The developer of the leading-edge ophthalmic laser technology solutions, Ellex Medical Lasers Limited (ASX: ELX), has published its half-year financial results for the period ended 31 December 2018. The total revenue for the group stood at $41.6 million, which is an increase of 9% over the prior comparative period (pcp).
On 8 February 2019, the company had notified about the conference call for investors which took place today (22 February 2019, 9:00 PM AEST) to discuss the half-yearly results which have been released today.
Ellex iTrack performance
Ellex iTrack surgical system global unit volumes were up 14% versus the pcp and revenues were up 24% (16% on a cc basis).
Laser & Ultrasound performance
The core business segment, Laser & Ultrasound recorded solid growth in revenues and EBITDA during the period. Revenue of $33.9 million was up 4% (2% on a cc basis), while segment gross margins (ex-labour) expanded by 620 basis points to 59%, driven by a favourable mix of FX effects and stronger sales of higher margin Selective Laser Trabeculoplasty (SLT) lasers to treat glaucoma. The Company’s strategy to focus on glaucoma therapy continues to gain traction. Revenue from devices for glaucoma therapy were $23.2 million for the first half, up 18% on the prior comparable period. Glaucoma therapy now comprises 56% of Ellex group revenues.
Ellex 2RT performance
Sales of Ellex’s proprietary Retinal Rejuvenation Therapy laser, 2RT surged during the first half by 532% to $1.2 million, following the release of the Company’s LEAD clinical study which showed that treatment with 2RT achieved a clinically meaningful 77% reduction in the rate of progression of 76% of patients with intermediate age-related macular degeneration (iAMD) to advanced forms of the disease over the 36 months of the study.
Cash Flow and Balance Sheet
Operating cash outflow of $1.8 million versus $0.5 million in the pcp, reflected an increase in working capital associated with higher inventory, build on sales expectations, particularly for Ellex iTrack in 2019. Capital expenditure of $0.4 million was down 73% on the pcp.
The Company maintains a conservative level of debt, with gearing (D/D+E) of 18% and net cash of $3.9 million (gross debt: $15.3 million, cash $19.2 million). Balance sheet capitalised development costs of $15.2 million grew 2% over the pcp, reflecting a reduction in product development capitalised during the period (down 18% to $1.3 million).
Revenue by Geography
North America (USA) continued to be the strongest Ellex market by unlimited growth and by sales mix. It was driven by Ellex iTrack and SLT5 growth in glaucoma markets and both high margin products for Ellex and beneficial to the margin at the cc level.
The EMEA consists of direct markets (France, Germany – Lasers & Ultrasound only) with the balance via distributors. The growth declined, resulting from the takeover of German distributor for Ellex iTrack & general decline in purchasing sentiment and was partially offset by the significant contribution from 2RT sales in AMD post LEAD clinical study results and improved SLT laser sales.
The Japanese revenues declined marginally by 8% on pcp since the focus was on higher margin product sales but had an improved gross margin despite lower sales. The Asian growth of 90% was solid across the entire product segment with continued growth in the Chinese market for Ellex iTrack and solid regional demand for other Ellex products. ANZ was up 17% versus the pcp by the momentum in SLT and initial sales of Ellex 2RT post LEAD.
While Ellex iTrack and Ellex 2RT performed strong for the 1H, there was an unexpected slowdown in core Laser % Ultrasound sales in the US and EMEA in the 2QFY19, which saw group revenue growth moderate for the 1H versus the AGM update in October.
Ellex iTrack is expecting a continued growth in FY19, with EBITDA results now expected to be like FY18 levels. Ellex reaffirmed that it remains on track to grow group sales and deliver an improved EBITDA result in FY19, subject to global economic conditions and foreign exchange rates.
At the end of the trading session, the stock price of the company stood at A$0.580 (as at 22 February 2019), down by 4.918% from its previous close.
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