SEALEGS HALF YEAR REVENUE RESULT AND FORECAST UPDATE

SEALEGS HALF YEAR REVENUE RESULT AND FORECAST UPDATE

AUCKLAND, Monday 20th October 2008: Sealegs Corporation (NZX:SLG) has today announced that sales for the half year ending 30th September 2008 were $7.8m, up 73% on the same period last year of $4.5m.

Final half year accounts will be complete early November and are expected to show an operating result within 5% of break even.

In the half year period the company significantly increased production capacity and reduced customer delivery times for new orders.  Sealegs CEO David McKee Wright said “Particularly pleasing was that for the last three months of the half year period, Sealegs delivered good operating profit at a monthly production level of 12 boats a month.”

Looking forward, the company sees the potential for weaker demand due to the global economic situation as the disposable income for luxury goods, such as Sealegs boats, has become very tight.  The result of the deteriorating economic climate has been felt by the company in the form of a sudden and significant reduction in the rate of new orders.

In response to the economic conditions Sealegs will endeavour to widen its international sales base.  Mr McKee Wright said “whilst existing market demand has slowed the global potential for Sealegs remains significant and the current conditions highlight the need to appoint new resellers and seed new markets.”  As part of the international expansion strategy Sealegs is exhibiting at boat shows in the USA over the next two months.

Despite the effort to widen its sales base Sealegs has revised its full year revenue forecast to a range between $11m to $15m and announced it will make an operating loss for the full year.  

Although some operating costs have already been reduced further cost reductions are required.  The current fixed overheads and stock levels mean that further capital will be required to fund cash flow requirements.

Recent international sales activity includes the Sealegs UK distributor Amphibious (UK) Ltd signing a contract to purchase $2m of product over the next 12 months.  

Sealegs is also progressing through a government budgetary approval process with the Malaysian Fire and Rescue department for the procurement of an estimated $10.6m of amphibious flood rescue craft.