ERoad turns to first-half profit from year-earlier loss, reiterates full-year forecast

Wednesday 25th November 2015

ERoad, the logistics and fleet management software and hardware developer, turned to a first-half profit from a loss a year earlier as gains in Australia and New Zealand made up for slower growth in North America.

The profit was $611,000, or 1.02 cents a share, in the six months ended Sept. 30, from a loss of $1.9 million, or 3.84 cents, a year earlier, the Auckland based company said in a statement. Revenue rose 55 percent to $12.2 million.

ERoad affirmed its annual guidance for profit of $500,000 and revenue of $26.5 million, after lowering its estimates in September as an acceleration of its US expansion hurt short-term sales and added costs.

The volume of distance recorder units contracted to ERoad customers increased 58 percent to 31,298 at Sept. 30 from the year earlier period, it said. Total contracted units in North America rose more than 300 percent to 3,158, and in Australia and New Zealand increased by 47 percent to 28,140, it said.

“While sales were slower than anticipated in North America, the shortfall was made up for in New Zealand/Australia,” said chief executive Steven Newman.

The company expects its Oregon based North American business to grow, once new federal regulations on electronic logging devices are announced, Newman said. The company sees broader opportunity in the North American market coming from new regulation and an international fuel tax agreement which covers 2.9 million vehicles across the US and Canada, and requires accurate reporting of mileage and fuel consumption, by state, to calculate fuel tax.

The company has developed an indirect sales channel in an attempt to target larger networks serving transport fleets.

"This enables us to address the 4.5 million vehicles subject to one or both of these regulations," Newman said. "This is a substantial opportunity over and above Oregon weight-mile tax services."

Newman will be based in Portland, Oregon, for the next six months to support ERoad’s management, training and sales focus in North America. While the North American business hadn’t grown as quickly as the company would have liked, its sales were 90 percent ahead of New Zealand sales at the equivalent point of market entry, he said.

ERoad is now collecting 31 percent of New Zealand’s heavy vehicle road user charges, up from 26 percent a year earlier and an expansion of its services is aiding its growth, the company said. Its New Zealand business is expected to continue to achieve strong sales growth in the second half of the year.

The company’s staff increased 58 percent to 180. Numbers were likely to “level out” at just under 200 as it moves from “capability building” to “take-off” mode.

The company won’t pay a first-half dividend.

The shares rose 0.9 percent to $2.20, and have dropped 43 percent this year. The stock reached a high of $4.28 in November 2014 after listing in August last year.

ERoad expects to release an update on its progress in North America and New Zealand on Jan. 29.

BusinessDesk.co.nz

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