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Ergomed plummets as delays hit sales forecasts
Original entry point: Buy at 227p, 24 May 2018
Pharmaceutical services specialist Ergomed (ERGO:AIM) has crashed out of our Great Ideas portfolio after various delays hit sales.
In a trading update on 28 June, Ergomed revealed delays and reduced scope for the size of certain contracts, meaning 2018 revenue would be approximately 5% lower than market expectations.
The company said adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) are forecast to be ‘only modestly ahead’ of £2.8m delivered in 2017.
The market didn’t like the news, resulting in a 30%+ decline in the share price. In turn, our stop loss was triggered so our trade on Ergomed is automatically closed out.
Numis analyst Stefan Hamill says contract delays are a frequent occurrence in the contract research organisation business.
Hamill has downgraded net service revenues by 5% to £46.5m and says the sum of the parts valuation moves to 250p.