20.3.2004: Meldung: Solar Energy Systems: Investor Update

Investor Update - March 2004
• New CEO and improvements to the management structure
• Slow first half sales mean profit no longer achievable for the full year
• ISO accreditation
• SES named Sustainable Small Company of the Year
Management Structure Improvements
As previously announced, the Chief Operating Officer of Solar Energy Systems (SES), Greg Allen, has resigned from his position to pursue other opportunities. He has been replaced by Duncan Stone, who will assume the position of Chief Executive Officer.
Duncan has extensive experience managing fast growing companies, as well as a background in the commercialisation of technologies. He graduated with high distinctions in Entrepreneurship, Marketing and Finance from the Masters of Business Adminstration (MBA) course at the University of Western Australia, and holds a Bachelor of Engineering degree (Honours) from the University of New South Wales. The board of SES believes Duncan"s experience, extensive business network and enthusiasm will produce significant results for the company.
The company"s founding Managing Director, Anthony Maslin, will remain in the position of Executive Director of SES. Mr Maslin has played an instrumental role in the development of the business and corporate profile. He will focus on developing international opportunities and continue to manage SES"s corporate profile whilst relinquishing managerial responsibilities to the new CEO.

Adverse market conditions lead to slow sales of Sun Mill
An extensive survey of Sun Mill customers was recently undertaken, and has provided encouraging results. Of 180 customers surveyed, less than 3% indicated they would not recommend the Sun Mill to others, indicating a very high level of customer satisfaction. The survey also provided valuable product, service and distributor feedback, as well as valuable market information, and will be collated and actioned over the coming months.
However, despite this high customer satisfaction level, Sun Mill sales over the last six months have been well below forecast. This is largely attributable to market conditions, with a wet season and strong crop meaning pumps have not been a priority purchase for the agricultural market. Sun Mill sales for the six months to December were $913,000, 26% below last years result for the same period.
Indications from rural markets are that the disappointing Sun Mill sales are in line with competitors in the market. New strategies to improve sales are being developed and implemented, with results expected in the new financial year.
The margin result to December was 21%, well below last years result, and contributed to the $702,000 loss for the first half. This was a result of several one off factors that have since been rectified, some of which will positively impact the current half year. Fundamentally, SES"s underlying margin has improved due to better component pricing, market-based retail pricing for the Sun Mill and strong margins from the Projects business.
Overheads for the period were slightly above budget at $897,000. This has been improved upon for the first two months of the second half, and is now in line with budget.
As a result of the poor result for the first half, SES"s stated goal of profitability for the 2003/04 financial year is no longer achievable. Whilst clearly disappointing, this position can be attributed to selling a single product into a single, volatile market. Actions have now been taken to rectify this situation, including seeking compatible products which can be sold through the extensive Sun Mill network.

Projects update
Order book for the Projects business has grown from $0 to $291,000 in the last 12 months, and continues to exceed expectations. East Timor continues to deliver results, with government, non-government and commercial customers. Domestic opportunities and sales have also improved.
East Timor has seen several projects undertaken in recent months, with jobs completed for Woodside, Community Water Supply and Sanitation Programme (the Ausaid funded government water supply program) and Rotary, amongst others. Rotary purchased SES"s first Solar Home Lighting Systems, with 150 systems being installed in the district of Railako Kraik.

ISO Accreditation
On December 22, SES was awarded ISO 9001: 2000 accreditation by BVQI (Bureau Veritas Quality International). This covers the supply of renewable energy equipment design, manufacture, installation and service, specialising in remote area pumping and power systems and domestic gridfeed systems. This is the culmination of several years of ongoing work to improve the quality of SES"s products and services, and forms the basis on which SES will continue to improve its quality assurance and quality control.

SES named Sustainable Small Company of the Year
As announced in December, SES was named Ethical Investor Magazine"s "Sustainable Small Company of the Year" for 2003. The awards draw on the expertise and research of the ethical investment industry to recognise achievement and performance of publicly listed companies against the triple-bottom line -attainment of financial, social and environmental goals.
Nominations of eligible ASX-listed companies were received from seven high-profile
research groups: Centre for Australian Ethical Research, Monash Sustainability
Enterprises, Sustainable Asset Management, Corporate Governance International, Green Capital, Rodger Spiller & Associates (who nominated New Zealand companies) and Sustainable Investment Research Institute.
A panel of expert judges then reviewed nominations and determined the award winners. The four judges were: Professor Charles Sampford, Director Key Centre for Ethics Law, Justice & Governance and President, International Institute for Public Ethics; Cathy Zoi, Executive Director Bayard Capital and member of the SRI consultative committee for AMP; Helga Birgden, Chairman Christian Centre for Socially Responsible Investment; and Steve Mullins, Union Services Manager and head of corporate sustainability initiative at the ACTU.

Maldives Update
Progress on the Maldives Feasibility Study has been slow, primarily due to short term managerial priorities and slow response times from the Maldives. Renewed efforts will be devoted to this area in the coming months, as resources are freed up for business development.

Successful capital raising
The share purchase plan announced at the Annual General Meeting raised a total of $417,000, being slightly above the Board"s expectations. As indicated at the AGM, a small placement was also undertaken, raising $196,250. In total, $613,250 was raised at a price of 18.5c, representing an issue of 3,314,907 shares.
As at February 28 2004, SES retains $1,057,825 cash at bank.

Whilst sales for January and February have been stronger than any month in the first half, sales in excess of $200,000 for each of these months remain below expectations.
As a result of the market research, several new strategies are to be implemented over the coming months. These strategies will be the prime responsibility of the CEO, and include increasing the range of products to be sold through the Sun Mill sales network and expanding the international sales network.
Overheads have remained in line with budget, and are being monitored closely.
Margins for January and February were encouraging at 41% overall. With significant reductions in panel prices (the major input into cost of goods sold) soon to take effect, the fundamental position of the Sun Mill and Projects business remains sound.

Whilst poor sales have delayed the effect of the structural improvements made to margin, the effects are now beginning to be felt, and the outlook is for further improvements in this area.
As indicated, it is highly unlikely that the company will record a profit in the 2003/04 financial year. However, new managerial input, increased margins, a broader product inventory and further emphasis on overseas markets combine to provide a more optimistic outlook for the following year.

Anthony Maslin
Executive Director
Solar Energy Systems Ltd.
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