Feedback from meeting with CEO and CFO

Many factors support improved margins

Good foundation for 2020e

Earlier growth initiatives bearing fruit…
We recently hosted a lunch with Boule’s CEO and CFO, discussing recent developments within the company’s main focus areas. We continue to believe that things appear to be heading in the right direction for the company. We are encouraged by the positive trend in most product areas, with growth reported in its recently launched five-part segment, as well as its veterinary products in more mature markets. Own consumable sales saw y-o-y growth of 18% in Q3 (but this, we feel, is largely assignable to the three-part systems). Thus, we believe that the current year’s five-part sales should generate solid support for consumable growth next year, and be supportive on margins. Management continues to work hard on addressing the FDA observations from the July audit, and we assess that the investments in quality and compliance during the last year will provide Boule with a better foundation going forward.

…and margins should be able to improve
Management is continuing its efforts to improve margins through manufacturing cost reductions and price increases, but we expect this to be a step-by-step exercise, and more emphasis on these exercises is expected when finalising all the FDA requirements. Furthermore, and as previously highlighted, a few instruments related to the large-tendered India order remain uninstalled. Although this is somewhat discouraging, the opportunity for an increase in consumable growth remains as these systems are installed and starting to be used. Boule estimates that it is the second-largest player in India, where it continues to sell instruments, while at the same time being much tougher on price than in the past.

Operationally set for a solid 2020e
Meeting Boule’s management strengthened our confidence that the company should be able to sustain the current growth, which will support a favourable mix in 2020e. We leav
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