Sealegs Reports Another Year Of Record Growth

Media Release

Sealegs Reports Another Year Of Record Revenue Growth

AUCKLAND, Tuesday 27 May 2008: Sealegs Corporation (NZX:SLG) today announced record operating revenue for the year ended 31 March 2008.

The listed amphibious marine craft manufacturer reported operating revenue for the full year of $9.6 million, an increase of 92% on last year’s figure of $5 million. Operating deficit (before options expense) for the year was $278,000 compared with $976,000 for the previous year - a 72% improvement.

Sealegs CEO David McKee Wright says he was pleased to announce the company had doubled its staff, taken on another 1000sq m factory, delivered 112 boats and was within 3% of profit breakeven (before options expense).

He reports the company found shipping 112 boats and revenues of $9.6 million provides sufficient margin to market, develop and support the Sealegs business model. “Sales beyond these numbers should provide profits that will vary according to how fast the company develops new markets, new products and sales territories,” he says.

The total deficit for the year of $1.7 million compared with $1.05 million for the same period last year was, says Mr McKee Wright, attributable to the newly adopted International Financial Reporting Standards (IFRS) which require staff share options to be valued and expensed.

Due to the grant date of the options and the period of share trading at that time (July 2007) the options expense valued up to in excess of $4 million, which needs to be recorded over the vesting period. Should the scheme be valued at today’s market values, then the expense would be half of what has actually been recorded. Timing and an inequitable accounting standard (IFRS) will mean the next three years of operating profit will have a theoretical expense booked against it. This expense will not affect cash flow.

The board and management of Sealegs intend to continue to grow the business at a controlled rate in line with the projections included in this release. At this rate, the company is confident of achieving the targeted margins and not compromising the quality of product that Sealegs is renowned for.

A second 1000sq m factory has recently come on-line which is dedicated to the fabrication of hulls. The new factory and the investment around it will ensure the consistent supply of hulls to the high quality Sealegs expects, thus speeding up the time to market and lowering the cost of new model development.

The business plan for 2009 provides for an investment in development of up to $1.3 million for the year ending 31st March 2009. This investment will be capitalised in accordance with the company’s development policy and amortized over the period of expected benefit of the new development. This development will go into the design of new models, improved technology, new accessories and market led initiatives.

Sealegs enters its new financial year with orders for 102 boats already pre-sold, representing approximately $10 million in future revenue and is ramping up to invest in development by next financial year.

Looking forward Sealegs is expecting to grow revenue to $18 million by this time next year lifting to $35 million by March 2011. Based on a growing order book, a larger work force and increased controls over the production processes; as successfully achieved in previous years, the targets seem realistic and achievable.

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