Ecoya confident despite further losses

Ecoya shareholders look set to remain empty-handed for sometime yet, unless they rely on capital growth rather than dividends.

The candle and skincare company announced further losses today, but says it is in line with market expectation.

Recently-appointed chief executive Stephen Sinclair expects better figures ahead, saying the losses stem from the company investing in capital growth.

Revenue for the first half of 2012 was $12.1 million, an increase of 16% on the same period last year.

The company posted a net loss of $797,000 for the six months to the end of September.

At an EBITDA level, the result was a loss of $184,000.

Mr Sinclair said the losses stemmed from investment during the first half of the year, which “should fuel growth for the rest of 2012 and into 2013 and 2014”.

This included advertising campaigns, new packaging, new websites for both Ecoya candles and Trilogy skincare products and further investment in the sales channel.

Ecoya and Trilogy have opened retail concept outlets at Auckland Airport and Westfield Bondi in Sydney.

Ecoya has also launched a new longer-burn range of candles in recent weeks, something which are expected to generate better revenues in the run up to Christmas.

The half-yearly report shows sales and marketing spending grew from $3.8 million in the first half of 2011 to $5.3 million in the same period this year. Cost of sales rose from $3.7 million to $4.5 million over the same period.

“The message is all that lays a good foundation for growth in the back half of 2012 and for next year,” Mr Sinclair says.

However, in recent months the Ecoya share price has slumped from around $1.30 for much of mid-2012 to nearer a dollar today.

Mr Sinclair expects the price to be “relatively stable” in the coming year. “We don’t see any significant move in the shareprice.” 

There will be no dividend payments, at least “in the short term”, and Mr Sinclair could not give any guidance as to how long that might be.

“Our strategy has been to invest in growth. Shareholders are with us and are backing us to invest in growth,” he says.

Instead, their only profit would come from future growth, with Ecoya expecting market revenues of $26 million in 2013.

“We wouldn’t expect to be paying a dividend in the short term. We will continue to reinvest. We are looking to create capital growth in our brand. Ultimately, that is where we will create value for our shareholders,” Mr Sinclair says.

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6 Comments & Questions

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Dividends are illusionary for Ecoya shareholders. The market has moved on from smokey scented candles to sexy LED-lit embedded [no smog] candles. Also I note that the Men's Trilogy range has been canned by the company as "too hard".

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There would appear to be little chance of true capital growth in Ecoya. Unless you are some of the select few (the Business Bakery, Rob Fyfe, Geoff Ross and few others) who got their shares for 25c when the rest were paid up at at $1.00 each during the sharemarket float.

This was most likely done to prop up the share issue, which nearly didn't make it. This gave the appearance of a company with a market capitalisation of $1 per share post float, but in fact only really had about 25c per share in post-float asset backing.

So even if the share price tanks to 50c, these people will have doubled their money, which is presumably how the idea was sold to them. This should be investigated - because although probably legal in one way or another, it certainly doesn't seem ethical, and it does nothing for the credibility of sharemarket floats for small businesses.

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I agree. There is not one fundamental reason to invest in this business. The key people were induced into becoming involved by the offer of cheap shares just to attach their names to this dog. People who have invested based on the so-called big names attached will do their money and, frankly, they deserve to.

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Couldn't agree more with comment #2. Ross did the same with 42 below, another company never to make a profit. Comments that shareholders in Ecoya will reap profit via capital growth and not via dividends due to losses is absurd. A company's share price is or should be directly related to its dvidend growth/EPS, etc. A loss-making business' share price that rises relies on the bigger fool theory, of which Ross has relied upon to make his $$.

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The fools are the Ecoya investors - and you start to see why the Moa float was timed as it was...

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Geoff Ross' comment in reply should prove illuminating. Let's hear it from you, Geoff.

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