Admedus Ltd (ASX AHZ) is likely to continue its impressive run in the market after delivering stellar financial results for fiscal 2018. This was reiterated along with CY18 results in its AGM presentation today.
Revenue growth supplemented by an increase in gross profit could be the catalyst to trigger a higher valuation for the AHZ share price.
About Ademus Ltd (ASX AHZ)
Admedus is a healthcare company engaged in the development, distribution, and commercialization of medical technologies as well as devices.
The company manufactures and sells ADAPT regenerative tissue products and has a market cap of about $35.39 million.
Stellar Financial Results
The company had an impressive FY2018 as revenues increased 20% year-over-year. ADAPT business unit revenues came in at $11.1 million and now account for 43% of the total portfolio from 34% as of 2017.
Infusion revenues totalled $14.5 million. Gross profit for the full year totalled $12.4 million as gross profit margin expanded to 49%.
The confirmation that profit continues to grow faster than costs should excite investors as it sets the stage for the company to generate significant positive cash flow.
Hence, it does not come as a surprise that AHZ share price has started picking up momentum and continues to rally after bottoming out from one-year lows.
Infusion Business Spin-Off
Buoyed by the performance, Admedus has confirmed plans to divest its infusion business as it seeks to become a structural heart company. The Medical technology company has since agreed to the divestiture of the unit.
BTC Specialty Health, a subsidiary of BTC Health Limited is to acquire Infusion in a deal valued at $6.3 million.
The transaction should close before the end of the month. This will result in a reduction of Admedus headcount by approximately 19%.
The divestiture should pave the way for Admedus to focus on its global strategy as it seeks to enhance the commercial growth of the ADAPT business.
“The restructure will enable us to improve working capital management and reduce cash burn through reduction in headcount and focus on the ADAPT® portfolio – which is delivering revenue growth and offers significant potential for future value creation as we grow global sales and advance the TAVR device into human clinical trials,” said Mr. Paterson, Managing Director and CEO of Admedus.
Admedus has achieved significant progress on its bid to reduce operating costs relative to revenue.
Growth in the ADAPT business unit should continue to strengthen the bottom line especially after the spin-off of the Infusion Unit.
The AHZ share price should continue to climb higher on improving underlying fundamentals that continue to strengthen investor confidence in the stock.
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