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The small cap has suffered from falling revenue and a big increase in costs
Thursday 30 Sep 2021 Author: Daniel Coatsworth

A slump in earnings triggered a 20% sell-off in HeiQ’s (HEIQ) share price to 105.85p on 28 September. That means its share price has now halved year-to-date.

The materials company suffered a 14.3% drop in first-half sales to $25.8 million, partially due to delays in starting a major contract.

Compounding matters was a 7.2 percentage points decrease in gross margins to 50.2% caused by price pressures and freight and raw material cost increases. Overheads also shot up as the company invested in additional resources to support future growth.

Overall, a drop in sales and a big increase in costs saw operating profit slump 69.5% to $3.3 million.

HeiQ was a Covid winner as the pandemic drove demand for its Virobloc technology which is added to fabric and kills viruses and bacteria which come in contact.

However, this sales surge provided tough comparative figures to beat this time round. One could also argue that supply chain pressures are being seen across multiple industries, so these problems are not unique to HeiQ.

The company features in a number of small cap funds which will have taken a knock from the latest news, including Amati UK Smaller Companies (B2NG4R3) and Octopus UK Micro Cap Growth (BYQ7HP6).

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