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Energy Mad 1H loss widens as quality control stymies Australian sales

Energy Mad, which raised $5 million in an initial public offering last year to kick start sales of its energy-efficient light bulbs, widened its first-half loss after quality control issues in manufacturing a halogen bulb replacement for the Australian market.

The shares dropped 8.5%.

The loss was $500,000 in the six months ended September 30, from a loss of $300,000 a year earlier, the Christchurch-based company says in a statement. That missed its IPO forecast for a $1.7 million profit.

Sales rose 47% to $4.8 million, about half the $9.8 million revenue it had forecast.

The company sold the shares at $1 apiece in its IPO in October 2011. They fell 5 cents to 54 cents on the NZX today, valuing the company at $20.4 million. They dropped as low as 49 cents on May 18.

Sales in the full year were likely to be $13 million to $20 million, missing the IPO forecast of $21.3 million.

The company has been aiming to ride a global wave of demand for energy-efficient bulbs as more countries phase out incandescent and halogen bulbs. Part of that growth is aimed to come from deals with energy utilities and other bodies via subsidies for products that save power.

Within three months of listing on October 19 last year the company cut its guidance for the 2012 year, when it posted a loss of $1.1 million while saying it remained committed to its 2013 IPO targets.

In the first half of 2013 sales in its largest market of Australia fell 4.8% to $1.99 million, while in the US sales more than tripled to $1.6 million and in New Zealand they jumped to $924,757 from $108,815. It made no sales in the rest of the world, compared to $416,563 a year earlier.

The company made zero sales of its 12-volt Ecobulb in Australia in the first half, a $3.1 million shortfall, while sales of its 240VEcobulb downlight were $1.3 million short of target.

There was no production of the 12V Ecobulbs in the period because of required design changes, it says.

It also suffered premature failures of the 240V Ecobulb downlight which it said were due to a poor connection between the spiral tube into the downlight fitting that forced it to revise the design.

As a result, Australian customers "lost confidence" in the product. It is more confident for the outlook for a new dimmable 12V Ecobulb.

To speed product development the company hired two technicians in Christchurch rather than just rely on work done at its Chinese factory.

It sees growth in US sales, thanks to distribution through 8200 outlets of retailer Walgreens.

(BusinessDesk)

Comments and questions
1

Seems to be missing all targets in the prospectus. Was the prospectus misleading or thorough on the risks of the business ?

Should the FMA be looking at the rigour of the process of the projected financial information at the time of the IPO, and the work of Woodward partners as their adviser?