Business Irish

Sunday 24 June 2018

GC Aesthetics flags need to raise new funds

Dublin-based breast implant maker lost $41m before income tax in 2016

Investor Bill McCabe
Investor Bill McCabe
Gavin McLoughlin

Gavin McLoughlin

GC Aesthetics, the Dublin-based breast implant manufacturer backed by Bill McCabe, needs to raise fresh funding.

In the company's latest accounts its auditors state there are "material uncertainties which may cast significant doubt" about the company's ability to continue as a going concern.

The accounts, covering the year to the end of December 31, 2016, state that the company lost more than $41m (€33m) before income tax in the period.

It "continued to be loss-making in 2017 following the imposition of restrictions on its ability to sell its product into its key Brazilian market".

The accounts go on to say that "this restriction was lifted in December 2017". The company had made a loss of $60m the prior year.

The group has received a number of waivers on its loan covenants and had an accumulated deficit of just under $285m at the end of December 2016.

The accounts state that according to its business plan, the company expects to need to raise additional capital to make repayments on a $60.4m loan, due in instalments from 22 February 2019.

That's in spite of receiving additional support from shareholders in 2016 and 2017. In 2016, $20m of equity was raised. Just over $6m of this was the conversion of a shareholder loan.

The accounts state that in 2017 a further sum in the region of $4m was raised by converting shareholder loans into preference shares, while $12.5m was raised from existing shareholders in the form of preference shares.

GC Aesthetics' accounts state that the company carried out an assessment of whether the "going concern basis" of accounting should be applied (meaning essentially that it has the resources to continue in business).

This included "a detailed assessment of the group's business plan, the status of funding arrangements and the continued financial support of [the Group's] shareholders".

"The key assumption underlying this assessment is that the Group will successfully raise additional/alternative funding as required to repay its lenders and support its business plan."

The accounts also state that there can be no certainty that the company will succeed in raising additional funding.

GC Aesthetics previously planned a flotation on the Nasdaq but abandoned the plan in September 2015. Alongside elearning pioneer McCabe's Oyster Capital Partners, it has also raised money from Montreux Equity Partners and Barry's Tea Holdings.

The then chief executive Ayse Kocak said this was because of a downturn in global stock markets and instability in certain emerging markets.

In a prospectus filed with the US Securities and Exchange Commission (SEC) prior to its planned float, the company said it wanted to become "the trusted brand and partner for women seeking to look healthy, youthful, vibrant and beautiful, and to feel confident about themselves throughout their lifetime".

In its SEC filings, the company said it has a "diversified revenue base", with almost half of its 2014 sales figure of $52.8m coming from Europe, the Middle East and Africa.

Around 42pc came from Latin America and 11pc from the Asia-Pacific region.

"We believe ... overall market growth is driven by multiple factors, including a growing middle class, increasing female disposable income and increasing awareness and acceptance of aesthetics procedures, as well as continuous innovation and improved accessibility to aesthetics procedures, through an increase in the number of surgeons," the document said.

The prospectus said new products the ­company planned to launch included a ­specialised bra that "allows women to ­experience the look and feel of fuller breasts instantly".

"We believe this will lead to an increase in the number of women considering surgical augmentation and consulting surgeons," the document said.

The company also planned to launch a gel product designed to minimise the appearance of post-surgery scars.

Sunday Indo Business

Business Newsletter

Read the leading stories from the world of Business.

Also in Business