H1s in line, reflecting business transition. As reported in the trading update on 1st August, revenue for the period was £37.5m (-2.8% YoY) including £3.5m of non-recurring revenue. Adjusted EBITDA (before £1.7m of transition-related exceptional charges) was £9.7m, with adjusted PBT of £5.8m (£4.1m reported). Net cash (incl. lease liabilities) at period-end stood at £17.2m.
Divisional trends as expected. POC diagnostics (37% of H1 revenue) performed strongly (+9.7% YoY) supported by a normalisation of testing patterns and the launch of EKF Link. Central Laboratory revenue (17% of H1 total) was flat YoY, held back by a temporary, fully resolved β-HB supply issue. In Life Sciences, the planned capacity expansion in the Indiana facility remains on track. Laboratory Testing revenue (for the first full 6 months of CLIA laboratory ownership) was £2.1m, with multiple assays planned for near-term launch. Finally, as expected, Contract Manufacturing revenue (23% of H1 total) declined by 51% due to the fall in Covid testing.
Minor forecast changes. For FY’22e, we add the £3.5m non-recurring item to trading revenue but leave adj EBITDA materially unchanged, excl. a further forecast £(1.5)m exceptional in H2’22e. For FY’23-24e we make minor adjustments to revenue mix, leaving total revenue and P&L financials broadly unchanged. We continue to expect the upscaling of life science manufacturing capacity in particular to drive top-line growth and margin enhancement.
Attractive valuation, reiterate Buy. Our 10-year DCF valuation implies a target price of 96p (from 94p). In our view, the strong cash generation and growth potential outside the Covid space is not recognised by current discount multiples (FY’23e P/E 21.8x vs. 25.7x for the global peer group). Buy.
