G3 Group operates three businesses: a New Zealand-based business mail operation; a unique UK tourist mail business (Universal Mail UK); and document management in New Zealand. The compliance listing on the New Zealand NXT market does not include the raising of any capital and will provide a platform for organic and acquisition-fuelled growth.
Since 2005, G3 Group’s corporate mail business has grown organically and through acquisitions, which include Pete’s Post (2012) and Fastway Post (2013). The UK Mail business began in London in 2009 and the acquisitions made in 2014 (Filecorp and Eureka) have given G3 a presence in the filing and document management business. Several of these businesses were acquired from parties who became the three major shareholders of G3. The acquisition strategy rationale includes combining infrastructure and expertise and building the scale required to undertake further industry consolidation in New Zealand and in Australia and to enter the electronic data management space.
The disclosure document reveals that there has been organic growth in each of the last 11 years; however, it does not disclose the contribution from acquisitions. Since 2005, revenue has increased from NZ$1m to NZ$41m in FY15. The EBITDA margin for FY15 fell to 9.3% from 10% in FY14 due to a higher proportion of earnings from the lower-margin NZ Mail business.
G3 sees its existing high-growth options as the UK tourist mail business and document management in New Zealand and Australia. It believes that there are near-term industry consolidation opportunities in the physical filing, document management and possibly in the mail house space in Australia. However, the most significant growth opportunity remains the yet to be explored digital space. The traditional mail business is expected to continue to slow with some upside from cost out and business aggregation.
The last share price used for an acquisition and for the issue of shares to the independent directors and certain key employees was NZ$0.75. This implies a market capitalisation of NZ$40.4m, which implies a FY15 EBITDA multiple of 11.3x and a FY15 P/E of 15.0x compared with a peer group FY15 P/E of 22.2x and the NZ All Index FY15 P/E of 19.4x.