Strong point-of-care and central laboratory performance, offset by lag in contract manufacturing and non-Covid testing EKF Diagnostics has this morning released a FY’22 trading update, highlighting a revenue performance in line with market expectations but with EBITDA slightly below expectations as a result of growth in non-Covid related Laboratory Testing and Contract Manufacturing lagging previous expectations. Meanwhile, the core Point-of-Care and Central Laboratory segments delivered a strong performance, which is expected to continue into FY’23e. Net cash at period-end stood at £11.4m, below our £14.0 forecast, mainly as a result of higher capital expenditure relating to fermentation capacity expansion in Indiana, the total cost of which is now expected to be $14.2m vs. $9.7m previously. In addition, delivery of the largest (14,500l) fermenter has been delayed, with installation and validation now expected in July 2023 (from early 2023). £2.4m of the cash at year-end was held in Russia (in EKF’s 60%-owned subsidiary O.O.O. EKF Diagnostika) and cannot be distributed at this time due to external restrictions. Mike Salter will step down as CEO with immediate effect to focus on optimising operational performance in Services and the delivery of key growth initiatives, including the ongoing fermentation capacity expansion. Deputy Non-Executive Chairman Julian Baines will temporarily assume the role of Executive Chairman until a permanent CEO has been found. Our view Although the delivery and installation of the largest fermenter (under the terms of an agreement with ABEC, a leading provider of bioprocessing solutions) will be delivered later and at higher cost than previously expected, we continue to believe that the investment is strategically sound, against a backdrop of market capacity shortage in mid-scale bioprocessing, as illustrated by a strong YoY organic performance in Life Sciences (+60% YoY). The slow growth in new business uptake in contract manufacturing and laboratory testing is disappointing, and we expect more detail of the outlook for this, and other business lines, to be released with FY’22 results in late March. We place our forecasts, recommendation, and target price under review.