Omega Diagnostics

SPECULATIVE BUY

08/07/2008

Diminutive diagnostics group Omega, chaired by industry guru David Evans, has bounced back into the black thanks to two astute acquisitions.

The £5.7m purchase of CNS and Genesis Diagnostics last September contributed to a 72% rise in revenues to £3.5m and a turnaround from the previous year’s £1.1m loss to a pre-tax profit of £124,000. These two purchases each have a technology platform that Omega’s management think they cannot only sell more effectively, via their established network into 100 countries around the world, but also develop to include other applications.

One of these is a ‘macro-array’ platform, whereby an over-the-counter home-testing kit for food allergies has been developed that Omega’s chief executive Andrew Shepherd says is the 'only one of its type' in the world. An extensive commercial research and rebranding exercise has just been completed for a relaunch as a more consumer-focused product, called the ‘Food Detective’, with listings in Boots and other European pharmacies currently sought.

The other platform is the ‘micro-array’, where the first application enables laboratories to identify 200 food allergies in 90 minutes. This generates significant margins but prior to the acquisition had only been sold to one laboratory in Spain. Shepherd says two other orders have already been signed in Spain, with larger ones expected later in the year.

The micro-array’s one customer contributed £420,000 during the seven months under group ownership, and the Food Detective £200,000 prior to its relaunch. Shepherd sees the micro-array in particular providing ‘major growth’ with this current application but says a similar test for gastro-intestinal diseases will widen the net even further.

Backed here at 28p in February, Omega’s shares have not been the most dynamic of performers, but now profitable and growing fast they are worth a speculation.

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