RE: Finncap10 Apr 2019 12:06
TW note:
As you know my only concern over Yourgene (YGEN), where I remain a loyal shareholder, is an ethical one. A full year trading update, though badly crafted - note to board: sack useless PR - is incredibly impressive and removes any financial doubts. The shares have not yet responded. They will. At a 12.75p offer fill your boots at up to 15p – this stock will soon be in the roaring twenties and is a STRONG BUY...
The problem with the trading statement is that by comparing the year ended March 31 2019 with the prior year you obscure the massive progress made in the second half which continues to this day and is, in fact, accelerating. Thus I know that as of now this company is cashflow positive. It is generating cash and with high margins and central costs pretty much fixed that means high operational gearing which, as sales race ahead, means things will only get better. That point about being cashflow positive is not in the statement but in recent institutional presentations it has been made.
So we are told that unaudited FY sales were up by 45% at over £8.9 million with growth in all active regions. BUT if you look at the H1, H2 split we see sales in H1 of £3.9 million and in H2 (post Illumina settlement etc) of £5 million. In fact the sales trend over each of the past half year periods is £2.7 million, £3.4 million, £3.9 million, £5 million + - an upward and accelerating trend.
This is what you would expect since if a customer signs up to use the IONA tests the initial orders cover only part of a half year period but carry on at the same rate for the whole of all subsequent periods. So we know that for H1 of this year the base is already well in excess of £5 million (a full six months of those new contracts won in H2 2019) and new contracts are being won every day in part thanks to the launch of the new Sage 32 plex test in January.
We are told that cash at the year end was £1.25 million “reflecting continued careful management of working capital”. Er it also reflects a £2 million (gross) placing. But none the less the underlying cashburn in H2 was just £0.9 million down from £3.2 million in H1. And you and I know that as of now the company is generating cash and as sales ramp up so will the cash generation. We are also told that the development of a version of the IONA NIPT test for use on Illumina next-generation sequencing technology remains on course for launch in early 2020 and that FY results will be out in July.
So what now for the shares? It would be nice to get upgraded forecasts and detailed research from house broker FinnCrap and I am expecting a note with all of that very shortly. The market cap at offer is £58.4 million. This is a business that could well deliver pre-tax profits of £2 million+ in the current year and be heading towards £5 million the year after with continued growth of that scale thereafter. A one yea
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