The perils of trying to break into the US medical testing and devices market were well illustrated by the half-year results at diagnostics company Avacta (AVCT). US distributor problems have been a recurring theme for diagnostics and medical companies this year and the need to change distributors for Avacta's Optim testing machine caused a big fall in the company's revenues.
True, the effect on sales should be temporary as the situation settles down, but there are questions about how Avacta will fund its research and development (R&D) effort as the business tries roll out a new generation of machines.
Avacta is now using ForteBio, now a subsidiary of Pall Corporation (US: PLL) to distribute its products in the US. The disruption impacted Avacta's analytical division the most with divisional revenue falling from £1m at this stage last year to only £0.42m. On a positive note, the results showed that Avacta has started to generate recurring revenue from the cartridges used in its machines - revenues doubled to £0.14m during the half. Avacta's animal health business, which supplies diagnostic products to the veterinary market, proved to be less affected by the US disruption and sales were maintained at £0.73m.
The sales shortfall led broker Panmure Gordon to downgrade its full-year revenue forecast from £3.9m to £3.3m. On that basis, expect a full-year pre-tax loss of £1.6m, around £300,000 more than previous estimates, and a loss per share of 0.042p, the same as last year.
AVACTA (AVCT) | ||||
|---|---|---|---|---|
| ORD PRICE: | 1.15p | MARKET VALUE: | £36.3m | |
| TOUCH: | 1.13-1.17p | 12-MONTH HIGH: | 1.41p | LOW: 0.72p |
| DIVIDEND YIELD: | nil | PE RATIO: | na | |
| NET ASSET VALUE: | 0.5p* | NET CASH: | £2.05m | |
| Half-year to 31 Jan | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2012 | 1.71 | -0.51 | -0.02 | nil |
| 2013 | 1.15 | -0.96 | -0.03 | nil |
| % change | -33 | - | - | - |
Ex-div: na Payment: na Includes intangible assets of £12.9m, or 0.4p a share | ||||
