For Immediate Release
Wellington achieves $0.7 million profit on 19% revenue growth
29 August 2019
Wellington Drive Technologies (Wellington), a leading provider of Internet of Things (IoT) solutions and energy efficient motors to the retail food and beverage industry, today released its unaudited financial statements for the six months ended 30 June 2019 (“H1 2019”). The company’s interim report, with management discussion and analysis, can be found on the NZX website, under the Ticker NZX:WDT at https://www.nzx.com/instruments/WDT
Revenue for H1 2019 was $33.3m, a 19% increase over H1 2018. The company achieved an EBITDA1 surplus of $2.45m for the period, a 98% increase. EBIT was $1.27m ($0.31m last year) and the net profit was $0.72m, a $0.92m improvement on the prior year.
Wellington’s strategy is focused on investing in and growing its IoT business with large food and beverage customers, accessing new markets with its IoT and digital marketing solutions and developing customers for its ECR2 motor platform. Its sales initiatives, developed to find adjacent markets for its IoT and EC Motor products, have resulted in more new customer wins, aided by the rapid global adoption of IoT solutions.
CEO Greg Allen commented, “Our business continues to diversify, with a deliberate and sustained focus on growing our IoT solutions and finding new customers for ECR2 motors. We are pleased to report a maiden interim net profit and are continuing to focus on developing and delivering new IoT and ECR2 products for our customers. It is exciting to be working on several new IoT projects that support our five- year growth vision of $100m in revenues. We are seeing a faster than expected decline in our legacy motors, however those are becoming less important to our five-year plan although they create a short-term headwind to growth. We are continuing to invest in the resources to support IoT solutions and ECR2 product expansion, both of which we expect to continue to deliver financial improvements for the company.”
- Strong revenue and profit growth: Revenue increased 19% to $33.3m. The company achieved EBITDA of $2.45m, at the top end of its $2.0m to $2.5m guidance range. It achieved a maiden net profit after tax for the period of $0.72m.
- IoT business growth: Wellington Connect SCS hardware volume grew 44%. Total IoT revenue (hardware, data and software services) was $13.4m, an increase of 52% compared to H1 2018. Data and software services growth: Data and services billings for the period increased to $1.7m, from $1.0m in 2018 as sales of IoT hardware and data packages continued to grow. ECR2 motor growth: ECR2 motor volumes grew 36% in the first half versus last year with 402,000 shipped in the half.
- Legacy motors declined: Legacy ECR1 and ECR92 motor volumes reduced 29%. In total motor volumes were 6% lower than for H1 2018, taking into account both legacy and ECR2. The Company is seeing a faster than expected transition away from the older legacy motors and towards its new ECR2 platform and IoT business – both of which are growing rapidly.
- Gross profit improvement: Gross Profit performance was $8.6m, an increase in $1.7m over last year. Margins increased slightly to 25.8% from 24.7% in 2018.
- Trading bank finance and net debt: In December 2018 the company secured a $1.5m debt facility with the Bank of New Zealand. The BNZ agreed to increase this facility to $2.0m in May 2019. At 30 June, the company has net debt of $4.76m.
|NZD (unless otherwise stated)
30 June (6 months)
|Wellington Connect IoT Revenue||$13.4m||$8.9m||+52%|
|Wellington ECR Motors||$18.8m||$18.0m||+4%|
|ECR 2 Motor Revenue||$11.2m||$7.7m||+49%|
|Legacy ECR Motor Revenue||$7.6m||$10.5m||-28%|
|Gross margin %||25.8%||24.7%||+1.1%|
|Operating cash flows||$1.11m||$1.88m||41%|
Wellington’s business mix is changing; sales efforts are targeted almost entirely towards both the new generation ECR motor platform and higher margin IoT products, where revenues are expected to continue growing. Our sales of legacy EC motors to bottle cooler customers has declined more rapidly than expected, negatively impacting overall company revenues in the short-to-medium term. We expect this to continue into 2020 with the legacy motor business constituting a relatively minor percentage of total revenue.
The company will continue its strategy to focus its investments on expanding and improving its IoT offering to the carbonated soft drinks segment as well as extending the product platform to adjacent market segments including beer, ice-cream and food service refrigeration. As part of this strategy, the Wellington team are developing a new IoT business opportunity, that would provide IoT hardware and data services to one of the largest manufacturers of commercial coolers in the Americas. Wellington has been verbally advised it has been awarded the business, although some risk remains as a formal commercial agreement has not yet been reached. This opportunity will require a new Connect SCS product and customer specific applications to be developed, with development and support costs in the range of $1.0 to $1.5m. At scale, this project could potentially deliver growth of around 100,000 Connect SCS devices per year with data services and open the opportunity for retrofit devices. If successful, programme revenues from this project would likely start during 2020.
Due to the wide range of opportunities under development, Wellington is accelerating its investment and assessing both resource and funding requirements. Future investment is likely to require resources to accelerate sales growth, development capability to expand the IoT hardware and software roadmap, as well as funding to support several new customer opportunities. This growth investment need, coupled with upcoming debt maturities means the company will explore all funding options available to ensure it maintains the capability to continue delivering strong growth and improving financial performance.
The changing sales mix is likely to accelerate during H2, with legacy motor volumes declining more rapidly, and seasonal revenue volatility expected to continue, resulting in the company’s total revenue in 2019 expected to be at similar levels to 2018. This decline in legacy motor volumes along with a higher level of operating cost to support new business and development activity, means the company anticipates EBITDA will be around $3.0m, with net profit and operating cashflow somewhat higher in 2019 in comparison to 2018.
1 EBITDA (i.e. Earnings before interest, taxation, depreciation, amortisation and impairment) is a non- GAAP earnings figure that equity analysts tend to focus on for comparable company performance analysis. Wellington considers that it is a useful financial indicator because it avoids the distortions caused by differences in amortisation and impairment policies.
Wellington is a leading provider of IoT solutions, cloud-based fleet management platforms, energy-efficient electronic motors and connected refrigeration control solutions. It serves some of the world’s leading food and beverage brands and refrigerator manufacturers, and offers proximity-based marketing for Smart Cities to the Australian market. Wellington’s services and products improve sales, decrease costs and reduce energy consumption. Headquartered in Auckland with a global reach, Wellington is listed on the New Zealand stock exchange under the ticker symbol NZ:WDT
For further information visit www.wdtl.com
Chief Executive Officer
Chief Financial Officer
+64 27 5870455