Announcement

HALFYR: SKL: Skellerup reports record first half and increases guidance 08:31am 
SKL
18/02/2021 08:31
HALFYR
PRICE SENSITIVE
REL: 0831 HRS Skellerup Holdings Limited

HALFYR: SKL: Skellerup reports record first half and increases guidance

Skellerup reports outstanding earnings growth for first half and increases
full year FY21 earnings guidance

Skellerup announced today a record unaudited net profit after tax (NPAT) of
$19.5 million for the six months ending 31 December 2020 and increased its
full year FY21 NPAT guidance to $33 to $37 million.

Key points for the six months ending 31 December 2020
o Revenue of $136.6 million, up 11% on prior comparative period (pcp)
o Earnings before interest and tax (EBIT) of $27.6 million, up 53% on pcp
o Agri Division EBIT of $15.3 million, up 56% on pcp
o Industrial Division EBIT of $15.5 million, up 52% on pcp
o Corporate Costs of $3.3 million, up 64% on pcp
o Net profit after tax (NPAT) of $19.5 million, up 61% on pcp
o Operating cash flow of $35.1 million, up 33% on pcp
o Net debt of $13 million down $15.5 million on FY20 year-end
o Interim dividend of 6.5cps (an increase of 1.0c per share), up 18% on pcp
o FY21 NPAT forecast in the range of $33 million to $37 million.

CEO David Mair said he was very pleased with the earnings growth achieved
across all businesses. "We are focused on our core strategy to deploy our
expertise to design and develop innovative engineered products that deliver
real solutions to OEM customers. We continue to work closely with customers
to clearly understand their requirements and challenges to rapidly develop
and deliver prototypes followed by standards-compliant product."

Mair noted that the first half NPAT was boosted by approximately $0.5 million
due to the impact of Covid-19 and Brexit. "Production constraints caused by
Covid-19 caused some deferral of sales from the prior year into the first
half of the current year. In addition, uncertainty over Brexit related
disruption saw some customers increasing purchases in December 2020 providing
an additional earnings boost for the first half of FY21. Our leaders continue
to lead and manage around the impacts of Covid-19 very well. We have seen
some project timelines for new products extend but despite this, we have
successfully moved into production with new products and customers in
Australia, the USA and Europe."

Skellerup's Agri Division achieved a record EBIT of $15.3 million, up 56% on
the pcp. Revenue grew 18% with increased dairy rubberware sales in
international markets (particularly into Europe), increased rubber footwear
sales in NZ and a full 6-month contribution from Silclear (acquired in
November 2019). Mair said operational improvements were also a significant
contributor to earnings growth. "We have made further improvements in the
efficiency of our operations at Wigram. Improvements in cycle times has
enabled better inventory management to smooth out the peaks and troughs of
manufacturing and changes in shift patterns has been key and delivers
sustainable earnings improvement."

Skellerup's Industrial Division also achieved a record EBIT of $15.5 million
up 52% on pcp. Revenue grew by 7% which reflected increases across the
Division but most notably increased sales of roof flashing and plumbing
products in Australia and U-Dek marine foam decking in the US, Europe,
Australia and New Zealand. Mair said the improvement in all parts of the
Industrial Division was the result of improvements in all areas. "Our returns
have improved because of product mix, new business, better operational
execution and reduced costs. Our leaders are focused on moving time and
resources into areas where the largest benefits can be achieved, and we
continue to have a strong pipeline of new business which will underpin growth
in future years."

Corporate costs of $3.3 million were up $1.3 million due to provisioning for
costs associated with defending a claim against a business Skellerup sold in
2008 and increased performance related employee expenses.

The excellent first half result meant that expectations for the FY result had
increased. Skellerup now expects to deliver FY21 NPAT in the range of $33
million to $37 million. This is an increase on the range of $30 million to
$35 million advised in October last year. "We are experiencing extended
shipping times and increased freight costs due to congestion and
availability. We have also seen some increases in raw materials and will be
impacted by the stronger NZ dollar. All of these factors will have some
impact in the second half of the year. However, we have taken early steps to
manage these risks and will continue to ensure we are able to meet our
customers' needs."

Chair Liz Coutts said the outstanding first half earnings, record operating
cash flow of $35.1 million and increased expectations for the full year,
allowed the Board to declare an 18% increase in the interim dividend to 6.5
cents per share, imputed 50% (the same as in the pcp).

"During the first half of the year, Skellerup has again demonstrated we have
a robust business that is generating earnings and cash flow growth from
delivering critical products to our customers around the world. The Board is
proud of the contribution from our global team, particularly considering the
significant challenges many face across the world. We remain focused on
ensuring Skellerup's team remain well supported as we target continued
investment to grow sustainable earnings and shareholder returns."

For further information please contact:
David Mair
Chief Executive Officer
021 708 021

Graham Leaming
Chief Financial Officer
021 271 9206
End CA:00367757 For:SKL Type:HALFYR Time:2021-02-18 08:31:17

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