MARKET REPORT: Novacyt crashes down to earth

MARKET REPORT: Novacyt crashes down to earth after revealing it has lost a major contract and is embroiled in a legal spat with the Government

Novacyt, one of the stock market darlings of the pandemic, crashed down to earth after revealing it had lost a major contract and was embroiled in a legal spat with the Government. 

The firm, which makes Covid-19 tests through Southampton-based subsidiary Primerdesign, has seen its shares rocket from just 14p to highs of 1270p since the Covid crisis began. 

But a bombshell announcement sent them tumbling 39.4 per cent, or 273.6p, to 421.4p – wiping more than £170m off its value. 

Novacyt has been supplying Covid-19 tests to the Department for Health since April and secured a second, 14-week contract to provide further equipment in September. 

Bosses had been in talks about potentially extending the second contract – but those hopes appeared to have evaporated. 

‘Unfortunately, an extension has not been agreed,’ the company said in a surprise trading update. 

‘Regrettably, the parties are now in dispute regarding the contract.’ Novacyt said the dispute could potentially hit its fourth quarter revenues in 2020, as well as revenues and profits for 2021. 

Elsewhere, shares in Babcock slumped amid reports the defence giant was poised to write hundreds of millions of pounds off the value of its assets. The Royal Navy supplier launched a balance sheet review earlier this year and warned that this would look at how profitable contracts were and suggested it could have a ‘negative impact’ on income. 

And yesterday it was claimed the result may be a grisly write-down worth ‘several hundred million pounds’, with the Financial Times saying an announcement was imminent. Babcock did not comment. But investors were spooked, and this resulted in the shares falling 1.6 per cent, or 3.7p, to 233.3p. 

It came on something of a choppy day for the FTSE 100 index of blue chip firms, which remained in the red for most of the day and closed down 0.4 per cent, or 26.47 points, at 6915.75. 

Dunhill and Lucky Strike maker British American Tobacco fell 2.5 per cent, or 72.5p, to 2786p after analysts at JPMorgan slashed their price target for the firm from 3500p to 3100p and lowered its rating from ‘overweight’ to ‘neutral’. 

Analysts at the bank claimed BAT is lagging behind rival Philip Morris, the maker of Marlboro, on next generation heated tobacco products, which are seen as a promising source of new income. 

The FTSE 250 index of mid-sized companies fared a little better than its elder sibling, creeping up 0.02 per cent, or 3.72 points, to 22251.26. 

Restaurant, bar and cafe operator Loungers climbed 0.75 per cent, or 2p, to 268p after announcing plans to open just under a third of its sites for outdoor service next week. 

The company behind Cosy Club and Lounge also revealed its £15m loan facility with Santander and Bank of Ireland had been extended by another year and increased to £25m. Next Monday Loungers will open 47 sites in England for takeaway and outdoor service, while five in Wales will open when restrictions there ease on April 26. 

It will reopen the rest of its English sites by May 17, and those in Wales later in the month, based on Welsh Government decisions. 

Deliveroo also finished the week lower after unconditional trading of the food delivery firm’s shares started on Wednesday. 

The company floated at 390p per share last week but shares crashed on the debut. And yesterday the slide continued, with the stock finishing 9.8 per cent, or 27.5p, lower at 254.5p – or 35 per cent down on the float price. Unhappily, that means some 70,000 customers of the firm who invested up to £1,000 could now be sitting on losses of about £347 so far.


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