(Sharecast News) - EKF Diagnostics updated the market on its strengthening cash position on Monday, having disclosed £6.7m growth in working capital in its 2021 results, "particularly as a result of additional inventory carried in the US".

The AIM-traded firm said that inventory increase included inventory associated with Covid-related contract manufacturing services in the United States.

It confirmed on Monday that it had now received a cash payment of $5.5m in relation to the inventory.

The accounting effect of the payment would represent an enhancement to both revenue and adjusted EBITDA for the current financial year ending 31 December, although the quantum of the enhancement was not yet confirmed.

Thus, the board said it was not seeking to change guidance to analysts on trading and outlook for 2022 at this stage, but expected to provide an ordinary course of business update within the interim results announcement in September.

EKF said its cash, net of borrowings, as at 31 May increased to £21.2m from £19.6m at the prior year end.

The more recent figure took into account the inventory-related funds, while also reflecting the execution of its £4m buyback programme, under which nine million ordinary shares were bought back and cancelled, and a further £2.5m investment in Verici Dx.

"We are very pleased to confirm this additional boost to our already strong cash position," said chief executive officer Mike Salter.

"The receipt of this cash payment is a significant move towards a clean break from Covid-related services for our contract manufacturing business as we transition into new areas.

"Our strong cash position allows us to continue to execute our strategy of investing for sustainable future growth."

At 0918 BST, shares in EKF Diagnostics Holdings were down 1.08% at 37.39p.

Reporting by Josh White at Sharecast.com.