Growth25 Jul 2024 11:22
Boiling it all down, we're potentially raising £5.7m gross at what is really a very moderate discount in order to grow. As HarChris said, this is nothing like a "keeping the lights on" raise.
Part of that growth is the CS acquisition. On the face of it, CS is being acquired using paper offered at 9.216 p/s (so again a moderate discount), plus existing cash reserves (although I say that with a wry smile given we're replacing those with the raise!). Between 2022 and 2023, CS grew its revenue by c50%, its EBIT by 83%, and from its accounts appears to have added net profit in 2023 of £230k. So we have bought a growing business wit h international reach, which should improve our own cash position moving forwards.
But as I say, I think we have bought more than just a compliance consultancy. We are buying a route into the US market through the strong connection CS has with RAF Solutions, (a company which has FDA importer registration). That widens our offering to existing and potential CDMO customers, all of whom will no doubt want access to that market. We really are becoming the full service offering and, of course, we should have cross selling opportunities into the existing CS customer base.
The other part of the growth is investment into own product and analytical services. Well, as far as I am aware, the only "own products" we're working on are the 5 FOFH STI tests, which remember we have exclusive manufacturing rights over, will be the exclusive regulatory partner for, for which we will lead UK and EU distribution using "existing and new routes to market" and, I think importantly, will have the rights to offer as an own brand to retailers. This should all be considered in the context that Boots (an existing route to market) have just launched their own self test range with a view to building it out and so I really do think its reasonable to suggest that this investment is to drive those FOFH tests, which I think will be innovative using the Senzo ALF platform to offer PCR quality, through into Boots in the UK and then ultimately imported into the US through RAF and distributed by FOFH.
And then of course there's the expansion of our analytical testing offering, which just further widens the offering.
And just to finish with a few little observations. I found it really odd to see Salignostics wait 2 months post launch to start actively promoting the Boots tie up for Salistick - could it be that finally Salistick is close to FDA approval and that all of these new tie in's might help a US launch. That's real conjecture! Secondly, we should hear something very soon about Eco-Flo, which is due to launch in September. Thirdly, in his January investor presentation Yates set out the strategy going forwards, which included growing the offering, growing the customer base, growing the international reach, and acquiring to do so - its just nice to see a CEO having a plan and sticking to it.
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