The chief executive of Scotland’s Omega Diagnostics has welcomed a revival in sales within its health and nutrition division but admitted that its high-profile Covid testing business remains “very much dependent” on the UK Government.

Speaking after the company posted its results for the year to March 31, which showed a decrease in revenues and widening losses, Colin King said the group remains confident this will still be a “transformative year” even though Covid testing revenues have so far been lower than expected.

Omega’s headquarters in Alva will be one of the sites producing tests on behalf of the Department of Health and Social Care (DHSC) as part of a potentially lucrative contract that could be worth up to £374 million over the lifetime of the deal. However, the Government has yet to decide which test it wants its contractors to produce under this contract.

Among its several Covid lines of business, Omega has partnered with Bedfordshire-based Mologic to make its lateral flow antigen test under the Scottish firm’s Visitect brand. The Mologic test is among those under consideration by the DHSC.

READ MORE: Omega shares fall on Mologic test woes

It was reported last month that Mologic was preparing to sue the UK Government for “stonewalling” approval of its antigen test, which determines whether someone is currently infected with the virus. The test was said to have fallen short because of “kit failure” or being too difficult to administer.

Omega, which is also working with Mologic to sell the test in other parts of the world, said at the time that the situation between its partner and the Government would have no impact on its agreement with the DHSC. Asked about it yesterday, Mr King said his company’s discussions with the Government were “progressing”, with Omega still confident that it can make whichever test is selected to the volumes and specifications required.

Turning to more positive news, Mr King noted that sales through its health and nutrition division during the first quarter of the current financial year were up 97 per cent on the same period in 2020, when the pandemic caused great disruption to this line of business. Compared to the same period prior to the pandemic, sales in the latest quarter were 5% higher.

Focused on products for assessing food sensitivities, revenues in the health and nutrition business fell by 29% in the first half of last year as the global healthcare focus was dominated by Covid-19. This improved to a decline of 11% in the second half of the year, and as noted by Mr King, has continued on an upward trend.

READ MORE: Omega shares slip as decision delayed on which Covid test it will produce

Total sales during the 12 months to March fell to £8.7m against £9.8m the previous year, leading to an operating loss of £3.3m. That was an increase on the operating loss of £313,000 the previous year.

On a statutory level, the pre-tax loss of £3.5m was an improvement on the previous year. However, the comparative figure included £7.7m of exceptional costs from the decision to close Omega’s allergens research division to focus more resources on its Covid testing activities.

Chairman Simon Douglas said the company intends to further build up its CD4 testing lines, which have received prequalification from the World Health Organisation (WHO) for use with patients with HIV. Omega has also signed an agreement with the Clinton Health Access Initiative for CD4.

“CD4 is a unique product and gaining traction in countries where HIV remains a serious challenge,” Mr Douglas said. “We intend to build on this short-term through further country registrations and international distribution.”

Chief financial officer Kieron Harbinson is leaving after 19 years with the company, and will hand over his role to Chris Lea, previously chief financial officer at IndigoVision, on August 30. Mr Harbinson said he has no specific plans going forward, but does not expect to go into “full retirement”.

Shares in AIM-listed Omega closed 1p higher yesterday at 48.5p.