In case you missed it, Cyprotex is being acquired by evotec (RNS 26/10/16). Among Cyprotex's shareholders are Oryx International Growth Fund Limited (11.11%) and Harwood Capital (0.44%). This exit should hopefully free up additional firepower for EKF!
Did anyone manage to attend the investor briefing last night? I would be grateful for anything you can share regarding the company's performance, and in particular, future performance....to help me make up my mind on whether to sell or hold..
"EKFs interims show its recovery is gathering pace. The business has returned to growth and margins are improving as a result of the actions taken by management. The outlook is positive (management again guiding towards the top end of its £3.5-4.0m target) and we see upside potential to our forecasts, which we prudently leave unchanged for now."
My hunch is that CM will buy up to 30% -1 share. Then launch a low-ball takeover offer, at say 20p. That either teases out a competing bid from a trade buyer, e.g. Alere, BD, Abbott, etc. or, if it doesn't, gives CM a fair chance to own the whole at a fair price, and to build it out over 2-3 years and then sell to trade. Either way, CM is bound to get a good return, either as a quick flip or over a more conventional holding period.
Just took this by Panmure from Research Tree "The transformation of EKF continues with a reduction in debt through a £4.75m placing (gross) and a positive update highlighting that both sales and EBITDA remain ahead of budget. We retain our FY forecasts for the moment but are increasingly confident that our estimates are achievable, with the prospect of upgrades later in the year. Ongoing restructuring should ultimately improve profitability, though we highlight the potential for near term disruption. "
Yes, I went to this and found it very useful and informative, if less upbeat than the last presentation I went to 2 years ago !
With the caveat that I am very much an amateur / part-time investor (please forgive my non-financial language) the key points I took away from it were:
1. The whole caboodle very nearly went to the wall. With the Selah fiasco (which, Julian said on the face of it could not have been anticipated) and the Mexico defaulters, the last year was a perfect storm. With the cost cutting measure taken, and the focus on core business the company can now meet its costs from reasonably (see below) anticipated receipts. Debt is high, but manageable (although we are not bomb proof). No real impetus/objective to pay it down (I asked the finance director). Re-financing is under active consideration, although the present lenders remain very supportive.
2. The parting with Ron Z was sudden, unexpected and appeared still a little raw. It arose from a disagreement about the way forward. I assume RZ wanted a break-up sale sooner than Julian and Chris. The company will look to be proactive in the very near future rearranging the debt provision RZ has provided. They do not know what he intends to do with his (substantial) holding.
3. Chris Mills had apparently confirmed that morning to the broker briefing he has no intention of taking the company private, although he may increase his stake (which might solve the RZ share holding issue, provided there is no Mexican stand off, no pun intended). Julian said that Chris's modus operandi was apparent from his cv. In answer to a direct question Julian said (to clumsily paraphrase) that he did not expect EKF to exist as a free standing company in three years time, although it would still be around in 18-24 months. The strategy is clearly to build the core point of care business to make us a (very) attractive proposition to bigger fish in that time scale.
4. No plans to expand the BoD, although they may look for some non-execs with industry knowledge / experience (which counts me out, unfortunately !).
5. With all of the above in mind, the accounting and forecasting now would be extremely conservative and would ignore "potential" contract wins or developments. Business for the first quarter 2016 was running around +10% on forecasts. From now the only surprises in that regard would be positive (and I think all shareholders should say amen to that).
6. In line with the above, projections have not included the prospect of any recovery from the written off debts in Mexico, notwithstanding the fact that legal action is being taken over there (we had a good laugh about that, as you can imagine - "you can stand it wi' bandit"), nor the fact that we have recovered a substantial amount of the product which 'may' have a resale value.
7. EKF also holds around 9.3m of its own shares as a result of the Mexico shenanigans (as I understand it). There is no decision yet on what to do about this, There was obviously concerns about alienating shareholders by putting them on the market (good !), but I suppose they also want to see how the RZ situation pans out. It seems to me that they might as well just cancel them, if the plan is to prepare us for sale, but what do I know ? Still, even at the present value that is £1m of equity that (I feel) we should try to realise or utilise asap.
All in all, I think we will exceed the forecast £3m profit this year, but not by a significant amount, teen digits I would guess. Then probably just build on this in a steady way. The shares might go up or down (probably both) over the next year, but I am hopeful that in a couple of years or so EKF will be bought out for a reasonable premium on the current price. However, it is hard to see where the substantial profit growth will come from, so this is no get rich quick play especially if, like me, you have a 22p average.
All the above just personal thoughts and ramblings,
Read Panmure's note on EKF Diagnostics (EKF), out this morning, by visiting www.research-tree.com
EKF has reported FY 2015 results to December, with headline sales, excluding discontinued operations, of £30m (£37.1m FY 2014 restated) and EBITDA losses of £0.3m (£6.7m profit FY 2014) excluding discontinued business. In our view the historic results bear little read through to 2016, but draw a line under a turbulent 18 months. More encouragingly, following the reorganisation at the end of 2015, trading in the first quarter has begun strong, with Q1 revenue expected to exceed £8m. Although the company remains a work in progress, a route back to sustainable growth and profitability is now visible
I am a bit concerned that he might be able to call in the convertible loan RNS 22/12/15 , and acquire the company at the expense of the share holders. like you said will know more tomorrow. Thanks for the reply. By the look of he share price any information leaks have been firmly plugged.
I cannot imagine that the reasons for Ron's departure are due to negative developments, i.e. that he has over-promised and under-delivered. Even if he did, his value is too great to give him the boot right away. One possibility may however be that his style was too aggressive and that some of the old guard could not cope with that. I am hopeful that the reasons for his departure are positive: I could imagine that he has been approached by a private equity firm to lead the take-private / buy-out of EKF and drive the business forward under private ownership (with eventual trade sale in mind). It would be a pre-requisite that he would not be a non-exec on the Board. If this is the case, then I guess we should find out tomorrow!
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