 2007, an increase of 79% over the previous corresponding period. This represents earnings per share of 7.39 cents. The full year profit was achieved on a 57% increase in sales revenue from $18.1 million last year to $28.4 million.
The financial performance comfortably met the Company's earlier guidance for 2007 which was for net profit after tax in excess of $3.0 million on sales revenue in excess of $27 million.
The Company has declared a fully franked final dividend of 3.0 cents per share which brings total dividends for the 2007 financial year to 4.5 cents per share fully franked. This represents a payout ratio of just over 60% which is in line with Essa's dividend policy. The Record Date for determining entitlements to the final dividend is 17 September 2007, with the dividend to be paid to shareholders on 2 October 2007.
Essa also recorded strong net operating cash flows for the year of $2.051 million compared with $1.471 million in the previous year.
Review of Operations and Performance
The Directors are pleased with the substantial improvement in the Company's operating performance in 2006/07. The record result reflected the benefits of previous initiatives undertaken by management against a backdrop of continued growth and expansion in the global mining and resources sector.
Essa experienced particularly strong demand for its standard and sampling equipment in line with the increasing development of iron ore resources in Western Australia.
The company improved profitability through better controls over the use of contracted labour and the outsourcing of components and non-critical manufacturing in order to reduce costs and maintain delivery schedules. The significant growth experienced by Essa has also necessitated the addition of new employees in various key areas. These initiatives have enabled Essa to increase its manufacturing efficiency and provide additional capacity to meet expected increases in future demand. The recent expansion of the Company's warehousing facility at Bassendean in Perth should also assist with these objectives.
Another highlight for the year was Essa's further expansion in high growth overseas markets. In particular, the South American market continues to offer strong growth prospects. Essa opened an office in Brazil during the year with the intention of establishing a manufacturing capability later this year. The new facility will allow Essa to take advantage of its established reputation in the iron ore industry. Essa also recorded some significant sales of sample preparation equipment into Russia.
The Company made good progress during the year with the development of its business in the area of sample automation. Pre-contract acceptance testing for a $7 million laboratory automation system to a world leading laboratory group is presently underway and should be completed shortly. This project will have a positive impact on Essa's performance in the current financial year.
Effective 29 September 2006, Essa acquired the business of STACE, a specialist company in maritime repair and testing services and engineered fabrication. This business improved its performance in the second half of the financial year as expected. Overall, STACE contributed revenue of $2.685 million and a net profit before tax of $0.161 million for the nine months since its acquisition.
The group employs a total of 113 employees.
Outlook
Essa's traditional markets continue to be buoyant, with activity in the resources sector globally likely to remain strong for the foreseeable future.
Essa remains focussed on its core businesses which provide multiple growth opportunities in the following areas:
- further organic expansion in the standard equipment and sampling equipment areas from continued growth in the mining industry, as well as an increase in recurring revenue from wear and spare parts as the installed equipment base of the Company's customers expands;
- continuing expansion into key overseas markets, especially in South America through the new Brazilian office and Russia;
- growth in sample preparation automation equipment, a new developing market with favourable long term industry trends;
- organic growth and expansion into mining, oil and gas in the maritime repair and testing services and engineered fabrication division; and
- the potential acquisition of complementary businesses should these opportunities become available.
In summary, Essa has a number of well defined expansion opportunities within a very favourable operating environment.
These factors provide the Directors with confidence that a further increase in profit in 2007/08 will be achieved.
