By Kristy Dorsey

The chief executive of Omega Diagnostics, Colin King, has left the company with immediate effect after nearly two years of Covid-driven highs and lows for the testing kit manufacturer.

He is being replaced by Jag Grewal, who currently heads up the Alva-headquartered company’s health and nutrition division. Former chairman Bill Rhodes, a non-executive board director since April 2013, will also leave the company at the end of February.

The moves come after a torrid 10 months for AIM-listed Omega, whose shares have lost more than 80 per cent of their value as a contract to produce rapid Covid tests for the UK’s Department of Health and Social Care (DHSC) has come unravelled. That followed a halcyon year for investors in 2020 when Omega’s participation in various other Covid testing partnerships drove the stock to unprecedented highs.

The company, which was hit in December with a demand to return £2.5 million in upfront payments provided as part of the DHSC contract, has also played down speculation that it is facing a funding crisis. The board noted that Omega currently has cash balances more than £2.5m and an undrawn overdraft facility of £2m.

“Thus, there is no short-term need to raise additional capital,” it said. “Like all growth companies, Omega will look to raise funds to drive growth as and when appropriate.”

The Herald: Colin KingColin King

Mr King joined Omega as chief operating officer in August 2015 from his previous post as site director with Axis-Shield. He was appointed chief executive in December 2017.

Mr Rhodes served as chairman of Omega for three years before Simon Douglas took over in February 2021.

Mr Douglas thanked Mr King for his service and wished him well. It was not immediately clear what Mr King’s future plans entail.

"Colin has been a valued leader of the Omega team and it is with considerable regret that he has decided to step down and I would like to wish him all the best in his future endeavours," Mr Douglas said. "I also offer my thanks to Bill for his support for the company during his tenure as chairman and latterly as non-executive director.

“I would also like to welcome Jag into this new role and we look forward to working together on the next phase of Omega’s exciting future.”

READ MORE: Omega shares tumble on expiry of major Government contract

Mark Brewer of house broker finnCap said Mr King’s departure “shouldn’t come as a surprise” as he spearheaded the contract discussions with the UK Government and presided over a strategic review in which the company axed its lower-growth allergy division to focus on Covid-19 tests.

The UK Government confirmed in March that Omega had been selected as one of three companies to produce hundreds of millions of tests in a two-part agreement that could have been worth up to £374m to the Scottish firm. However, no decision was ever made on which specific test the government wanted, and in November of last year it was confirmed that the contract had expired and would not move into the production phase.

“The fact that the UK Government elected not to proceed to part two of the development programme [is] probably what led [Mr King] to make this decision,” Mr Brewer said.

“Undoubtedly he has faced some pressure from shareholders. It’s not really an institutionally-held share, it’s mostly a large retail shareholder base and I suspect quite a lot of retail shareholders…are unhappy with the direction of travel of the share price.”

READ MORE: Omega hit by £2.5m refund demand

The stock lost more than a quarter of its remaining value in December when the government demanded the return of a £2.5m pre-production payment given to Omega to ramp up manufacturing capacity during the initial phase of the contract.

“Omega’s legal advice is they don’t have to repay the £2.5m, but they are in discussions with [the DHSC], and they are also in discussions with them about utilising the government-loaned machinery that they have installed and is in place at Alva,” a spokesman for the company said yesterday.

Asked about Mr King’s replacement, Mr Brewer at finnCap said the health and nutrition business under Mr Grewal has grown "very substantially", helping to fund developments in other parts of the business.