AFT Pharmaceuticals Limited Analysis

Overview

AFT is a growing multinational pharmaceutical company that develops, markets and distributes a broad portfolio of pharmaceutical products across a wide range of therapeutic categories which are distributed across all major pharmaceutical distribution channels: over-the-counter, prescription and hospital. AFT's product portfolio comprises both proprietary and in-licensed products, and includes patented, branded and generic drugs.

Performance

The following information was extracted from AFT Pharmaceuticals Limited's half year results, 21 November 2024:

FINANCIAL RESULTS FOR THE SIX MONTHS TO 30 SEPTEMBER 2024

AFT reports record sales and invests for growth

AFT Pharmaceuticals (NZX:AFT, ASX:AFP) today reports record sales for the six months to the end of September 2024 led by double digit sales growth in Australasia despite subdued economic conditions.

Both International and Asia sales were lower due to specific significant one-off factors, but a strong recovery is forecast in the second half of the financial year. These factors included a temporary one-off reduction in demand as several of our largest customers reduced stock in response to the improving supply chain outlook. In Asia, a doctors strike in South Korea, which has now been resolved, significantly impacted Maxigesic IV sales.

In line with prior years, AFT expects a strong recovery in the second half of the year, with the results assisted by the resolution of the demand disruptions and new product launches. However, given the trading challenges of the last six months, the company expects its operating profit for the year to the end March 2025 to range between $15 million to $20 million .

HIGHLIGHTS

• Half-year operating revenue up 4% to $86.7 million led by growth in the core Australasian business

• Revenue in International and Asian markets dropped largely due to short term, significant one-off reductions in demand from several of our largest customers

• Operating loss of $1.8 million down from operating profit of $3.3 million

• EBITDA1 loss of $0.7million down from EBITDA gain of $4.1million. Net loss after tax of $2.4 million down from net profit of $1.8 million

• Balance sheet strong with net debt2 down 37% to $18.9 million from $30.6 million, and working capital reduction with lowering inventory cover post pandemic supply disruptions

• Momentum expected to accelerate in H2 FY25 assisted by product launches in multiple markets.

• FY 25 guidance for operating profit to range between $15 million to $20 million1.

FINANCIAL RESULTS

Revenue from the sale of products and royalties grew by 6.0% to $86.6 million from $81.7 million.

Growth in the Australasian business – led by the OTC portfolio of medicines - making the largest contribution to the increase. Revenue in Australasia was up a pleasing 17% to $76.8 million.

These gains were diluted by the disruption to sales in the International and Asian businesses. The net impact of these one-off events was a combined reduction in income from product sales and royalties in these two markets from $16.3 million to $9.8 million.

Total revenue, which includes licensing income of $0.2 million, rose 4% to $86.7 million from $83.6 million.

Gross Margin on product sales and royalty remained steady at 41.6%. The overall gross margin reduced to 41.7% from 43.0% due to the lower license income.

Operating expenses increased with start-up funding for the new business hubs in North America, the United Kingdom, and South Africa; marketing for new products and markets; and an increase in research and development expenditure.

The resulting operating loss was $1.8 million, down from an operating profit of $3.3 million in the same period of the prior financial year. For the same reasons EBITDA fell from $4.1 million to a loss of $0.7 million, while net profit after tax fell from $1.8 million to a loss of $2.5 million.