Redflow Limited (ASX: RFX) is pleased to announce its results for the six months ending 31 December 2019 (H1 FY20), a period where Redflow gained further traction with its focused growth strategy in the telecommunications vertical.
Revenue was up 282% to $1.4 million (H1 FY19: $376k) as sales momentum built with follow up orders delivered to strategically important telecommunications customers, including Vodacom (through telco partner Mobax in South Africa) and the Rural Connectivity Group (through new partner Switchboard Services Limited in New Zealand).
At the same time, Redflow has been progressing new opportunities with additional telecommunications companies in its target markets that are expected to underpin strong sales growth in the short to medium term.
Reflecting Redflow’s scale up phase, a loss after income tax of $(3.7) million was posted, a $1.2 million improvement on H1 FY19’s loss of $(4.9) million. At 31 December 2019, Redflow had a cash balance of $5.0 million and no debt, and received an additional $2.0 million in January 2020, following receipt of a R&D tax rebate.
Commenting on the H1 FY20 results, Redflow CEO and Managing Director Tim Harris said:
“We have made significant commercial progress over the first half, as we received and delivered follow up orders from key telecommunications customers. The positive momentum we are experiencing follows successful reference deployments and customer wins during previous periods.
“The record half year revenue significantly exceeded the total revenue achieved over FY19, and we are encouraged by the recent orders from world class telecommunications companies and a rapidly growing number of new prospect telco and tower customers. All of these customers have a critical business need that our unique battery can address and have the ability to order Redflow batteries in material volumes.”
South African sales underpinned strong sales growth
During H1 FY20, Redflow won and commenced delivery of an order to provide 68 Redflow zinc-bromine flow batteries for at least 20 mobile phone tower sites in South Africa. The sites are owned by Vodacom, one of Africa’s leading telecommunication companies, and the batteries are being deployed by strategic partner Mobax, following an extensive trial by Vodacom. The order will deliver a commercial margin to Redflow.
“The Redflow batteries will reduce operational costs for Vodacom through decreased diesel use, lower fuel delivery costs to remote locations and less frequent generator servicing. Vodacom also adopted Redflow batteries to tackle the issue of battery theft, as Redflow’s batteries cannot be broken down into individual components that can be transported, sold, or re-used. The Redflow battery also contains a number of mechanical and software features that stop a device from working if moved, providing additional theft mitigation features for Vodacom. This order was a significant milestone for Redflow and builds on our previous work for Vodacom through our partner Moropa,” said Mr Harris.
Redflow selected for off-grid storage in New Zealand
During November 2019, the New Zealand Rural Connectivity Group (RCG) selected Redflow zinc-bromine flow batteries to store energy in off-grid telecommunication sites in remote rural locations. This is a substantial opportunity for Redflow, as RCG will build over 400 new cell sites in rural locations (both on and off-grid) to extend mobile and wireless broadband coverage to more than 34,000 rural homes and businesses by December 2022.
RCG’s off-grid cell sites will meet their energy needs through a combination of PV solar panels, Redflow energy storage batteries and a backup generator. The first site was installed at the end of December 2019 and utilises eight Redflow batteries.
Redflow is currently working on a broader commercial agreement with RCG, which is targeted to be finalised over the coming months.
Australian deployments provide strong reference points
Redflow delivered an order of 27 ZBM2 batteries in October to power a microgrid installation in North West Tasmania for Redflow’s largest shareholder, Simon Hackett. This deployment provides resilience by automatically switching to off-grid mode during any grid power failures and importantly serves as a reference site for future rural opportunities.
Redflow also worked with its Perth-based based installation partner, TIEC Electrical, to install an energy storage system at Yallalong Station, a 348,000-hectare cattle property 650km north of Perth. Prior to Redflow’s solution. the off-grid site was only able to run a diesel generator two to three hours a day due to the high cost and required maintenance. The deployment demonstrated the market opportunity for Redflow batteries to provide off-grid energy storage for rural properties in harsh Australian environments.
Redflow is currently working on further opportunities for rural deployments in Australia and continues to actively support its key partners in Australia and other markets across a number of opportunities.
Opportunities in China
In September 2019, Mr Harris presented at the China Energy Storage Alliance Conference in the Qinghai province of China. The event provided an opportunity to demonstrate Redflow’s 100 kWh battery system at the Zbest Power Haidong Transport Project site to a wide range of government and private sector participants.
While the recent COVID-19 outbreak has delayed business development opportunities in China, Redflow plans to resume discussions with potential customers at the appropriate time and confirms that there have been no material impacts on supply of battery components to date.
Strong order book and pipeline underpins Redflow’s positive growth outlook
Commenting on the Company’s positive growth outlook, Mr Harris said: “With a committed book of orders for batteries to be delivered over the second half and an exciting pipeline with world-class companies, we are well-positioned to continue commercialising our technology and scaling up the business. Significant progress has been made on key engineering projects and supplier discussions to deliver the cost benefits that are critical to our long-term competitiveness and profitability, as contracts scale further. We continue to moderate our Thailand manufacturing production to preserve cash and we have made further significant cost savings in Australia. Our sales pipeline in our target markets is expanding and we remain ready to quickly respond to any material uplift in orders over the short to medium term.”