Declining Covid-related revenues are masking the strong base that EKF Diagnostics (LON: EKF) can grow from. Profit slumped in the first half and will be lower for the full year, but all the core operations have good growth prospects.
In the six months to June 2022, revenues slipped from £38.6m to £37.5m and pre-tax profit dived from £11.4m to £4.1m. Stripping out the Covid revenues, which did make a contribution early in the latest period, revenues were 11.5% ahead.
Net cash was £16.9m at the end of June 2022. The cash includes £2.6m that is difficult to get out of Russia.
EKF still owns shares in Renalytix (LON: RENX) and Verici Dx (LON: VRCI). These investments were valued at £1.57m at the end of June 2022, but the share prices have fallen since then. EKF intends to focus on its core businesses and not become involved in other early-stage investments.
Business
The point of care business grew thanks to increasing demand for diabetes and hematology analysers. The central lab business was hit by supply chain problems, but they have eased in the second half.
The smaller life sciences division nearly doubled its revenues from enzyme manufacturing services and there is capital investment to increase capacity. This is where the faste4st growth is likely to come.
The Advanced Diagnostics Laboratory (ADL) business acquired last year made an initial contribution. ADL is a Texas-based PCR-focused testing laboratory operator that is certified under the Clinical Laboratory Improvement Amendments (CLIA) for complex testing.
Contract manufacturing revenues halved, but there is an underlying business that can grow now that Covid demand has gone away. A full year pre-tax profit of £12.2m is forecast, rising to £16.7m in 2023. At 39p, the shares are trading on less than 15 times prospective 2023 earnings.