Broker comment/excerpt via Research -tree -
The strong improvement in margins and cash generation evident in H1 continued into H2 as self-help measures and strong execution from management took effect. Whilst revenues were slightly behind expectations, this is down to an acceleration in the decline of non-core low/no margin product lines and as such, the impact on profitability was muted. The key highlight was stronger than expected cash generation and the significant improvement in the strength of the balance sheet over the year. As a result, the board is looking at options to deploy excess cash to increase shareholder value via accelerating growth and/or returning cash to shareholders. We look forward to hearing more details on this at the prelims in late March. We stay at BUY, with an unchanged TP of 39p.
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It all depends on what your share cost base is and if you believe changes have been made to strengthen the business and decision processes.
My take is this is a trough and it's onward now but such changes don't happen quickly and historical baggage takes time to ebb away in memory. |
 Culling low margin products is usually a sensible management strategy, but I fear that that does not adequately explain the latest dip in anticipated FY 2024 revenues.
Singer (the house broker) had previously forecast FY 2024 revenues of £53m. It is not expecting much good news any time soon, as it has reduced forecast FY 2025 revenues to £53.4m (previously £56.6m) and FY 2026 revenues to £57.1m (previously £60.3m).
And not a word in this TU about revenues from the fermenters' investment (completely botched, on any analysis).You would have thought - and certainly hoped - that such revenues would have more than offset the lost low margin product revenues and that they would start to come through strongly in the revenues over the next few years. Apparently not.
Given this, I am not at all surprised that the market reacted negatively to today's announcement. I had hoped that the bottom had been reached around one year ago and I resisted my temptation to sell out completely at that time, although I did trim my holding. I finally bit the bullet and sold out at a painful loss a few weeks ago. I have simply lost all faith in the current management, who have had more than enough chances. I have simply concluded that there are much better opportunities elsewhere. It is not impossible that the business can be revived, but you (or rather, I) wouldn't bet on it. If I was still shareholder, I would also be alarmed that the company is contemplating further M&A activity, amongst various options. The previous M&A deals have been the stuff of nightmares. |
What is interesting is they could have put in an estimated overall margin (or margin range) vs 2023 but didn't.
Only those bothering to consider the numbers get to see. |
We won't have a say and I guess someone will be doing the maths on the optimum allocation of capital. Growing the business is my #1, especially if they can do so with at least the level of net margin they have now.
For the medium to long term they should be investing for top line growth and the capital gain will more than offset any dividend lost imho. |
If they go for share buybacks I for one would prefer the dividend as would many. |
Good results. Dividend not an issue at this stage-needs to reinvest to keep momentum going but as is obvious from cash generation can be introduced anytime and could be quite decent. Expect ramp up on fermentaation revenue next year-not even in the numbers. |
It has had a good shake-down and tidy-up to become a very cash generative business. Cost cuts and dumping low margin sales.
Excellent cash generation but a slight miss on adj EBITDA and revenue below consensus - can be expected given the transformation it has been going through. Allowing for the revenue miss (-£3.3M) the results per unit of sales are much better than the market predicted and look forward to seeing the final margin figures vs 2023. Good news on the cash front and the amount it is spinning off.
Final EBITDA > £11M so a miss of < 700K. NOISE!
Overall excellent and have tidied up the low margin areas and costs. This is the trough imho.
Expect the market to puke as all it will see is the top line and adj EBITDA miss which are inconsequential.
Ready for 2025.
DYOR etc. |
Just wish that on their options of what to do with the cash they included resumption of the dividend. |
A positive Trading Update released today.
And a positive backdrop in terms of a range on investment opportunities and value creation. |
I don't remember Trump being in favour of testing for COVID. His argument was less testing and the problem disappears rather bizarrely. |
Irrespective of the stance on vaccines, you need to test in order to understand the risks and levels of infection, and hence put in place appropriate safety and mitigation measures.
And one could argue you would need even more testing without an available vaccine response. Otherwise you are flying blind! |
The problem is Wan you are dealing with a Trump Govt and an anti vac head of Healthcare who clearly is no scientist. Just too risky guessing what these chumps are going to do next. |
TU was early Feb in 2024.. I'm using that as my guide |
Tuesday, March 18th 2025Full Year 2024 EKF Diagnostics Holdings PLC Earnings Release |
I have posted a couple of times in 2024 on the bird flu epidemic in the US, noting that the monitoring and testing levels had been increasing, including testing of poultry, cattle, other mammals, meat, dairy, and people with exposure to those industries.
Whilst the CDC still considers the risk from avian influenza A(H5) viruses to the public to be low, with the risks rising amid high levels of seasonal influenza activity, last week the dynamic for testing changed significantly!
On January 16th the CDC issued a health alert -
Distributed via the CDC Health Alert Network
January 16, 2025
CDC has routinely recommended influenza testing for hospitalized patients with suspected influenza. In light of the ongoing avian influenza A(H5) virus animal outbreak in the United States, CDC now recommends subtyping of all influenza A virus-positive specimens from hospitalized patients on an accelerated basis. This accelerated subtyping is part of a comprehensive strategy to identify severe human infections with avian influenza A(H5) viruses, in addition to characterizing seasonal influenza viruses in a timely fashion.
Enhancing and expediting influenza A virus subtyping of specimens from hospitalized patients, especially from those in an ICU, can help avoid potential delays in identifying human infections with avian influenza A(H5) viruses. Such delays are more likely while seasonal influenza activity is high, as it is now, due to high patient volumes and general burden on healthcare facilities. Additional testing also ensures optimal patient care along with timely infection control. Furthermore, expediting transportation of such specimens to commercial or public health laboratories for additional testing may also accelerate public health investigation of severe A(H5) cases and sharing of information about these viruses.
Full release -
PrimeStore transport media enables safe expedited transportation of such specimens to commercial or public health laboratories.
Longer term investors will already appreciate that EKF manufacture and supply PrimeStore MTM.
PrimeStore MTM, the only FDA Class 2 cleared product for microbial nucleic acid storage and stabilization -
Let's continue to hope that effective monitoring and testing is all that's required to get the situation under control and to prevent/respond to any potential for the virus to mutate into being transmissible between humans. |
I have already indicated that there is an improving and positive backdrop in life sciences (and healthcare) for 2025, where there is a combination of significantly improved balance sheets and multiple opportunities across the sector, all of which will hopefully bode well for the areas EKF operate in.
A LinkedIn post from Chairman, President and CEO, Thermo Fisher (that arrived in my inbox this week), strongly endorses the fact that there is more than just bias in those assumptions, and gives me even more confidence about the prospects for Life Sciences in 2025 and 'beyond' -
Marc Casper
Chairman, President and CEO, Thermo Fisher Scientific:
This week, during the J.P. Morgan Healthcare Conference, I had the opportunity to speak with our investors and customers and share an update on our company as well as discuss the opportunities ahead for the industries we serve. My key message was this: for both our company and the life sciences, I’ve never been more excited about the future.
My enthusiasm is based on very strong fundamentals and enduring long-term trends – including rapidly accelerating breakthroughs in science, robust drug development pipelines and huge unmet medical needs.
Full LinkedIn post -
Indeed, EKF describe the opportunities for their Life Science division as potentially transformational from an earnings perspective. So let's hope we start to see some meaningful benefits now that the "state-of-the-art" precision fermentation facility is completed and tested (including process development, qualification, validation, and scale-up), and revenue generation has commenced. |
TU has quite often been around the later part of January. |
Any idea of the TU update? |
Wan, would agree.
It's looking interesting but some catalyst needed to garner interest.
In the doldrums more than just consolidating. |
EKF is very cash generative and currently sitting on around £15m in cash. Apparently, the Board will thus be thinking about what to do with the cash, especially as EKF continues to generate further cash.
So, one potential catalyst might be the reinstatement of a dividend policy, which I am sure would be well received. A 1p dividend would cost around £5m and would currently equate to a yield of around 4%, still leaving capacity for significant investment.
Given the the completion of the rationalisation process (which is set to deliver further benefits from margin improvements), a combination of growth and a dividend policy would, in my view, be a very good place to land, in turn sending a strong signal to the market (given the current low valuation, especially when stripping out the current cash element and future cash generation). |
M&A and growth strongly feature -
Day 1 and 2 coverage of The 43rd annual JP Morgan Healthcare Conference with companies in the diagnostics and genomics tools markets providing updates on their businesses and previewing what may be coming down the pike. |
Thanks for the heads-up Simon.
Good to hear that someone else agrees that the strong dollar is good for EKF! And as you state, lots of cash being generated.
Interview with Chris Mills here (EKF 16min 40secs in) Interestingly, margins in the new enzyme facility are very high (which most of us knew), but Chis Mills describes the opportunity as being transformational for EKF, but which is subject to more effort and getting it right - |
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