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Excellent exposé, Hemo.
The successive RNS released by the company were clearly misleading the shareholders regarding the state of the core business. Plainly said, the management lied - there's no way around it.
Well, ultimately you have to decide whether you believe this or not ...
“Our full year outlook remains in line with management expectations and we look forward to updating investors again when we publish our half-year results in December.”
.. and if you don't, perhaps identify other investments with better prospects? Writing two page essays here will make no difference to anything except your blood pressure!
I take it you have asked the company about your concerns?
Hemo, you can reduce or sell your holding quietly without a two page spread on your intentions! I for one don't need to know what you are intending. Thanks for the write up though!
Even at the end of May, the performance of the NIPT was still not a cause for concern and indeed growth was still expected at this stage even though all the damage occurred during this quarter:
26 May 2020
“The core molecular diagnostics business continues to perform in line with management expectations and remains on track to build on the strong year end performance announced in the trading update for the year ended 31 March 2020.”
“It's also especially pleasing to see that the main growth drivers of the business remain on track and with approval for our new Illumina platform NIPT just around the corner I look forward to providing further updates on our exciting new product development pipeline."
There was still no mention of the issues in the core NIPT and international businesses at the end of July when the poor sales figures must have been known, with growth still expected to meet ‘ambitious’ levels:
28 July 2020
“The Board remains confident that the Company's growth trajectory will continue and remain on track to hit ambitious growth targets for 2021 in line with consensus expectations.”
“We are confident in our outlook for the year ahead, even before potential COVID-related product and service revenues, and we are very excited about the prospects for further growth in the coming years.”
In the company presentation at the end of July the talk was again of the growth trajectory continuing (+86% for the 2019/20 financial year, not 5%!) and full profitability was very close. It seems likely now that full profitability will not be achieved in H1 2020/21:
28 July 2020
“Market forecasts for 2021 and beyond see our growth trajectory continuing and heralds a move towards full profitability in the near term”.
Even at the end of September when the damage was clearly known the talk was of resilience, not of double-digit sales declines in the core business:
22 September 2020
“The new financial year started with much of the world in lockdown, however our core business has proved resilient”
We now need to do £17.6m in H2 2020/21 to meet the broker’s full-year forecast. This is more than the whole of 2019/20. This leaves us very vulnerable to a profit/sales warning in the next six months, particularly when it is uncertain how the virus will affect the business in the coming months.
For me the investment case has been undermined since yesterday’s announcement, as has the credibility of the Board. The investment horizon just got longer as well. I will be looking to reduce if the opportunity arises unless the Board can quickly deliver something spectacular and show it has learnt from this.