Why the CleanSpace (ASX:CSX) share price is freefalling 23% today

CleanSpace shares can’t catch a break today.

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shocked man with hands over his face with a declining graph in background representing falling CleanSpace share price

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The CleanSpace Holdings Ltd (ASX: CSX) share price is plummeting during early morning trade. This comes after the respiratory protection equipment company announced its unaudited results for the second-half of the 2021 financial year.

At the time of writing, CleanSpace shares are down 21.37% to $1.49.

How did CleanSpace perform in the second-half of FY21?

Investors are heading for the hills, selling CleanSpace shares following its latest performance update to the ASX.

For the 6 months ending 30 June 2021, CleanSpace reported revenue to fall at $10.2 million. This is a significant drop from the $39.7 million recorded in the first-half of the 2021 financial year. CleanSpace stated that United States vaccination rollout programs, oversupply of disposable masks, and extended lockdown restrictions impacted its result.

The company maintained a gross margin of 72% for H2 FY21, broadly in line with the prior period of 78%. This is encouraging despite the shift in sales mix from higher margin healthcare to industrial sales.

Statutory earnings before interest, tax, depreciation and amortisation (EBITDA) are estimated to come at a loss. The business is forecasting negative $2.1 million to negative $1.9 million after accounting adjustments are made. The disappointing result will drag down overall EBITDA between $17 million to $17.2 million for the entire FY21.

CleanSpace declared a cash balance of $38.2 million at the end of June, after paying a $5.2 million tax liability. Complementing the healthy balance sheet, the business minimised cash outflows whilst investing in the sales capability and other growth initiatives.

During the second-half, CleanSpace continued to increase unit sales from an improved customer base across its Healthcare and Industrial segment. It added over 50 new hospitals in the United States, more than 20 in Europe, and above 200 in Asia. In the Industrial sector, the business saw 8 new United States mining customers included in the mix.

Pleasingly, the United States government is seeking to protect COVID-19 frontline healthcare workers with powered air-purifying respirators or elastomeric respirators. This is expected to benefit CleanSpace, as it holds clinically designed best-in-class powered air-purifying respirators.

What did the CEO say?

CleanSpace CEO, Dr Alex Birrell noted that the operating environment has been challenging. However, the business is advancing its programs to support growth in the current climate. He said:

The business is committed to accelerated growth for market adoption by expanding our pipeline through aggressive sales and marketing activity, stakeholder engagement and our R&D roadmap.

CleanSpace is pleased to see countries with high vaccination rates that underpin the path to economic recovery; with customers and policy makers (as seen by the new OSHA Standard) now far more educated about respiratory protection, our technology is well positioned both in health and industry to meet their needs.

The company did not provide a guidance for the 2022 financial year, given the uncertain trading conditions.

About the CleanSpace share price

Over the last 12 months, CleanSpace shares have underperformed the broader ASX market, down almost 80%. Most of these losses have come this year after its massive fall in late March following a trading update.

On valuation grounds, CleanSpace presides a market capitalisation of roughly $145 million, with approximately 77 million shares outstanding.

Should you invest $1,000 in CleanSpace right now?

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Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended CleanSpace Holdings Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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