Investors dump Source BioScience (SBS) after the lab services and products supplier’s new management incentive scheme forces the company to issue a profit warning.
Shares fell 8% in early trading on Friday before recovering to 16.6p, a 4.3% drop on Thursday’s closing price.
Source, which helps pharmaceuticals to develop new and better drugs, now expects pre-tax profits for 2015 to be £400,000 lower than previously expected. Consensus pencilled in £3.6 million for 2015 before the announcement.
Nic Hellyer of Source’s broker N&1 Singer defended the move by stating: ‘Management only get the shares if they perform.’
That rather weak defence will be hard to take for investors, sitting on a paper losses today, and it increases the pressure on management to deliver longer-term.
That said, conclusions must also be drawn against a stellar share price run over the past year - the stock has rallied 48% - and pointers to a strong performance in the core business.
Revenue has also taken a hit from a decline in the demand from the liquid-based cytology market for cervical cancer screening, another reason why turnover will be lower than expected but will still beat the £25.2 million recorded in 2014.
The update pointed to demand for Source’s lab services remaining strong with its acquisition of Select Pharma Laboratories in August adding stability testing, quality control product and batch release testing services to its offering.
Source also continued its expansion into new geographic areas, with services rolled out in the US during the year.
Prelims are due on the second half of March.