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Why the Admedus share price is sinking again on more big losses

The Admedus Ltd (ASX: AHZ) share price fell 8% to 0.049 cents today after the healthcare business reported another quarter of blowout costs dwarfing its revenues.

For the quarter ending December 31 2018 Admedus reported revenues of $6.4 million, but operating costs around $11 million to lead to an operating cash loss of $5.8 million.

Of the costs $6.3 million went on staff costs and $2.5 million on “corporate and administrative” over the quarter.

Worse news is that the group is forecasting cash outflows of $15.5 million in the current quarter which look unlikely to be offset by much more than the $6.4 million it earned in the current quarter.

Of the $6.4 million in last quarter’s sales, $3 million came from its ADAPT business and $3.5 million from its Infusion division.

The group now has cash on hand of just $12.036 million despite conducting multiple capital raisings from long suffering retail speculators over the last 5 years.

It also looks likely Admedus will have to raise more money or take on debt within about a year if its current cash burn trajectory continues in a gloomy sign for anyone continuing to hold shares.

The company even managed to raise $19 million over the recent quarter from “investors” who will likely be feeling underwhelmed by today’s update on cash flows.

It’s hard to find anything positive to say about this business given its track record and large costs have returned huge losses to unsophisticated retail investors seemingly buying into its story oblivious to the reality of the cash flows.

I’ve warned repeatedly over the past 4 years about the danger of large losses to shareholders in this business and I don’t expect that status quo to really change unfortunately.

The stock is down 95% or more in 4 years and Admedus is not alone in blowing up shareholder capital at the speculative end of the market, with others like Yojee Ltd (ASX: YOJ) and ResApp Health (ASX: RAP) also letting down a lot of less-sophisticated retail investors.

Serious investors avoid speculative capital sinkholes in favour of companies making profits and paying rising dividends, as that’s how you create real wealth for you and your family….

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Motley Fool contributor Tom Richardson has no position in any of the stocks mentioned.

You can find Tom on Twitter @tommyr345

The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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