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

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the ASX yesterday, when the company said managing director Stephen Hampson has resigned, effective immediately, and has been replaced by chief financial officer Paul Viney.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.


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