H1 18 results: not so bad given the poor top-line
H1 18 results: not so bad given the poor top-lineEARNINGS/SALES RELEASES
FACT
DMS released its H1 18 results. Sales (already announced on 29 August) reached €10,701k (vs €12,700k, or -16%), EBITDA €-1,008k (vs €-1,211k), EBIT €-1,776k (vs €-1,914k) and net result €-1,849k (vs €-1,603k). Net debt at the end of H1 reached €3.8m vs €1.7m at the end of FY17.
ANALYSIS
The H1 18 results are not sexy, this is a fact. That said, they do not look as disastrous as one could have feared when the group released its H1 sales at the end of August, which showed a sharp decline in sales. In fact, the group has benefited from the higher margins in the bone densitometry segment (+33%), while radiology (down 29%) has a lower (undisclosed contribution). As a matter of fact, EBITDA remained of the same magnitude as last year’s (about a €1m loss) despite the fall in the top-line (keeping in mind that last year’s mix was unfavourable, i.e. with less densitometry and more radiology). Not so bad after all. It does not change the fact that the group is far from its objective of becoming profitable again, but at least things are not worsening. The group suggests that H2 should be better, in particular thanks to the booking of a €1.6m order in radiology in Egypt and the first Platinum and Optima sales to UniHA (the first cooperative purchasing group of French public hospitals). DMS Biotech and DMS Wellness, the two new segments of the group, should keep developing, although, once again, these are pretty small activities so far in the total mix. We also note that the results of the first clinical studies of its arthrosis treatment solution should be released in H2 (with no impact on the P&L in a foreseeable future though). On the less positive side, we note that the group is burning cash (c. €2m in H1), making a recovery in profitability all the more necessary. We are also surprised that no news is given about the new factory, which was supposed to be built this year and up-and-running by year-end. Altogether though, our forecasts seem very much in line with what H1 18 numbers and H2 prospects suggest, that is: a flat to slightly declining top-line combined with improved margins (mix effect) which should lead to a pretty flat loss level. It remains to be seen whether the group is able to grow again, but this is the absolute condition if it is to fulfill, at last, its promise to get back to profit, a commitment its CEO had taken for…FY16.
IMPACT
We will not materially change our forecasts after H1 18. As a result, our current target price is likely to remain close to what it currently is. The good point is that, after a few disappointments as of late, this set of results is, at least, showing a stabilisation of losses.
DIAGNOSTIC MEDICAL SYSTEMS SA, (formerly known as DMS), is a France-based company, which together with its subsidiaries, designs, produces and markets medical imagery devices dedicated to conventional and digital radiology as well as bone densitometry. The Company manufactures a range of products for bone densitometry examination, including the ultrasound imaging system UBIS 5000, Challenger Envision, Stratos dR and Stratos. In the radiology sector, its products include Baccara dRF 43, EOL, Platinum and Da Vinci solutions, among others. In addition, it offers such products as scanners, transcranial Doppler, and Giotto Image mammography system. The Company operates several direct subsidiaries, AXS Medical, Apelem SAS, which manufactures radiology equipment, Medilink SARL, which produces Doppler and bone densitometry devices, Apelem SA, based in Spain, Alpha MOS based in France and one indirect subsidiary, SA Apelem and one indirect affiliated company, Spectrap.
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