AFT Pharmaceuticals recently reported its FY19 results; the highlights were improving margins, as well as operating profitability for the year. Revenue grew 4.9% over 2018 while gross profit grew by 15.4% following the divestment of relatively low-margin hospital products in New Zealand and Australia. Lower SG&A and R&D spending allowed the company to report an operating profit of NZ$6.2m and the company is currently targeting an operating profit of between NZ$9m and NZ$12m for FY20.
Although full year revenue in New Zealand fell by 1.1%, it grew by 5.4% after adjusting for the divested products. Also, H219 sales in the region were up 9.6% compared to H218, driven by the OTC segment, especially the allergy, pain and eyecare categories. Additionally, gross profit for the year was up 22% due to the divestment of low-margin hospital products. Operating profit for the full year swung from a loss of NZ$2.7m in FY18 to a profit of $0.5m in FY19.
Rest of world revenues increased by 63.4% due to increased Maxigesic sales worldwide. Maxigesic is now sold and launched in 20 countries, up from 10 the prior year. Recent launches this calendar year include Spain and Portugal (April 2019) with launches pending in several key geographies such as France, Belgium, Eastern Europe and the Nordics.
Revenue in Australia was up 2.3% in 2019 compared to 2018 and was negatively affected by the hospital product divestments as underlying growth when adjusting for this was 12.6%. The OTC channel grew 11%, while the hospital segment fell by 13% due to the divestments. The company expects newly launched hospital products to replace the lost revenue in FY20 but at higher margins.
We are increasing our valuation to NZ$495m or NZ$5.09 per share, from NZ$478m or NZ$4.91 per share, mainly due to improved cost controls across the business and rolling forward our NPV. This was mitigated by slightly lower revenue estimates, mainly due to a more conservative view of Maxigesic launch timing in new markets as well as slightly lower Australia estimates.