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Collagen Solutions warns of bigger loss due to increased costs from a development and manufacturing contract, flags coronavirus concerns

Published: 19:54 18 Mar 2020 AEDT

Coronavirus
Collagen Solutions also noted that it is facing multiple uncertainties that may also impact year-end revenue

Collagen Solutions PLC (LON:COS) has warned that it expects its full-year loss will be materially greater than anticipated due to increased costs from a development and manufacturing contract which has taken longer than originally anticipated and also flagged up coronavirus (COVID-19) impact concerns.

In a trading update for the year ended 31 March 2020 and a statement regarding the COVID-19 outbreak, the AIM-listed developer and manufacturer of biomaterials for the enhancement and extension of human life said the related accounting treatment requires a one-time write-down of around £900,000 recognising the full loss over the life of the development portion of the contract only.

READ: Collagen Solutions says it is investing in "people, capabilities and technology”

The group said the accounting treatment does not reflect a change in the company's commercial view of the full value of this contract inclusive of the contract manufacturing portion.

Collagen Solutions also noted that it is facing multiple uncertainties that may also impact year-end revenue, pushing some sales into the next financial year. 

These include closing certain contracts in late-stage discussions and delivery of collagen and tissue products for which the company has already received orders.

It said the contract closure is uncertain because some customers have recently communicated that they are delaying their investment decisions because of economic and business uncertainty due to the coronavirus (COVID-19) outbreak.

The group added that the delivery of collagen and tissue products is at risk due to evolving government travel and transport restrictions and potential reduced capacity of import and export offices, testing services, and other aspects of the supply chain.

The company said it has put in place health and safety measures aligned with the latest government and industry recommendations and policies related to the COVID-19 outbreak, including a suspension of all non-essential travel, flexibility for employees faced with indirect effects of these measures, and a requirement to remain at home for any sick employees.

Collagen Solutions said it expects to provide a trading update with preliminary year-end revenue and cash balances by mid-April.

In early trading, the shares dropped 42% to 1.125p.

Collagen Solutions emerges from 'challenging' year in stronger position

Collagen Solutions PLC (LON:COS) CEO Jamal Rushdy and CFO Hilary Spence discuss with Proactive Investors the firm's results for the year ended 31 March 2018. The loss of contracts with four key customers – valued at over £800,000 a year – meant revenue slipped 6% to £3.83mln in the 12...

on 10/7/18