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Windflow struggles to survive, but profitability in sight

MARTA STEEMAN
Last updated 05:00 15/03/2014

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Embattled Windflow Technology may have to tap again its expat Kiwi investor for more capital to survive.

Whether ex-Wellington and Windflow investor David Isles, who lives in New York, needs to inject capital or lend more money to Windflow depends on how many wind turbines the Christchurch manufacturing firm manages to sell in its target United Kingdom market.

On the sales front progress has been very slow in the past three years and the company has had to raise capital several times to stay afloat, with Isles the main contributor.

Yesterday Windflow forecast a $4.4 million loss for the year to June 30 2014, after posting a half-year loss of $2.8m for the six months to December 31, 2013.

The half year loss was almost 50 per cent higher than the previous half year of $1.9m.

It shares were steady at 6c with no trades yesterday.

Asked had the board discussed liquidation, Windflow chief executive Geoff Henderson said "It's a bit early for that."

The company was making sufficient progress to stay the course, he said.

The General Dynamics relationship was progressing and it was investing in a prototype based on the Windflow turbine.

David Isles continued to be supportive, Henderson said.

Isles had 16 per cent of the company's ordinary shares, about 80 per cent of its preference shares , regarded as equity, and had lent it a lot of money, Henderson said.

Henderson, company founder, and family members had about 6 per cent and about 200,000 preference shares.

Asked was the company insolvent on its December 31, 2013, half-year balance date when it had negative equity of $2.2m, Henderson said that was one of the definitions of insolvency but the company raised $2.9m in early January.

Asked about coming close to insolvency and laws around that, Henderson said: "The board was well aware of these issues."

Revenue from turbine operations for the six months to December was $373,000, compared with the previous half of $837,000, as the company struggles to sell turbines in Britain.

Licensing revenue from General Dynamics amounted to $641,000, compared with $168,000 the year before.

The company has made provisions this financial year for $1.6m of warranty costs over the turbines it supplied Te Rere Hau wind farm in Manawatu.

The company has stuck with the "going concern" assumption but warns of uncertainty about maintaining that in the half year report.

"The company estimates that it can make the transition to profitability in 2015 with projects proceeding at a rate of one turbine per month in the years to 30 June 2014 and 2015."

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Isles has committed a £7.38m loan facility (NZ$14.8m) to Windflow, and at December 31 last year Windflow had borrowed $4.82m of that.

- BusinessDay

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