EKF Diagnostics Holdings PLC (LON:EKF) is evaluating plans that would split the company into two separate companies which could see it delist from AIM and list on another market, and may lead the firm to make a share buy-back offer pitched at 21.5p a share.
In early morning trading, EKF shares were over 5%, or 1p higher at 19p.
In a statement, which accompanied separate news of a big jump to profits in 2016, the diagnostics firm said that while both its business divisions - Point of Care and Lab Diagnostics - “are valuable in their own right" it considers that separating the companies out "represents a better route for shareholders and one under which they are more likely to achieve a fair reflection of the value of each separate business”.
However, the group added that, based on tax advice received by the company, its understanding is that US federal income tax chargeable on any gain associated with the divestiture of the business could be significant, and in order to mitigate these potentially adverse tax effects, the distribution needs to qualify as a 'tax-free spinoff'.
EKF said the implementation of the proposals is envisaged to include a cancellation of the company's shares from trading on AIM following which its current intention is to seek a listing of the shares of both companies “on a market to be determined.”
The group said in order to provide those shareholders that do not wish to wait for the completion of the restructuring and subsequent potential sale of the two businesses with an exit, it is evaluating the possibility of a share buyback offer to shareholders.
This buyback offer would, if completed, be prior to the commencement of the separation and would be at a price of 21.5p per share.
Profits jump …
EKF reported underlying profits (EBITDA) of £6.1mln for the full-year to December 31, against a £0.3mln loss in 2015, as revenues rose 28% to £38.6mln, up from £30.0mln.
The AIM-listed firm said it had net cash of £2.2mln as at December 31, a turnaround from net debt of £8.8mln at the same stage a year earlier
The group highlighted strong organic growth across all there of its Point-of-Care business areas and Central Laboratory, with 13,650 analysers and 69 mln tests sold worldwide in 2016,
EKF’s non-executive chairman, Christophe Mills said: "Much has been done very quickly to turn the Group around, however work continues to simplify the business to allow the management team to concentrate on making it more cost efficient so that we can service our growing customer base and build for the future.
“I am confident that shareholders will see the continuing benefits of this in 2017 and we are currently trading in line with management's expectations."
In a note to clients on EKF, analysts at ‘house’ broker N+1 Singer said: “FY16 prelims are slightly ahead of our latest expectations, those having been increased materially over the course of H2’16 as the strength of the recovery in trading became apparent.”
-- Updates share price; adds broker comment --