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Meldex’s shares fell as much as 19 per cent after 2007's revenues failed to match those indicated in its trading update in late January. Moreover, the group's pre-tax profit (adjusted for such items as amortisation and exceptionals) reached just £1.6m - well below broker Landsbanki's £3.8m forecast.
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Shareholders shouldn't, however, be too alarmed as the difference reflects accounting issues. Essentially, International Financial Reporting Standards doesn't allow for the inclusion of two group products - Rocgel and Alfatil - that were acquired during the year, says management. The good news for shareholders, according to chief executive Richard Trevillion, is that this will be overlooked by the potential bidders that the company has been in discussions with since the beginning of the year.
No further details about the timing of that process were were provided, but management remains upbeat about the trading outlook. Indeed, the company has 155 medical products being sold in various markets around the world with several due for launch this year and next. Moreover, Meldex's acquisition of the Melbrosin group of companies during the year has made a significant contribution to the business and helped the group to penetrate new markets.
| MELDEX INTERNATIONAL (MDX) | ||||
|---|---|---|---|---|
| ORD PRICE: | 51p | MARKET VALUE: | £ 109.1m | |
| TOUCH: | 51-52p | 12-MONTH HIGH: | 97p | LOW: 37p |
| DIVIDEND YIELD: | NIL | PE RATIO: | 85 | |
| NET ASSET VALUE: | 33p* | NET DEBT: | 5% | |
| Year to 31 Dec | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2003 | 0.95 | -1.67 | -3.40 | nil |
| 2004 | 2.51 | -7.13 | -6.30 | nil |
| 2005 | 4.40 | -9.07 | -7.50 | nil |
| 2006 | 9.47 | -1.94 | -1.20 | nil |
| 2007 | 27.1 | -0.35 | 0.60 | nil |
| % change | +187 | - | - | - |
*Includes intangible assets of £75m, or 35p a share |
||||
Click here for a guide to the terms used in IC results tables.
Meldex's shares are amongst the more volatile in the sector, and are currently below our buy advice (60p, 31 December 2007). Still, the decent business model looks set to deliver earnings growth of over 20 per cent a year, while a potential bid could also mean more upside. Buy.
Last IC View: Buy, 70p, 17 March 2008
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