Compumedics Limited (Compumedics), an Australia-based medical device company, has reported revenues of $17.1 million for the first half of fiscal 2009, down 15%, compared with the revenues of $20.1 million in the year-ago period. It has also reported a profit after tax of $2.5 million for the first half of fiscal 2009, compared with the profit after tax of $1.6 million in the year-ago period.
Compumedics has booked first half earnings of $2.5m and its fifth consecutive profit report to market in the six months to December 31, 2008.
At $2.3 million, the company is reporting its highest level of operating cash for any six month period in more than 4 years. It is also the company’s fifth consecutive positive operating cash report to market.
As a consequence the company has reduced its bank debt at 31 December 2008 to $1.9m, a 30% reduction on its June 30, 2008 balance and the lowest level of bank debt the company has had since listing on the ASX in late 2000. With a cash balance of $1.4m at 31 December 2008, the company is also reporting its strongest cash position to market in more than three years.
Achievements for the half-year ended December 31, 2008
Operating cash flows more than doubled in the half-year to $2.3m.
Debt levels for the business are the lowest since ASX listing with a further reduction in debt by 30% to $1.9m at December 31, 2008 compared to $2.7m at 30 June 2008.
Revenues have stabilised over the last few reporting periods as a consequence of restoring the profitability and the financial performance of the company. The company believes this was a reasonable outcome given the current economic environment, which resulted in an unanticipated deferral of orders by customers late in 2008. This was particularly noticeable in the company US based business. Importantly the purchasing patterns of the company customers have recently normalised and the company’s booked business in January and February has been more in line with the same months in prior years.
The revenues for the half-year would have been stronger if not for the unanticipated tight credit environment in the latter part of calendar 2008 as evidenced by the company holding almost $2m in orders placed by customers that could not be shipped prior to December 31, 2008. These orders will ship in the current half-year.
Despite the above constraints margins improved to 61%, compared to 58% as reported June 30, 2008.
Importantly the clearance or head-room on the company’s periodic bank covenant tests at December 31, 2008 demonstrate significantly greater and increasing safety margins and reinforces the company’s strategy and financial position.
The company has focused on debt collections, reducing the ageing profile of its accounts receivable.
Grael PSG, Neuvo L and SomniLink SPAP will commence production level shipments in 2009, underpinning future revenue growth despite the current economic environment.
The company has maintained a strong R&D pipeline with further new and improved products to follow.
Compumedics increased operating cash flow for the half-year and period end cash position was driven in part by the significant improvement in its aged receivable position on its rest-of-world ledger from June 30, 2008 to December 31, 2008 with accounts receivable over 90 days declining from 38% of total accounts receivable at June 30, 2008 to 31% of total accounts receivable at 31 December 2008. This result compares favourably with others in this and related sectors for this type of business.
In addition to the above highlights the company has implemented a further $2 million in annualised cost savings as of January 2009 as a precautionary measure for the company’s earnings over calendar 2009. Importantly we have seen signs in January and February, particularly out of the US, that business is resuming more normal sales levels for the company core medical diagnostic capital equipment business.
Further, the company has maintained its R&D program at between 12% and 15% of revenues, which is typically about double comparable and related industry averages. As a result of the above industry average investment in R&D the company has a number of key strategic and core products releasing to market. These core products include its innovative long-term neurological-monitoring (LTM) product, Neuvo into the US market and the up-coming release of its next generation sleep laboratory product, the Grael PSG.
These products should generate incremental sales and lead to an expansion in revenues and earnings for the company over calendar 2009 and into 2010.
David Burton, CEO, said about Compumedics’ results, “We are all pleased to see the company increasing profits amidst the current economic conditions but we understand the importance of retaining these disciplines whilst growing the revenues and corresponding earnings”.
“The continuing profitability of the company for 5 consecutive reports to market since the major restructuring in FY2005/06 has been achieved due to the focussed efforts of Compumedics’ dedicated and highly skilled team of loyal employees and supporting stake-holders”.
“I am pleased that, in the face of a very tough global economic environment that the Compumedics team was able to improve the earnings and cash position of the company. The company continues to strengthen its position to underpin its traditional growth outlook, whilst improving its financial position.”
Compumedics anticipates the business to grow overall in the present outlook period based on confirmed business disciplines, a significant pipeline of new products and strengthened sales and marketing, despite the toughening and uncertain global economic conditions.