Energy Mad outlines risks for return to profit

BUSINESSDESK: Energy efficient lightbulb innovator and marketer Energy Mad says it is committed to hitting the 2012-13 net profit projection of $4 million in the prospectus for last year's share float after badly missing its targets within months of listing on the NZX.

The Christchurch-based company had forecast a net profit of $2.1 million in the year to March 31 but turned in a $1.1 million loss instead as revenue shrank to $6.2 million from $8.6 million the previous year.

But chief executive Chris Mardon said the company was "committed" to delivering its prospectus projections of a $4 million profit and sales of $21.3 million as its operations in New Zealand, Australia and the United States gain traction.

However, he still took shareholders at the company's annual meeting through five areas of risk that could yet undo that plan.

The first is the potential for longer-than-expected lead times to bring the company's new dimmable downlight Ecobulbs to market.

Intended as a lower-cost alternative to LED lamps – which are beginning to replace hotter, higher energy use downlights – Energy Mad is rolling out its new dimmable downlights in the New Zealand, Victorian and New South Wales markets.

With its reliance on large-scale energy efficiency bulb campaigns usually led and subsidised by energy utilities, longer than expected lead times to secure large projects could also affect the current year's performance, Mr Mardon said.

The manufactured quality of Ecobulbs was a further potential risk, with issues at the Chinese factory it uses for manufacturing its products, which was also a problem in the previous year.

While the company has made a number of key appointments to strengthen its financial management, sales and marketing, he also warned of risks in delivering and managing growth.

The final risk was the potential for competitor initiatives, including by LED manufacturers.

On the positive side, the company is experiencing fast growth in sales through its direct installation business in New Zealand, with sales growing from around $40,000 a month to $200,000 in June, assisted by a Meridian Energy offer to customers in Christchurch.

Ecobulbs are also being offered in the 8200 US stores of the Walgreen's eco-conscious goods chain, with initial stock valued at $1.7 million and regular re-stocking orders.

Energy Mad also hopes to use its Walgreen's presence to gain involvement with large-scale bulb replacement programmes involving American utilities, and to use the Walgreen's relationship to gain credible in key European markets, including Germany.

In Australia, NSW and Victorian utilities have mandates to encourage energy efficiency, Victoria has introduced a new bulb replacement scheme and the company is focusing on commercial lighting opportunities.

Energy Mad's shares had not traded by late afternoon today, but last changed hands at 52 cents apiece, down 34% over the last six months, but above their record low of 45 cents.