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Trinity Biotech announces Quarter 4 and Fiscal Year 2016 Financial Results

DUBLIN, Ireland, March 14, 2017 (GLOBE NEWSWIRE) -- Trinity Biotech plc (Nasdaq:TRIB), a leading developer and manufacturer of diagnostic products for the point-of-care and clinical laboratory markets, today announced results for the quarter ended December 31, 2016 and fiscal year 2016.

Fiscal Year 2016 Results

Total revenues for fiscal year 2016 were $99.6m versus $100.2m in 2015, a decrease of 0.6% year on year.

Full Year
2015
Full Year
2016
Full Year
2016 vs 2015
US$’000US$’000%
Point-of-Care18,81016,908(10.1%)
Clinical Laboratory81,38582,7031.6%
Total100,19599,611(0.6%)

Point-of-Care revenues decreased from $18.8m in 2015 to $16.9m in 2016, which represents a decrease of 10.1%. This was due to lower HIV sales in Africa where, due to the nature of the market, sales tend to fluctuate significantly quarter on quarter. Critically, during 2016, the Company maintained its position as the designated supplier of confirmatory tests in all of the markets in which it operates.

Meanwhile, Clinical Laboratory revenues were $82.7m, an increase of 1.6% versus 2015. This level of increase would have been higher but for the impact of foreign exchange movements. The impact of the strengthening of the US Dollar against the Brazilian Real, Canadian Dollar and Sterling, all of which represent the non-dollar currencies in which the Company invoices sales, resulted in a reduction in our US Dollar denominated revenues. In addition, in markets where we invoice in dollars but where the local currency has weakened, we have been required to reduce our pricing in order to preserve our competiveness. The primary drivers of Clinical Laboratory growth during 2016 continued to be sales of Diabetes and Autoimmune products, though this growth was partly offset by lower infectious diseases revenues.

Gross margin for the year was 43.3% compared to 46.2% in 2015. This decrease was due to adverse sales mix (lower sales of higher margin point-of-care products) and foreign exchange factors, including the impact of exchange rates on distributor pricing.

Operating profit for the year decreased from $13.5m to $7.5m in 2016. This decrease was attributable to a reduction in gross margin combined with higher Selling General and Administrative (SG&A) expenses. The increase in SG&A expenses was due to higher amortisation charges and the impact of favourable non-cash foreign exchange rate movements last year, principally in Q4, 2015.

Profit after tax (before the impact of once-off items) was $5.2m which compares to $21.8m in 2015. However, these amounts include non-cash financial income recognised in relation to the Company’s Exchangeable Loan Notes. Excluding such movements, profit after tax would have been $3.6m compared with $9.3m in 2015. This reduction is due to the lower operating profit but is also impacted by the full year effect of financing expenses associated with the Exchangeable Notes which were issued in early Q2, 2015.

Basic EPS (excluding once-off charges) for the year was 22.4 cents. However, excluding the impact of non-cash financial income this would have been 15.7 cents versus 40.2 cents in 2015. Meanwhile, unconstrained diluted EPS was 29.0 cents compared to 46.2 cents in 2015.

Earnings before interest, tax, depreciation, amortisation and share option expense for the year was $15.0m compared with $20.7m in 2015.

The above measures exclude the impact of once-off charges amounting to $105.8m, more details of which are provided below.

Quarter 4 Results

Total revenues for Q4, 2016 were $23.7m which compares to $24.9m in Q4, 2015, a decrease of $1.2m.

Point-of-Care revenues for Q4, 2016 decreased from $5.4m to $4.0m when compared to Q4, 2015, a decline of 27.3%. This is due to the normal fluctuation patterns which impact HIV sales in Africa.

Clinical Laboratory revenues increased to $19.7m, which represents an increase of 1.2% compared to Q4, 2015. As in the case of the annual revenues, this increase would have been higher but for the impact of exchange rate movements.

Revenues for Q4, 2016 were as follows:

2015
Quarter 4
2016
Quarter 4
Increase/
(decrease)
US$’000US$’000%
Point-of-Care5,4363,950(27.3%)
Clinical Laboratory19,50119,7311.2%
Total24,93723,681(5.0%)

Gross profit for Q4, 2016 amounted to $9.5m representing a gross margin of 40%, which is lower than the 43.2% achieved in Q4, 2015. This decrease is largely due to lower sales of higher margin point-of-care products and the impact of currency movements on distributor pricing. It has also been impacted by lower production levels during the quarter in line with the lower revenues experienced.

Research and Development expenses of $1.3m are slightly lower than the equivalent quarter last year. However, Selling, General and Administrative (SG&A) expenses at $7.2m are $1.2m higher than Q4, 2015. Last year’s SG&A expenses of $6.0m were unusually low due to the benefit from some once-off foreign exchange gains. This quarter’s expense was actually slightly lower than the average for the preceding three quarters of $7.4m.

Operating profit for the quarter was $0.6m, which is lower than the $3.1m achieved in Q4, 2015. This is due to the combination of the lower revenues and gross margin, and higher indirect costs.

The profit after tax, but before once-off charges, for the quarter was $4.9m, though this was largely impacted by non-cash income related to the Exchangeable Notes. Excluding these non-cash items, the profit after tax, before once-off charges, for the quarter was $0.1m.

The basic EPS (excluding once-off charges) for the quarter was 21.6 cents. However, excluding non-cash financial income, principally a gain of $5.0m on the fair value of the embedded derivatives of the Exchangeable Notes, the EPS would have been 0.2 cents versus 8.0 cents in Q4, 2015. Diluted EPS for the quarter amounted to 4.3 cents, which compares to 10.5 cents in the equivalent quarter in 2015.

Cash generated from operations during the quarter was $4.6m, though this was largely offset by capital expenditure of $4.2m and resulted in free cash inflows for the quarter of $0.4m. This was offset by shares bought back of $3.3m, Exchangeable Note interest of $2.3m and payments of $2.4m incurred in relation to the closure of our facility in Sweden. Overall, this resulted in a cash balance at the end of the quarter of $77.1m.

Earnings before interest, tax, depreciation, amortisation and share option expense for the quarter was $2.6m compared to $4.8m in Q4, 2015.

Once-off Charges

During the period the Company recognised once-off charges amounting to $105.8m net of tax which is broken down in the table below.

$m
Meritas
- Impairment of Assets56.7
- Closure costs5.8
- Foreign currency translation reserve 3.8
Total Meritas66.3
Impairment Charges43.4
Product Cull Provision4.8
Tax Impact(8.7)
Total105.8

The Meritas impairment of $56.7m followed the Company’s decision to withdraw its Meritas Troponin submission from the FDA in October, 2016. The impairment charge represents the write-off of all capitalised development costs, tangible fixed assets, inventories and other assets associated with the Meritas project. In addition, a further $5.8m was recognised in relation to closure costs of the Swedish facility. This principally consisted of employee redundancy costs and other contractual obligations associated with terminating premises and supplier contracts. A further charge of $3.8m was recognised in relation to foreign translation reserves which had been recognised in previous periods as a reserve movement, but which under accounting rules is now required to be recognised through the income statement.

The Company is also recognising an impairment charge of $43.4m in relation to non-Meritas assets. This was largely driven by the provisions of accounting standards, whereby companies are required to carry out annual impairment reviews of asset valuations contained on their balance sheet. In determining whether a potential asset impairment exists, companies are required to consider a range of internal and external factors. One such factor is the relationship between a company’s market valuation and the book value of its net assets. The fall in the Company’s share price after our Meritas announcement resulted in the Company trading at a significant discount to the book value of its net assets. In such circumstances, given the accounting standard requirements, the Company felt it was prudent to recognise an impairment provision. By its nature this adjustment has no cash implications for the Company.

Finally, the company has recognised a product cull charge of $4.8m. This is in relation to a number of products which have been discontinued. This mainly represents our Bartels and Microtrak product lines which we acquired over 15 years ago. Sales of these products have been declining significantly over the last number of years and have now reached the end of their economic life, especially given the level of technical support required to keep older products of this nature on the market. The revenue impact of this decision will be a reduction of approximately $3.0m per annum.

The tax impact of the above mentioned items was a tax credit of $8.7m, which is mainly the reversal of deferred tax liabilities recognised in previous quarters.

Share Buyback

During the quarter the company bought back 572,000 shares at an average price of $6.84 and a total value of $3.9m, of which $3.3m was paid out during the quarter. This brings the total buyback for the year to over 1.1 million shares at an average price of $8.95 and a total value of $9.9m. A further 143,000 shares at a price of $6.92 were bought back during the period to date in Q1, 2017.

Comments

Commenting on the results Kevin Tansley, Chief Financial Officer said “Profitability for the quarter was adversely impacted by a number of factors. Lower revenues due to HIV fluctuations and compressed margins attributable to exchange rate and sales mix factors have resulted in an operating profit for the quarter of $0.6m and a reduction in diluted EPS to 4 cents per ADR. During the quarter we recognised once-off charges totalling $105.8m. Of this, $66.3m was due to our withdrawal of our Meritas Troponin submission to the FDA and had previously been flagged, whilst a further non-cash impairment charge of $43.4m was recognised on non-Meritas assets, though this was largely driven by the recent fall in the Company’s share price.

Meanwhile, for the year as a whole the Company made an operating profit of $7.5m and a profit after tax of $3.6m (excluding non-cash financing items and once-off charges) which equates to an unconstrained diluted EPS of 29 cents for the year. This is lower than earned in 2015 due to the impact of exchange rate movements and higher SG&A expenses.”

Commenting, Ronan O’Caoimh, Chief Executive Officer stated “The latter part of 2016 was particularly challenging for Trinity Biotech. We withdrew our Troponin submission to the FDA and this was followed shortly thereafter by our decision to close our plant in Sweden and move the Meritas technology to another group facility.

Since then we have also reviewed our product portfolio and have decided to cull a number of older products which have been declining for a number of years. These products which would have continued to decrease were becoming economically inefficient and no longer merited the level of investment and resources required.

On a more positive note, the remainder of the business remains strong, particularly with regard to Premier and Autoimmunity, but also in the case of HIV notwithstanding the fluctuating nature of its sales. By carrying out a targeted cull we have removed a number of declining products from our portfolio which have been depressing revenue growth in the Company. Furthermore, with the closure of our Swedish facility, we have meaningfully changed the cash generative ability of the Company, such that going forward we will operate at close to a free cash flow break even position. This provides us with the financial flexibility to continue our share buyback program, which in our opinion represents the best deployment of capital at current share price levels.”

Conference Call Dial-in Details

The conference call to discuss the results released today will be held at 11:00am ET (3:00pm GMT – not 4:00pm GMT as previously released).

Interested parties can access the call by dialing:

USA: 1-844-861-5499
International: 1-412-317-6581
Conference ID #: 10102284

A simultaneous webcast of the call can be accessed at:
https://www.webcaster4.com/Webcast/Page/1135/19990

Forward-looking statements in this release are made pursuant to the "safe harbor" provision of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that such forward-looking statements involve risks and uncertainties including, but not limited to, the results of research and development efforts, the effect of regulation by the United States Food and Drug Administration and other agencies, the impact of competitive products, product development commercialisation and technological difficulties, and other risks detailed in the Company's periodic reports filed with the Securities and Exchange Commission.

Trinity Biotech develops, acquires, manufactures and markets diagnostic systems, including both reagents and instrumentation, for the point-of-care and clinical laboratory segments of the diagnostic market. The products are used to detect infectious diseases and to quantify the level of Haemoglobin A1c and other chemistry parameters in serum, plasma and whole blood. Trinity Biotech sells direct in the United States, Germany, France and the U.K. and through a network of international distributors and strategic partners in over 75 countries worldwide. For further information please see the Company's website: www.trinitybiotech.com.

Trinity Biotech plc
Consolidated Income Statements
(US$000’s except share data) Three Months
Ended
Dec 31,
2016
(unaudited)
Three Months
Ended
Dec 31,
2015
(unaudited)
Year
Ended
Dec 31,
2016
(unaudited)
Year
Ended
Dec 31,
2015
(unaudited)
Revenues 23,681 24,937 99,611 100,195
Cost of sales (14,202) (14,170) (56,518) (53,950)
Gross profit 9,479 10,767 43,093 46,245
Gross profit % 40.0% 43.2% 43.3% 46.2%
Other operating income 28 65 239 288
Research & development expenses (1,330) (1,508) (5,041) (5,068)
Selling, general and administrative expenses (7,206) (6,009) (29,451) (26,475)
Indirect share based payments (378) (184) (1,349) (1,541)
Operating profit 593 3,131 7,491 13,449
Financial income 221 132 877 431
Financial expenses (1,182) (1,189) (4,726) (3,483)
Non-cash financial income 4,860 975 1,552 12,480
Net financing income / (expense) 3,899 (82) (2,297) 9,428
Profit before tax & once-off items 4,492 3,049 5,194 22,877
Income tax credit / (expense) 421 (223) (41) (1,081)
Profit before once-off items 4,913 2,826 5,153 21,796
Once-off charges (net of tax) (105,779) - (105,779) -


(Loss) / profit after tax and once-off items


(100,866


)


2,826


(100,626


)


21,796
(Loss) / earnings per ADR (US cents) (443.1) 12.1 (438.2) 94.1
Earnings per ADR (US cents)** 21.6 12.1 22.4 94.1
Earnings per ADR excluding non-cash financial income (US cents)** 0.2 8.0 15.7 40.2
Diluted (loss) / earnings per ADR (US cents) (373.1) 10.5 (344.8)* 46.2
Diluted earnings per ADR (US cents)** 4.3 10.5 29.0* 46.2
Weighted average no. of ADRs used in computing basic earnings per ADR 22,761,641 23,259,669 22,964,703 23,161,773
Weighted average no. of ADRs used in computing diluted earnings per ADR 28,031,122 28,690,599 28,299,399 27,407,793

* Under IAS 33 Earnings per Share, diluted earnings per share cannot be anti-dilutive. Therefore, diluted earnings per ADR in accordance with IFRS would be 22.4 cents for the year (i.e. equal to basic earnings per ADR).
** Excluding once-off charges

The above financial statements have been prepared in accordance with the principles of International Financial Reporting Standards and the Company’s accounting policies but do not constitute an interim financial report as defined in IAS 34 (Interim Financial Reporting). Once-off charges is a non-GAAP accounting presentation.

Trinity Biotech plc
Consolidated Balance Sheets
Dec 31,
2016
US$ ‘000
(unaudited)
Sept 30,
2016
US$ ‘000
(unaudited)
June 30,
2016
US$ ‘000
(unaudited)
Dec 31,
2015
US$ ‘000
(unaudited)
ASSETS
Non-current assets
Property, plant and equipment13,403 21,495 21,760 20,659
Goodwill and intangible assets87,275 173,240 169,049 161,324
Deferred tax assets14,556 13,531 13,312 12,792
Other assets870 849 932 954
Total non-current assets116,104 209,115 205,053 195,729
Current assets
Inventories32,589 39,989 39,253 35,125
Trade and other receivables22,586 25,802 27,832 25,602
Income tax receivable1,205 811 712 550
Cash and cash equivalents77,108 84,751 84,920 101,953
Total current assets133,488 151,353 152,717 163,230
TOTAL ASSETS249,592 360,468 357,770 358,959
EQUITY AND LIABILITIES
Equity attributable to the equity holders of the parent
Share capital1,224 1,222 1,221 1,220
Share premium16,187 15,801 15,575 15,526
Accumulated surplus93,004 197,379 197,588 201,951
Other reserves(1,688) (4,002) (3,721) (4,809)
Total equity108,727 210,400 210,663 213,888
Current liabilities
Income tax payable175 772 657 1,163
Trade and other payables25,028 19,976 19,384 18,874
Provisions75 75 75 75
Total current liabilities25,278 20,823 20,116 20,112
Non-current liabilities
Exchangeable senior note payable96,491 101,351 99,232 98,044
Other payables735 1,939 1,986 2,096
Deferred tax liabilities18,361 25,955 25,773 24,819
Total non-current liabilities115,587 129,245 126,991 124,959
TOTAL LIABILITIES140,865 150,068 147,107 145,071
TOTAL EQUITY AND LIABILITIES249,592 360,468 357,770 358,959

The above financial statements have been prepared in accordance with the principles of International Financial Reporting Standards and the Company’s accounting policies but do not constitute an interim financial report as defined in IAS 34 (Interim Financial Reporting).

Trinity Biotech plc
Consolidated Statement of Cash Flows
(US$000’s)Three Months
Ended
Dec 31,
2016
(unaudited)
Three Months
Ended
Dec 31,
2015
(unaudited)
Year
Ended
Dec 31,
2016
(unaudited)
Year
Ended
Dec 31,
2015
(unaudited)
Cash and cash equivalents at beginning of period84,751 104,289 101,953 9,102
Operating cash flows before changes in working capital3,294 5,574 16,245 19,853
Changes in working capital1,325 234 (2,147) (7,157)
Cash generated from operations4,619 5,808 14,098 12,696
Net Interest and Income taxes received/(paid)(64) 79 (327) (361)
Capital Expenditure & Financing (net)(4,185) (5,980) (21,165) (21,604)
Free cash flow370 (93) (7,394) (9,269)
Payment of HIV-2 licence fee- - (1,112) (1,112)
Share buyback(3,296) - (9,322) -
Once-off items(2,417) - (2,417) -
30 year Exchangeable Note proceeds, net of fees- (45) - 110,529
30 year Exchangeable Note interest payment(2,300) (2,198) (4,600) (2,198)
Dividend payment- - - (5,099)
Cash and cash equivalents at end of period77,108 101,953 77,108 101,953

The above financial statements have been prepared in accordance with the principles of International Financial Reporting Standards and the Company’s accounting policies but do not constitute an interim financial report as defined in IAS 34 (Interim Financial Reporting).


Trinity Biotech plc Kevin Tansley (353)-1-2769800 E-mail: kevin.tansley@trinitybiotech.com Lytham Partners LLC Joe Diaz, Joe Dorame & Robert Blum 602-889-9700

Source:Trinity Biotech plc