Positive POC and Central Lab momentum. FY22e revenue and adjusted EBITDA were -19% and -44% YoY, respectively, in line with indications in the trading update on 6th February. The results highlighted, in particular, strong positive momentum in Point-of-Care / POC (+13%) and Central Laboratory (+11%), offset by continued weakness in Contract Manufacturing (-78%) and Laboratory Services / ADL (£2.5m FY22 revenue vs. £1.0m in Q4 2021). In Life Sciences (+60% to £3.2m), the capacity expansion project in Indiana is well underway, with installation of the largest (14,500l) fermenter anticipated in Q3 2023. As a result of the restructuring, £17.5m of exceptional costs were incurred in FY22, including a £9.8m impairment of ADL Health assets (acquired in Q3 2021), and we expect a further £1.8m charge in FY23e.
Active forecasts reinstated. Our new forecasts, shown overleaf, reflect the business change first outlined in the trading update on 6th February, in addition to FY22 results and the sale of the Advanced Diagnostic Laboratory (‘ADL Health’) subsidiary, announced on 23rd March (which we reflect as a discontinued operation from FY23e).
Valuation implies Buy. Following significant consensus downgrades over FY22, the shares are trading at an approximate 30% discount on FY24e P/E to a global peer group of suppliers of diagnostic and reagent products and services. We believe the discount could close, over time, assuming increasing commercial traction in enzyme manufacturing in line with guidance and continued positive core business momentum. Our revised DCF-based valuation implies a target price of 42p. Buy.
