There are two ways to look at Horizon Discovery’s (HZD) 2017 acquisition of cell-line specialist Dharmacon. Optimists – including broker Numis – will praise the timing of the purchase: after several years of poor growth, Dharmacon reported a 6 per cent increase in revenues in the first six months of 2018 as demand ramped up, while growth is expected to accelerate again in the second half when competition is weaker. But sceptics will say the acquisition looks desperate. Without the new division’s £14m revenue contribution, Horizon Discovery reported an 8 per cent decline in sales to £11.1m.
The acquisition also dented Horizon’s margins. Dharmacon has bulked up the research products division to 56 per cent of the top line, although it reported significantly lower gross margins than the applied products division (which is now just 18 per cent of total revenues). Group gross margins therefore came in at 63 per cent, compared with 74 per cent last year, further hampering efforts to report maiden profits (which management has been forecasting for more than a year). Adjusted cash losses were £2.2m compared with £5.1m in the first half of 2017, but Numis continues to forecast adjusted cash profits of £0.5m for the full year.
| HORIZON DISCOVERY (HZD) | ||||
| ORD PRICE: | 220p | MARKET VALUE: | £329m | |
| TOUCH: | 220-229p | 12-MONTH HIGH / LOW: | 266p | 128p |
| DIVIDEND YIELD: | NIL | PE RATIO: | NA | |
| NET ASSET VALUE: | 112p* | NET CASH: | £24.9m | |
| Half-year to 30 Jun | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2017 | 12.1 | -8.5 | -8.6 | nil |
| 2018 | 25.1 | -7.8 | -5.1 | nil |
| % change | +108 | - | - | - |
| Ex-div: | na | |||
| Payment: | na | |||
| *Includes intangible assets of £127m, or 85p a share | ||||
