25 May 2012

EKF delivers on expectations

28/09/2011 Miles Nolan

From a standing start less than two years ago, EKF (EKF) has already established a solid point-of-care business by acquiring four complementary operations.

Driven by dynamic duo David Evans and Julian Baines, there is little doubt that further deals are likely, but for now the focus is on organic growth. Speaking to Growth Company Investor Baines said 'we have spent a lot of time getting to grips with all the acquisitions, but now know them all very well'.

In the six months to June, sales on a proforma basis came in at £7.4 million - up 23 per cent, but the ongoing costs of investing in its infrastructure led to a widening of losses to an expected £1.49 million (2010: £660,000). EKF has opened a new plant in Poland to cope with increased demand for its Hemo_Control cuvettes, and in Germany it has also scaled up its manufacturing capabilities.

With distribution in over 65 countries, diabetes focused EKF is confident of its ability to launch four new products in the next year. The Quotient Diagnostics business has enjoyed an investment of £350,000 and is expected to be profitable in 2012, it is also doing particularly well in China. The biggest deal was the $25.5 million acquisition of US based Stanbio - a move that should prove astute.

Its Quo-Test has been designed for easy and reliable measuring of HbA1c used in the detection and management of diabetes. The 1,000th instrument is expected to be placed this month, as its installed base rises so too will demand for its high-margin consumable products.

EKF has enjoyed cumulative revenues of £11.4 million to the end of August, moreover it now has an installed base of analysers of 41,000 units. Having raised £28 million to fund acquisitions it still has cash of £5.5 million, together with untapped borrowing facilities.

Recently appointed broker Collins Stewart forecasts 2012 sales of £31.2 million and losses of £1.3 million, in 2013 this rises to sales of £36.1 million and a pre-tax profit of £2.5 million. We recommended EKF as a nap for 2011 at 22p, despite the terrible market we have endured, at 25p the share price is still usefully ahead. Still a buy.

Tags: Acquisitions, AIM market, David Evans, Julian Baines, Share nap for 2011

Sector: Health Care Equipment & Services

Companies: EKF Diagnostics

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