Member Info for ChrisToffer

Hi Chrisdr, I think you've read my message wrong. I believe we will see a resolution in line with (or less than) the directors assessment.

Excellent summary Sword! I completely agree that, although the company were legally obliged to detail the maximum disputed revenue, it is in both parties interest to come to an amicable agreement, therefore it's likely we'll see a resolution in line with the directors assessment.

I found it strange they quoted the stockopedia PE ratio of 4.49. I've just went stockopedia and it quotes revs of 67m and an EV of 221m. This is all grossly incorrect, even assuming a worst case outcome from the dispute.

As per the RNS, that could be an acquisition or licencing agreement.

The LFT is being developed with a partner so there will be an NDA covering whatever transaction will facilitate that. I think it unlikely we'll see director buys ahead of that announcement.

As per the RNS

Thanks everyone.

Maddock, that was my interpretation of the £129m vs 19.8m figures.

Interesting that they say 'a specific product' implying only one type of assay is in dispute? I wonder is it exsig or winterplex? Find it hard to imagine they orders £129m of winterplex kits..... but the again, ya never know.

Thanks Soder! I haven't had a chance to put the RNS numbers into a spreadsheet so I can get my head around them.

So do you think the DHSC declared payment in Feb was for Q4 invoices and, as such, are still due to pay for Q1 invoices?

The machines do not make up that much of the contract. Theyre only worth about 10k each and they were deploying 300 under the contract (there is some evidence to suggest that they didn't even all get delivered).

However 300 x 10k is only 3m.

The issue is more likely around exsig vs the introduction of PROmate, which supersedes exsig on ease of use and cost effectiveness. And/Or Winterplex which were ordered ahead of an expected flu season that didn't happen.

Would have been nice to see a resolution but the dispute is in line with figures that we've spoke about on this board. An LFT laugh now should hopefully kickstart the recovery

Thanks SC for your post on those timelines. Isn't it strange that the VOC framework hasn't appeared on bidstats yet? That could be a significant tender with only 4 companies. If that's a 1B+ tender then its another potential kickstart for a reversal in SP.

I also find it odd that we continually see other suppliers being name dropped by government and nothing mentioning NCYT(not this year anyway).

Gasman has a good thread on twitter that points to the partner being Katalyst labs. NCYT already partner with them, Tmthey already have a test card on the approved Porton Down list.

Macmdude, the dispute is based on contractual obligations and payment. If it were quality related they wouldn't be generating significant revenue elsewhere.

Costs related to the production of tests would already have been accounted for in the 2020 unaudited results. Those costs will remain unchanged regardless of the dispute outcome.

Gasman, I suspect its because DHSC declarations are inclusive of VAT and revenue declarations in NCYT trading updates are not.

£48m/1.2 is £39m which is c.50% of Q1 revs.

That's a really good read Porky, Thank you! Couple of interesting comparisons;

2016 Median/Mean Gross Profit Margins - 55.55%/57.03% (max was 77.8%)
NCYT 2020 unaudited margin - Above 80%

2016 Median/Mean EV/EBITDA - 19.05/19.54
NCYT EV/EBITDA (based on current MCAP, unaudited 2020 YE Cash position & EBITDA) - 0.9(!)

The impact of 2020 outstanding DHSC invoices (£24.3m) on the EV/EBITDA ratio is minimal - 0.98

Of course, there could be more to the dispute, but even if we take the full £91.8m cash position out of 2020 accounts giving us an EV equal to MCAP, it still gives an EV/EBITDA less than 2. The 2016 Minimum in that report was 11.6.

NCYT's 2020 H1 Revenue of £63m applied to the 2016 Annual Average EV/REV (4) gives us an EV of £172m - MORE than the current EV!

So what are we missing?

The TO talk is not something I've paid too much attention to but the fact is that, even stripping out DHSC revs, the EV is around £120m. If the company were bought at Enterprise Value, the cash position would cover the cost of the buyout.

I took my calculated Q4 and Q1 DHSC dispute money out and i'm looking at an EV of somewhere between £70m and £120m. Someone could buy the company at current prices and it would pay itself off with the year. Insane!

SC, I think that's it in a nutshell!

Also, having gone over the redacted contract; The original 14 weeks were fixed fee (£150m) for a fixed number of Exsig/Winterplex kits and the purchase order for those was to be raised on signing of the contract. The large payments in OCT/NOV suggest that that PO was raised and NCYT responded with invoices.

Its still a lot of money but even in the worst case I think theyll still be posting 200m+ audited revs and that should see the SP appropriately reflect fundamentals.

I do however trust that they have strong grounds to collect the outstanding invoices and that could make the bounce even harder

Thats a fair point SC! Ill bounce that off the testing numbers over that period when I'm next looking into it.

My feel for the shortfall/dispute is very similar to yours (somewhere between 25-45m) so expecting this to bounce hard once we have some clarity.

No I don't think its a VAT issue but we should remember that declared revenue doesn't incude VAT whereas the declared DHSC payments do. Thats important when going over the numbers. I believe its why DHSC feb payment was 49m but company revs were '50% of 72.6m'

But I should add that, if indeed the DHSC payments are in the bank then i believe the worst case were looking at 45m revs at risk.

Hi Jc, most of it is laid out in the DHSC declarations (Whats been paid at least). Maintenance and support payments are fairly negligible. The money is predominately in testing kits. Even the machines are only a fraction of total cost.