LONDON (Alliance News) - Exova Group PLC Thursday said it has conditionally agreed to sell its food, water and pharmaceutical businesses within the UK and Ireland for around GBP18.0 million and said revenue has risen since the start of the year to leave its full year guidance intact.
The testing, calibration and advisory services company said it has entered into a conditional sale and purchase agreement to sell the businesses to life sciences company Eurofins Scientific, for a cash consideration.
Under the proposed deal, Exova would sell ten well-established laboratories in the UK and Ireland which provide chemistry and microbiological testing services, with the aim of completing a deal in the third quarter of the year.
The food, water and pharmaceutical businesses generated revenue of GBP20.0 million in 2015.
"The sale of our Food, Water and Pharmaceutical business in the UK and Ireland allows us to dedicate significantly more financial and management resource to growing in sectors where we can build on our market leading positions in technically demanding services such as fire, transportation, aerospace, industrials and infrastructure related testing," said Ian El-Mokadem, chief executive of the company.
Exova said it still expects to deliver "modest" organic growth this year and said earnings should be in line with its previous guidance, but adjusted to take the sale unveiled Wednesday into account.
"For the full year, the board continues to expect modest organic growth at constant currency and earnings in line with previous guidance, adjusted for the disposal announced today. Given the strong pipeline, we expect our M&A programme to contribute significantly to overall growth," said the company.
Exova has made a good start to the year after reporting a 12.7% rise in revenue at constant currency rates during the first four months of 2016, rising 15.4% from last year on actual currency rates.
The company said it delivered organic growth of 1.7% at constant currency rates in the period, adding this grew 7.7% if it excludes its oil & gas and industrial divisions, whilst M&A activity is up 11% from last year.
Exova said the aerospace unit delivered organic growth in Europe in the first four months of the year, but as expected, the oil and gas unit has continued to see activity levels contract whilst the health sciences division also reported "some reduction" in revenue, it said.
The aerospace division also reported solid organic growth in the Americas, as did health sciences. There was a high level of activity within the transportation unit in the Americas, but this is expected to fall back to "normal levels" going forward.
Exova said the oil and gas division is not performing any better in the Americas or anywhere else in the world than it is in Europe, as the worldwide industry shares the burden of lower oil prices and reduced activity levels. The company said it is continuing to take action to mitigate the negative impact from the division.
Elsewhere around the world, Exova said there was very strong organic growth from the Middle East in the first four months of the year.
"I am pleased with our performance in the first four months of 2016. Organic growth is in line with our expectations, demonstrating the strength of our portfolio and business model, and we continue to make very good progress with acquisitions," said El-Mokadem.
Exova shares were up 4.6% to 169.50 pence per share on Thursday morning.
By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance
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