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EKF Diagnostics keeps buying

RESULT: EKF Diagnostics keeps on the acquisition trail as its tests gain ground
September 17, 2013

First-half results at diagnostic testing specialist EKF Diagnostics (EKF) showed strong demand for low-cost diabetes tests, with growth in organic sales across both the company's testing machines and consumable products ranges. The company also continued its acquisition policy with the buyout of cancer testing specialist 360 Genomics.

IC TIP: Hold at 28p

360 Genomics, which will allow EKF to branch out from diabetes, was bought for £1.6m paid in EKF shares issued at 28.3p, with a further consideration of £8m due if various revenue targets are met. Deferred consideration costs of £1.43m were also made during the period to settle the balance of the Stanbio and Quotient acquisitions. The company also has to cover a charge of €0.7m (£0.6m) to cover an outstanding tax liability related to the original buyout of EKF-diagnostic GmbH.

Operationally, demand for EKF's Quo-Lab diabetes and HbA1c haematology tests hit new heights, with sales doubling in the half. In the laboratory segment, EKF faced greater competition to its Beta-Hydroxybutyrate reagent product, but revenues remained steady. The gross profit margin fell from 57.4 per cent to 51.3 per cent due to changes in the mix of products sold.

Broker Peel Hunt forecasts pre-tax profits of £1.1m, giving EPS of 0.4p, compared with a pre-tax loss of £0.2m and EPS of 0.1p in 2012.

EKF DIAGNOSTICS (EKF)

ORD PRICE:28pMARKET VALUE:£74.6m
TOUCH:27.5-29p12-MONTH HIGH:36pLOW: 24p
DIVIDEND YIELD:nilPE RATIO:na
NET ASSET VALUE:16p*NET CASH:£0.65m

Half-year to 30 JunTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201212.70.15-0.18nil
201314.90.19-0.38nil
% change+17+27--

Ex-div: na

Payment: na

*Includes intangible assets of £36.6m, or 14p a share