1.3.2005: Meldung: Solco Ltd.: Investor Update March 2005
Maiden Half Year Profit at Solco
This week Solco released its Half Year Report to December 2004, the highlight of which was the Company’s maiden half year profit. Revenues have grown 252% over the previous corresponding period (“pcp”) being the half year to December 2003, through the acquisition of Solco Pty Ltd and a series of internal business improvement across all facets of the enterprise. The business is now well positioned for significant further growth in turnover and profitability.
Key Financial Results
Profit increased substantially from the pcp loss of $702,000 to a small profit of $7,000 with this trend expected to continue. Net Tangible Asset backing per share increased from 4.57 cents in the pcp to 6.35 cents for the December 2004 half. Cash at bank was a healthy $2.11 million.
In order to maintain our growth momentum we have made a number of changes to our management in the past six months to ensure we can continue to improve our business delivery.
? John Beech has been appointed to the Board to replace Chris Middleton. John was CFO and director of Orbital Engine Corp Ltd for over ten years and brings significant experience and rigour to the board. John has already had an impact in terms of improving financial management and corporate governance.
? Since Duncan Stone took over as CEO Anthony Maslin has the role of Executive Director responsible for International Projects.
? Ashley Arnott, Solco CFO has been appointed company secretary.
? Stuart Whittam, an experienced manager with an MBA and electrical engineering background has joined the executive team as Chief Operating Officer. Stuarts role will be to fully integrate acquisitions and improve delivery systems and margins.
Solar Hot Water
Sales for our solar hot water systems have been steady while we focus on integrating the business and at the same time developing new systems and processes that will enable us to substantially gear up this business unit. This growth has already been seen with November providing our largest monthly production on record and we are looking to double that production in the next four months. Sales will be driven by a new distribution strategy where we are increasing our number of eastern states distributors from three to thirty to take advantage of the new rebates and legislation in place.
Solco Manufacturing System
One of the major contributors to business profitability was the establishment in Portugal of our 14th manufacturing licence. The licensee will produce our solar hot water systems for the Portuguese and Spanish markets. Solco established the turnkey operation and produced the first Solco solar hot water units in Europe in early December, two weeks ahead of schedule. Like many other governments around the world both the Portuguese and Spanish governments have this year announced that they will support the installation of solar hot water systems on new houses (in excess of 500,000 built per year). Solco holds a 19% interest in the Portuguese business as well has receiving royalties on sales. Solco is currently negotiating the sale of four other manufacturing licences in other locations and expects to complete the sale and installation of at least two by December 2005.
Our projects team, recently renamed Power Systems, has improved sales by 107% on the pcp. To help manage this business unit we have recently recruited Nathan Stone who has been working in the solar power industry for over ten years and brings significant new industry contacts and experience to the team. Power Systems has commenced 2005 strongly, winning two of its largest projects ever.
Sales for solar pumping were up 34% on the pcp with a 106% increase in Gross Margins. This result has been achieved through a stronger management regime, refinement of our distribut ion capability and improved production efficiencies. Sales are expected to continue to grow this half year through further improvements, which include:
? Launching the largest range of solar pumps in Australia, expanding from the Sun Mill to also include the small application Shurflo, the mid range Lorentz submersibles, and the large Totale Energy solar pumps.
? Improving promotional activities and support to dealers including in store merchandising, new advertising, and a new range of brochures.
? The two activities above are expected to enable further expansion of our dealer network to improve coverage and sales.
Events Subsequent to Reporting Period
Solco intend to add to the success of its acquisition last year with at least one further acquisition this financial year to complete its objective of becoming the largest distributor of solar products in Australia. In line with this Solco is moving towards the settlement in March of the recently announced Choice Electric (“Choice”) acquisition. Choice is the leading solar distribution company in Australia and with a 15 year history of profitability and return on capital employed of greater than 30%, represents an outstanding opportunity for Solco to continue to grow its eastern states presence.
Placement to London Institution – Henderson Global Investors
In January 2005, the company placed 7 million new shares at an issue price of $0.30 (30 cents) to raise an additional $2.1 million. The funds are to be utilised as part of the Choice Acquisition and to supplement existing working capital.
Maldives Plant Delivers first Pure water
The milestone Maldives water supply project has commenced. The Chairman of European Triodos Bank Renewable Energy Fund, which is debt funding the venture, was in the Maldives to drink the first glass of water produced from our solar desalination/purification water bottling plant. Water supply to the local population will commence this week with a three month trial which is expected to result in substantial scale up of the project to the other twenty approved sites in the Maldives. This is an extremely high profile project and is the first operation of its type in the world with relevance to a market in excess of one billion people globally.
Solco has made significant improvement to its business results and opportunities in the past six to nine months and management believes that the business is well positioned to continue to develop profitably. It is expected that FY 05/06 we see a year of consolidation to ensure that we realise significant value from the internal business changes and acquisitions we have made this year.
For further information contact:
Chief Executive Officer
(08) 9334 8100
Or the corporate advisor:
Director – Investment Banking
(08) 9224 6806