Melbourne, Australia, February 28 2017 – Azure Healthcare Limited (ASX:AZV) attaches its half year report for the 6 months ended 31 December 2016.
- The net loss after tax for the half year ended 31 December 2016 was $4.56 million, which included one off restructuring costs, provisions and balance sheet impairments of $3.66 million;
- Due to the transition of manufacturing from Perth to Dallas, revenue for the period was $4.26 million down and therefore gross profit was down $2.38 million on the prior corresponding period, however, orders currently on hand exceed $12.2 million;
- All restructuring, balance sheet repair and business divestment milestones have now been achieved with all associated costs borne in the first half; and
- The Board reaffirms its previous guidance that the Company expects to return to a modest profitability in the second half of FY17.
As previously announced, the Company undertook a significant program to restructure the business operations. This has included the transition of its manufacturing operations to the USA and the largest review and rationalization of products in the Company’s history. The Company is pleased to report that these initiatives have now been completed as at 31 December 2016. As a result the Company experienced a temporary slowing in revenue and increase in transfer costs due to the restructuring activities.
The Company maintains that the investment in these programs will create a foundation for future growth and profitability. The Company has eliminated dual manufacturing facilities and excess costs and is already seeing financial benefits, which will return the company to profitability in the second half of the financial year.
The significant variances in the Company’s financial results when compared to the previous corresponding period are:
- Operating net loss after tax (excluding the impairment of goodwill but including restructure costs as discussed below) of $1.81 million compared to $0.5 million in the previous corresponding period representing a reduction of $1.31 million;
- Revenue of $13.05 million compared to $17.31 million in the previous corresponding period representing a reduction of $4.26 million. This is largely attributed to the loss of productivity while raw materials were moved between Perth and Dallas. However, the orders in hand currently exceed $12.2 million and annual revenue for the full financial year is expected to be comparable to FY16;
- Gross margin of $5.99 million compared to $8.37 million in the previous corresponding period representing a reduction of $2.38 million, attributable to lower turnover;
- Profit on sale of $0.46 million for the divestment of CellGuard; and
- One-off expenses related to the restructure included:
– $0.40m in inventory provisions;
– $0.08 million in make good obligations in respect of termination of the Perth lease
– Other expenses associated with legal, recovery fees and balance sheet repair of $0.410 million.
Non-operating impairment loss
The Company has undertaken a total company review of its intangible assets within all operating divisions. As a consequence of this review, the Company has determined that as a one off, non-operating, non-cash transaction, it should impair the full amount of acquired goodwill of $2.75 million reducing the total Goodwill intangible assets to nil. The reasons for the write-down of goodwill are principally the reduction in revenues and operating profit for the last 2 years whilst undertaking restructuring activities, which have significantly changed the business.
Whilst the Company is confident that the future earnings will now be positive the impairment of goodwill will create a stronger balance sheet for all stakeholders.
The Company has expended considerable financial resources to complete its restructuring program negatively impacting operating cash flows for the 6 months ended 31 December 2016.
Divestment of non-core business
In the context of the restructure and strategic initiatives, the Company has now completed the sale of its Cellguard business. Cellguard provides audio communication systems for custodial care facilities such as prisons. The process was completed in December 2016 and had a positive financial impact of $0.46 million as a profit on sale as assets divested were less than the sale proceeds. These amounts are reflected and accounted for in the attached Appendix 4D – Half year report.
The Company reaffirms its previous guidance. Whilst the Company does not expect to be profitable for the full 2017 financial year it does expect to be modestly profitable in the second half of the 2017 financial year. The Company is already seeing the benefits of the restructure with:
- a second manufacturing shift added in the Dallas Factory;
- record output for the Dallas factory in January;
- a strong order book;
- continued growth in the sales of software; and
- research and development continuing with the release of the Company’s Tacera Pulse RTLS product in December 2016 and the release of the Company’s mobile application for Tacera Pulse on track for March 2017.
For further information please contact:
Mr Clayton Astles
Chief Executive Officer
Telephone: +1 416 565 7457