News blog
Supercart
- BY: Andrew Hore |
- POSTED: 17/07/2009 |
Plastic supermarket trolleys supplier Supercart has widened its range of products through the purchase of moulds from a US-based former rival.
Supercart has been on AIM for more than five years and has made slow progress during that time. The purchase of moulds and intellectual property rights from its financially distressed US rival Rehrig International provides Supercart will help it to compete more effectively in North America and other countries around the world. Supercart has raised £1.5m at 10p a share in order to finance working capital and the purchase of those assets. A mixture of existing and new shareholders put up the cash.
Supercart is paying $690,000 for the Rehrig moulds and will pay up to $800,000 more depending on sales of Rehrig products. Supercart is effectively buying the business, which has supplied around 10m trolleys over the years. Production will be outsourced to Supercart’s supplier in Michigan. Unlike Supercart, Rehrig supplies a plastic/metal hybrid trolley. Surprisingly, Rehrig does not appear to have lost customers and Supercart has already won new contracts since manufacturing was up and running at the end of May 2009.
The Rehrig deal means that Supercart has a range of 13 trolleys and four hand baskets. In the past Supercart has found it difficult to attract customers because it did not have a full range of products. It now has a full range of both plastic and plastic/metal hybrid trolleys – which normally cost around $100 each. This will make it easier to persuade customers to buy Supercart trolleys and baskets.
Supercart floated in February 2004 and raised £4m at 50p a share. At that time, house broker Charles Stanley forecast that Supercart would make a profit of £800,000 on turnover of £10.75m in 2005. Turnover for the three years between 2006 and 2008 came to little more than that 2005 turnover forecast and Supercart has never reported a profit.
Although Supercart is based in Sevenoaks, the South African market has always been the main earner for the business. Supercart has a 60% share of the supermarket trolley market in South Africa and this is a profitable part of the business, which helps to finance some of the cost of expansion in other countries.
Trolleys are produced in South Africa, Australia, Portugal and Michigan in the US. This covers the main regions that Supercart is targeting. There are 2.5m trolleys sold in North America each year and a similar number in Europe. Supercart has never had significant quality problems with its trolleys, whereas Rehrig was partly brought down by quality problems – along with its high debt levels.
The £1.5m raised by Supercart will improve its balance sheet. Venture Holdings, which owns 35.7% of Supercart, has lent the company $690,000 at an annual interest rate of 4.02% to enable it to buy the Rehrig assets prior to the share issue. The loan is repayable after two years.
In recent years cash has been invested in new moulds for trolleys. At the end of 2008 there was £1m in cash on the Supercart balance sheet, offset by financial and lease liabilities of £2.44m. The cash outflow from operating activities was £1.61m in 2008.
The benefits of the Rehrig purchase will not be seen until the second half of 2009. Supercart lost £1.2m on revenues of £4.81m. There are no forecasts for this year but it seems reasonable to assume that Supercart is unlikely to do well enough to breakeven this year. However, the figures should improve this year.
A full year’s benefit from Rehrig could mean that 2010 is much better, though. Longer-term, Supercart should benefit from a move from metal to plastic supermarket trolleys but it is difficult to predict how quickly that shift will happen.
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