Wellington Drive narrows annual loss, tagged by auditor

Wellington Drive five-year NZX price history (Findata)

Wellington Drive Technologies [NZX:WDT], which makes energy efficient refrigeration motors, narrowed its annual loss in 2013 in the second year of its turnaround plan, while having its accounts tagged by auditor PwC over its cashflow forecasts.

The Auckland-based company had a net loss of $3.77 million, or 3.49 cents per share, in calendar 2013, down from a loss of $6.33 million, or 8.97 cents, a year earlier, it said in a statement. Sales fell 23 percent to $27.4 million, missing its target of between $30 million and $33 million. Wellington Drive had a loss on an earnings before interest, tax, depreciation and amortisation basis of $2.91 million. Last month it said the EBITDA loss would be lower than $3 million.

"Over the last two years we have significantly reduced Wellington's internal operating costs and supply chain costs," chief executive Greg Allen said. "We believe the strategic decisions made, and now being executed around East West and other supply chain improvements, will continue to drive cost out of the business and help to improve financial performance."

Last month the company dropped its goal of breaking even on an EBITDA basis in the 2014 financial year, and will instead target revenue of between $30 million and $35 million. It forecasts a 2014 EBITDA loss of less than $2 million and a net loss below $2.7 million.

Allen said the decision to sacrifice short-term profitability was to accelerate growth plans, and will "ensure it does not forgo new market, new product and new customer opportunities."

Wellington Drive's accounts were tagged by auditor PwC, which raised an 'emphasis of matter' over its ability to achieve forecast cash flows, which it said was "inherently uncertain" and may require additional funding to keep the company operating as a going concern.

"These conditions indicate the existence of a material uncertainty that may cast significant doubt about the Group's ability to continue as a going concern," the auditor's report said.

The company had an operational cash outflow of $2.45 million in the year, compared to an outflow of $3.45 million in 2012. It raised $5.76 million through a share issue, which helped leave it with cash and equivalents of $2.98 million as at Dec. 31.

The shares were unchanged at 18.5 cents today, and have dropped 23 percent this year.


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