Cyprotex posts operating loss for first time in 7 years after contract delays in the US

LONDON (ShareCast) - Drug research group Cyprotex (LSE: CRX.L - news) reported an operating loss in 2014 for the first time in 7 years. Despite a 18.4% increase in revenues to £11.57m during the period, the company posted an operating loss of £3.75m due to investments. In 2013, the company posted a profit of £0.6m.

Losses before tax more than doubled to £3.95m from £1.2m the year before.

The company also announced a goodwill impairment charge relating to its US operations of £3.04m.

Sales growth was lower than anticipated at 13% and the group experienced "frustrating" delays in a contract with the US Environmental Protection Agency.

Chairman Ian Johnson explained that the operating loss was due to operational issues in the acquisition of CeeTox before it started running effectively, and "the new technical projects took longer to validate than we anticipated".

He added that "the acquisitions and investments are, however, critical for our future growth and we have every expectation that these will contribute to significant revenue growth and a return to profitability in 2015".

N+1 Singer analysts remained confident in the business.

"Although 2014 financial performance has been impacted by unforeseen delays and operational issues given the complex nature of the group's service offering, the issues have been addressed and Cyprotex should benefit positively from the recent service launches in 2015," the broker said.

"We believe Cyprotex has the ability to continue to expand its service offering, attract new customers and expand into new end markets," it added.

Shares (Berlin: DI6.BE - news) in Cyprotex fell 2.6% to 56p on Wednesday at 16:20.