News blog

Cyprotex

• BY: Andrew Hore |
• POSTED: 23/01/2014 |

Contract toxicity research services provider Cyprotex says trading was slightly ahead of expectations but non-cash accounting adjustments have hit the share price.

In 2013, revenues were 17% higher at £9.77m with growth coming from all the main geographic markets. Operational gearing means that the 2012 pre-exceptional operating profit of £326,000 will jump to between £750,000 and £850,000. There will be a one-off charge of £140,000 for the write-off of the Apredica brand in the balance sheet.

However, last year’s issue of £3m of redeemable loan notes, maturing on 30 September 2018, notionally convertible at 6p a share and £4m of convertible loan stock with the same conversion price has led to an accounting adjustment. The share price in the 30 dealing days prior to the end of 2013 averaged 7.25p.

This has led to an additional finance cost of £1.5m. Every time that Cyprotex reports its figures there will be a figure relating to the movement in the share price. If it is lower than 7.25p next time there will be a write back and if the share price is higher then there will be another charge. There would be another significant charge at the current share price.

This additional finance cost bears no relation to the trading of the business and is just an adjustment to balance sheet values. It will confuse investors though. The reported profit of Cyprotex will be difficult to follow and it will require adjustment to understand what is going on.

The share price slumped 3.5p to 8.88p, which values Cyprotex is valued at £19.9m. The share price had risen sharply in recent weeks and there was no underlying problems with the trading statement. The additional interest cost was the only negative and that has no real meaning.

The valuation still assumes further significant growth in the next couple of years.

Download the latest AIM Journal from http://wwww.hubinvest.com/AIMPDFJanuary2014_52.pdf