Novacyt S.A. ($ALNOV)

Novacyt is a global provider of diagnostic tests and services. For anyone that knows the global marketplace will understand that Australia, specifically as a region, has been fast growing over the last couple of years. So when I looked at the acquisition of Southern Cross Diagnostics, the first thing I look at is fundamentally, it supports our corporate objectives, which are around growth, getting closer to profitability and product portfolio expansion. We've known Nick, the owner of this business, because he's been our distributor for a long number of years. So there was a good cultural alignment between the 2 organizations, and the business has been growing at quite a rate over the last couple of years as well. So clearly, a successful entity. When we looked at all the various pieces on the table here, this deal gave us -- well, first of all, it's accretive. So it brings us profitability from day one. Secondly, it gives us a wider range of portfolio of products. And thirdly, it gives us customers, so regional growth. So when you look at those things, it was quite an easy decision to do this deal. Southern Cross supply products into the serology, molecular and general lab space. So they have a breadth of products and customers in region. Key customer would include Sonic Healthcare, the largest provider of diagnostic testing services in the Australian market, but they also work with a wide range of hospitals and private health screening services there. I think the opportunity for us is twofold. Number one, when you work with a distributor, even a distributor as high quality as Southern Cross Diagnostics, you don't have the direct relationship with the customer. So now we bought the business, we're going to be able to be in the room every time there's a conversation. So we get closer to key opinion leaders. We get closer to the voice of the customer, which will give us great feedback to help us formulate and shape our new product innovation and implementation plans. I think that's the first opportunity. The second opportunity is looking at this wider range of products that Southern Cross have in comparison to Novacyt and seeing if there's any opportunity to widen the distribution capability of that. Southern Cross is an Australian and New Zealand business. They service those markets. And we have the opportunity to speak to these product organizations now and see if there's any availability to spread the distribution wider through our geographic footprint across the world. We've got the full team. So that's about 11 members of full-time staff and Nick. Listen, Nick is hungry. Nick really wants to build his business, and I think he understood that his chance of building the business was greater by partnering with a larger business. But it's not a case of selling your business and kind of sail off into the sunset. Nick has committed for a long period of time. He's invested heavily in our organization and become a shareholder. And he's really committed to working with us, becoming part of our senior leadership team to drive the continued success, not just of his business, but the wider Novacyt Group now. Nick's got a lot of geographic-specific experience. He's been based in that region for a long time. So I think he will be instrumental in helping us understand and shape our responses to the market needs in terms of service and the products that we provide moving forward. So yes, it's great to welcome him and the other 11 members of staff into the organization. A lot of those guys we knew already because we've been working with them for a long time. So it's great to welcome them into the family.

We paid an initial cash consideration of around AUD 8.5 million, and that's roughly a 4x multiple of their EBITDA. So we think as a business, we've got a good deal for what is a growing profitable business. Now on top of that, there's a contingent consideration of up to AUD 16.5 million, and that's dependent on Southern Cross delivering certain EBITDA targets. Now the ratchet is measured over a 4-year period. And in order for any earn-out to be paid, both an annual and cumulative EBITDA target has to be met. And for every AUD 1 that is earned above the target, the former owner receives around 83% of that. So to put it into perspective, in order for the full AUD 16.5 million to be paid, then Southern Cross has to deliver an EBITDA of over AUD 30 million over the 4-year period. So we think as a business, that's a win-win situation. So we launched a thing called a preferential subscription rights process, and that was to enable existing shareholders to participate in the capital raise following the acquisition of Southern Cross. So we chose this route because it was the only option available to us as a result of the resolutions that were approved at the last AGM. So we're hopeful that for the forthcoming AGM for 2026, shareholders will provide us with some more optionality and flexibility on this front. Now the really good news is that we were oversubscribed by around 25%, so a massive thank you to existing shareholders supporting the business. So the company was able to raise around EUR 785,000, and we issued just under 2 million shares. Now just over 50% of those shares were issued to the former owner of Southern Cross, and that represented an investment of around EUR 415,000. Now because we were oversubscribed, it meant that the Board, excluding Jean-Pierre, were fully scaled back and were not able to participate and acquire any shares. So finally, the net amount that we raised, which is the amount after cost, totaled around EUR 580,000, and that will be used to strengthen our balance sheet.

I think the first thing is more communication. We pushed out our 3-year business plan at the end of last year. We're updating you with a video today. So I think more use of video, more [ IMC ], more attendance of investor events just to keep delivering the drumbeat on the story and updating our shareholders and potential investors on the progress that we're making. I'd like to see some new product launches in 2026 to build off the success of the product launches that made such a big difference to our reproductive health care product range and our Ranger product range last year. We'd be looking to strengthen key commercial partnerships. There's a couple of landmark changes coming to our industry. And we want to make sure we've got the right commercial partnerships as the market dynamics change to make the most of the new world, so to speak. And I think a continued simplification of the business. Let's be real about this. The investment community has not rebounded in the way everyone had hoped it would. So cash is even more king than it was 12 months ago. So I think preserving our cash, focusing on costs as we manage the continued uncertainty geopolitically and the investment markets across the world is really important to us. We've done a great job of that over the last 18 months. And I think Southern Cross presents another opportunity to look at synergy costs within the business. So yes, in summary, it's a mixture of some new products, some more communication, hopefully some new commercial partnerships, all done whilst keeping a very firm hand on the tiller of the costs and the operational footprint of this business. Thank you to all shareholders who have watched this. Thank you to all our shareholders who participated in the recent raise. And I think our results are coming out at the end of April, so we look forward to speaking with you all again then.