Energy Mad borrows $1mn at 20% as losses narrow

Tuesday 22nd November 2016

Energy Mad, the energy efficient light-bulb developer and retailer has borrowed a further $1 million to meet its capital needs, paying an interest rate of 20 percent under a one-year loan from Smartshares Limited, the pioneer of Exchange Traded Funds.

In notes to its half-year results, the Christchurch-based company said the money would "fund a significant increase in inventory to support the growth in sales."

Energy Mad borrowed $1 million from asset manager SuperLife in June, paying 15.75 percent, again for a one-year loan. At the time, NZX-owned SuperLife held 45.64 percent of Energy Mad, but it sold down its entire stake in October, and currently holds just 0.16 percent. Energy Mad also owes SuperLife $500,000, money it was loaned in September 2015 for a period of up to 3 years, with the interest rate rising to 15 percent.

The new loan from Smartshares, which is also part of the NZX group of companies, is secured over Energy Mad's inventory.

Energy Mad also owes $2.53 million in unsecured convertible notes which were issued in 2014 for a period of three years, with an interest rate of 12.5 percent for the first note and 13.5 percent for the second. Both notes can be extended for a further year by Energy Mad. Convertible notes held by SuperLife can be converted into shares at the average share price over the five days prior to their conversion.

The company is currently valued at just $3.1 million. The company listed in October 2011 at a price of $1.00, but shares now trade at just 4 cents.

In its unaudited results for the six months to the end of September, Energy Mad said operating revenues had risen 48 percent to $3.7 million from $2.5 million in the same period a year earlier. Operating losses shrank to $200,000 from $500,000 and $300,000 was set aside to cover obsolete inventory.

New Zealand revenue fell to $500,000 from $1.1 million, which the company said reflected the transfer of its direct-to-consumer business to My Eco Limited.

Australian revenue more than doubled to $3.1 million from $1.4 million, as Energy Mad focuses on the Australian business to business market, especially in Victoria, South Australia and the Australian Capital Territory, with sales driven by state government energy efficiency schemes.

The company's Ecobulb LED's are currently undergoing independent laboratory testing ahead of being submitted to be part of the New South Wales scheme.

Despite sales more than doubling, monthly revenue fell over the period due to an oversupply of energy certificates in Victoria, causing the value of the certificates to more than halve between January and the end of September. That led to a fall in installations and a decline in the sales of LED's.

However, it said it expects a recovery in demand and sales due to a re-balancing of supply and demand and an increase in the efficiency target for 2017.

A bonus of $146,277 was paid to former chief executive Paul Ravlich, who left earlier this year. The notes to the accounts show this was to reflect his efforts in restructuring the business and substantially reducing its losses. The bonus was used to extinguish a loan he had borrowed from Energy Mad in 2013 to buy shares in the company.

Shares were unchanged at 4 cents, and are trading at exactly the same level as they were at the start of the year, having briefly hit a high of 7 cents a share in May.

BusinessDesk.co.nz

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