Powerhouse posts $11.2m full-year loss on Hydroworks impairment

Stephen Hampson resigned as managing director

Powerhouse Ventures turned to a full-year loss after writing off its investment in hydroelectric turbine designer Hydroworks and recognising other one-time decreases in the value of its investments.

The Christchurch-based, ASX-listed incubator reported a net loss of $11.2 million in the 12 months ended June 30 from a profit of $765,000 a year earlier. Total income and fair value changes were a deficit of $907,763 compared with income of $8 million a year earlier. Expenses rose to $11.7 million from $5.9 million.

An interim liquidator was appointed to Hydroworks, in which Powerhouse holds a 24 percent stake, this month. Powerhouse's full-year accounts show a $4.3 million impairment to write off its investment in the business, $2.3 million to fully impair short-terms loans and interest owed to the company by Hydroworks and $1 million for the potential impact of a lien held by the bankers of Hydroworks. Powerhouse also took a one-time charge of about $3.1 million to reduce the value of other investments in its portfolio, which it didn't identify.

Powerhouse went public in an A$10.2 million initial public offering last year at A$1.07 a share. It traded at 35 Australian cents on the ASX yesterday, when the company said managing director Stephen Hampson has resigned, effective immediately, and has been replaced by chief financial officer Paul Viney. In an unsettled year for the management and governance of the company, Russell Yardley was named chair in June, replacing Blair Bryant, who departed the company after it was made public that he failed to disclose his bankruptcy in the US.

The board's portfolio committee commissioned a full review of the investment portfolio after the listing last year. Today the board said it had "reviewed this work and resolved that some investee companies are 'off model' due to a low Powerhouse shareholding and other factors."

"This is likely to result in Powerhouse pursuing value creation or liquidity events for some portfolio companies to realign the portfolio," it said.

The company reiterated its comments of last week that it is considering an unsolicited offer for some of its shares in one investee company. If that occurred, Powerhouse would "benefit from a substantial immediate cash inflow and a fair value uplift," it said today.

The carrying value of its portfolio of companies fell to $17.5 million as at June 30 from $20.7 million a year earlier, with the Hydroworks impairment offset by valuation uplifts for its 33 percent-owned Photonic Innovations and other companies including Syft Technologies (since sold).

Powerhouse said it expects an increase in the value of its portfolio in 2018 and combined with "stringent cost control and the potential for value creation events is expected to result in much stronger earnings in H1 FY18 and an increase in NTA per share," it said. Net tangible assets per share dropped to 68 cents at balance date from $1.17 a year earlier.

Powerhouse was established to help commercialise research generated by universities in New Zealand and Australia. It has a portfolio of 23 companies ranging from early stage to mature businesses in clean-tech and engineering, medical and healthcare, agritech and environmental, and ICT.

The biggest shareholder in Powerhouse is Christchurch City Council-owned Canterbury Development Corp with 22.5 percent.

(BusinessDesk)


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14 Comments & Questions

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Why is the HW write off $7.7m when the PVL release to the ASX said $6.8m?

Of the 6 largest investments at the time of the IPO, HW written off, Solar Bright and Motim appear to have been written down by around 80%. Crop Logic / Invert Robotics / Arc Active have had no material change in their value for the past 1 - 2 years.

Anyone who invested in PVL or along side them in the Equity Crowd Funding campaigns they ran have lost a lot of money in absolute terms and much more in terms of forgone returns on investment.

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PVL was/is simply intelligent yet unscrupulous men taking money from unintelligent bureaucrats, tax payers and Mum and Dad shareholders

Callaghan Innovation is the most poorly run organisation in the Western World.

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Anyone who has doubts about whether re-stating results to show "underlying profit" should be banned should look at Powerhouse asserting that a $11.2m reported loss is actually equivalent to a $0.8m underlying profit.

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This is unbelievable. AUD$10M IPO and now this less than 12 months later. Its inspiring but for all the wrong reasons unfortunately. How can Viney stay on and expect to be taken seriously?

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Chair Russell Viney promises aggressive expansion in Australia. With what money? With what people? At what cost to current Portfolio Companies. This is "stupid strategy" and questionable leadership.

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This is one of their biggest issues (and that is saying something). They need to dig themselves out of a hole and to do that, they need to improve their reputation, or they will be unable to raise new capital.

WIthout new capital, any start up would we wise to reject any approaches, PVL will be unable to help.

So basically, they need to knuckle down and do what they were always meant to do and help their investee companies increase in value. That will increase their reputation and their NTA value.

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Thank god EY stepped aside from the business media awards - the PVL story just keeps on giving. Might not be the $500m of Fuji Xerox but perhaps much more entertaining to watch unravel.

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I would also like to complain about the lack of female photos on the NBR stories, surely there is a woman or two that is in this mess.....cannot just be middle age / old white men.........

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I have checked to see if there is a woman involved and indeed there is. A much respected scientist, Dr Dianne McCarthy, is an independent board member. She is one of five directors, the other four being male. But she is not quoted in the story, so that's why there is no picture.Do you really want us to put up strange celebrity shots just to balance pictures by sex? That's not news - that would be hebetudinous, wouldn't it?

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I think Anon was being tongue-in-cheek but hey, big up-vote for word of the week 'hebetudinous' - had to hit auntie Google for that one ;-)

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The Corporate & Investment teams are 50/50 male/female whilst the Executive team is 100% middle age/old white men!! Talk about management for Africa - the salary bill must be eye watering.

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The board (new chair) clearly lacks the courage to do what needs to be done. What value is the executive team bringing to this business? Those involved directly in the Hydroworks fiasco (including Viney & Matheson) should also be gone. Viney as CFO has his finger prints all over this mess and he is appointed to the CEO role. This is an absolute joke. The board also needs to be held accountable for information presented to investors at capital raise. Have they misled investors with the valuations of the investee companies? I expect there will be a number of investors starting to line up to have a crack at the directors.
Edited

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Maybe now the IPO investors will see that they have been done. PVL is a pretend company; the business model for investing in companies developed by university researchers does not exist, for good reason.

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It does actually. Germany does it, rather well, and they are anything but a patient model.

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