Boule Diagnostics - Patiently awaiting a market recovery
Tough conditions persisted in Q4 Negative revisions in ‘21e-22e… … but entering an intriguing period of growth from H2’21 Q4: organic decline of 23%, Instruments trading upwards The resurgence of COVID-19 cases across the globe continued to have a negative impact on Boule’s operations in Q4. The sequential recovery witnessed from Q2’20 was broken in Q4, primarily as haematology test volumes remained low across most nations. Adj. EBIT came in at SEK -1.
6m, as the sales decline (-23% organic) drove a y-o-y gross margin contraction of 2. 3pp, with adj. opex only down ~7% y-o-y.
The number of instruments sold (834) continues to recover sequentially, which encouragingly suggests that purchasing decisions are ongoing amid the second wave of COVID-19. However, with lockdowns and restrictions remaining, lower doctor visits and testing volumes will most likely continue to inhibit a full recovery for Consumable sales in the near term. Negative revisions: EBIT down 15% in 2021e Considering the still-imposed restrictions and lockdowns in many regions, we lower our expectations for H1’21, thus cutting ‘21e EBIT by 15%.
Looking at ‘22e, we have lowered the EBIT margin by 90bp, primarily due to now forecasting a weaker product mix. Due to the nature of Boule’s haematology tests, there should be limited backlogs to work down when the pandemic pressure eases. Even so, we see good chances for strong growth when markets start to normalise.
Entering a period of high growth from H2’21 While patiently awaiting a market recovery, we still find reasons to be positive. First, the proposed dividend of SEK 0. 55 indicates that Boule expects its markets to recover by H2’21, and points to good cash flow management through 2020.
Second, the company’s comments about the industrialisation of its new haematology platform and a late ‘22 launch are arguably bullish. Finally, its comments about the underlying efficiency improvements generated throughout 2020 are positive as well. We see Boule.
