Novacyt FY revenues potentially 'materially affected' by outcome of DHSC dispute

Biotechnology company Novacyt warned on first-half revenues on Thursday as a result of its ongoing dispute with the US Department of Health and Social Care.

Novacyt reiterated revenue guidance, excluding the £40.8m in disputed DHSC revenues, of approximately £100.0m and underlying earnings margins of roughly 40%, but stated that full-year group underlying earnings margins could be "materially affected" by the outcome of the dispute.

As a result, the firm has opted to take "a conservative approach" and decided that while the dispute with the DHSC remained unresolved, it would not recognise the revenue in question but highlighted that the remaining first-half revenues of £54.0m from non-DHSC sales remained unchanged.

Novacyt also "prudently decided" to recognise manufacturing costs of £6.9m related to the disputed sales and take an exceptional one-off cost of £28.9m to write down inventory that it had built in anticipation of further DHSC demand and to terminate supply commitments with third parties that were no longer required.

As of 1145 BST, Novacyt shares were down 5.13% at 324.94p.