Wellington Drive creeps closer to the black as sales climb 27%

Friday 25th August 2017

Wellington Drive Technologies edged closer to a long-awaited profitability as first half sales climbed and margins improved, although the board sounded a warning over cash constraints coming when there could be opportunities to grow.

The Auckland-based company narrowed its loss to $522,000, or 20 cents per share, in the six months ended June 30 from $1.2 million, or 48 cents, a year earlier. Earnings before interest, tax, depreciation and amortisation soared to $1 million from just $45,000 a year earlier, and Wellington Drive generated its first surplus on an earnings before interest and tax basis of $181,000. Revenue climbed to $23.8 million from $18.7 million, while gross margin widened to 24.9 percent from 22.4 percent.

Wellington Drive is forecasting its first net profit for the 2018 financial year, with revenue growth expected to be between 20-and-30 percent, although it has some way to go before it will make a dent in the $112.1 million of accumulated losses it's built up since listing in 2011.

"There are many exciting developments underway, in particular with the launch of our Smarter Cooler offering, the strengthening of our software development capability and the addition of new market leading proximity based digital marketing solutions in partnership with iProximity," chief executive Greg Allen said. "Our continued financial performance improvement, with the company's first ever ebit profit result demonstrates the success of our strategy."

The company, which makes energy efficient motors and control systems for commercial refrigerators, marked its first positive ebitda result in calendar 2016 as a five-year turnaround plan came to fruition, and it's now developing a range of 'Internet of Things' products for large food and retail brands as a second stream for the business.

Wellington Drive's operating cash flow halved to about $300,000 in the six-month period as increased sales and slower payments made a greater demand on working capital, and in June the firm renewed its debt facility with NZX's Smartshares. As at the June 30 balance date, Wellington Drive had drawn down $1.5 million of the $2 million facility, that attracts annual interest of 14.75 percent until September, rising to 15.75 percent thereafter.

"Whilst the company has finalised extended debt support with Smartshares it is envisaged that these funds will be used almost exclusively for working capital management and to support customer growth," chairman Tony Nowell and CEO Allen said in their report. "Whilst the board believes this debt finance is adequate to run the day to day business, it also holds a view that a fast growing technology company requires increased flexibility to support a broad range of growth opportunities" and that "the board and management are continually assessing the best options with respect to further growth capital needs."

The company held cash and equivalents of $1.2 million as at June 30.

The shares climbed 4.7 percent to 22.5 cents, having already gained 33 percent so far this year.

(BusinessDesk)

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