Cryosite analysis points to profits

As Cryosite prepares to announce a 2018-2019 loss of about $1.5m, a question arises – how did the group perform in the June half?

To answer the question we need to first look at the December half result. It was a loss of $1.32m. This included a $1.14m expense relating to a cartel action settlement with the ACCC.

Excluding the ACCC item, the interim trading loss was about $180k. Turnover was $3.95m, up a creditable 35%.

I would describe a loss of $180k has being material yet not substantial. Certainly not large enough to warrant a humble market cap of $2.3m.

Keep in mind that there are some 190 medical/biotech companies listed on the ASX and that CTE has the lowest MC of all of them.

Now let’s estimate Cryosite’s result in the June half.

On June 27 the company issued a Trading Update.

This claimed the company has “yet to return to an operating profit”.

“The operating loss disclosed in the half year report to shareholders has continued into the second half of the year”, CTE said, adding it had decided write off the “historical carrying value of previous software development costs of approximately $300k.”

“This write off, the continuing ongoing operational loss and the inclusion of the ACCC fine will result in an estimated non-audit adjusted loss for the full year after tax of approximately $1.5m.”

Given the conservative accounting policies applied by CTE’s chartered accountant-centric administration, this is far from a damning outcome.

If we deduct the $300k software write off from the forecast loss $1.5m, we get a result of $1.2m. And if we deduct the $1.14m ACCC fine, we get a negative trading result of for the full year of just $60k.

On this basis I would conclude that Cryosite actually made a trading profit of $120k in the June half.

I will be taking a close look at the full CTE accounts due to be released next month in order to substantiate my belief that Cryosite is recovering, is trading profitably and is set to score more positive results in the new financial year.

I’m confident CTE has the potential to multi-bag.