Shares in Abingdon Health (AIM:ABDX) were on the move on Tuesday as the company confirmed rumours that it has reached a settlement agreement with the Department for Health and Social Care on outstanding invoices payable by DHSC for lateral flow tests and component stock. Abingdon said that the settlement agreement only technically completes as and when the cash payment is received.
Abingdon Health is a specialist in rapid testing technology. It has one of Europe’s largest manufacturing capacities for rapid testing. It recently inked a deal with an undisclosed European customer for the manufacture of lateral flow device components.
What’s all the fuss about?
The company had been caught up on the fringes of a legal challenge by the Good Law Project regarding the award of multi-million pound contracts by the UK government to Abingdon Health. The GLP had alleged that several projects had been awarded by the government without advertisement or competition.
The government has refused to pay Abingdon Health GBP 8.9m for tests and components that it requested during the early stages of the pandemic. This had created the need for the company to sell further shares to make up for a capital shortfall. It also had to reduce its work force by 60 employees as a consequence. It has previously argued that the non-payment by the UK government was making it hard for it to create more jobs as part of the UK government’s own Northern Powerhouse plans (the company is based near York).
How good is the settlement agreement for Abingdon Health?
The settlement agreement is a full and final settlement of an outstanding debt of GBP 8.9m to the company, excluding interest. This includes a contractually required cash payment of GBP 6.3m from DHSC to Abingdon, which is required to be paid to the company on or before 22 July 2022 and GBP 1.5m of this cash payment will be held under charge until the outcome of the judicial review is known.
The agreement also covers transfer to Abingdon Health of ownership of the outstanding component stock that it had procured on behalf of DHSC in 2020/1 and joint-ownership, alongside DHSC, of the intellectual property of the AbC-19 COVID-19 antibody test. There is also a lower royalty payable to DHSC on sales of the AbC-19 COVID-19 antibody test, with this royalty time limited to one year from the date of the settlement agreement.
The money received from DHSC, once received, will provide additional working capital and be deployed to help fund Abingdon Health’s various growth initiatives underway.
Shares stage a small rally
Shares in Abingdon Health in London jumped from 10p on the rumours and were trading at around 13p at the close of the London market on Tuesday. The stock has been relatively moribund since March. Shares are still down 57% YTD.The disputed tests had been used in the UK Biobank study. Abingdon Health has argued that there were no legal grounds for the government to withhold payment. The company has been following a dispute resolution process. It represents what looks like a significant victory for Abingdon Health. The company remains somewhat exposed to the ongoing judicial review, mentioned above, looking into the so-called ‘chumocracy’ awards by the UK government.
The company has been at pains to point out that it was not been party to any VIP treatment and has no links to the Conservative party, government ministers of indeed Conservative MPs.
“Abingdon was approached by the DHSC at the outset of the pandemic to use its expertise to help in a time of national emergency and they did so in good faith,” the company has said in a previous statement. “We look forward to conclusion of this matter which has been extremely damaging to the company and its employees.”
