Wellington Drive misses 2017 revenue and earnings guidance
Wellington Drive Technologies says it won't meet 2017 earnings guidance after disappointing revenue in the fourth quarter, and has some supply concerns but remains positive about 2018.
The Auckland-based company, which makes energy efficient motors for commercial refrigerators, previously downgraded annual revenue growth guidance after a weaker third quarter to the lower end of, or possibly below, a 25 percent to 35 percent range. It said today it had seen growth of 22.6 percent. Earnings before interest, tax, depreciation and amortisation (ebitda) in 2017 was an improvement on 2016, but below $1 million, it said.
In 2016, the company posted its first ebitda profit of $204,000, compared to an ebitda loss of $1.4 million a year earlier. The company prefers ebitda because it believes the measure avoids distortions. It expects to release its full audited financial statements on Feb. 28.
The lower-than-expected revenue was due to delays in end of year seasonal orders for beverage coolers from carbonated soft drink bottlers meaning some orders from cooler suppliers expected in late 2017 spilled over into the first quarter of the current year, the company said. Ebitda had been affected by "a sales mix that oriented towards more lower gross margin products than the company expected, and a deliberate decision during the year to increase certain operating costs in support of our developing internet of things business," it said.
"We are disappointed by the shortfall in revenue in Q4, but much of it is flowing into 2018 and it doesn't negatively impact our long-term growth outlook," chief executive Greg Allen said. "Q4 was still one of the highest revenue quarters we have had and December the highest ever month, although it wasn't enough to overcome the weak Q3."
Its supply concerns stem from strong demand for silicon, which it uses for its SCS Connect and ECR2 motor products, meaning some components haven't been delivered against agreed orders and delivery dates.
"We have implemented actions including sourcing and designing-in alternative components, placing long lead-time orders out to Q2 2019 and keeping 50 percent component buffer stock on order," Wellington Drive said. "We have been able to increase our allocation of components, but for ECR2 it is still not at the level needed to support customers' short-term demand."
The company said it's expecting 10 percent revenue growth in the first half compared to the same period in 2017, with ebitda "well above" $1 million, but has little visibility on second half customers' requirements. It maintained guidance for 2018 ebitda between $2 million and $4 million, and is targeting a net profit, but says ongoing demand volatility and lessons from the latest year means it is cautious.
The shares last traded at 17.5 cents, virtually unchanged from this time a year ago when it traded at 18 cents.