OMEGA Diagnostics is to close its German allergy business and pull the plug on its Indian manufacturing site as it attempts to rein in costs.

This comes as the company said it expects to make an adjusted £700,000 pre-tax loss against analyst forecasts of a £500,000 profit, with revenue £1 million lower than expected, at £13.6m.

Investors have told the company it has “been trying to do too much with too little resources and that there is a need for focus”.

Shares dived by 25% yesterday upon the announcement.

This shareholder feedback formed part of a strategic review undertaken by new chief executive Colin King, who replaced founder Andrew Shepherd in December.

ANALYSIS: The prognosis for Omega is serious but stable

The Clackmannanshire group, which focuses on diagnosing allergies, food intolerances and infectious diseases, is to focus on three core products, FoodPrint, Allersys and Visitect CD4 – which improves treatment of HIV patients in the developing world.

The outcome of the strategic view left the board in the belief that “the sum of the individual parts at present may be substantially greater than the perceived value of the whole”.

Omega said the move would impact both the 2017/18 and 2018/19 financial results with non-cash write-downs of around £5m for the German site and £700,000 for the facility in India.

The closures will lead to cost savings of £800,000 for both sites. And Omega will make a further £200,000 annual saving by streamlining its UK business from four separate legal entities into one.

Omega said it would consider any potential offers for the two loss-making operations in Germany and India.

ANALYSIS: The prognosis for Omega is serious but stable

“These decisions have not been taken lightly but the headwinds experienced and commented upon in our interim report have continued and the board will now focus its efforts and resources where it believes it can generate the greatest return,” said the board in a statement.

Omega expects to return to profitability from a lower revenue base. For the year to March 31, it will report that sales in its infectious disease division have increased 3% to £2.7m.

In this division, the company has high expectations for its Visitect CD4 product, which allows field clinicians to carry out blood tests on HIV patients and adjust medication as required. A second version of the kit will be used to identify advanced HIV through analysing the cells in a patient’s blood at a lower threshold than the current test.

In November, CD4 was granted CE marking and the group recently appointed a distributor in Nigeria, a country where 3.2 million people live with HIV.

The major sales hurdle the group faces is that countries have individual registration processes, the timing of which cannot be controlled. This process has begun in six countries and Omega plans to commence a further six registrations over the coming months.

Its allergy and autoimmune business will fall 8% to £3.3m although its Allersys menu was extended to 53 allergens.

ANALYSIS: The prognosis for Omega is serious but stable

Omega also suggested that the lengthy contract discussions with Immunodiagnostic Systems (IDS) on a global distribution deal for Allersys would be concluded imminently. It acknowledged these discussions had been “frustrating for shareholders”.

Food intolerance is expected to fall 6% to £7.6m after Omega lost a US partner. Of its two remaining partners, one is awaiting regulatory approval for samples tested in the US, which led to a reduction in expected volume.

The company’s plan for growth will largely be delivered through the commercialisation of Visitect CD4 and by growing its food intolerance business in the US.

“Beyond the immediate restructuring challenges outlined above, we remain confident in our key value drivers,” said the group. “The outlook for CD4 is encouraging with the first of what we believe will be many individual country distributorships being signed recently.”