aap Implantate announced its H1 results with a 5% increase in l-f-l sales to €5.4m. This increase was predominantly due to a reported 14% Trauma sales growth in H1 despite Q2 Trauma sales remaining flat versus the previous year’s €2.3m, though still broadly in line with management’s expectations. H1 positives include growth in established markets where aap Implantate has focused initiatives to drive sales (North America +26% and DACH region +10%). Traction in these markets (Europe and the US) remains key to a sustained return to growth.
Written by
aap Implantate |
Exploring strategic alternatives to add value
|
Healthcare equipment & services |
QuickView
17 August 2017 |
Share price graph
Share details
Business description
Bull
Bear
Analyst
aap Implantate is a research client of Edison Investment Research Limited |
||||||||||||||||||||||||
aap Implantate announced its H1 results with a 5% increase in l-f-l sales to €5.4m. This increase was predominantly due to a reported 14% Trauma sales growth in H1 despite Q2 Trauma sales remaining flat versus the previous year’s €2.3m, though still broadly in line with management’s expectations. H1 positives include growth in established markets where aap Implantate has focused initiatives to drive sales (North America +26% and DACH region +10%). Traction in these markets (Europe and the US) remains key to a sustained return to growth.
Strategic progression starting to prove fruitful
aap Implantate has focused sales initiatives in its established markets, both of which have shown good growth in H1 (26% North America and 10% DACH region). Q2 was a slower sales quarter than Q1 with Q2 Trauma sales flat on the previous year (€2.3m). Importantly, however, results remain in line with guidance. The H117 cash position of €24.8m will be utilised to increase value to shareholders, a part of which has been a voluntary public share buyback in H117.
Steps to create value via review of strategic options
aap Implantate also announced that it is exploring strategic alternatives in order to create more value from its Trauma product portfolio and its patented platform technologies as well as building on its strengthened financial position following the divestment in 2016 of its biomaterials and aap Joints businesses. There are various options potentially available to management (co-development, licensing, joint ventures asset and share deal), although all of these options require aap Implantate attracting an interested party. The orthopaedics market is dominated by a small number of large companies, which are often acquisitive in order to bring in innovative products and/or improve existing products to create a leading, differentiated proposition. If aap Implantate can demonstrate a return to sustained growth now it has streamlined its focus on Trauma, the company could attract M&A interest.
Valuation: Strategic execution could offer upside
aap Implantate has three technologies in its trauma portfolio: its anatomical plating system LOQTEQ for fracture repair (being marketed); its antibacterial silver coating technology (in regulatory process); and absorbable magnesium (in development). Areas of focus which, if delivered, could offer upside include established revenue growth in the established markets of North America and Europe, execution of a technology deal for its LOQTEQ and/or its silver coating technology with a larger player and decisive steps for CE marking and FDA approval for its silver coating technology.
|
Reported financials
Source: aap Implantate accounts |
|
Disclaimer
|
|
Disclaimer
|
Research: Consumer
Evolva is transforming itself into a product-based company, and the new CEO is evaluating the organisational structure and operational strategy. R&D-based revenue is likely to fall due to the transformation. EverSweet remains on track for 2018 launch, nootkatone is on track for US regulatory approval in pest control in H218, and resveratrol revenues were up strongly. Our fair value falls to CHF0.69 as we cut our sales forecasts, but we continue to believe the current share price offers a good entry point.