Energy Mad blames production delays for big earnings downgrade
UPDATE 12.10pm: Energy Mad shares [MAD:NZX] closed at 55c down 21.43% from their 70c opening. The company listed at $1 in October.
Just three months after raising $5 million in a share float, energy-efficient light-bulb manufacturer Energy Mad has slashed its earnings forecasts by almost 70%.
The company blamed recent production delays, higher than expected freight costs, currency revaluations and accreditation delays in Australia for the downgrade.
Instead of its IPO earnings forecast of $3.5 million for the 2012 year, Energy Mad now expects earnings before interest, tax, depreciation, depreciation and amortisation of approximately $1.1 million.
Energy Mad shares [MAD:NZX] last traded at 70c, having shed 30% since listing at $1 each in October. Because of its small size, Energy Mad has no analyst coverage.
Last month the company secured a $2 million banking facility with Hong Kong and Shanghai Banking, which Energy Mad said gave it access to funds to meet large orders.
In a statement today managing director Chris Mardon said significant recent production delays for new Ecobulb Downlights for the Australian market mean a major customer order forecast to be filled before March 2012 will now not be filled until early in the new financial year.
“We were disappointed to be advised so recently of production delays with the new Ecobulb Downlights and have since addressed the underlying issues with the factory. It is important to note that the revenue from this order will be deferred, not lost, as the customer order remains in place.”
Energy Mad holds a 20% stake in its China-based production facility.
Dr Mardon said Energy Mad was had not yet achieved 20,000 hour accreditation for its Ecobulb Spirals in Australia, and this had delayed projected sales to some customers.
“We expect to gain that accreditation by May 2012”, he said.
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Comments and questions19
Shameful. The NZX needs to do a much better job of vetting companies before allowing them to list. A minimum market cap is probably also needed, having companies ask for a paltry $5 million in IPO raising is simply asking for trouble with liquidity and market perception.
Another penny dreadful in the making.....
This is disgraceful and the promoters should be held to account.
No wonder only a thrid or fourth rate advisor was involved in this float.
Where is the NZX to protect investors??
Where is the FMA??
Surely both should be investigating
Does anyone remember the Feltex prospectus?
Shouldn't the NBR be highlighting that the shares are now trading at a 43% discount to the float price- and the profit forecast has dropped 68% from the float forecast - just 3 months after floating on the Stock Exchange - not an 18% drop this morning!!!!
Not a good look and definitely worthy of the NZX and FMA investigating - thoroughly
Who signed off on the misleading statements which has left investors suffer 55% fall in value.
Investors should have just looked at the stock ticker to figure out who should invest in this issue.
I wonder at what point it becomes a buy?
The first tech stock floated since Xero.
Another big fat ZERO - two in a row
Aren't these companies being floated before they justify being listed - maybe list on Unlisted first to prove themselves - rather than survive on hype and good old BS
Stop complaining. Investors in this sort of thing are the same sort of people that buy race horses. They expect to do their dough most of the time.
Incorrect comparison
Race horse owners or syndicators don't promise huge profits - the Energymad directors did.
And if they hadn't of promised big profits they would not have been successful in raising the $5M capital
As it was it took about 3 extensions to get to the minimum level of capital to proceed with the float - Do you think they would have got to $5M if they had of promoted a $1.1M profit - ABSOLUTELY NOT
Another IPO biting the dust...
Are the FMA and NZX execs still on holiday or are they going to wait to it falls over before they investigate??
I suppose it's still January and they won't be abck at work until February - meanwhile once again the small investors get screwed - it's a bit like the court system the victims are the criminals
As skeptical as I am, hardy investors should think of the Diligent story as a source of hope.
Launched at a dollar. Thanks to bad PR at the launch around directors failing to disclose financial misbehavior in the past, the stock tanked. It went to 8c from memory. Now up to $2.50 after a year of record performance.
Energy Mad might yet end up a promising story, but really, investors need better protection from tiny companies missing their forecasts right from the start.
The real issue with pathetically small IPOs is that stocks lack decent liquidity for trading. Of course stocks will go lower when there aren't any buyers.
Besides, if a company needs the NZX to raise $5 million, there's something wrong with the company. They should be able to get private equity or a decent bank loan without any of the compliance costs associated with listing on the NZX, or dealing with small shareholders.
Anonymous at 2:41 is right - where is the NZX compliance people? Still up at the Bay of Islands or Martinborough?
Why did the share price fall 9 cents (or 10%+) on Friday? Who sold out? Worth a look also.
They should have to provide a full updated forecast including impact on 2013 profits and revenues. That will show how much of the slip is timing and how much might be real losses.
But overall a poor IPO that is just making it harder on others that may contemplate this type of option - or perhaps we just will see tech companies listing overseas (Germany etc).
That's a bit tough
The NZX and FMA guys are either still on holiday or first day back - you are asking too much for them to look at Friday's trades as well - tha's a whole different team of experts required
One wonders what sort DD Woodward partners (Lead Manager) did ? The Woodward partner guys are largely ex Cameron Partners. They either did SFA DD or were hoodwinked by management.
Disasters like this do occur but a pity there wasn't a clawback on equity.
Good points
Suggest a bit of both
Maybe the founder director/shareholders could put half their shares in a legal entity and if they don't meet certain pre described milestones those shares are forfeited.
That way if they deliver over say the next two years they retain those shares and the other shareholders will be happy. If they only partly perform they lose the shares and if they totally underperform well the whole company is custard.
Isn't that fair??
A trip down memory lane:
http://www.nbr.co.nz/article/nzx-steps-prop-ipo-ck-102719
Energy Mad was granted a waiver to ensure its listing on the NZX went ahead today, a filing has revealed. The waiver holds for 18 months.
By the rules of the exchange, at least 500 members of the public holding should hold at least 25% of the IPO. At its close-off, Energy Mad had 460 subscribed, including 15 existing holders, who hold 44% of its shares.
Energy Mad extended its original IPO deadline of September 23 to October 12. Investment banker Mark Donnell, with Woodward Partners, which oversaw the IPO, told NBR he hoped the extension would see wavering Australian institutional investors come onboard.
Energy Mad had sought to raise $10 million - up to $6 million through new shares, with a further $4 million on tap from Mr Mardon and Mr Mackenzie's holdings.
But in the event, no existing shares were sold and the pair have wound up with a combined 56% of the shares on issue.
The Christchurch maker of energy efficient lightbulbs had a muted debut this morning. With zero trades by midday, its shares [NZX:MAD] remained at their listing price of $1, valuing the company at $37.75 million. An offer of $0.80 had no takers.
Under a deed of embargo, Mr Mardon and Mr Mackenzie cannot sell their shares until the first anniversary of the IPO.
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