PhotonStar results darkened by Brexit

30th Jan 2017 08:29

(ShareCast News) - Intelligent lighting and building control designer and manufacturer PhotonStar LED Group announced a trading update for the year to 31 December on Friday.The AIM-traded company said it experienced challenging trading conditions in the second half of 2016, and as such the group's results for the year were expected to be below current market expectations.It said the audit for the year was now underway, but its unaudited full year revenue for 2016 was approximately £5.4m, down from £6.9m in 2015.That reduction in revenue, when compared with the previous year, was due to the continued price pressure in the more traditional area of the group's business, such as light fixtures, the ongoing emphasis by the group on transitioning itself away from light fixtures and into intelligent lighting solutions and building control systems, and market uncertainty following the UK's Brexit referendum which had a negative impact on existing and potential customers.Those factors impacted group revenues strongly during the fourth quarter, the board said, and also impacted revenues during January 2017.The group made an unaudited EBITDA loss in 2016 of approximately £0.6m and unaudited loss after tax for the year of £1.3m.Included in the loss after tax was an investment by the group into its 'halcyon' system of approximately £0.6m, whilst revenue generated by the installation of 'halcyon' - primarily as trial systems that were expected to result in much larger projects - was approximately £0.5m.Overheads for the year were £2.5m, which compared favourably to £3.5m for 2015, and was a reflection of the cost saving measures that the group implemented during the year.At 31 December the group held unaudited cash balances of approximately £0.23m and it had drawn down £0.83m of invoice financing debt out of its total maximum facility of £1.65m.The paid-for trials for 'halcyon' and 'halcyon cloudBMS' were still under evaluation by customers, with several new trials being installed during the fourth quarter.Overall 'halcyon' revenues slowed slightly and were lower than management had forecast, as the trials indicated that certain software features and upgrades were needed to improve the performance of large systems.Additional features had since been identified and would need to be added before further roll outs could be considered.PhotonStar did report that it completed the development work on hardware and Internet of Things device firmware for lighting control during the fourth quarter, which would reduce research and development expenditure by approximately £150k/pa from the first quarter.The focus of the R&D effort by the group was now on platform and cloud software development for the 'halcyon' platform and 'halcyon cloudBMS'.It said its key strategic focus for 2017 was on the further development of 'halcyon' into the roll out stage and the completion of its transition into becoming a designer and manufacturer of intelligent lighting and building control solutions.PhotonStar said it expects to release its full year results for the year ended 31 December before the end of May."In 2016, we made good progress in transitioning the group into becoming a retrofit connected lighting and building management business and we have installed a number of trials in a variety of different industry sectors," said PhotonStar chief executive James McKenzie."We are therefore very pleased with the progress in this area of the business."We are currently evaluating additional trial sites in conjunction with our customers and look forward to providing shareholders with further updates regarding the trials in due course."McKenzie said the traditional lighting business continued to be affected by significant competitor price reductions, resulting in a decline in revenues and increased pressure on profit margins."Specifically in Q4 we had anticipated growth in lighting but unfortunately this did not materialise due to significant delays in construction projects due to uncertainty caused by Brexit and margins were also affected due to increasing costs associated with buying many key components in USD, euros and RMB."In Q4 we further restructured the group in order for this area of the business to be profitable at the lower revenue levels we are now experiencing and to position the group to deliver on the growth opportunities afforded by 'halcyon' IoT projects and paid for trials, which could lead to the roll out of significant new contracts."