EKF Diagnostics kitchen-sinking will drive break-even 'by April'

After a dark end to 2015, in which one director died and the company announced a significant profit warning, the company admitted defeat in its experiment with personalised medicine by selling wholly-owned subsidiary Selah back to its founders.

In a kitchen-sinking exercise, new chairman Ron Zwanziger, the US industry heavyweight appointed in November, has also begun to trim other fat, cutting headcount to 315 from 400 and writing down assets in a range of £55-£60m for the 2015 financial year including making due provisions against Mexican debtors.

He said this was expected to achieve cut costs by £6.7m on an annualised basis and, though cash is tight, this restructuring should allow EKF to be cash positive as soon as April 2016.

"As we rebase the company, it is key that the expectations are set at a level that reflects the core business without the inclusion of tender business, which has been an Achilles heel in the past."

On that basis, Zwanziger set 2016 guidance for core revenues, without tender wins, of "just over" £30m with an adjusted EBITDA of £3-4m.

"I have leveraged my expertise and network to look to expand our distribution in areas where we are currently weak and it is my ambition to make this company a major player in Point-of-Care," he said.

"With both the distractions and under-performance of 2015 behind EKF, I believe we now have all the foundations in place to be able to build and deliver on this and have considerable prospects for future growth."

Broker Panmure Gordon said investors "should be in no doubt" about ex-Alere CEO Zwanziger's highly proactive approach.

"As a well-known player in point-of-care, today’s statement emphasises his expertise and network in order to deliver on this strategy. With respect to the wider point-of-care landscape, investors will have noted Abbott announced this week a $5.8bn deal to acquire Alere to expand its point-of-care diagnostics capabilities.

"At the very least, the Abbott deal reflects what we consider to be strong strategic value of point-of-care capability and it is this strategic view which we believe will inform and drive EKF development over the foreseeable future."

After hitting 8p, the lowest level since EKF changed its name from International Brand Licensing in 2009, the shares bounced to 9.19p, an 11.4% rise on the day.