The chief executive of embattled healthcare company Omega Diagnostics has paid tribute to his predecessor Colin King for his “honourable” management through a tumultuous year that forced a change of leadership at the business.
The comments from Jag Grewal came as Omega confirmed that discussions are continuing about the return of upfront payments of £2.5 million to the Department of Health & Social Care (DHSC) as part of an ill-fated contract to supply the UK Government with Covid testing kits. That agreement eventually lapsed in late 2021, pushing Omega’s share price into freefall and paving the way to Mr King’s departure.
Omega has repeatedly maintained that it is not liable to repay the money and has now added that it believes it is entitled to recover additional losses linked to redundancy costs, contract breaks, and losses on the disposal of assets that include the £1m sale of its former headquarters in Alva to China’s Accubio.
Writing in the company’s financial accounts covering the year to March 31, Mr Grewal said excitement during the period under review centred on the potential for Omega to support the Government’s response to the pandemic through increased testing.
READ MORE: ‘No surprise’ as battered Omega share price prompts CEO’s exit
“However, government policy and market conditions changed rapidly throughout the period,” he said. “The UK Government effectively decided not to invest in parts of the UK industry and to source products from abroad.
“This left Omega, along with several other domestic in-vitro diagnostic manufacturers, in a position where [scaled-up] resources and capacity were unviable and/or unsustainable.”
The company added: “The group is now in a better position to quantify the additional costs suffered as a result of the DHSC’s actions and expects to pursue the recovery of these incremental costs from the DHSC. The financial statements do not, however, assume any recovery of such costs.”
Mr King stepped down in January of this year with Mr Grewal, previously managing director of the company’s health and nutrition division, appointed his successor. Omega then announced the sale of its Alva facility in Clackmannanshire to Accubio – a wholly-owned subsidiary of Zhejiang Orient Gene Biotech – ending its 19-year relationship with the town.
Following a failed placing in March to raise cash to transfer its CD4 division – which makes tests to monitor patients with HIV – to its new headquarters in Cambridgeshire, Omega also sold that business to Accubio in a deal valued at up to £6.1m. This has left Omega focused solely on its health and nutrition division, which makes tests for detecting food allergies.
Revenues from that business during the year to the end of March rose by 25 per cent to £8.5m, but operating losses rose to £900,000 from £500,000 previously. Losses at the pre-tax level more than trebled to £9.6m after absorbing a £400,000 hit on the disposal of the Alva site and a £1.9m impairment on the sale of its CD4 business.
The company currently has £2.5m in the bank and expects to receive a further £4m later this year in deferred payment for the CD4 operation.
READ MORE: Omega sells Alva HQ and exits Scotland
The company is pinning its immediate growth hopes for the health and nutrition business on expansion in China, but noted that adoption of its food sensitivity products will be hampered by that country’s zero tolerance approach to Covid-19. Revenues are expected to be weighted towards the second half of the current financial year, with increased operating expenses as Omega invests in higher production capacity.
Mr Grewal added that on a personal level he was “honoured” to be leading the business, which was under Mr King’s stewardship for four years.
“Over the past few years, Colin led the organisation honourably over that time and brought a lot of positive change to our business,” he said. “I would like to thank Colin for his support and mentorship over the years, without which I would not be in a position to take the reins and lead a company I love, in a healthcare market I am passionate about.”
Chairman Simon Douglas added: "On behalf of the board I would like to offer our sincere thanks for [Colin's] contribution to the group over many years and to wish him well for the future."
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