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Source BioScience (LON:SBS) report:Interim results

Contributed by Daniel Stewart & Company

By Daniel Stewart & Co

- Source BioScience’s (SBS) interim results demonstrate that the group’s blended business model has again proven to be resilient in the face of trying economic times. All three of the group's business units showed continued operational progress.

- While group revenue was relatively flat at ?6.9m (H1-09: ?6.7m), EBITDA at ?0.6m came in 26% higher YoY (H1-09: ?0.4m)—moreover, H1-09 was a particularly strong half, in part due to the increased awareness of the need for screening as a result of publicity surrounding Jade Goody’s death from cervical cancer. Finally, the company closed the period with healthy cash reserves of ?5.5m and no debt.

- As a result of the group’s consistent performance we remain confident in our FY2010 EBITDA forecast of ?1.2m. We are however adjusting our PBT (DSC) forecasts down to ?0.3m (?0.5m) in 2010, and to ?0.5m (?0.8m) in 2011, as a result of lower than expected finance income on cash balances (due to the current ultra-low interest rate environment) and higher than expected depreciation charges.

- Nevertheless, we maintain our 11p target price, which is driven by a conservative 1x 2010-EV/Sales target multiple—the company is profitable, cash-generative and has a strong balance sheet, unlike many of its peers.