WDT
02/03/2015 08:30
FLLYR
PRICE SENSITIVE
REL: 0830 HRS Wellington Drive Technologies Limited
FLLYR: WDT: 2014 Results, a Promising Start to 2015 & Capital Raising
Wellington Drive announces 2014 results, a promising start to 2015 and a
fully underwritten rights issue to fund its growth turnaround.
Our audited results for 2014 are consistent with previous guidance and show
disappointing revenues of $17.8m with gross margin of 18.0% and a loss for
the year of $4.5m. As highlighted previously, our Latin American business
was the cause of our revenue decline, while the European and Asia regions
both grew by more than 20%. The team is however encouraged by the strong
cost and margin performance and ability to mitigate losses despite a $7.8
million decline in refrigeration revenue versus 2013.
2014 key points:
- Total revenues decreased by 35% to $17.8m attributable to discontinuance of
the ventilation product in 2013 and weakness in Latin American demand;
- US Dollar revenue breakdown:
- Refrigeration revenue was US$14.8m versus US$20.7m in 2013.
- Revenues in Latin America decreased 46% due to lower market demand from
several customers in that region. The contributing factors included reduced
demand from our largest customer in the region, impact of the Mexican "sugar
tax", Argentine foreign exchange restrictions impacting purchasing in that
area, slower transition from shaded pole to EC motors in Brazil, and customer
de-stocking in all areas due to the lower demand.
- Europe revenues increased 27% as a result of improved volume from major
customers in that region, including our new supermarket manufacturer.
- Asian revenues increased 27% due to increased sales in Thailand and
Australia.
- Inventory increased from $4.0m to $4.7m as a result of strategic inventory
built for the East West Manufacturing transfer and this inventory was slow to
be consumed due to Latin American demand issues;
- Ended the year with a cash balance of $1.2m, a result of previously
discussed demand issues and inventory build-up impacting cash-flows;
- Successful completion of the supply chain transition to East West
Manufacturing with no cost over-runs or customer delivery issues;
- Successfully completed the transfer of electronics manufacturing to a lower
cost factory in Indonesia;
- Commenced new sales distribution partnerships with East West USA, Ting
International China, and sales agents in Australia, United Kingdom and South
Africa. These partnerships are expected to contribute sales in 2015;
- Commenced field trails of the SCSConnect Smart Controller system with
global beverage brands;
- Shipped samples of the highly efficient ECRWhisper motor to selected
bottler cooler and supermarket refrigeration equipment manufacturers;
The revenue performance in 2014 means our growth turnaround plan to bring the
company to breakeven has been delayed by a year. Our objectives to reduce
cost, diversify customer growth through new products and further improve
supply chain performance remain the focus for 2015 and in the coming year we
expect to return to growth with improving revenue and margin.
2015 Outlook
The company has started 2015 positively. Revenues for January 2015 were $2.4m
and when improved margins, exchange gains and reduced operating costs are
taken into account, this gave an unaudited profit before interest and
taxation of $227,000. Volumes in Q1 2015 are expected to be solid, and
whilst it is still early in the year, we are seeing a modest recovery in
Latin American demand and other regions are tracking to expectations.
We commenced customer trials of our new Smart Controller in Q4 2014. These
trials are well advanced with customers indicating that the product provides
benefits that others do not and that they will adopt our controller. We
anticipate first orders in the second half of 2015. Our new ECRWhisper
motor, which addresses customers' requirements for efficiency, noise and cost
performance is in final testing with production expected by June. These new
products will deliver revenue in 2015 and significant revenues thereafter.
We have achieved further supplier cost reductions and expect further
reductions by Q3 2015. We have also further reduced our headcount cost. The
cost improvements we are making are expected to reduce our breakeven revenue
point from NZ$43m seen in 2013 to around NZ$25m in 2015. As a result, we
believe a breakeven result is possible in 2015, although much depends on some
level of recovery in the market issues we experienced in 2014.
Greg Allen, Wellington's CEO commented: "Latin American demand declines have
resulted in us being one year behind in our growth turnaround plan. Despite
this, our team is energised, working diligently on further cost reduction,
new product launch and customer development. Our partnership with East West
and indeed our other strategic suppliers is very strong and these
relationships are helping us improve margins and develop new business
opportunities."
Capital Raising
To ensure the business successfully launches its new products and executes on
its growth recovery, the company will raise additional capital by way of a
fully underwritten pro rata rights issue of ordinary shares to all
shareholders. The key features of the offer include:
- Raising approximately $3m through a 5:6 rights issue at 3 cents per new
share;
- The offer is expected to close in April with the new shares issued early in
May 2015;
- The issue is fully underwritten by SuperLife Limited, a major s-shareholder
in the Company;
- The Company will seek shareholder approval at the Annual Shareholder
Meeting for SuperLife to increase its holding above 20% pursuant to the
underwriting commitment.
Wellington Chairman Tony Nowell said: "We are grateful to SuperLife for
supporting our continued growth recovery plans and underwriting our capital
needs in 2015. We welcome other shareholders participating alongside
SuperLife in the capital raising. The team is pleased with the way 2015 has
started and the new capital will ensure we successfully launch our new
products and deliver profitability."
SuperLife commented: "The Company continues to make progress in its
turnaround efforts over the last 3 years and we believe that it's important
to ensure their plans are supported to completion. We believe that the
Wellington team are building a strong customer proposition and building the
foundation for shareholder value".
About Wellington Drive Technologies
Wellington Drive Technologies is a leading global provider of energy
efficient electronic motors, airflows solutions and refrigeration control
solutions for the commercial refrigeration markets. It serves some of the
world's leading food and beverage brands and refrigerator manufacturers with
advanced products and solutions that reduce their costs improve product sales
and reduce energy consumption. Wellington is headquartered in Auckland, New
Zealand.
About SuperLife
SuperLife is a specialist financial service solution providing
superannuation, KiwiSaver, investment and insurance options to over 35,000
members. It has over $1.2 billion of assets invested and has been in the
superannuation business for over 16 years and has 40 staff.
___________________________________________________________
Contact:
Greg Allen
Chief Executive Officer
Phone +1-778-238-6494
Howard Milliner
Chief Financial Officer
+64-9-414-6590
End CA:00261305 For:WDT Type:FLLYR Time:2015-03-02 08:31:19
