CONNEQT Health’s $4.7M Investment Write-Down Drives Larger 2025 Loss
CONNEQT Health has disclosed significant revisions to its 2025 financial results, highlighting increased losses driven by a larger-than-expected fair value write-down on its inHealth investment and a heightened inventory provision.
- Increased $4.1 million fair value loss on inHealth Medical Services investment
- Convertible notes converted to 28.05% equity stake in inHealth
- Inventory provision for ATCOR raw materials raised by $455,717
- Net loss widened by nearly $5 million compared to preliminary results
- Adjustments include marketing expenses and foreign exchange impacts
Context of the Revision
CONNEQT Health Limited (ASX, CQT), a company focused on vascular health technology, has provided clarity on material differences between its unaudited preliminary financial results and its final 2025 Annual Report. The company’s updated disclosures reveal a notably larger net loss than initially reported, driven primarily by adjustments to its investment valuation and inventory provisions.
Investment Valuation Impact
A key driver of the revision is CONNEQT Health’s investment in inHealth Medical Services. Initially reported as a convertible note, this investment was converted into 630,000 shares, representing a 28.05% ownership stake. Following an external valuation using discounted cash flow analysis, the carrying value of this investment was adjusted downward to $649,119. This revaluation resulted in a $4.7 million fair value loss, which is $4.1 million higher than the loss disclosed in the preliminary Appendix 4E filing.
Inventory Provision Adjustments
Another significant adjustment relates to inventory provisions for raw materials used in the manufacture of the company’s ATCOR products. Post preliminary reporting, CONNEQT Health increased its inventory provision by $455,717, bringing the total provision to $824,502. This provision is a cautious measure based on expected raw material usage over the next three years and past consumption trends. Importantly, the company confirmed there is no indication that this inventory is obsolete or unusable, and the provision will be reassessed regularly.
Other Financial Variances
Additional variances include increased marketing and sales expenses accrued during the year and minor foreign exchange adjustments on financial assets and liabilities. These factors contributed to the overall widening of the net loss before tax to $18.2 million, compared to $13.2 million reported in the preliminary results.
Implications for Investors
The revisions underscore the challenges in valuing early-stage investments and managing inventory in a specialized medical technology business. While the increased losses may raise concerns, the company’s transparent communication and prudent provisioning reflect a cautious approach to financial reporting. Investors will be watching closely for how these adjustments influence CONNEQT Health’s strategic direction and future financial performance.
Bottom Line?
CONNEQT Health’s updated financials highlight the delicate balance between investment valuations and operational prudence, setting the stage for scrutiny in upcoming reports.
Questions in the middle?
- How will the revised valuation of inHealth impact CONNEQT Health’s future investment strategy?
- What assumptions underpin the inventory provision, and could changing market conditions alter this outlook?
- Will the increased losses affect CONNEQT Health’s ability to fund product development and marketing initiatives?
