Last year’s best performing stock, specialist clinical diagnostics firm Novacyt (NCYT:AIM), said on Friday full-year revenues to 31 December 2020 increased over 20 times to €311.6 million.
The shares fell around 11% to 948p on profit-taking, having risen 30% over the last month and 234% over the last six months.
There was also some disappointment that the company didn’t announce an extension to its contract with the Department for Health and Social Care (DHSC) today.
Novacyt was one of the first companies to develop a rapid Covid-19 test, which it launched at the end of January 2020.
CONTRACT EXTENSION UNCERTAINTY
The company said it was in active discussions with the DHSC to extend the current phase of the contract, which involves deploying 300 instruments and related kits worth a minimum value of £150 million for 14 weeks from 29 September 2020.
The extension was due to run for a further 10 weeks from late January and could be worth a further £100 million of revenues, so it is an important development for investors in Novacyt.
TRANSFORMATIVE YEAR
Chief executive Graham Mullins commented, ‘2020 has been transformational for Novacyt. We have cemented our early mover advantage of developing one of the first tests for COVID-19 into an established position within COVID-19 testing and the broader diagnostics market.’
Building on strong first-half momentum, during which revenues grew 10-fold year-on-year to €72.4 million, the company delivered a further €230 million of sales in the second half.
The company achieved relatively high gross margins above 80% which generated earnings before interest, taxes, depreciation, and amortisation (EBITDA) of more than €210 million.
While the result is around 9% lower than Numis’ estimate, Novacyt said it expects to convert 80% of EBITDA into free cash flow on an ongoing basis which is higher than expected. To illustrate this, the company had €101 million of cash at the period end compared with €19.7 million at the end of June.
This is an impressive performance considering the ‘significant investment’ in working capital needed to meet demand and ensure uninterrupted supply. Despite this investment the group was able to pay down its debts and is debt free for the first time in its history.
As well as securing two contracts with the DHSC, Novacyt is supplying Covid-19 products to non-government organisations and has expanded its global presence. Aside from the UK, the firm’s biggest markets are the Middle East, Germany and the US.
Novacyt said demand for its products remained strong so far in 2021 and is expected to remain so throughout the rest of the year with the conversion of new opportunities including several new product launches.
