Interactive Investor

Shares round-up: Omega Diagnostics, SSP, National Express

11th February 2021 15:12

Graeme Evans from interactive investor

A rundown of risers and fallers in a week of holiday uncertainty and good vaccine news.

One of last summer’s most-bought stocks was back in demand today when AIM-traded Omega Diagnostics (LSE:ODX) revealed a major deal to support the UK’s Covid-19 testing drive.

Omega’s shares were 3% higher, and within sight of the 100p threshold first breached in October, during a year in which it met demand for both at-home and laboratory-based tests.

The latest milestone for the medical diagnostics company, which also tests for food intolerance and gut health, came with a Department of Health (DoH) contract to provide manufacturing capacity for Covid-19 lateral flow antigen tests.

As part of the UK government’s target of producing two million lateral flow tests per day, the DoH plans to loan Omega a number of key pieces of equipment to expand its Falkirk facility so that tests are made as a quickly as possible.

Omega expects it will have the capacity for two million tests per week by the end of April, with enough left over to support other work including its Covid-19 antibody tests.

Volumes under the DoH contract are still to be confirmed, but Omega expects the work will result in “substantial” revenues growth for the year starting in April.

FinnCap analysts called the contract a “significant endorsement of Omega’s capabilities and competencies”, with the potential in theory to generate between £150 million and £200 million of annual revenues based on prices similar to those achieved for Omega’s other Covid-19 tests. For now, they are keeping their target share price under review.

Today’s update also revealed that, for the current financial year, sales in the company’s food intolerance division have held up well in the pandemic and will be 19% lower at £7.5 million.

Revenues from existing Covid-19 activities are expected to be about £1.5 million, including from the UK’s Rapid Test Consortium’s antibody test jointly developed with Abingdon Health.

Despite considerable investment in scaling up production capacity, Omega said its year-end cash position should be between £5.5 million and £6 million, compared with a deficit of £600,000 a year earlier.

Chief executive Colin King said: “These are very exciting times for the business and I am delighted that we can play a part in supporting the UK government’s national effort to control the spread of the coronavirus.”

That excitement has been reflected by retail investors after the AIM stock soared in value from 7.5p at the start of April to 107p six months later. In July, it was among the 10 most-bought stocks on the interactive investor platform.

Appetite for shares in Upper Crust and Ritazza owner SSP (LSE:SSPG) has been much less robust in recent weeks as memories of the vaccine-driven re-opening trade behind shares doubling before Christmas are replaced by significant uncertainty about when travel locations will reopen.

Shares in the FTSE 250 index company were down 10% at 283.4p after confirmation last night that it is considering another City fundraising. SSP raised £200 million from shareholders in March and, according to the Financial Times, is looking for another £500 million to navigate the latest turmoil.

SSP, which has more than 2,500 outlets in 38 countries, is burning cash at a rate of between £25 and £30 million a month but has a strong liquidity position with cash and undrawn facilities worth around £520 million at the end of September.

It is confident in the medium-term recovery of the travel market and is looking at a range of funding options to strengthen its balance sheet in the meantime, including debt markets.

SSP was joined on the FTSE 250 fallers board by a number of other consumer-focused stocks, with Mecca bingo business Rank (LSE:RNK) and National Express (LSE:NEX) down 4% amid confusion about whether UK travel restrictions will be lifted in time for the summer.

JD Wetherspoon (LSE:JDW) and Mitchells & Butlers (LSE:MAB) were also 3% lower after consolidation hopes in the industry were dampened by private equity firm Platinum pulling its interest in a takeover offer for Marston's (LSE:MARS).

All-Share brewer Marston’s stock fell back 12.15p to 87.2p, although it said its recent brewing joint venture with Carlsberg and significant cash headroom meant it was in strong position to absorb the impact of the current lockdown.

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