Medical diagnostics provider EKF Diagnostics (LSE: EKF) has seen its share price obliterated in Thursday business following a shock profit warning, and the stock was recently dealing 46% lower from yesterday’s close.
The Cardiff business advised that, after the initial stages of a company-wide review by new non-executive chairman Ron Zwanziger, that full-year revenues are expected to register at around £32m for 2015.
This marks a huge fall from sales of £40.1m printed last year and puts paid to EKF Diagnostics’ strong revenues momentum — the firm reported sales of £31.8m and £21.6m in 2013 and 2012 correspondingly.
Alarmingly EKF Diagnostics added that “there are likely to be a number of items” to materially impact pre-tax profits during the period.
 These include possible impairments concerning the company’s Molecular division, discussions concerning the closure or sale of which are ongoing; provisions against, or the writing-off of particular debtors; and costs concerning the shuttering of EKF Diagnostics’ Separation Technology manufacturing site in United States.
The aforementioned closure of its site in Sanford, Florida, and subsequent relocation of centrifuge and hematocrit analyser operations to its plant in Boerne, Texas is part of EKF Diagnostics’ ongoing cost-cutting programme.
The business advised today that “the management team is making progress in realigning its cost base with the goal of achieving positive cash generation in the early part of next year.” But this was the only patch of good news in an otherwise dour market update.
Under the cosh
Indeed, today’s update is the latest bout of turbulence to hit the Welsh business in recent weeks.
The appointment of Zwanziger — a veteran of the industry who has previously enjoyed stints at MediSense, Inverness Medical Technology, and more recently US diagnostics giant Alere — has elected to slim the board down to two executives and five non-executives, including some outside appointments.
 On top of this, the death of non-executive director Kevin Wilson was announced last week, leading to the installation of ex-chairman David Evans as chair of the audit committee.
 Prior to Thursday’s announcement the City expected EKF Diagnostics to chalk up revenues of around £45.2m in 2015. But today’s downgrade is now expected to result in yet another loss thanks to the issues mentioned. And EKF Diagnostics’ situation is hardly helped by its significant cash burn, either — the firm reported net debt of £5m as of June, swinging from net cash of £2.4m six months earlier.
Chairman Zwanziger’s review has already revealed colossal problems at the firm despite it only being in its initial stages. Although today’s release may encompass the full extent of EKF Diagnostics’ problems, I for one will not be investing into the firm until further details concerning the state of the company are released.