Covid test manufacturer makes breakthrough in £9m dispute with Government

Abingdon Health is close to resolving a dispute with Government that would enable it to collect nearly £9m it is owed for Covid-19 tests and services.

They have been in mediation to resolve disputes relating to multimillion-pound contracts and made a breakthrough last week.

It has reached a “non-binding agreement in principle” with the Department for Health and Social Care which it said if concluded would “lead to the outstanding monies being substantially collected and resolve all outstanding disputes”.

York-based Abindgon Health has seen its cashflow put under severe pressure because of the Government’s non-payment.

More than £5m of the unpaid revenue is due from 1 million antibody tests that were supplied between July 2020 and January this year.

In a joint statement from chairman Dr Chris Hand and chief executive Chris Yates, they said: “The delay in these monies being paid has had a material impact on the group, as previously announced to the market and has led the board to conclude that there is a material uncertainty in relation to the going concern of the group in the near term, linked to the non-recovery of these funds in line with the contractual obligations.

“We look forward to the conclusion of the dispute resolution process in due course so we can focus our efforts on building our business, creating jobs in the Northern Powerhouse region and supporting our customers’ innovation and growth plans.”

The dispute with Government has been part of a “significant and challenging year” for the group.

It has revealed it made a £7.0 pre-tax loss in the year to June, double the previous year, despite revenues more than doubling to £11.6m.

Abingdon’s management expects a working capital shortfall “could arise” in the first quarter of next year if it does not collect enough money from the Department of Health and Social Care.

It said that “certain directors have indicated that they would be prepared to advance further funding to the group and the board is investigating options to raise further capital for the group”.

In December 2020 it raised £20m as it floated on the AIM market, but its share price has since fallen by more than 60%, which includes a 20% drop in early trading this morning.

Abingdon has invested £8.9m since the start of 2020 in the expansion of its manufacturing facilities in York and Doncaster to meet the growing demand within the lateral flow market. The group’s current manufacturing capacity now totals over 150m tests in card format and up to 85m tests to foiled device format per annum.

Staff numbers have been volatile, caused by the need to scale quickly then respond to the cashflow problems. Average staff numbers trebled during the year, but at its October year-end its headcount of 132 was 60 below its peak.

Yates added: “It has been a significant and challenging year for Abingdon, against the backdrop of a constantly evolving situation with regards to the COVID-19 pandemic.

“Whilst the COVID-19 market environment remains uncertain, the Group is well placed to support our global customers, having expanded the range of COVID-19 rapid tests under manufacture.

“We are optimistic about the opportunities that lateral flow tests can play across multiple disease areas, as well as within the COVID-19 pandemic, and we also look forward to the conclusion of the DHSC Dispute Resolution Process, where constructive talks have taken place in recent weeks.”

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