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The Aim 100 2021: 100 to 91

The Aim 100 2021: 100 to 91
The Aim 100 2021: 100 to 91

100. Novacyt

At various times in its 26-year history, Aim has been called a “casino”. How fair that label seems will depend on your view of what incubator-focused markets are designed for. But for some investors, this reputation is a key attraction of the junior bourse: although there are plenty of losers, a heady combination of extreme volatility and innovation should create some huge winners.

Since the start of the pandemic, shareholders in Anglo-French clinical diagnostics group Novacyt (NCYT) have experienced all the adrenaline highs and crushing lows Las Vegas can offer. After steep declines in 2018 and 2019, the stock leapt by an eye-watering 6,523 per cent last year after it developed a polymerase chain reaction (PCR) molecular testing kit for Covid-19 just weeks after the virus was first identified.

Contracts with desperate national health authorities soon followed – concerns around pricing be damned – leading to an explosion in sales and a surge in the group’s cash profit margin from 5.5 to 64 per cent. The bottom line swung from a £5.7m loss to a £132m post-tax profit for 2020.

A new year began with broker Numis’s target price for the shares at £14, or around 100 times where they were 12 months earlier. Instead, Novacyt has since lost more than two-thirds of its market value, in large part due to the cancellation of a deal with the UK’s Department for Health and Social Care (DHSC).

This contract – which made up more than half of sales in the first quarter – has since been the subject of a bitter dispute between company and government and led to 43 per cent of the top line being scrapped from the half-year results. Worse still, Novacyt was forced to recognise £6.9m in associated manufacturing costs, write down a further £28.9m in stock and terminate supplier agreements struck in anticipation of further DHSC demand.

While the debacle will hopefully prove a one-off, the group’s investment case now hinges on the strength of the private testing market, which at this stage of the pandemic is hard to quantify.

Novacyt has also submitted 11 products for review in relation to the UK Health Security Agency’s programme on Coronavirus Test Device Approvals, but only its PROmate® Covid-19 test had been named on a temporary protocol by the initial deadline. If no other products are approved, Novacyt will take an estimated £3m hit to full-year revenues.

Announcing his departure in July, after 13 years, chief executive Graham Mullis described Novacyt as “far more than the success it has enjoyed during the last 18 months”, citing the importance of the group’s role in responding to Covid-19 and its foundations as a leader in specialist diagnostics. Time will tell. But even after accounting for the DHSC cancellation, Numis expects profits to contract in 2022. Hold. AN


99. Proton Motor Power Systems

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