Tuesday, September 18, 2012

The Recently Concluded Listed Company Reporting Season Threw Up A Ripper in the E-Health Space.

The following was filed on the very last possible day of the reporting season by Global Health Pty Ltd. (GLH:ASX)
As I had the misfortune to own a few shares in the company a few years ago I thought I would have a browse of the Annual Report.
You can have your copy from here:
Unless I badly miss the mark this is an extremely sick little puppy we have here.
First we note:
Revenues from ordinary activities down 21% to 4,148,000
Loss from ordinary activities after tax attributable to members up 194% to (658,000)
Loss for the period attributable to members up 204% to (657,000)
Dividends (distributions) Nil
Net tangible assets per ordinary security (0.63)¢ Prior Period (0.15)¢
Additionally we can note that the investment in support and maintenance has fallen while marketing costs have risen.
And guess what we are then told:
“Despite a 45% increase in sales and marketing expenditure to approximately $1.35M (2011: $0.926M) over the period, the expected return in new sales was not achieved.
The sales effort was directed to the business development of the Company’s:
  • MasterCare Shared electronic Medical Record,
  • ReferralNet connectivity platform, and,
  • LifeCard Personal Health Record;
to support the improved management of population health outcomes within geographical regions.”
The reasons were given as:
There were two major reasons for the lack of sales closure across the non-acute customer segment:
  •  the delivery of National e-health Infrastructure provided through government agencies was directed at vendors of GP software and trials at 12 “Wave” pilot sites. The 12 pilots were selected from 91 tenders submitted by Health Agencies. Global Health platforms were involved in 16 out of 91 submissions but  were not among the successful tenders. This effectively curtailed demand for our e-health platforms from the public sector;
  •  the government announced the establishment of 61 new Medicare Locals nationwide which replaced funding previously provided to 120 Divisions of General Practice. The new Medicare Locals, which are regional clusters representing General Practice, Specialists and Allied Health providers, were progressively operational from July 2011, January 2012 and July 2012. These new regional entities will determine demand for the Company’s eHealth platforms for population health. However, there have been significant delays in the time taken to confirm the new organizational structures and funding conditions. Consequently, demand for the Company’s eHealth platforms have slipped.
The level of sickness is clear from here:
Business development through organic growth is extremely sensitive to the pace and success of the government’s Health Reform agenda.
The operating profile of the Company has been adjusted to reflect the existing lack of scale and difficulty in engaging with public sector health providers especially given the poor outlook on the financial status of the three largest states – NSW, VIC & QLD and the general uncertainty of the business environment.
The results reinforce the Directors view that the Company’s lack of scale is the major impediment to improving shareholder value.
Consequently, the Company has engaged in preliminary discussions with a variety of parties to consider merger and amalgamation opportunities that can achieve the necessary tipping point in terms of scale that will rectify the current lack of shareholder value and enable EBITDA growth into the future.”
Translation - we are dead ducks and are up for sale to anyone who can help.
This view is rather confirmed by the fact that cash on hand as of June 30, 2012 was a fabulous $ 11,659.
I have to say this company really looks like a mining explorer. It has not much cash, is spending more than it earns and has taken over $20 million of funds from investors in its life. If ever something was run to pay management and staff salaries and not shareholders this is it!
It will be interesting to see what happens next. Pity they did not agree to be bought by iSoft a few years ago when it was rumoured that was on the cards.
The last point to be made about all this is just how damaging working with Government can be. It is clear at least part of the problem is government delay etc.!
Glad I sold out a good few years ago! Really pretty sad the way things have gone especially since at least some of their software seems to work pretty well.