Pharmaceuticals developer Ergomed Plc (LON:ERGO) have seen their shares dip in the wake of a disappointing first half.
The company’s status was downgraded from ‘buy’ to ‘hold’ by analysts at Numis, as shares dipped 27 percent today, down to 173.25p. Looking to the rest of the year, the firm has warned its shareholders that delayed contracts and reduction in scope of some contracts will lead to profits staggering 5 percent behind the market consensus.
Because of this, the company expects 2018 profits post tax, depreciation and amortisation to amount to little more than the adjusted profits of 2.8 million for 2017. A spokesperson for the firm said the AIM-listed company’s profits were “below management’s expectations”, as there is now a backlog of contracts worth just over 100 million GBP.
“This year, we anticipated exceeding market expectations for revenue, allowing us to more than cover the cost of the additional investment required to deliver our strategic goals for 2020. It is unfortunate that delays and reductions in scope of a limited number of contracts has resulted in us investing ahead of the curve. The business overall is in robust health, as demonstrated by a backlog approaching GBP100 million, and we are confident 2018 will provide a solid foundation for future growth”, said chief executive, Stephen Stamp.
Analysts from Numis then noted that Ergomed, “is constantly hiring ahead of anticipated revenue growth”, thus a delay in anticipated revenue, alongside a resource surplus, was bound to drive margins lower.
Both the firm and the broker analysing them were equivocal in response to the delays, and the company’s next course of action. They certainly appear less proactive than their larger counterparts.