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Trinity Biotech plc (TRIB)
Q2 2008 Earnings Call
July 22, 2008 11:00 am ET
Joe Dorame - Lytham Partners
Brendan Farrell - Chief Executive Officer
Kevin Tansley - Chief Financial Officer
Matt Dolan - Roth Capital
Cillian Murphy - Goodbody Stockbrokers
Mark Healy - Davy Stockbrokers
Neal Goldman - Goldman Capital Management
Matt Reiner - Adirondack Fund
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Thank you. I’ll now turn the call over to Mr. Joe Dorame. You may begin your conference.
Good Morning. Thank you for joining us today to review the financial results for Trinity Biotech for the second quarter ended June 30th 2008. As Brook indicated, my name is Joe Dorame. I’m with Lytham Partners and we are the financial relations consulting firm for Trinity Biotech. With us today on the call representing the company the company are Mr. Brendan Farrell, Chief Executive Officer, and Mr. Kevin Tansley Chief Financial Officer.
At the conclusion of today's prepared remarks, we will open the call for a Q&A session. Before we begin, I would like to remind everyone this conference call includes statements that constitute forward-looking statements within the meaning 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 effects of regulations by the United States Food and Drug Administration and other agencies, the impact of competitive products, product commercialization and technological difficulties and other risks detailed in the company's periodic reports filed with the Securities and Exchange commission. The company can give no assurance as such forward-looking statements will prove to be correct. We undertake no obligation to affirm publically update or revise any forward-looking statements whether as a result of information of future events or otherwise. With that having been said, I would like to turn the call over to Mr. Brendan Farrell, Chief Executive Officer of Trinity Biotech. Brendan?
Thank you very much. Good day everybody and welcome. This is Brendan Farrell speaking. I would like to start first by asking Kevin Tansley as CFO to review the results of our quarter two and year to date, thank you Kevin.
Thanks Brendan. Today I will take you through the review of the income statement for the quarter and secondly the key movements in the balance sheet from the end of the 2007 to date.
Starting with our revenue performance, as usually you will note in the press release an analysis of revenues broken down by our key product areas, clinical laboratory, point-of-care, and also with geographic location for the quarter.
Looking at the total revenues, you will note that this quarter's revenues are $36.3 million. This represents a 6% increase over quarter one this year. Within this, there was a 21% increase in point-of-care revenue. Our clinical laboratory revenues also increased during the quarter growing by 4.3% from $30.1 million to almost $32.3 million.
Looking at this quarter's revenues compared to same period last year, we see a decrease of 3%. As can be seen in the table contained in the press release, this is attributable to our point-of-care division and specifically sales of HIV products in Africa.
In previous calls, we've highlighted the fact that the nature of African markets has and will result in fluctuating sales quarter-and-quarter in this segment. We would also point to the fact that quarter two 2007 represented a very strong quarter for African HIV’s sales, and hence it's not most representative benchmark. Again, I will point out that HIV sales this quarter represented 21% increase over last quarter.
From our clinical laboratory perspective, sales this quarter were over 4% higher than the equivalent period last year. Rather than getting into the detail on the movement by product category and geographic location, I will move on to our gross margin of performance. Brendan will shortly take you through a more detailed analysis of this quarter's revenue.
Our gross margin for the quarter was approximately 45%. This compares to 48% in quarter two in 2007, however a more realistic comparison is quarter one of this year when the gross margin was 46%. The lower gross margin this year is largely due to the impact of two factors. First, is foreign exchange, throughout 2008, the dollar has continue to weaken and this has put pressure on margin. Just put this in context, the average euro dollar exchange rates for quarter two this year has been 156 and this compared to 133 same period last year, as an effect a depreciation of about 15%. Second factor is product mix, point-of-care sale tend to generate higher gross margin, and so far this year point-of-care sales made up a smaller percentage of revenues than in 2007.
Moving on to our indirect cost, our R&D costs are slightly ahead of the previous quarter, or just under 5% are consistent as a percentage of revenue. Our selling, general and administrative expenses however, have shown a decrease both compared to last quarter and quarter two 2007. This quarter, SG&A expenses amounted to $11.8 million, down from $12 million in quarter 1 this year, and down from $12.3 million last year.
Principle factor driving this reduction, are cost control measures that we’ve been adopting in recent months. As a management team, we are acutely aware of the need to continue to contain cost and look for efficiencies where available, in the view to achieving our primary objective of improving the profitability of the company. We are now, I am happy to say seeing some of the benefits with restructuring program that we began to implement towards the end of 2007. Also, these victories have been achieved in the face of the upward foreign exchange movement that I have already alluded to.