Member Info for DRB83

Disagree, a small buy back maybe to instill some confidence but that cash needs to be spent on 2-3 smaller non covid acquisitions. Not just any though.

Chris, correct it is impossible to truly know the ins and out of the cash without the balance sheet and commentary. One thing I am relatively sure if is that the £5m LTIP payment would have been made in November. The cash was slightly higher than I had predicted based on £96m revenue so I suspect they have also received something back from HMRC. We'll see.

It's certainly reassured me by doing the dispute calculations that whatever the outcome it won't severely eat into our current cash pile.

The ones saying it would be £50m don't understand cash flows and are mainly trolls who tend only to know which way a trend line points. That's as good as you'll get from trolls.

Hydra, appreciate that is your worse case but if DA is forecasting £54m then I'd like to think he would also forecast some indirect cost savings. At £8m EBITDA your margins are 15%. Very conservative but then it is your worse case.

A quick note in addition. I am assuming worse case is we lose and just have to pay everything back as if it never happened. There could of course be penalties on top which would obviously increase the net £28m outflow.

Personally, given the companies strong stance I would expect a resolution somewhere somewhere in the middle that would ultimately result in replacement products and no cash leaving our account.

Ncyt don't know what is going to happen so may be holding off investing too much just in case. It's prudent to do this but just another example of how much this whole dispute debacle has really quashed our growth opportunities.

Captain, the £20m doesn't need to be ringfenced as such in the cash. The cash balance is just the total cash we have at any one point. However, ncyt will have a cash flow forecast by week/month and in there they will have allocated a proportion of the £102m to a worse case scenario regarding the dispute. They'll probably have several versions.

1. If we have to provide replacements. We'll need to spend £20m in materials either directly on the replacement goods or by replenishing stock levels. In this scenario we would also forecast the receipt of the £73m currently overdue and the £8m VAT payment from £49m sales.

2. If we lose and have to give all monies back. We would show £105m going back to DHSC, £49m coming in from DHSC for Q1 sales, £21m VAT refund coming in in relation to the £129m sales, a tax rebate coming in of £15m and the VAT of £8m relating to Q1 sales going out.

Net cash outflow of £105 - £49 - £21 - £15 + £8 = £28m

I notice on my previous estimate I said outflow was £38m but I see I got the VAT number wrong. £28m is more accurate I believe.

This all won't happen at the same time and it is unlikely that we would be required to pay back the £56m (105-49) in one go so cash I believe will only be impacted minimally. If everything happened before June interims then based on what we know now we could have

£102m
Cash from operations (60m X 0.24 cash conversion) £14m
Less dispute resolution £28m
Cash at Jun22 = £88m

This is a very basic guideline as we can't see the balance sheet yet and who knows what investment spend will be like in the next 6 months.

This is not a ramp. I have clearly laid everything out so you know where I'm coming from. I'm sure the trolls will give us their informative 1 line response.

Chris, the tax we are discussing is from the FY20 accounts as this is where the dispute is so I believe it offers the best information we can get.

Wilson, the provisions are all charged to the P&L as a debit and put on the balance sheet as a credit (liability), meaning we may owe some money in the future.

The £20m warranty provision was charged to Cost of sales in FY20 and put in the short term provisions category as a liability on the balance sheet.

The £41m revenue from Q1 was reversed and as far as I can see does not actually appear anywhere in the numbers but the accounting would have been to debit sales thereby reducing sales and credit trade debtors thereby reducing the money owed to us.

Stock provision was again charged to P&L thereby reducing our profit and credited to stock thereby reducing our stock value.

Basically, when they make provisions, yes they are putting the values to one side (from an accounts perspective). If the bad news does come then the accounts won't be significantly affected as the bad news has already been provided for. Hope that makes sense.

Captain, in FY20 the net assets were £150m. Based in what ncyt told us in the last results, EBITDA will be around £36m. Exceptional costs will probably equate to £36m so EBITDA after exceptionals will be break even. Therefore, I expect the net assets in FY21 to remain around the £150m mark. Today the mcap is £121m.

Based on our forecast of £60m revenue and hopefully a £20 EBITDA then our balance sheet at FY22 would be £170m (give or take).

A company is very rarely valued based on its net assets as this contains provisions for worse case and only represents the value of the business if it ceased trading today (with the exception of a bit of goodwill). The balance sheet does not take into account future cash flows.

Discounted future cash flows give a more accurate valuation of a company but unfortunately in ncyt's case due to the uncertainty of future revenues the market is unable to quantify this.

Should we be subject to a takeover then the bod and their auditors would be forced to come up with some reasonable forward looking cash flows which would then be used to derive at a reasonable sales price. This would most definitely be multiples of today's mcap.

Captain, the below is from the annual accounts:

The balance of £15,116,000 at 31 December 2020 (2019: £nil; 2018: £nil) reflects the UK corporation tax liability of the Group. The amount reflects the tax due at the full UK rate (19%) on taxable profits, although in due course, if patents are granted and a Patent Box claim be made, future taxable profits should be taxable at a much lower rate

We know the tax charge for FY20 was £32m but it isn't clear why the liability is only £15m. I can only assume we have offset the tax losses of previous years against FY20 being our first year of profit.

If we lose the dispute 100% then we would have to credit the full £129m back. VAT is £21m so £108m would come off revenue, we would release the £20m provision. This would result in the bottom line getting worse by £88m. Tax at 19% is about £17m. As we only paid £15m it's likely that we would only get £15m back. The other £2m would drop into deferred tax but that's a little grey area.

Hydr, I would say the 86% related to the £96m not the £137m. I believe the non covid revenue will grow in FY22 so I am going with a forecast of £60m total revenue. Where do you get the small EBITDA loss from? I am assuming that the bod will have to cut some costs and will be able to hold a 30% EBITDA (was 43% in H1).

Neil, that is an interesting viewpoint which I recall has been discussed before on here but I forgot all about it. The Q1 sales of £41m was primarily PROmate. We know the product in question is Exsig which was supplied Q4. This supports the theory that Q1 revenue is merely collateral in the dispute. This is good news.

£129m in dispute
If we lose and have to pay it back we owe £105m less the £49m they owe us = £56m. We'll get a VAT rebate of £11m less the £8m that we held back in Q1 so £3m. We'll also get the corporation tax rebate from FY20 in full which is £15m.

So worse case net is £56m - £3m - £15m = £38m cash to DHSC.

From a BS perspective we would release the £20m warranty provision, write off the £24m trade debtors and release the £41m q1 provision as well as the £7m relating to production costs. Not sure what will happen with the stock. So BS will improve by £44m less £38m cash payment so net increase of £6m.

Cash would be £102m less £38m cash payment so £64m.

Worse case actually not looking too bad afterall. I don't even think it will be worse case. I'm sure the trolls won't understand any of this and will still say we'll owe £100m, or we'll give it all away in a special dividend or we'll just burn it all. You know, the same old same.

Hydr, your £31m gross profit figure already has the exceptional costs included.

The £36m EBITDA ncyt mention is pre exceptional costs. Hope that helps.

Chris, it clearly states that the £49m from Q1 is also included in the dispute.

No, that's just the element they haven't paid. Total dispute was £129m + £49m

Our science correspondent, Hannah Devlin, looks into a new technique could cost a 10th of a PCR test:

Scientists have developed a highly sensitive Covid test that relies only on low-tech kit and a smartphone, which could be used as a quicker, cheaper alternative to PCR testing.

The team behind the 25-minute saliva test say it provides a highly reliable platform for testing in the workplace or at home. It requires a basic lab kit that includes a cardboard box, a small hot plate and LED light that can be produced for less than £75. The cost of running a test, including the reagents, is about a 10th of a PCR test and is also cheaper than a lateral flow test. The team’s findings are published in the journal JAMA Network Open.

“As new Covid variants emerge globally, testing and detection remain essential to pandemic control efforts,” said Dr Michael Mahan, of the University of California, Santa Barbara and lead author. “Nearly half the world’s population has a smartphone, and we believe that this holds exciting potential to provide fair and equal access to precision diagnostic medicine.”

The app, which is freely available, uses a smartphone’s camera to measure colour changes indicating a chemical reaction and determines a diagnosis in 25 minutes. When tested in 50 patients with Covid, it matched PCR testing for sensitivity. The same technique was also applied successfully to diagnosing flu infections.

https://jamanetwork.com/journals/jamanetworkopen/fullarticle/2788464?resultClick=3

All the money spent on getting science to be exact and precise and now they want to use your mobile phone camera to produce your test result. Great idea but really?

My phone camera is blurry, jumpy and colours keep flitting between different shades. Think I need a new phone.

Cranleigh, I already checked that. The £1.2m for the Chill domain has all been paid. It is clearly shown in the cash flow statement. The accrued liabilities fall from £1.2m to £0.6m. This imo is the LDA, so we only paid £600k. Also, reference the friend loan, helping out the supply chain is fine when you can afford to. Doing it interest free is questionable.

Bluerill,
"The reconciliation of reported orders and the £1m in revenues is just working capital, ie., the difference between orders received and the 30/60/90 days given to customers to pay ONCE THE ORDERS ARE INVOICED"

That's nonsense, what accounting experience do you actually have?

An order is placed.
It is invoiced on despatch.
The invoice goes straight to sales and trade debtors

Therefore, an order placed in May I would assume would be delivered in a few days but let's for argument's sake say June (covid issues etc). Those May orders would have been invoiced in June and therefore part of our sales numbers. The payment of said invoices matters diddly squat. The invoice just sits on trade debtors until paid. The only explanation is that the orders got cancelled or deferred into October 21. If they were deferred and therefore still on the order book then Antonio should have shared this information rather completely ignore what he had told us earlier in the year.

The fact you are getting 15 recommends for a factually incorrect post is worrying.

No problem saint

How do you know that's new Saint. Sure I saw that at least a few months back.

Like the more familiar version of Omicron, BA.2 has a large number of changes – about 20 – concentrated in the spike protein, the part of the virus that’s targeted by vaccines.

Unlike Omicron, however, it doesn’t cause a certain signature on lab tests called an s-gene target failure, meaning it can look like other SARS-CoV-2 variants on a first screen. That has some calling it ‘the stealth variant’.

Can ncyt distinguish between the 2 variants? I'm not sure but if not, I'm sure they'll be working on it.

Blue, yes I understand where you got the £30m but imo if they are forecasting £60m revenue in FY22 then if they can maintain their op margin of 70% then Gross profit would be £42m. A 30% EBITDA means £18m so based on £60m revenue I would expect indirect costs to come in at £24m. So £6m of headcount reductions, no charity giveaways, fewer business expenses. Seems reasonable to me.

I still think DA has lowballed the hell out of that forecast. The market has fallen for it and come H2 we'll see an upgrade to the guidance and the market will hail sir DA. Just my opinion of course

A share buy back is similar to a director buy so a small one should be seen as positive. The company basically saying what most of us here are saying. EV of less than ODX and ABDX'S is criminal so we'll have some of that.

Having said that. I would rather see the bod invest it in the growth plan. Hopefully DA has received is options now and we can crack on. Hoping for a R&D update in Feb

A lot of us are in the same boat as you John. What you speak is sense. The market currently makes no sense. Eventually and hopefully soon the market will start making sense

Not heard from our friend Dribbles for a while. Hope he's ok. Maybe he got banned for spreading misinformation. Remember him banging the drum about ONS saying that Covid had only caused 17000 deaths. A few on here supported these wild claims. I had a big debate with them about it so thought it was only fair to post the below article. Hey Dribbles

https://www.theguardian.com/world/2022/jan/28/ons-debunks-spurious-covid-deaths-claim-shared-by-david-davis