Member Info for ChrisToffer

Hi Soder, I did have that thought on point 2.

The write down for 29m is this year so likely they expected the go ahead after end of Jan. Could this write down be claimed in a settlement that favours NCYT?

Is it a threat/posturing to stand down suppliers just as demand of testing capacity is ramping up again? I still believe he game is very much alive here and things need to be sorted ahead of winter.

I've updated my own calcs on the Y/E cash position, based on a few scenarios - all of which assume the 100m rev target is reached;

No Q1 DHSC Revs and no further writedowns - £92m

Replacement of disputed product and no Q1 revs (I.e £19.8m - £6.9m Q1 write down) - £79.5m

Replacement of product (19.8m - 6.9m again) and Q1 revs collected - £93m

No further writedowns and Q1 revs collected - £133m

Full refund in dispute - (129.1m- 40.8m) - £4.1m. I dont believe this last scenario would be booked against the cash in one lump so this is unlikely but still leaves the company cash positive.

Thanks HKK,

I think the move to using LFTs is primarily to relieve pressure on PCR testing capacity. Third party labs that have been contracted for test and trace are already at capacity so can't support travel testing anymore.

The daily PCR testing capacity on gov websiteis also moving up to 700k a day. Theyre clearly expecting PCR testing to go through the roof.

Hi Hillseeker, I did have the same thought around the inventory cost after seeing New forms research post on twitter highlighting the 2020 inventory.

Ive made the assumption that the 2021 inventory build up was specifically PROmate, which only went into production late 2020, and was stocked for expected extension of the contract beyond end of Jan. Its hard to say with certainty.

Absolute worst case; the company meets it's (3x) stated guidance and has positive 2021 EBITDA of £7.2m.

For me, there is so much potential to improve on that. If any of the outstanding Q1 invoice gets paid, it will go straight onto the cash pile.

Winterplex (potentially a PROmate version?) Sales could give it a lift. Potentially more contracts from the national Microbiology Framework and also from the VOC framework.

K, thats one way to look at it. Its the same thinking that the directors used in the 2020 accounts to come to the 19.8m figure for replacement of goods.

Incidentally, it may be that that 19.8m cost is now reduced to 12.9m.

Hi Kaeren, yes that outstanding Q1 invoice would indeed reduce the amount in dispute but until they completely rule out the (possible but not probable) refund of 129m then DHSC are probably withholding that invoice. So if that unlikely refund were to happen the company would only pay 79m back.

Earth, you are correct and we should also remember that these additional costs will be offset against this year's tax.

Tax aside though, these exceptional costs look to have been offset against the cash position. I was expecting around 110m in cash and it (pretty much) all adds up to that. Without DHSC or any change in projection, they'll be very close to 100m cash by year end.

Trek, yes 6.8m is manufacturing costs incurred when delivering the 40m of Q1 Promate (at a margin of around 83%).

The 29m is a little more vague as we don't know if it is Exsig, winterplex or Promate. I dont think it'll be machines but its hard to say.

Its an interesting development, given the previous margins, that inventory is potentially worth over 100m in revs.

Sir Digby, apologies my last reply to you was misleading. Of course EBITDA is subject to tax and is reflected in cash conversion (80% of EBITDA IIRC), however I dont believe this is the case here because taxes from 2020 earnings would not be due yet.

Sir Digby, CAB is calculated from EBITDA so is not subject to atax or VAT

Hi Porky. I understood it that the Q1 product was delivered which is why the company are not recognising the revs (40m) AND still have to incur manufacturing costs of 6.8m.

I believe the larger 28.9m write down of stock was for inventory built in anticipation of the contract being extended in January/Feb.

I think the reduction in cash position is because they have offset both cost writedowns against the cash position. If they didn't have to write those down then the cash position would be circa 77m + the 6.8m + 28.9m = 112m

The current EV means someone could buy this company and it'd pay itself off within 20 months. Think about that for a second.

The RNS draws a line under the company's enterprise value. Someone could currently pay 240/250m, get 77m back in cash and a company thats averaging 8.3m a month in sales, not to mention all the IP.

Oversold

Thanks Kaeren,

There were links posted last night that showed NCYT job posts for Stratford upon Avon and there are links to Ajan Reginald, NCYTs CTO and Celixirs CEO(?)

Some of the talk last night was of buyouts, however Celixir are developing heart stem cell therapies and one of the biggest risks to their application is Sepsis.

How valuable would the early detection of sepsis be In stem cell therapies?

Hi Bluelight, Thats the crux of this buyback discussion isn't it? Until the company clarify the cash position and show what they intend to do with that cash, then people will clamour for a dividend or buyback.

Investors don't like companies sitting on cash. If they were to announce an acquisition tomorrow then all talk of buybacks or divs will disappear.

Apologies for the triple paste below, it strangely didn't show the first 2.

The EKF comparison is a valid one and suggests that NCYT should be trading a lot higher.

However there are 2 key differences. The first is the dividend payments. The dividend itself is not justification for the high PE, however NCYT are sitting on a cash pile so until they show their hand in how they're going to use that money, investors aren't interested.

The second key difference is this statement,

"The Group remains confident that its growth strategy, as outlined to shareholders at the Annual General Meeting in May, and set out above, will create a business which, aside from any COVID-19 related revenues, is capable of generating significant double-digit growth in adjusted EBITDA over the next three to four years."

 
"The Group remains confident that its growth strategy, as outlined to shareholders at the Annual General Meeting in May, and set out above, will create a business which, aside from any COVID-19 related revenues, is capable of generating significant double-digit growth in adjusted EBITDA over the next three to four years."

"The Group remains confident that its growth strategy, as outlined to shareholders at the Annual General Meeting in May, and set out above, will create a business which, aside from any COVID-19 related revenues, is capable of generating significant double-digit growth in adjusted EBITDA over the next three to four years"

Similar statements from NCYT board have been too wishy washy or unclear. I retain the hope that there is good reason for this lack of clarity and that this reason will become apparent when new contracts are signed.

Kaeren, the bidstats contract that appeared last night is the 4.7m contract announced officially in the half year update. Yesterday was only its publishing date but it was awarded on 9th August and announced to the market on the day of the webinar.

Bidstats publications have normally followed company announcements. The opposite happened with the framework inclusion but that itself doesn't constitute or guarantee any money.

EXMEX, great post as always. The PROmate technology applied across other High use assays, like winterplex, must be the way forward.