AFT Pharmaceuticals founder Hartley Atkinson might claim his company isn't a Covid stock but it's definitely one of the winners in the time of the coronavirus.
It had to grapple with a few Covid-related problems, such as delays to trials of new products, but that was made up by surging sales of products such as vitamins, hand sanitiser and hospital antibiotics.
On top of the 87 per cent jump in normalised operating earnings AFT delivered in the year ended March, it's forecasting an increase in the current financial year of anywhere between 23 per cent and 58 per cent.
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That's before any revenue from new licensing agreements, which tend to be large and lumpy with uncertain timings – they contributed $9.8 million to last year's $21.2m in earnings before interest and tax, but AFT said they've typically been $2m to $3m a year.
The forecast for the current year looks very conservative, even ignoring new licensing agreements.
Jarden analyst Jack Crowley said in his commentary on the latest results that the bottom end of guidance "appears to be factoring in broadly flat sequential performance" compared with the second half of 2020 when ebit was $6.9m.
The second half "likely included some Covid-19 demand pull/pull forward, but a headwind from an export ban in India" - India placed a short-lived ban on exporting paracetamol, an ingredient in AFT's flagship Maxigesic product, early in the coronavirus crisis.
Crowley forecasts ebit this year will come in about $20.4m, well above AFT's $14m to $18m guidance.
Chelsea Leadbetter, an analyst at Forsyth Barr, is clearly of a similar though slightly more cautious view because she's forecasting ebit of $18.9m for the current year.
"The reality is, in the world we're in at the moment, things can change very quickly," and that's making a lot of companies very conservative, Leadbetter said.
Edison analyst Maxim Jacobs, the third analyst covering the stock, falls in the middle with a $19.7m ebit forecast.
A major factor fuelling profit growth is the internationalisation of Maxigesic and its line extensions. In the year just gone, Maxigesic was sold in 28 countries, up from 20 the previous year.
That number would have been higher but for the temporary Indian ban on exporting paracetamol, delaying launch orders of Maxigesic into 10 more countries.
Those orders have now slipped into the current year. The company expects Maxigesic will be sold in about 125 countries or more by March 2022.
But AFT is far from a one-trick pony. It has a portfolio of 125 proprietary, branded and generic products covering everything from pain relief, allergy treatments and vitamins to eyecare and skin treatments.
Australia is its biggest market, accounting for 58.2 per cent of sales in 2020, and AFT's sales growth of 22.1 per cent in the year ended March is certainly brisk.
But the real prize will be the rest of the world where sales are starting to accelerate. In Southeast Asia sales more than doubled in the year just gone, while rest-of-world sales jumped 55.2 per cent.
From an investor's point of view, particularly institutional investors, the biggest obstacle to investment has been how tightly held AFT's shares have been.
Founders Hartley and Marree Atkinson owned nearly 75 per cent at April 30 while cornerstone investor, US-based Capital Royalty Group, owned another 13.4 per cent.
Alleviating that problem was CRG's decision to sell out – it's a private equity firm and the funds it invested in AFT are now mature and being returned to their investors – coupled with the Atkinsons selling down a little and the company's $12m capital raising announced earlier this month.
Post those events the Atkinsons' stake is now about 69 per cent and they say they have no current intention to sell further shares.
It doesn't look like AFT actually needed extra capital, though of course it will come in handy. It will use the money to reduce gross debt, $43.2m at balance date, and before taking into account the $6.1m of cash it had on hand.
It had just refinanced that debt on March 31. Previously, CRG had lent it money at an effective interest rate of 13.7 per cent and AFT replaced that with a Bank of New Zealand facility at an 8.48 per cent effective interest rate.
And now the company's intense investment phase is over – financing that was the reason the company floated in 2015 – growing operating cash flow is likely to be more than sufficient to service the debt.
In the year just gone, operating cash flow rose to $14.9m from $1.1m the previous year.
But, since New Zealand investors dearly love their dividends, the company has said that "once debt is retired to satisfactory levels", and it said that should happen by the year ending March 2022, it will "assess the potential for a dividend policy".