Primer Design : Profit Margins29 Feb 2020 10:31
Have read many comments regarding profit margins for NCYT / Primer Design. Using historic data from companies house I’ve attempted to justify a valuation.
As Primer Design are incorporated in the UK, they file annual accounts on Conpanies House.
https://beta.companieshouse.gov.uk/company/05228545/filing-history?page=1
Whilst 2019 hasn’t been filed yet, there are over 10 years of reports that all evidence strong profitability.
Taking the last filed year to 31/12/18,
Revenues were £5.5m
Cost of Sales: £855k
Gross Profit: £4.6m
Gross Profit Margin was therefore 84%
Ignoring exceptional costs as they relate to an intercompany loan, operating costs were;
Distribution Costs: £76k
Admin Costs: £3.1m
Leaving Operating Profit / Profit Before Tax of £1.5m
2017 was similar, with a slightly lower operating profit of £1.35m
Indeed they have grown steadily and been profitable every year in recent history, and we know that 2019 saw 12% growth in international markets, which was partly offset by the UK, so assuming similar margins, the base revenue for 2020 was around £6m.
As per yesterday we know Primer have generated sales of £920k in the first 10 days of launching the CE mark test, plus another £2.1m over 6 months in Asia. IF Covid-19 becomes a pandemic, which at present seems more likely than not (sadly for those affected), IMO it’s inevitable that Primer will generate significant revenues based on their history, credibility and first mover advantage.
Making a reasonable assumption of £20m of Covid-19 specific revenue booked in 2020, plus underlying revenues of £7m for their other products (could easily be much higher based on the publicity they have had), you get to 2020 revenues of £27m.
Lowering the gross margin slightly to 80% to be prudent gives;
Revenue: £27m
Cost of Sales: £5.4m
Gross Profit: £21.6m
Less Operating Costs:
Distribution: £2m (assumed 10% of Sales)
Admin; £6.2m (assumes doubling of payroll costs)
Operating Profit / Profit before tax; £13.6m
Current market cap; £100m
Current P/E; 7
Of course total sales could be much higher than £20m, given the Asia agreement is for £2.1m for just 6 months & 2 countries. If Primer supply the 30 countries mentioned in their first launch RNS at £1m per country for 6 months, the annualised revenue would be £60m...
Hopefully this is analysis useful, realistic and generates some good discussion! There is clearly potential for the share price to continue rising until the full potential of Covid-19 is known
Sign In
Follow the stocks
