In today’s trading update, medical diagnostics company Omega Diagnostics (ODX:AIM) said it expected to report earnings for the year ended 31 March 2020 above market expectations, but this was overshadowed by impairments to its Allergy assets and lower revenues in its Food tolerance business.
After surging more than 400% in the last three months, the shares sank 17% to 51p.
Omega has interests in five COVID-19 testing opportunities of which its ELISA antigen test (denoting a current infection) has started to ship while today, the company announced an extension of its collaboration with manufacturing partner Mologic in regard to three additional tests.
OMEGA’S REFOCUS
The current range of opportunities in relation to developing both antigen and antibody tests has led the board to reassess how it utilises current resources and resulted in the company mothballing the development of its allergy product range. It will continue to meet current obligations for ongoing demand from its partner Immunodiagnostic Systems (IDS).
As a result the company has incurred an impairment charge of £8.74m to be recognised in the financial year ended 31 March, comprising capitalised development costs of £7.25m and a licence fee paid to IDS of £1.48m, offset by a credit in relation to deferred income of £1.02m.
In addition, the company has seen a short-term impact on the demand for its food intolerance business due to COVID-19 such that first quarter revenues for the new financial year are running around 30% lower than last year.
The board believes this will be offset by additional revenues from its COVID-19 ELISA antibody test.
Chief executive Colin King commented, ‘the decision to stop the development of further allergens has not been taken lightly but we recognise we can achieve better returns from directing our development efforts in other areas and we look forward to providing further updates as the opportunities we have in front of us deliver on their undoubted potential.’
Excluding the aforementioned impairments the company expects earnings before interest, tax, depreciation and amortisation (EBITDA) to be in the range of £850,000-to-£900,000 for the year ended 31 March 2020, at least 20% ahead of current consensus of £700,000 according to data compiled by Refinitiv.
