Electrical Geodesics revenue rises despite softer second half

13th Jan 2017 11:56

(ShareCast News) - Neurodiagnostic medical technology company Electrical Geodesics posted a trading update for the year to 31 December on Friday, saying that on a preliminary, unaudited basis, it expects to report revenues for the year of approximately $14.3m.The AIM-traded firm said that was an increase of 5% over the $13.6m reported for 2015, but with revenues for the second half of 2016 some 9% lower than the company's record second half performance in 2015.A weaker than expected fourth quarter reflected a significant number of sales opportunities moving into 2017, the company's board said, with customers reporting uncertainties arising from the US election results and the impact on research funding, and the likely efforts to repeal the Affordable Care Act.It said indications are that a portion of the US commercial opportunities that were expected to close in the fourth quarter of 2016 will likely finalise in the first half of 2017.International sales continued to be challenged by the strength of the US dollar, though the major markets in the EU and Asia showed growth over 2015, the board added.On a preliminary, unaudited basis, and in addition to the above revenues, the company expects to recognise grant income of approximately $2.0m for 2016, up from $1.5m in the prior year.The company's cash reserves as at 31 December were approximately $1.1m, precisely in line with the end of June.Outstanding borrowings under firm's revolving credit facility were $1.8m at year end, up from $1.0m at 30 June 2016, and eligible collateral provided remaining availability of approximately $0.5m but was limited by the $2.0m maximum borrowing amount on the credit facility.EGI had recently entered into an amendment to the credit facility increasing the maximum borrowing amount from $2.0m to $2.3m.It said the credit facility bears interest at the prime rate plus 6.0%, with a minimum rate of 9.5% and a current borrowing rate of 9.75%.Generally, availability under the credit facility is the sum of 85% of eligible accounts receivable plus a portion secured by inventory which is calculated as 15% of eligible accounts receivable, or $200,000, whichever is less, the board explained.During the fourth quarter of 2015 and to a lesser extent the first quarter of 2016, the company incurred and deferred $0.4m of legal, accounting and other costs that were in support of a planned financing.Due to poor market conditions, that particular financing was terminated and EGI confirmed that it expensed the deferred offering costs in their entirety in September.The directors said they were carefully managing the company's cash flows whilst also reviewing potential financing options to increase the working capital available to the group which would assist it in maintaining necessary levels of liquidity and maximising its growth opportunities.EGI's board said it expected to renew the company's credit facility which falls due in June 2017.It said some combination of new financing and additional cost controls will be required, however, in order for the company to maintain adequate levels of liquidity throughout 2017."I am pleased that despite the market delays in the second half of the year, EGI still delivered revenue growth for 2016 although not quite at the level which had been expected earlier in the year," said CEO Don Tucker."I believe the strong order opportunities for the early months of 2017 reflect the delay rather than loss of a significant portion of those sales that had been expected to close in the final quarter of 2016."Tucker said it is still early in 2017 but the firm will have better visibility on the outlook for 2017 at the time of publication of its final results, which are expected to be released on 6 April."Operationally, EGI achieved strategically critical milestones in 2016 with the release of our GTEN and GeoSource 3 systems to the research markets and the release of our flagship, next-generation Net Station 5.3 software for clinical laboratories."We expect that these products will continue to impact favourably our sales worldwide in 2017."Tucker added that the increasing levels of sales of dEEG systems to high-end epilepsy evaluation centers, both in the US and in Europe, bodes well for EGI's revenue projections."The adoption of dEEG as a standard of care by several European neurology societies will further support continuing clinical growth."