Building momentum toward break-even
Novacyt (PA:ALNOV) reported FY16 results on 27 April. Headline sales announced in January showed that total FY16 sales grew 25% y-o-y to €11.1m (38% at a constant exchange rate, CER). The acquisition of Primerdesign (consolidated from May 2016) added to total group H216 sales, which grew an impressive 47% (68% at CER) y-o-y. Novacyt’s earnings showed that sales growth was accompanied by a substantial expansion in gross margin from 48.1% in FY15 to consolidated 54.9% in FY16 or 59.0% pro forma. All this boosted consolidated EBITDA close to break-even at -€0.7m in H216 versus €1.6m in H116. We find the combination of a continuing high growth trend and near break-even EBITDA comforting and supportive for the share price.
Primerdesign to lead the profitability
On a pro forma basis, Primerdesign’s FY16 sales were £4.2m (€5.1m), constituting 46% of the total Novacyt revenues compared to £3.9m (€5.3m) in 2015. While still a recent acquisition, Primerdesign (innovative real-time qPCR equipment and consumables) is profitable with a gross margin consistently in excess of 80% and an EBITDA margin of 40% and we expect it to be one of the key growth drivers for Novacyt in the short term. Lab21 represents an established business within Novacyt with FY16 sales of £5.0m (€6.2m), a decrease of 8% at CER mainly due to a series of one-offs including lumpy tender awards, challenging emerging market conditions and a strong comparator period. Notably, Lab21’s H216 sales were stronger by 7% at CER versus H116. NOVAprep’s (innovative, proprietary liquid-based cytology platform) FY16 sales were €1.6m, up 24% y-o-y, with the Asia region growing the fastest at 116%.
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