Small-cap round-up: Novacyt, Abingdon Health, Ceres Power all rally

Once the stars of the AIM market, this trio of exciting companies has been on the back foot. But each has something to cheer today, triggering significant improvements in share price.

Covid testing and green energy stocks were back in the AIM spotlight today after double-digit percentage gains for Novacyt (LSE:NCYT) and Abingdon Health (LSE:ABDX) and a rally by Ceres Power (LSE:CWR).

The health diagnostics sector created fortunes for many investors at the start of the pandemic, but interest has long since waned as vaccines have brought the virus under control.

In the case of Novacyt and Abingdon Health, long-running invoice disputes with the Department for Health and Social Care (DHSC) have put further pressure on valuations.

However, Abingdon shares jumped more than 50% at one stage Tuesday to over 15p as it confirmed it had reached an £8.9 million settlement with DHSC relating to its lateral flow tests and component stock.

The shares were priced at 96p in December 2020 when it raised £22 million towards bolstering manufacturing capabilities. They were 38.5p by November as the York-based firm revealed in full-year results the cash flow impact of delays in invoice payments.

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Abingdon said today: “The monies from DHSC, once received, will provide additional working capital and be deployed to help fund the company's various growth initiatives underway.”

These include a supply agreement unveiled this month with Taiwan’s Arise Corporation for 10 million of its Covid-19 antigen tests.

Novacyt remains in dispute with DHSC, having this month filed a defence of the claim it received on 25 April and also issued a counterclaim of £81.5 million.

Novacyt's shares were 1,190p in January 2021, having risen from 13p at the start of 2020 on the back of its early mover advantage on Covid testing. They now stand at 160.9p, having fallen to as low as 133p earlier this month.

The shares rose 20.9p, or 15%, today as Novacyt reminded investors of its “global first responder” abilities with the launch of a research-use only monkeypox assay.

Green energy stocks have also endured a tougher 2022, although Ceres Power moved higher today after it unveiled a major partnership with Shell (LSE:SHEL).

Imperial College spin-out Ceres said the tie-up with the energy giant signalled the potential of its fuel cell technology to deliver low-cost green hydrogen for industrial decarbonisation at the scale and pace needed to reach net zero.

Shares were up over 3% at 592p in late afternoon trading. That compares with less than 500p earlier this month after a 2022 performance in which optimism over green hydrogen’s role in energy security has been clouded by fears over rising costs and expectations for higher interest rates.

The shares were above 1,200p in November and analysts at Berenberg recently highlighted a price target of 1,560p based on the increasingly favourable backdrop for green hydrogen.

The company’s electrochemical technologies are used to develop fuel cells for power generation, electrolysis for the creation of green hydrogen and for energy storage.

Based on an asset-light licensing model, it has already formed partnerships with engineering giants including Bosch of Germany, Doosan in Korea, Weichai in China and Miura in Japan.

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Today’s agreement will see Shell and Ceres deliver a megawatt scale solid oxide electrolyser (SOEC) demonstrator by next year. The system will be installed at Shell's research and development technology centre in Bangalore, where the hydrogen will be used in industrial processes on site.

The testing programme is intended to run for at least three years, forming the first stage of a collaborative relationship.

Ceres chief executive Phil Caldwell, who has worked in the industry for 20 years, said: "Today's announcement with Shell is a hugely important step for Ceres.”

Ceres has committed £100 million for the development of its SOEC technology - with the aim of achieving a market-leading levelised cost of hydrogen of $1.5/kg by 2025.

The technology is seen as a credible route to decarbonise hard-to-abate parts of the energy system that rely on fossil fuels today. Ceres aims to produce hydrogen at efficiencies around 20% greater than other technologies.

Last week, Goldman Sachs switched its recommendation on Ceres from “sell” to “buy” and raised its price target to 700p.