The Directors of Azure Healthcare Limited are pleased to report the financial and operating results for the financial year ended 30 June 2017. The Company spent the first half of the financial year completing and implementing a substantial restructure program and also implemented many strategic initiatives for the balance of the year. The Board are committed to Azure’s long-term future and recognise these actions as necessary to allow us to advance our goals of evolving into a clinical workflow management software business. These strategic initiatives included but were not limited to the following:
A return to profitability in the 2nd half of the financial year
After completing a number of strategic initiatives in the first half of the financial year, the Company returned to an operating profit in the 2nd half of the financial year reporting a Profit before tax of $0.25 million from revenues of $16.08 million. See Financials below for further details.
New products including Pulse RTLS and Mobile Apps
Pulse RTLS is the second module in the evolution of Austco’s innovative Tacera Pulse software suite and represents an important milestone in the company’s development of next generation clinical business intelligence solutions.
Pulse’s built-in RTLS integration offers the flexibility to choose a locating system that meets the needs of modern healthcare organizations. The Tacera Pulse software suite provides a visual presentation of a healthcare facility, which allows for the effortless monitoring and improvements of operational performance. Pulse RTLS uses an open API for unified integration with leading RTLS solutions such as CenTrak, Ekahau, Ekotek, Elpas and Stanley without using expensive middleware.
Pulse Mobile is a smartphone application designed for iOS and Android devices that allows healthcare personnel to receive nurse call and 3rd party alarms directly on their personal devices. The easy to configure solution is available for download from the Apple and Google Play stores. Users simply connect to their facility’s Wi-Fi network, and the app will communicate with the Austco Mobile Gateway (AMG).
Pulse Mobile creates an optimized user experience with its intuitive user interface. The app is easy to learn and navigate, using technology that users are already familiar with. Caregivers can “Accept”, “Reject” or “Escalate” alarms with a simple action if they are unable to get to an assigned alarm immediately.
Using VoIP audio calling and VoIP-enabled call points, staff can respond to patient/resident alarms with Pulse Mobile’s callback feature. Since patient information is never stored on a recipient’s smartphone, Pulse Mobile ensures complete compliance with patient privacy laws.
Pulse Mobile simplifies the day-to-day activities of healthcare personnel by increasing their mobility. Notifications are routed to assigned caregiver’s smartphones, allowing them to determine which alarms require immediate attention at a quick glance. Pulse Mobile enhances staff efficiency and caregiver response times, which will help improve patient/resident outcomes.
Completion and transition to new manufacturing facility
The Company completed its transition to a new manufacturing facility in the USA during the year. The rationale for this change is a direct result of increased world awareness for FDA compliant products. The Company is of the view that this trend will continue; in particular as healthcare products expand into clinical workflow and software solutions. The US is the leader in the healthcare innovation field with the remainder of the world tending to adopt US practices. Moreover the Company is engaging the fastest growing market in the United States where a strong presence is required.
Rationalisation of product lines
The Company underwent the largest product review and rationalisation in its history which reduced the number of parts manufactured from over 800 to less than 300. This initiative will help streamline order fulfilment, reduce operational and inventory holding costs whilst simplifying regulatory compliance for the Company.
Divestment of non-core CellGuard business
In the context of the restructure and strategic initiatives, on 23 December 2016, Austco Communication Sytems Pty Ltd, a wholly owned subsidiary of Azure Healthcare Ltd, divested its CellGuard product line through an asset sale agreement. This business was not a separate legal entity and its operating revenues and expenses were not material enough to disclose separately as discontinued operations. Sales, margins and costs associated with this business were not material to the financial report of the Consolidated Group for the current year.
Non-operating impairment loss
In December 2016 the Company undertook a total company review of its intangible Goodwill assets within all operating divisions. As a consequence of this review, the Company determined that as a one off, nonoperating, 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.
Taxation – Non-operating Deferred Tax Asset (DTA) write down
In June 2017 the Company completed an assessment of the book value of its tax assets. Although these tax credits are available to offset future profits in the Australian tax consoldiated Group; it could not be readily determined if these tax credits would be utilised in a reasonable time period. As a consequence of this assessment, the Company determined that as a one-off, non-operating, non cash transaction, it should write down the book value of any available tax credits totalling $2.08 million as an income tax expense.
Completion of Placement and Rights issue
During the 2017 year the Company successfully completed a placement of 28,456,731 new fully paid ordinary shares to sophisticated, professional and institutional investors at an issue price of $0.070 per share, to raise $1,991,971.
In conjunction with the Placement, the Company also completed a 1:15 pro-rata, non-renounceable rights offer comprising an issue of 14,544,552 fully paid ordinary shares at an issue price of $0.070 to raise $1,018,119.
The Placement and the Rights Offer raised a total of $3,010,090.
Revenue from ordinary activities decreased by 8.8% in the 2017 financial year to $29.19 million versus $32.02 million in 2016 largely due to the disruption of moving manufacturing from Perth to Dallas during the year. Note that second half revenues were $16.08 million versus the first half revenue of $13.11 million.
Gross margins were 46.3% (2016: 48.9%) reflecting higher overall costs of manufacturing in two facilities for the first 6 months of the financial year including restructuring initiatives.
Net loss after tax (NPAT) was ($6.42) million including the non-cash impairment of goodwill of $2.75 million and non-cash tax asset write down of $2.08 million, compared to ($3.65) million in the previous corresponding period representing a 75.9% increase in net loss after tax in the 2017 financial year.
Net earnings before interest, tax, depreciation and amortisation, (EBITDA) were ($0.93) million, whilst earnings before interest and tax (EBIT) were ($4.20) million after the one off non-cash impairment of goodwill expense of $2.75 million.
Net Tangible Assets (NTA): Net Tangible assets have increased from 3.74 cents to 3.86 cents per share, an increase of 3.2%.
Final Dividend: The directors have not declared a final dividend, as the Company will continue to focus on short-term working capital requirements for production expansion, R&D investment and Group debt reduction.
Operating expenses: operating expenses decreased by 20.46% over the prior corresponding period largely due to restructuring initiatives explained above. Our Research & Development investment expenditure increased from $2.9 million in the 2016 to $3.1 million in the 2017 financial year.
During the year the Company generated negative operating cashflow of $2.55 million and finished the year with cash at bank of $1.72 million. Increased working capital for the North American operations included inventory increases of $1.16 million. Note that the Company repaid $0.9 million in bank debt during the financial year.
The following performance summary table highlights the comparative results for each 6 months over the last 2 financial years.
In 2018 we will focus on the following key objectives and initiatives to improve our business:
- Continue our focus on quality improvements including FDA and UL compliance
- Streamline manufacturing and operational efficiencies post strategic initiatives
- Establish a recurring revenue stream based on a subscription based pricing model
- Build strategic partnerships with market-leading healthcare technology companies
We have undertaken a number of bold strategies at Azure in the last 2 years and it is pleasing that we are now just starting to see the financial benefits flowing on from a substantial operational restructure program. We remain committed to delivering shareholder value by creating innovative products and solutions and believe that this will be the foundation to the Company’s continued sustainable and consistent growth.
On behalf of the Board of Directors and Executive Management team, I would like to thank our dedicated and passionate staff who have delivered some exciting new products and continued fantastic customer service.
Finally, I would also like to thank you, our shareholders, for your trust and investment in our Company as we move into the future.
Chief Executive Officer