Shares in clinical diagnostics company Novacyt (NCYT:AIM) sank 12% to 367.6p on Friday after warning that disruption to a second government supply contract will have a material impact on first quarter results.
Today’s warning is the second in as many months and the shares have now halved since the company first announced it had not agreed an extension of a supply contact with the DHSC (Department of Health and Social Care) on 9 April 2021.
In January, the share price hit highs of £11..90.
LACK OF REVENUE VISIBILITY
At the time the company said revenues for the first quarter to 31 March 2021 were €83 million (£72.6 million), noting that roughly half of these revenues were driven by sales to the DHSC, and the other half by continued growth of international sales.
The company said it had taken legal advice in relation to the dispute and believes it has ‘strong grounds to assert its contractual rights.’
The second phase of the contract allowed for the provision of a further 700 PCR instruments and other products and was expected to generate ‘considerably more’ sales than phase one which had a minimum value of £150 million.
INVESTMENT CASE UNDERMINED
Since the first profit warning in April, consensus analyst forecasts for 2021 revenues and profit have dropped by 38% and 50% respectively to €161 million and €70 million, according to Refinitiv data.
The seemingly deteriorating relationship with the DHSC and uncertainty over revenues and profit should be a key concern for investors and underpinned Shares’ recent call to sell the stock on 15 April 2021.
