Steriliser hopes scrub out dividend in the shorter term

ALAN WOOD
Last updated 05:00 11/12/2013

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Mercer Group says it is unlikely to pay dividends in the short term.

Instead the stainless steel manufacturer wants to reinvest in its technology, including its "breakthrough" sterilisation process announced to the market earlier this week.

The company, in which Christchurch businessman Humphry Rolleston is an influential shareholder, yesterday told shareholders it wanted to raise $2 million to spend on further developing its sterilisation product.

Earlier this week the NZX-listed firm announced it had licensed the "S-Clave" to a North American corporation which would help commercialise the product for United States and Canadian hospitals.

Mercer chief executive Rodger Shepherd said Mercer also wanted to develop the vacuum-packed bag sterilisation product for the Australasian and SouthEast Asian markets.

It had not determined how the funding would be raised, but it was unlikely to be from shareholders.

Mercer also had a target of increasing the amount of "headroom" in its banking facilities for investment from $1m now to $3m by June 30, 2014. That money would be a "war chest" for potential bolt-on acquisitions.

It could also potentially be used for developing the S-Clave, and fund five or six research and development staff to work on the system for the next two years.

"We're exploring some funding ideas around that, both government support and other funding."

The commercialisation process could include Mercer working with hospitals or district health boards to trial the S-Clave in a working situation.

Asked by a shareholder how long the "long-suffering" investors would have to wait for a dividend, acting chairman Paul Smart said the company was continuing to invest in its growth.

"The board does review the dividend potential on an annual basis, but it's probably a little early [for dividends] at this stage."

Mercer shares yesterday closed 1 cent weaker at 20c, having gained 2c in the previous session after announcing the North American licensing agreement.

Shepherd said Mercer missed a revenue growth target of $10m in the financial 2013 year over 2012, reporting growth of $5.5m.

This financial year the company was not setting a revenue target, but aimed to beat 2013's profit of $778,000, Shepherd said.

Mercer had secured a significant amount of dairy tank and silo work.

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