Yorkshire firm Carclo secures financial agreement after fall in demand for Covid tests scuppers huge contract

The deal had been projected to deliver between £10m to £15m in incremental sales for each year of the contract.

But Carclo announced in December 2022 that the customer no longer intended to proceed into the production phase of the project and talks were taking place on reaching a settlement.

It has now updated the London Stock Exchange to confirm an agreement has been reached.

A statement said: “Following the completion of the design and engineering phase, a contraction in the end-market demand for COVID testing influenced the customer's decision to suspend progression into the production phase. Despite this, Carclo has largely fulfilled and received payment for its design and engineering phase.

“The Group has now signed a mutually satisfactory settlement agreement with the customer concerning working capital and recompense for business disruption. While the specifics of this agreement remain confidential, it is expected to largely offset the Group's financial exposure arising from the early termination of the contract.

“Carclo has also rapidly implemented a plan to repurpose the production capacity assigned to this project. The majority of the capital investments, inclusive of infrastructure such as buildings, clean rooms, and state-of-the-art equipment, have been reallocated to enhance projects with existing strategic partners.”

Frank Doorenbosch, CEO, said: "The cancellation, though regrettable, has served to highlight Carclo's capacity for agility and resilience.

"We have responded promptly, optimising our asset utilisation whilst continuing to focus on our strategy on stability and balance sheet fortification.

"These actions demonstrate our unwavering commitment to delivering securing long-term shareholder value."