The Investment Column: Celsis customers are biting
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Your support makes all the difference.In this age of the health scare, testing food, water and toiletries for bugs is big business for Celsis. The company makes hi-tech machines based on bioluminescence to detect contamination. Celsis kits are fast and accurate. Agar plate testing, still the norm, takes some five days to process. Celsis machines do the job in 24 hours. A new range of hypersensitive machines will cut that to eight hours.
The snag is that a Celsis system does not come cheap. Persuading conservative big business to stump up an average pounds 40,000 for a start-up kit and change age-old work practices requires good products, persistence and first-class support to keep customers happy. Celsis delivers on all these.
Once customers bite, Celsis is ensured a reliable earnings stream from selling reagents.
Persuaded by a typical five-month payback, Celsis customers are biting. The company has more than 2,000 customers compared with 1,500 in 1996, including blue-chip names such as Unilever and Proctor & Gamble.
Sales in the six months to September rocketed 70 per cent to pounds 7m, boosted by a pounds 1m contribution from the Lumac acquisition. That and the group's tight control of overheads and research spending reduced losses from pounds 2.7m to pounds 800,000. Celsis should be profitable by the year end. At present Lumac sales are coming mainly from Europe. A push into the US should boost sales and a marketing tie-up with Becton Dickinson should more than compensate for a lacklustre show from DiversyLever, Celsis' other partner.
Given the paranoia about food poisoning, the launch next summer of a simple, fast and sensitive litmus paper-style test will be timely, opening a potentially huge market for testing hygiene in places such as restaurants and hospitals. The only question is, when will the Celsis share price move? Floated at 100p in 1993, the group's share price rose 1p back to 100p yesterday. Celsis may seek a US listing to give its shares some oomph. Share price inertia remains the biggest risk for Celsis shareholders. Still, this looks like a quality company. Good value long term.
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