Member Info for ChrisToffer

Sorry if this seems like 9 months too late, but did anyone ever find any quotes from Guillermo Raimondo as to why he gave up a 26 year career at Siemens Healthineers to come to little old Novacyt?

Thanks Kaeren and Wilson!

Several labs have been awarded contracts (ref bidstats) to provide additional lab capacity to test and trace until Oct/Nov. They were awarded in August so hopefully another round of contracts being issued soon.

RBM, I suspect it's timing. Theyve already stated their 100m forecast several times so it's a waste of time repeating it like these other companies.

We know they've got other products to announce (IMUPLEX/2nd gen Antibody etc). Half year results on 27th could be the day. The 2nd DHSC contract was announced on the same day as the AGM last year so it could be the 29th.

This is not simply a matter of communication.

Sourcebio released an almost identical RNS to the MHC one and is down 20%.

The facts of the matter are that NCYT has a diverse covid testing portfolio which means it is best placed to handle changes in government/travel approach to testing.

Additionally, if you look at some of the testing labs (e.g Alpha Bio) that have been contracted by the government to provide additional lab support, you will see that they're already at max capacity and therefore could not support travel testing anymore. The governments move to LFTs for travel is to increase PCR capacity going into winter. Again, NCYT are positioned to capitalise on that.

HarChris, I've also been looking at other companies in the sector. NCYTs Gross Profit and EBITDA margins are ahead of its peers. Sector EV/EBITDA ratios are consistently between 10-20.

Remove the exceptional cost related to the DHSC dispute and the NCYT underlying business is delivering minimum 40m EBITDA.

DRB, 9th April RNS explains that,

On 29 September 2020, Novacyt announced a second supply contract with the DHSC for exsig® COVID-19 Direct kits and other products. In the full year trading update announced on 29 January 2021, Novacyt explained it was in active discussions with the DHSC regarding an extension of the supply contract. Unfortunately, an extension has not been agreed, although the Company supplied PROmate™ in Q1 2021 in accordance with DHSC demand.

 Q1 trading update and 2021 outlook

Novacyt delivered revenue for Q1 2021 of €83.0 million (£72.6 million). Approximately 50% of Q1 revenue was driven by sales to the DHSC, predominately PROmate™.

We know from the redacted contract on bidstats that winterplex was also supplied IAW the contract but was unlikely to be used due to the absence of flu.

Db, the RNS' clearly state that 40.8m Q1 2021 revs are for deliveries of PROmate.

Separately, the 19.8m(cost)/129m (sales) replacement product is for the initial contract in 2020, for Exsig/Winterplex. This may not even have to be replaced.

It all got roped in together because of the unlikely possibility of a full refund that would result in money going from NCYT to DHSC. Its for this reason that I'm confident the Q1 40.8m will get added to the Y/E EBITDA.

Incidentally, that should give the company Y/E EBITDA of somewhere between 40-50m (including the exceptional costs!). Sector EV/EBITDA ratios are between 10-20.

P.s the exsig inventory is obsolete in the eyes of DHSC because they only want PROmate now.

Winterplex was rendered unusable because of the absence of flu. The unfortunate part is that other suppliers have now been able to catch up with their own multiplex panels. Unless of course someone comes up with an simplified workflow version.....

DRB,

The company does not have to refund the 40.8m Q1 revs. They haven't been paid that yet, therefore in the worst case that the dispute results in a refund of the 129m exsig/winterplex from 2020, then the 40.8 will come off that. They won't receive that invoice and will have to pay back the remaining 79.1m.

This is incredibly unlikely in my view and this very thread should demonstrate that. If it were that clear cut this thing would have been resolved months ago.

The 40.8m Q1 revs are for PROmate which isn't even mentioned in the contract.

Kaeren, I think that depends on the outcome. The 6.8m cost could come off the 19.8m for replacement of goods but theyre different products. Equally, the 40.8m of PROmate sales could be used as credit in the event of a full refund of the 129m exsig/winterplex (i suspect this is the DHSC grounds for withholding the Q1 payment).

If I were NCYT though, I'd want paid for the PROmate and then deal with the Exsig/winterplex separately. Even with the minimal info we have, its a complicated situation.

DRB, they have physically paid for them though. Its a Q1 PROmate order that has been delivered and used + 2020 stockpile of winterplex/exsig that has been superseded (and not used). Thats material stock therefore the costs are not just a paper booking.

In the absence of a paying customer, that liability has to come cash (or debt).

Thanks Kaeren, it is very hard to call. There has definitely been some sort of agreement to move from Exsig to PROmate. I guess it depends on how much is documented.

Having gone round the bhoy again, I'm really confident that a full refund is highly unlikely. That reassures me that therell be a cash position north of 80m at Y/E. It could be well north of 100m

ShellDonald/DRB, ill try to put it another way. The RH table of Thursdays RNS shows that the company are gonna book an EBITDA loss of c.12m.

The only place that can come from is the Y/E cash pile of c.91m.

The benefit of them doing that now, is that the costs are booked. So if they receive the Q1 invoice it will not be subjected to those costs. 80% or more of it will go straight onto the 77.2m cash pile.

Shelldonald, it looks like the H1 exceptional costs of 28.9m and 6.8m have come straight off the cash pile (which is the right place to take them from).

The company have stated they get 43% ebitda from sales and around 80% (its a little moredue to IP tax savings) of that gets converted to cash.

So 53m sales and 23m H1 ebitda would have added around 20m to the 2020 92m cash position. About 112m. Take the 35m exceptional costs off and you get roughly 77m.

SD, the contract is pretty clear on that. There would be no nod and a wink. They had to be instructed in writing (2 weeks in advance IIRC) by the DHSC that the reduced amount of product on the 15th week would be 0.

Thanks Kaeren, So at the end of 2020 the company has built this 10 weeks worth of Exsig/winterplex ahead of the extended period of the contract, which was due to begin on 5th Jan (29th sep + 14 weeks).

If the DHSC didn't give the company due warning that they wanted none of the product beyond 5th Jan, then the company may well be due some recompense under the dispute? In short, there could be more than 40.8m due?

Going back to that RNS on 29th Sep last year,

'Under the terms of the contract, which is in two phases, Primerdesign will supply its products to the DHSC for up to six months. Phase one has an initial fixed term of 14 weeks with the potential to extend supply by a further 10 weeks. This first phase of the contract will involve the immediate deployment of 300 PCR instruments, related kits and support services with a minimum value of £150 million for the first 14 weeks. Based on this initial period, a further £100 million of revenue could be expected for the subsequent 10 weeks, however volumes can be varied up or down subject to certain notice criteria given by the DHSC.'

So the inventory may not even be related to phase 2 (700 additional machines), just the 10 week extension period beyond the initial 14 weeks.

Having read this again, I also agree with you SD, that the inventory must be exsig/winterplex. That has reinforced my confidence that the Q1 invoice should be retrievable.

Reading the RNS again it states that the inventory build up was a direct response to the government's call for UK manufacturers to build capacity . That doesnt suggest to that it was in anticipation of phase 2.

The amount of inventory suggests it is. If it was built in anticipation of the contract extension and if it is an element of the dispute, they probably wouldn't be allowed to say.

I agree its unlikely to be defect related as A) the dispute would be over by now and B) replacement of the product wouldn't be an option.

P.s Phase 2 was 10 weeks at £10m/week IIRC so £100m of product fits the description.

Hi Digby, no it doesn't because I assumed that the Y/E cash position of c.90m already counted for that.

The 2021 write downs weighed against that figure reinforce my assumption (i.e it more or less all adds up and doesn't have 20m missing).

That 29m of inventory should have a sales value of over £100m. If it were for phase 2 of the contract then is it likely to be PROmate? They would presumably have known by the turn of the year that the NHS only wanted PROmate.