MAD
28/05/2014 09:08
FLLYR
REL: 0908 HRS Energy Mad Limited
FLLYR: MAD: Energy Mad releases its FY2014 results
Media Release 28 May 2014
Energy Mad releases its FY2014 results
Energy-efficient light bulb manufacturer Energy Mad has released its
preliminary results for the twelve months ending 31 March 2014.
Energy Mad delivered operating revenues of $7.5 million for the 12 months
ending 31 March 2014, compared to $9.2 million for the 12 months ending 31
March 2013.
The main cause of the fall in revenue was the lack of repurchase orders from
Walgreens in the United States as they sold through their initial stock. This
saw the United States revenue fall to $0.2 million for the 12 months ending
31 March 2014, compared to $2.5 million for the 12 months ending 31 March
2013.
Walgreens stock has now fallen sufficiently for them to have already placed
two reorders totalling $0.14 million with Energy Mad for delivery in FY2015.
The Australian revenue fell to $4.0 million for the 12 months ending 31 March
2014, compared to $4.6 million for the 12 months ending 31 March 2013, as a
result of one large customer who reduced their orders by $1.4 million.
In contrast, the New Zealand Direct Installation revenue grew to $2.9 million
for the 12 months ending 31 March 2014, compared to $2.0 million for the 12
months ending 31 March 2013.
The European revenue grew to $0.4 million for the 12 months ending 31 March
2014, compared to $0.02 million for the 12 months ending 31 March 2013.
In November 2013, Energy Mad wrote a $2.0 million deferred tax asset off its
balance sheet.
This was written off because of the uncertainty of timing of sales orders and
the loss for the six months ending 30 September 2013.
At the time Energy Mad stated that this tax asset was not lost and could be
utilised when Energy Mad became profitable, as long as Energy Mad maintained
a 49% minimum continuity of shareholding between the beginning of the period
in which the associated tax losses were earned and the end of the period in
which they are offset.
Energy Mad has been advised that one of its long-standing international
shareholders may sell their remaining shares in Energy Mad (as at 19 May
2014, this had not occurred). If that shareholder were to sell a further
115,000 of their shares in Energy Mad, Energy Mad will fall below the 49%
minimum continuity of shareholding in respect of the $2.0 million deferred
tax asset. This will then not be able to be utilised upon Energy Mad
becoming profitable, with gross tax losses of $7.7 million being lost.
However, because the founding shareholders have maintained their
shareholding, Energy Mad still has gross tax losses of $12.4 million ($4.7
million if the $7.7 million of gross tax losses described above are lost)
available to be utilised when Energy Mad becomes profitable (subject to
maintaining a 49% minimum continuity of shareholding between the beginning of
the period in which these tax losses were earned and the end of the period in
which they are offset).
Energy Mad has impaired $1.4 million of its research and development
intangible asset. This values Energy Mad's research and development
intangible asset at $0.4 million as at 31 March 2014.
This impairment covers Energy Mad's earlier research and development into
selected Compact Fluorescent Lamps (CFLs), which Energy Mad is now
superseding with growing sales of Energy Mad's new range of Ecobulb LEDs.
Energy Mad is also making a stock provision in the year end accounts of $0.2
million in respect of some of its CFL stock. This is because of its
transition to its new Ecobulb LEDs.
The reduction in revenue, the deferred tax write-off, the impairment in the
intangible asset and the stock provision resulted in a 12 month after tax
loss of $5.7 million ($3.7 million operating loss before tax). This compared
to a loss of $2.5 million ($2.0 million operating loss before tax) for the 12
months ending 30 March 2013. The operating loss of $3.7 million without the
effect of the impairment charge and stock provision is $2.1 million compared
to $2.0 million in the previous year. The increase in loss of $0.1 million
over the previous year is despite revenue being down $1.7 million.
The deferred tax write-off, impairment in intangibles and the stock provision
has no impact on Energy Mad's cash position for the 12 months ending 31 March
2014 or its carried forward tax losses.
The Energy Mad Directors and Management know the FY2014 loss and previous
losses are disappointing for its shareholders.
The Directors and Management have invested considerable resource into
developing and implementing a strategic focus for Energy Mad that it believes
will deliver a growing and profitable company. This strategic focus is
outlined later in this Media Release.
Energy Mad 15W 3-pack supplied to Walgreens that were reordered
Highlights
o New Zealand Direct Installation revenue grew from $2.0 million in FY2013 to
$2.9 million in FY2014.
o Energy Mad's new LED Ecobulb sales growing in New Zealand through its
direct to consumer sales channel.
o Secured 20,000 hour lifetime Victorian State Government Scheme
accreditation for its new 12V LED Ecobulb that replaces 12V halogen light
bulbs.
o Completed two United States direct mail projects in Massachusetts with the
electricity utility National Grid. The second of these sold 2,200 of Energy
Mad's energy saving Walgreens "Ology" light bulbs in February 2014.
o Commenced an LED trial in 10 Walgreens stores in New Jersey in May 2014,
with these LEDs heavily discounted by utility funding from the State of New
Jersey's Clean Energy Program.
o Commenced selling its energy saving bulbs through Amazon United States in
late January 2014.
o Delivered $0.4 million of spiral Ecobulbs to its German Distributor
Eisen-Fischer, with the bulk of these order supplying a major German
Supermarket chain.
o Received $1.7 million from selling its remaining 20% factory shareholding
in the Chinese joint venture factory, while retaining its preferential supply
arrangements.
o Secured a $2.25 million Convertible Note facility from SuperLife Limited in
February 2014.
o Delivered cost reductions (excluding the costs attributable to the growth
in Direct and excluding the foreign exchange) of $0.9 million for the 12
months ending 31 March 2014, compared to the 12 months ending 31 March 2013.
Strategic Focus on Energy Mad's Strengths
As a result of extensive work by the Directors and Management, Energy Mad is
shifting its strategic focus to a new LED sales model and developing new LED
Ecobulbs, while outsourcing elements of its operations to an international
third party field force.
This is intended to allow Energy Mad to deliver profitable growth on a leaner
overhead structure.
New Zealand Direct Installations of Downlights
Energy Mad's Direct Installation business sells and installs Ecobulb
Downlights and associated insulation in New Zealand homes. This can cut home
power bills by up to 25%.
There are around 900,000 homes in New Zealand with inefficient incandescent
and halogen downlights.
Given this market potential, Energy Mad is implementing further improvements
over upcoming months to grow the sales and profitability of this business.
New LED Ecobulb Direct to Consumer Sales Model in New Zealand
Energy Mad has successfully piloted a direct to consumer LED Ecobulb sales
model in New Zealand.
This model sells Energy Mad's new LED Ecobulbs that use up to 90% less
electricity than the inefficient light bulbs they replace, while lasting up
to 25 times longer.
This LED Ecobulb direct to consumer sales model involves an outsourced field
force demonstrating Energy Mad's LED Ecobulb light bulbs in consumer homes,
then calculating the electricity savings for that consumer from replacing
their old light bulbs with Ecobulb LEDs.
The current low uptake of LEDs in New Zealand, combined with little
competition in the direct to consumer space, creates a significant market
opportunity that Energy Mad is well positioned to take advantage of.
Energy Mad plans to aggressively scale-up this direct to consumer LED Ecobulb
sales model throughout New Zealand by utilising the large size of the
outsourced field force.
Australian Energy Efficiency Schemes
Australia continues to provide growth potential for Energy Mad in Victoria,
the Australian Capital Territories and the South Australian State Government
electricity utility energy efficiency schemes.
Spiral Ecobulb Sales:
Energy Mad has grown its customer base from 6 accredited energy efficiency
scheme providers for the Victorian and South Australian State Government
schemes at the start of FY2013 to 19 accredited providers as at the time of
this release.
Future sales are being assisted by the Australian Capital Territories energy
efficiency scheme. This scheme, which started in 2013, saw its targets double
for 2014.
12V Halogen Replacement Sales with LED Ecobulbs:
The 12V halogen replacement market in Victorian homes is poised for growth in
FY2015 through the Victorian Energy Efficiency Scheme.
Energy Mad has helped develop a 12V LED Ecobulb bulb that replaces 12V
halogen bulbs.
This 12V LED Ecobulb recently secured 20,000 hour lifetime Victorian State
Government Scheme accreditation.
Within two days of gaining accreditation, the initial order of 12V LED
Ecobulbs, worth $15,000, had been pre-sold to Energy Mad's VEET customers.
This order is due to arrive in Australia in June.
This customer demand is because of its combination of appearance, high
performance, high transformer compatibility and attractive price relative to
the other 12V LEDs that have secured VEET Scheme accreditation.
The United States
Energy Mad is focused on expanding its relationship with Walgreens and the
number of electricity utility energy efficiency projects it completes in
partnership with Walgreens.
Energy Mad has funding for electricity utility projects through 1,300
Walgreens stores and is targeting to grow these numbers during 2014.
Utility funding allows the retail pricing of Energy Mad's light bulbs to be
heavily discounted, without impacting Energy Mad's margins.
Energy Mad recently commenced a one month LED trial in 10 Walgreens stores in
New Jersey using Energy Mad's "Ecospiral" branded reflector LEDs on
standalone displays.
The reflector LEDs replace 65W incandescent reflector bulbs, while using only
10W of electricity. They also last up to 25 years.
They are heavily discounted by utility funding from the State of New Jersey's
Clean Energy Program. As a result, shoppers in the 10 Walgreens New Jersey
stores can purchase the Ecospiral reflector LEDs at virtually the same price
as the inefficient 65W incandescent reflector bulbs they replace.
There is significant potential to rollout to a larger number of Walgreens
8,000 United States stores using utility funding if Energy Mad can get this
model right.
Research has shown there are over 600 million incandescent reflector lamps in
the United States and replacement with LED reflector bulbs would create
significant energy savings.
Energy Mad recently signed a Sales and Marketing Agreement with Advantage
Sales and Marketing ("Advantage") in the United States.
Advantage procures new sales on behalf of manufacturers from United States
retailers and is paid a commission on the sales they generate for these
manufacturers.
Advantage employs 38,000 people and generates US$59 billion in sales for
manufacturers through United States retailers.
Advantage is also the exclusive provider of in-store merchandising to
Walgreens.
Advantage is working with Energy Mad to grow the sales of Energy Mad's energy
saving light bulbs through Walgreens.
Advantage has strong relationships with many of the other large retailers in
the United States, and is working with Energy Mad to secure sales to selected
retailers.
Innovative New Ecobulb LED Range
Energy Mad has developed and sourced a range of LEDs to supply the rapidly
growing LED markets in New Zealand, Australia and the United States.
This follows extensive testing of various LEDs available from different
manufacturers throughout the world.
Energy Mad's LEDs have market leading appearance and performance.
Energy Mad's first LEDs have been manufactured for the New Zealand, Australia
and the United States markets.
Maximizing Energy Mad's Growth and Profitability
Energy Mad is focused on maximizing its growth and achieving profitability.
It believes it will become profitable through its focus on its core strengths
of developing innovative sales models matched with high performance energy
saving Ecobulbs, and outsourcing elements of its operations to a large
international field force.
Energy Mad expects growth in the short term will come from the New Zealand
scale-up of the Ecobulb Downlight Direct Installation business and the LED
Ecobulb direct to consumer sales model with the outsourced field force.
Additional growth will come in Australia through the ramp-up of the 12V
halogen replacement market in the Victorian Energy Efficiency Scheme, and in
the United States through Walgreens, electricity utility projects and the
introduction of Energy Mad's LEDs.
We would like to thank our team and shareholders for their ongoing efforts
and support for Energy Mad during the challenging last few years.
ENDS
For More Information Contact:
Chris Mardon, Managing Director
(021) 041 2981
End CA:00250951 For:MAD Type:FLLYR Time:2014-05-28 09:08:24
