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EKF Diagnostics hit by delays

RESULTS: Operational delays held back sales growth at point-of-sale diagnostics company EKF, but the business has made decent progress since the half-year end
September 24, 2012

EKF Diagnostics's (EKF) strategy of growing quickly by acquisition explains much of the big increase in half-year revenues. However, when these contributions are stripped out, like-for-like sales growth was a lower than expected at 7 per cent because of operational delays to two key products.

IC TIP: Buy at 28.75p

The delays weren't all down to EKF. Marketing partner, Alere, delayed the launch of the HemoPoint haemoglobin analyser in the US market until mid-April, knocking back potential revenues into the second half. The good news is that the order rate since then has picked up considerably and EKF has already delivered the minimum 1,400 machines that Alere agreed to buy this year, leaving room for expansion.

EKF also suffered order delays due to political instability in Mexico which prevented tenders from going through. On a positive note, the company achieved high rates of sales growth for its high margin Beta-Hydroxybutyrate (BHB) reagent test for diabetes - sales in the six month period trebled to £1.5m from the second half of 2011. In addition, sales of consumables were up by a solid-looking 32 per cent.

Peel Hunt expects full-year pre-tax losses to halve to £1.2m, giving a loss per share of 0.3p (2011: loss of 1.1p).

EKF DIAGNOSTICS (EKF)

ORD PRICE:28.75pMARKET VALUE:£73m
TOUCH:28-29.5p12-MONTH HIGH:33pLOW: 21.25p
DIVIDEND YIELD:nilPE RATIO:na
NET ASSET VALUE:14p*NET CASH:£1m

Half-year to 30 JunTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20117.4-1.55-0.89nil
201212.60.15-0.18nil
% change+71---

*Includes intangible assets of £32m, or 12p a share