Clean water technology solutions group HaloSource's total revenues from continuing operations decreased by 48% to $1.4 million in the six months to the end of June.
This was largely due to manufacturing related production stoppages at one of its key customers in China (unrelated to product supplied to the customer by HaloSource), resulting in customer orders of approximately $750,000 not being shipped in the period.
HaloSource says its customer's manufacturing challenges have now been resolved and they restarted production in July 2016. Sales were also affected by lower than expected revenues from major customers in India and Latin America, offset somewhat by better than expected sales to the company's second largest customer in China. Gross margin from continuing operations was -10%, down from +20% for the corresponding period last year, representing the impact of reduced sales from our largest customer as noted above. Operating expenses from continuing operations for H1 2016 totalled $5.2 million, down from $5.4 million in H1 2015.
The previous year's operating expenses included a one-time goodwill impairment charge of $0.2 million related to the termination of the patent licence for its anti-microbial coatings business during the period. It expects operating expenses to be significantly lower in H2 2016, taking into account the reduction in its US based headcount that occurred in its continuing operations during H1, as well as ongoing reductions in other operating expenses. Consolidated net loss was $4.5 million for the period, down from a net loss of $5.4 million in H1 2015, driven primarily by income from discontinued operations of $0.9 million.
The income from discontinued operations included a gain on sale of our Recreational Water and Environmental Water businesses of $1.3 million and $0.3 million, respectively.
President and chief executive Martin Coles said: "In order to focus exclusively on our class leading, bromine based, contact kill biocide solution for drinking water contamination we exited two of our three business segments during the first six months of 2016.
"In doing so we have significantly reduced our operating costs and realigned our resources to focus exclusively on the growth of our Drinking Water business and accelerate our strategy of becoming the technology solutions provider of choice for multi-national companies operating in the Drinking Water sector.
"The Company remains committed to accelerating the commercialisation of our unique, proprietary water purification technologies by leveraging both the go-to-market capacity of our existing customer base and the new customers we expect to add at the regional level.
"Against this backdrop, we expect to deliver gross margin expansion and tight control of operating expenses in addition to revenue growth while significantly decreasing the revenue required to generate positive cash flow on a consolidated basis.
"We remain confident in the growth potential of the business and look forward to bringing the full capability of our realigned team to the problems presented by biological and chemical contamination of the world's finite water supplies."