Announcement
MKTUPDTE: WDT: Wellington Drive Technologies Q1 result and COVID-19 update
12:21pm
WDT
01/05/2020 12:21
MKTUPDTE
PRICE SENSITIVE
REL: 1221 HRS Wellington Drive Technologies Limited
MKTUPDTE: WDT: Wellington Drive Technologies Q1 result and COVID-19 update
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 announced its unaudited trading results for the
three months ending 31 March 2020 (Q1 2020).
Financial Metrics
Three months ended 31 March 2020 2019* Change
Revenue $15.4m $15.8m -3%
Wellington Connect IoT Revenue $6.8m $7.1m -6%
ECR2 motor revenue $5.3m $4.3m +24%
ECR legacy motor revenue $2.9m $3.9m -27%
Gross profit $4.5m $4.1m +8%
Gross margin % 29.4% 26.2% +3.2pp
EBITDA reported $1.50m $0.99m* +51%
EBITDA pre fair value adjustment $1.01m $1.09m -7%
EBIT $0.91m $0.38m* +$0.53m
Profit before taxation $0.79m $0.09m* +$0.70m
o Revenue for the quarter was $15.4m, consistent with the same period in
2019. There was some level of impact on Q1 2020 revenue due to COVID-19
disrupting the company's Asian supply chain, however, these supply
constraints were largely resolved during March and the supply chain and
manufacturing operations are currently operating normally.
o Gross margin improved from 26.2% to 29.4% reflecting the ongoing focus on
implementing various productivity improvement measures and the increasing IoT
product share of revenue.
o EBITDA1 for the three months was $1.5m versus $1.0m for the same period
last year, a result which included a $0.5m non-cash accounting gain arising
from a change in fair value of the contingent consideration payable for the
acquisition of iProximity Pty Limited. EBITDA1 excluding this gain was
$1.0m, 7% lower than 2019.
o Net profit before tax for the three months, including the fair value
adjustment, was $0.8m, up from $0.1m last year.
o The company shipped 9% fewer motors for the same period in 2019. ECR2
motor revenue grew 24% compared to Q1 2019. Wellington's legacy motor volume
reduced as expected.
o Wellington SCS Connect shipments were 14% lower compared to the same period
in 2019.
2020 Update and Cost Initiatives
COVID-19 related factory and border shutdowns are impacting Wellington's
customers globally. The duration of the shutdowns in the company's key
markets is uncertain as is the pace and timing of recovery in demand. The
impact of COVID-19 on the capital expenditure plans of major food and
beverage brands is also not clear but the company is planning for demand to
be well down on 2019 levels.
The company has successfully navigated the New Zealand level 4 lockdown and
similar lockdowns in its overseas offices. Despite the work-from-home
mandates the company has continued progress on new product development,
supply chain right sizing and maintaining customer support.
The focus for the board and management is on maintaining financial liquidity
and being in a strong position to support customers as they exit their
shutdowns. As most customers have temporarily closed their factories and
office operations for varying periods, receivables collection and product
demand have been impacted. Customers have been cancelling or deferring
purchase orders, seeking to reschedule demand and taking extensions of their
payment terms.
The company is implementing a range of measures to help mitigate the impact
of changes in the market. These include:
o a number of temporary compensation changes which the company expects to be
in place for much of 2020 with the position to be reviewed every three
months:
o Board of Director fees reduced by 50%
o Chairman fees reduction of 100%
o CEO salary reduction of 30%
o postponement of the 2019 performance payment into 2021.
o implemented a hiring freeze for the balance of 2020.
o reduction of travel expenses to near zero for the balance of 2020.
o deferred $2m of capex spend, with the balance of $1m allocated to complete
the development of new Connect SCS products, new proximity marketing software
solutions and the ECR2+ motor.
o secured extended terms from the company's main suppliers to match delayed
receipts from customers.
o applied for and received a $434,000 wage subsidy payment from the New
Zealand government. Other wage support grants in Australia, USA and Singapore
have been applied for.
o negotiated a rent reduction for the Auckland and Turkish office premises.
Wellington is also exploring or considering additional initiatives to ensure
the company emerges from the pandemic in a strong position and will update
the market as these initiatives progress.
Wellington's CEO Greg Allen commented; "We were pleased with our first
quarter results, especially with the backdrop of the COVID-19 challenges
emerging during the quarter. These are challenging times for all businesses.
Our team has done exceptional work to date to meet customer demand after
supply constraints were resolved and we continue to target the launch of new
IoT products during 2020. The team is working hard to ensure we conserve
cash at the same time as maintaining our ability to supply customers and
support their product needs as demand returns."
End CA:00352482 For:WDT Type:MKTUPDTE Time:2020-05-01 12:21:25
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