Gene editing specialist Horizon Discovery (HZD) has restructured its business units around its five key customer segments, designed to better target products and services. The process has largely gone as expected, but “organisational issues” led sales in the newly created diagnostics segment (9 per cent of revenues) to fall 29 per cent during the first half. These were offset by the rest of the group, however, and sales were up 8.8 per cent on a constant-currency basis.
Horizon is undertaking a £5m, 18-month investment programme aimed at improving business processes and production capacity. Now halfway through this process, the group has re-engineered its cell line engineering process, tripling capacity, and is on track for a fivefold increase by March 2020 compared with the beginning of 2019. This is expected to lead to accelerated growth in the group’s core research reagents division (58 per cent of revenues) in the second half of the year, with a positive knock-on effect on the group’s other businesses.
The bio-production business has benefitted from validation of five investigational new drug filings across both China and the US, encouraging new customers to sign up for commercial licences without an initial evaluation period. This has helped drive further profitability improvements, with group gross margins up 530 basis points to 68.5 per cent. However, the lumpy nature of contract sales, combined with a tough comparator in the second half, may hamper full-year performance.
Broker Peel Hunt expects the full-year loss per share to narrow to 1.6p, from 23.9p in 2018.
| HORIZON DISCOVERY GROUP (HZD) | ||||
| ORD PRICE: | 140p | MARKET VALUE: | £211m | |
| TOUCH: | 140-142p | 12-MONTH HIGH: | 252p | LOW: 135p |
| DIVIDEND YIELD: | NIL | PE RATIO: | NA | |
| NET ASSET VALUE: | 91p* | NET CASH**: | £24.8m | |
| Half-year to 30 Jun | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2018 | 25.1 | -7.77 | -5.10 | nil |
| 2019 | 28.6 | -6.13 | -3.50 | nil |
| % change | +14 | - | - | - |
| Ex-div: | na | |||
| Payment: | na | |||
| *Includes intangible assets of £96.5m, or 64p a share **Excludes lease liabilities of £14.3m | ||||
