Wellington announces fully supported rights issue to fund continued growth
Wellington Drive Technologies Limited (Wellington), a leading provider of Internet of Things (IoT) solutions and energy efficient motors to the retail food and beverage industry, today announced its intention to raise approximately $5.3m of new capital through a fully supported pro-rata rights issue. This announcement is on the back of strong year-to-date results that demonstrates improving profit performance, plus an expanding array of growth opportunities, including the recently announced new North American IoT project.
Wellington’s Capital Committee Chairperson, Gottfried Pausch commented “With continually improving operating performance and an exciting funnel of growth opportunities the board believes now is the right time to increase the company’s growth investment. We appreciate the support of those shareholders that have committed to support this rights issue and we invite other shareholders to also participate. This new capital will let Wellington accelerate its product development and business development capability, so that it can grow revenue consistent with its 2023 growth target and further increase earnings and cash generation”.
To ensure Wellington can successfully execute new growth projects, continue to add the necessary skills in sales and IoT engineering and successfully launch new products planned for 2020, Wellington intends to raise approximately $5.3m from a pro-rata rights issue.
The key features of the offer include:
– Raise approximately $5.3m through a 1:5 pro-rata rights issue at 10 cents per new share;
– The offer is expected to close in November with the new shares issued early in December 2019;
– The issue is 100% committed with either underwrite agreements or firm pro-rata rights commitments.
Use of funds:
• New IoT business opportunity: Develop a new Connect SCS product and hire customer support resources for the new IoT business opportunity with one of the largest manufacturers of commercial coolers in the Americas (the opportunity previously disclosed in the company’s 2019 Interim report). This new product has an approximate development cost of $1m to $1.5m. Revenue is estimated to start Q4-2020, with full production revenues estimated at $2 to $4m annually from 2021. This project is in the latter stages of negotiation. Wellington’s confidence at this stage of negotiations stems from the fact there is an existing long-standing commercial relationship with this customer on another line of business. The Wellington board has approved the commencement of early development work on customer specific applications.
• New product launches: Ensure the successful completion and launch of other new products launching in 2020. New hardware includes the ECR2+, a new version of the successful ECR2 platform; Connect SCS Black, a Connect IoT device specifically targeted at large scale new build coolers; Connect Monitor, a new IoT device to allow retrofit in a broader range of coolers; Connect Network, a new ‘always on’ IoT device; and new apps including one that helps store owners manage the in-store cooler or display shelves.
• Develop the food service market: Fund entry into the food service market with new IoT hardware and data solutions. Market entry has already commenced in New Zealand with SKOPE Industries. Deploy sales and technical resources that are closer to the main USA market for food service.
• iProximity platform development: Market development in support of expanding the company’s iProximity platform sales which includes technical marketing resources to explore new areas such as smart venues and non-refrigeration based digital marketing. The expansion of iProximity sourcing relationships to support the growth of proximity marketing devices used for non-refrigeration customers.
• Expanding sales and technical capability: Expanding the USA and Western European sales teams to win new customers for Wellington’s IoT solutions, ECR2 and ECR2+ motors. Continue the expansion of the company’s software and hardware teams to improve capability and accelerate time to market for new products.
• Repay high cost debt: Wellington has a $1m loan from Onimeg Investments Limited and a US$0.6m loan from Meta Capital Limited which are both repayable on 31 March 2020. Proceeds from this issue will be used to repay these loans on or before the due dates resulting in annualised savings of $250k in interest costs. Total annualised savings including the partial repayment of the Onimeg loan in September 2019, is approximately $500k.
This rights issue has been approved by the independent Directors of Wellington.
Acting Chairman John McMahon is the sole director and shareholder of Meta Capital Limited. Meta Capital has loaned US$0.6 million to Wellington on arms-length terms and this loan is due for repayment on 31 March 2020. Part of the proceeds of the capital raising will contribute towards repayment of this loan. In addition, Mr McMahon is a director of NZX Limited, the parent company of Smartshares Limited, which is a substantial product holder of Wellington with 27.478% of the issued ordinary shares of Wellington as at 6 June 2018 (being the date of its most recent substantial product holder disclosure). Given these factors, Mr McMahon is deemed to be “interested” in the Offer. Accordingly, he has not participated in discussions or information where a conflict of interest may arise and has been recused from all Wellington Board decisions relating to the Offer. Mr McMahon is not an independent director of Wellington.