Comvita flags first-half loss as it fights UK patent infringement

Medical honey products developer Comvita said it turned to a first-half loss on legal costs relating to a patent infringement case in the UK, weaker sales and changes to New Zealand tax laws. The shares dropped 3%.

The net loss was $2.2 million for the six months to September 30, down from a profit of $1.6 million for the same period last year, as the company was forced to realise a $2 million dollar one-off expense relating to an infringement on one of its wound care patents, as well $1.5 million for changes to New Zealand tax laws for depreciation on buildings.

The company is confident it will win its case against Brightwake with a ruling expected later this month, but has chosen to absorb legal expenses in the first half, chief executive Brett Hewlett told BusinessDesk.

“We have a wound care patent granted in the UK, US, New Zealand and Australia that is well established, and a company in the UK, Brightwake, has taken it upon themselves to sell a product that infringes on that,” Hewlett said.

“We’ve taken provision for the costs if it goes against us, but if we win then there is capacity for some upside as we recover expenses.”

Sales during the first half of the financial year fell 9% to $36.5 million, partly reflecting the sale of surplus inventory in the preceding year.

“The biggest variance on the sales line was from FX, with most of our sales in US dollars and euros. Those currencies have been decimated,” Hewlett said.

“The reality is that the business is geared to be profitable around the 70 US cents mark.”

The kiwi dollar traded recently at 74.86 US cents.

Hewlett said sales prospects for the rest of the year look positive, with strong growth in the key markets of China and Hong Kong. In addition the company is working to turn around its UK operations and has secured new listings with retailers Waitrose, Sainsburys and Boots.

The results also include operating costs associated with the development of a new online store, which is being rolled out on a country by country basis over six months following its launch in New Zealand in September.

Shares of Comvita fell 6 cents to $1.95 and have climbed 79% in the past year.

Businesswire.co.nz

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