Investment Column: Take precautions to avoid infection with Biotrace

Biotrace International's germ-testing equipment is a defence against everything from listeria in food to biological warfare. This would appear to be a good niche to be in, given the seemingly constant food scares and newly present danger from biological weapons through war and terrorism.

Biotrace International's germ-testing equipment is a defence against everything from listeria in food to biological warfare. This would appear to be a good niche to be in, given the seemingly constant food scares and newly present danger from biological weapons through war and terrorism.

But the company's shares took a tumble yesterday after the company issued a stinging profits warning for the first-half results - despite the fact that revenues were up 40 per cent.

The problem is that contracts that the microbiology products group had hoped to book for the first half have slipped. However, Biotrace stressed that the business was still expected - it would just be deferred to the second half.

The idea was that Biotrace would turn its activities to the more predictable industrial markets, reducing its dependence on the military. Defence contracts are higher margin but were supposed to be unreliable, so the company reduced such business to 3 per cent of turnover, from 25 per cent previously. It has now discovered that civil customers can be unpredictable too.

It remains to be seen whether the company's confidence about a much better second half is justified. The next update will be issued in September, with the actual interim results. The shares, down 34 per cent at 83p, are best avoided.