IDH.L Regulatory News (IDH)

17 June 2013

Immunodiagnostic Systems Holdings PLC

Final Results for the year ended 31 March 2013

Immunodiagnostic Systems Holdings plc ("IDS" or "the Company"), a leading producer of manual and automated specialist diagnostic testing kits and instrumentation for the clinical and research markets today announces its final results for the year ended 31 March 2013.

Financial Highlights

·; Revenue of £49.8m (2012: £53.7m), in line with management expectations

·; Automated revenues (IDS-iSYS), 37.1% of overall revenues, increased by 23.7% to £18.5m (2012: £14.9m)

·; Revenues from manual tests, 50.9% of overall revenues, decreased by 25.1% to £25.3m (2012: £33.8m)

·; Gross margin of 73.1% (2012: 74.7%), reflecting changing product mix

·; Adjusted PBT decreased by 21.0% to £9.8m (2012: £12.4m) before charging of exceptional items; Statutory PBT of £10.0m (2012: £7.3m)

·; Adjusted basic EPS before exceptional costs of 27.2p (2012: 29.2p); basic EPS of 27.5p (2012: 16.7p)

·; Proposed dividend of 3.0p (2012: 2.75p)

·; Cash generated from operations of £21.4m during the financial year, closing net funds of £19.6m (2012: £6.9m)

Operational Highlights

·; Appointment of new executive management team: Patrik Dahlen (CEO) and Chris Yates (Group Finance Director)

·; Strategy refined to target new specialist assays, improved instrumentation and broader geographic sales presence

·; Joint development agreement with Diagnostica Stago for next generation of IDS-iSYS instrument

·; 3 new IDS-iSYS assays launched: renin, aldosterone and 1,25 dihydroxy vitamin D

·; 88 net placements (2012: 87) representing an increase of 50% over the installed based as at 31 March 2012

·; R&D and Chinese distribution agreement with Beijing Leadman Technology Co, Ltd

Patrik Dahlen, CEO of IDS, commented:

"Despite the difficult market conditions in our core markets, we have delivered revenues and profits in line with expectations and significantly improved our cash generation. Our automated revenues have increased substantially whilst we have managed the expected decline in revenues from manual tests.

We have put in place a strategy to return the Group to growth and are pleased with the progress made to date. In particular, we have started to increase the number of assays available and are making progress in extending our geographic reach.

We will continue to execute on our strategic plan and drive change within the business in the current year and beyond."

For further information:

About Immunodiagnostic Systems Holdings PLC

The Group operates in the in-vitro diagnostics ("IVD") market by designing, manufacturing and selling immunoassay kits as well as its automated analyser, the IDS-iSYS System. The IDS product range is used to measure or detect particular substances within a sample, thus aiding the diagnosis or monitoring of a disease or providing information for research studies.

http://www.idsplc.com

Chairman's Report

2013 has been a year of significant change for IDS. The Group reported revenue for the year of £49.8m (2012: £53.7m) and adjusted profit before tax of £9.8m (2012: £12.4m). Behind the revenue performance there was, however, a significant shift in the Group's sales mix with automated revenues accounting for 37.1% of overall revenues (2012: 27.8%), manual revenues 50.9% (2012: 63.0%), instrument revenues 5.8% (2012: 5.2%) and other income (including royalties) 6.2% (2012: 4.0%). We are encouraged by this continuing move towards automated revenues, which accelerated in the second half of the financial year. We expect this shift in the sales mix to continue into 2013/14 and this should provide an improved quality of revenue and earnings.

The Group's headline profit before tax was £10.0m (2012: £7.3m). Adjusted profit before tax was £9.8m (2012: £12.4m) before exceptional net income of £0.2m (2012: charge of £5.1m).

Strategy

The Group is pursuing a threefold strategy of increasing our portfolio of specialist automated assays, developing the next generation IDS-iSYS system and entering into new geographies with attractive growth opportunities. Good progress was made in all three areas during 2012/13 and in the early part of 2013/14.

Our business model is focused on developing and launching a range of assays for use on our proprietary IDS-iSYS instrument. At the time of writing the Group has 13 assays approved for use on the IDS-iSYS instrument. This is significantly lower than our competitors and it is clear that a broader range of automated assays will enhance the functionality of the instrument to current and new customers, by offering the ability to operate a number of test panels on the same instrument. We will grow our automated portfolio through internal development, partnership and acquisition. The Group launched three internally developed assays in the financial year: renin, aldosterone and 1,25 dihydroxy vitamin D. We also made progress with our assay partners, announcing in April 2013 that we had been granted the option for the distribution rights in our core markets to the allergy tests being developed by our OEM partner, Omega Diagnostics Group plc ("Omega"). In May 2013, we announced an R&D agreement with Beijing Leadman Biochemistry Technology Co, Ltd ("Leadman") to convert over 50 of their proprietary immunoassays for use on the IDS-iSYS instrument. We will continue to pursue this flexible strategy in order to accelerate the range of tests on the IDS-iSYS instrument.

The continued development of our IDS-iSYS instrument also remains a core focus for the Group. The IDS-iSYS has a reputation for reliability and quality and it is important to retain this competitive advantage. To this end we were pleased to announce the joint development agreement with Diagnostica Stago ("Stago") in February 2013, which will underpin the evolution of the next generation IDS-iSYS system ("IDS-iSYS Mark II"). This will create a significantly more cost-effective instrument with a reduced footprint, allowing access to a greater number of laboratory customers, both in terms of size and geography. The IDS-iSYS Mark II will also be connectable to laboratory track systems, enabling improved access to large laboratory customers. The agreement with Stago underlines IDS's reputation as a best-in-class provider of instruments and highlights the potential prospects for collaboration in non-core diagnostic markets that could bring significant revenue and manufacturing efficiency opportunities. The development remains on track and the expected timescale for completion of the European system is the first half of 2015.

The third element of our strategy is to increase our geographic sales and distribution coverage and, in particular, improve our exposure to the rapidly expanding emerging markets, in particular Brazil, Russia, India and China (the BRIC countries). We were pleased to announce in May 2013 the distribution agreement with Leadman, which gives IDS access to the large and fast-growing Chinese market. We will continue to pursue opportunities to expand our distribution into Brazil, Russia, India and other selected high growth emerging markets, and we anticipate further progress in 2013/14. Furthermore, in 2013/14 we will invest in building the sales coverage in our core markets of the United States and Europe with a focus on increasing our marketing capabilities and new business team.

Board and Management

2012/13 saw a significant change to the composition of the Executive team. During the year, Ian Cookson, Dr Roger Duggan and Gerard Murray stepped down as Directors of IDS. We would like to thank them for their contribution to the Group.

Patrik Dahlen was appointed CEO in July 2012. Patrik has substantial diagnostic and international industry experience, most notably with PerkinElmer Inc. and Dako A/S. Prior to his appointment, Patrik had been a Non-executive Director of IDS since December 2009. In March 2013, Chris Yates was appointed Group Finance Director. Chris has previous diagnostic experience with Cozart plc and Abingdon Health Limited.

We would like to thank Barry Hextall for stepping in as Interim Group Finance Director for the period until Chris's appointment. Barry has since resumed his role as Deputy Group Finance Director.

Further management appointments have been made including Dr Karim Tabiti as Head of Strategic Marketing, Nicola Trewin as Group HR Manager and Dr Chandra Krishnan as USA General Manager. These experienced individuals will help support Patrik and the existing team in the development and execution of the Group's strategy and in driving change within the business.

Dividend

The Board has recommended a dividend of 3.0p (2012: 2.75p).

Outlook

Trading for the first two months of the current financial year is in line with management expectations. We have continued to place additional IDS-iSYS systems and automated revenues have continued to grow as a proportion of overall revenues. We are encouraged by the continued expansion of non-25OH vitamin D tests in the current financial year. The Board continues to believe that revenues in the current financial year will be similar to those achieved in the year ended 31 March 2013.

The Executive team has undergone significant change in the past 18 months. The Board believes that the team now in place has a clear, iterative strategy to deliver shareholder value over the medium term and we look forward to the continued execution of this strategy.

Finally, during a challenging year I would like to formally thank our employees for all their hard work and commitment over the past 12 months.

Anthony Martin

Chairman

Operational Review

In the light of difficult market conditions we have sought to stabilise the business during the financial year and put in place a strategy to return the Group to growth. Whilst overall revenues declined by 7.3%, automated revenues increased by 23.7%, net placements of IDS-iSYS instruments represented an increase of 50.3% over the installed base at 31 March 2012 and three additional tests were added to the IDS-iSYS menu during the financial year.

The strategic review we undertook in 2012 highlighted the need to execute three key objectives to improve the sustainability, quality and level of our earnings. These strategic objectives are:

1) Broaden our automated assay menu

2) Develop the next generation of our IDS-iSYS instrument

3) Expand our geographical reach

We have begun to execute this strategic plan and we look forward to making further progress during 2013/14 as we reshape the business towards our automated platform.

Broaden our automated assay menu

IDS continues to invest in internal R&D as well as seeking strategic partners to increase the "content" available on the IDS-iSYS platform. Our focus is on developing and marketing a range of specialist tests in clinical areas not well served by existing providers. This niche focus allows the Group to develop a level of leadership in these market segments providing a key point of differentiation compared to our competitors. Increasing the range of tests available will enhance the value and appeal of the system. During the last year we expanded the IDS-iSYS product menu by launching a further three assays: renin, aldosterone and 1,25 dihydroxy vitamin D, the first ever automated test for this important analyte.

We remain on track in 2013/14 for further FDA clearances for 1,25 dihydroxy vitamin D, osteocalcin, renin, aldosterone, BAP and P1NP and European product launches for cortisol, Bone TRAP and MGP.

Outside of our core clinical areas of bone and calcium metabolism, growth, hypertension and kidney disease we will continue to look for alternative ways to increase the assay menu. Our preferred approach will be to partner with businesses that have a leadership position in these areas. Progress in building these partnerships continues to be made. We offer our partners access to a best-in-class instrument and the opportunity to leverage our sales and marketing capability in our core markets of the United States and Europe. This integrated approach should foster long-term collaborations which build significant value for both parties.

We continue to work with our partner Omega in the allergy testing market. In March 2011, we granted Omega a worldwide licence to develop and distribute allergy tests on the IDS-iSYS automated instrument. Omega's initial target is to launch 40 allergy tests in 2014, with a further development path to eventually increase the range of allergens tested to 150. We strengthened the partnership with Omega in April 2013 with the announcement that IDS will have the option to exclusive rights to distribute the allergy tests developed by Omega on the IDS-iSYS in our core markets including the USA, Germany, France, Scandinavia and the UK.

In May 2013, we announced a significant R&D collaboration with Leadman, a leading Chinese diagnostics group. Over the initial three-year period the target is to convert over 50 of Leadman's proprietary immunoassays for use on the IDS-iSYS instrument. Leadman currently markets a range of immunoassays in the thyroid, tumour, fertility, cardiac, diabetes and infectious disease areas. It is anticipated that the conversion and subsequent regulatory approval of the first 15 immunoassays will take approximately 12-18 months. Leadman will distribute these converted assays in China with IDS having exclusive rights to distribute these assays outside of China.

Overall, we currently have 13 proprietary assays approved for use on the IDS-iSYS instrument. It is our intention to grow our assay portfolio to over 100 in the medium term through this strategy of internal development, targeted partnership and also acquisition.

Develop the next generation of our IDS-iSYS instrument

The IDS-iSYS instrument remains a best-in-class instrument with a track record of reliability. Our "mean time between failures" is around 190 days and is a key indicator of the robustness of our instrument.

It is critical to continue to improve our instrument in light of technological developments to meet our customers' evolving needs. Our development agreement with Stago, as reported in the Chairman's statement, will accelerate this process and we anticipate the launch of our next generation of IDS-iSYS instrument in the first half of 2015. From a customer perspective, the instrument will be smaller and therefore take up less laboratory space. In addition, for higher throughput customers using laboratory tracking systems, the next generation instrument will be "trackable". This will improve efficiency for customers and increase the attraction of using the IDS-iSYS system.

The base cost of the next generation of instrument is anticipated to be materially lower than the current instrument, allowing the Group to remain competitive and also target lower throughput assays where current returns are not as attractive. In addition, the partnership with Stago should lead to a significant uplift in the volume of instruments being manufactured. Stago will have exclusive rights to sell the IDS-iSYS instrument in its core haematology market and initial estimates suggest a significant increase in the volume of instruments being placed.

The final specifications for the IDS-iSYS Mark II instrument were approved in March 2013 by both IDS and Stago. Stago are contributing €1m to the development of the instrument, payable on the achievement of certain milestones and the first €0.5m of the contribution from Stago was received in April 2013. We anticipate the first prototype will be available in 2014 with product launch in H1 2015.

Expand our geographical reach

Rest of World represented only 13.3% of the Group's revenues in 2013 (2012: 13.0%) and is a significant growth opportunity for the Group. We restructured our distribution business during 2012/13 and, under new leadership, our export team have a greater focus on capitalising on opportunities for the IDS-iSYS in higher growth emerging markets, notably the BRIC countries.

We were pleased to announce the appointment in May 2013 of Leadman as our Chinese distributor. We anticipate making further progress in 2013/14 by building our distribution base into Brazil, India and Russia. In addition, we are actively pursuing opportunities in other developing IVD markets such as Mexico and Poland.

We will continue to invest sales and marketing resources in our core USA and European markets and anticipate growing our sales force in 2013/14 to improve sales coverage and reach critical mass.

The Group's USA revenue declined by 16.7% at constant exchange rates in the year ended 31 March 2013. This was mainly due to a 32.5% decline in manual revenue, primarily the result of lower manual 25OH revenues. Automated revenue in the USA increased by 32.8% with non-25OH vitamin D revenues growing at 485.4%. Whilst 2012/13 was a disappointing year in the USA, we are confident we will see an improved performance in 2013/14 with the anticipated FDA approval of a number of automated tests, the introduction of our new USA General Manager and further investment in our sales and marketing team.

In Europe, we saw a growth in revenues at a constant exchange rate of 1.4%. Overall, in Europe we saw a 26.4% decline in manual revenues, driven by a 30.3% decline in manual 25OH vitamin D revenues. Growth of automated revenue in Europe of 22.6% to £9.8m was encouraging with non-25OH vitamin D revenues growing at 130.8%. The picture in Europe was mixed with Germany seeing a strong performance in 2012/13 with overall revenue growth of 14.2%. However, France saw a 15.8% decline in revenues.

Business review

IDS produced a creditable performance given the continued headwinds from a declining manual 25OH vitamin D market, increased automated vitamin D competition and increased laboratory consolidation in France.

Group revenues were down 7.3% to £49.8m (2012: £53.7m) mainly as a result of the continued decline in manual 25OH vitamin D revenues (2013: £12.1m, 2012: £19.4m).

We were pleased with the 23.7% growth in automated revenues to £18.5m (2012: £14.9m) and we anticipate revenues will be increasingly weighted towards our automated platform as we continue the implementation of our strategic plan. This increased level of automated revenue will provide the Group with an improved quality of revenue and earnings as the placement of instruments creates a platform for the generation of repeatable reagent revenues.

Automated test revenue

During the financial year ended 31 March 2013 automated revenues grew to £18.5m (2012: £14.9m) to represent 37.1% of Group revenues (2012: 27.8%). Driving the expansion of non-25OH vitamin D tests is a key priority for the Group. The Board is therefore encouraged by the growth seen in sales of its automated specialty test kits (including 1,25 dihydroxy vitamin D), particularly the Group's bone, growth and hypertension panels. Non-25OH vitamin D automated tests accounted for 20.7% of the Group's automated revenues (2012: 10.9%). Excluding the impact of IFRIC 4, non-25OH vitamin D automated tests accounted for 25.1% of the Group's automated revenues (2012: 12.8%).

H2 2012/13 saw a 25.2% increase in automated revenues compared to H1 2012/13 and a 28.2% increase in revenues compared to H2 2011/12. This was driven by a 105.1% and 147.8% increase in Other Specialty automated revenues compared with H1 2012/13 and H2 2011/12 respectively.

The Group discloses the operating lease component associated with the placement of IDS-iSYS systems and as such the Group has adopted IAS 17 when determining the relevant proportions of automated assay revenues and operating lease rental payments. This has the effect of reducing automated 25OH vitamin D revenues from £13.8m to £11.4m and Other Specialty from £4.6m to £3.8m. Total operating lease income increased from £2.1m in 2011/12 to £3.3m in 2012/3.

Growth in automated revenues is dependent on continued placements of the Group's IDS-iSYS instrument. In 2013, direct instrument placements were 88 (net of returns) (2012: 87) representing an increase of 50.3% over the installed base as at 31 March 2012. Direct instruments are those sold or placed with reagent rental IDS end-user customers in the Group's core markets of the USA and Europe (excluding distributor territories of Spain and Italy). The total number of instruments placed (directly or through distributors) and sold to OEM partners was 138 (2012: 134).

Average revenue per direct instrument ("ARPI") was £72,000 per annum (calculated on a rolling 12-month basis) (2012: £84,000). This decline was anticipated due to our focus on small to medium sized laboratories and our changing product mix. Typically, our new instrument placements are at a lower ARPI than historic levels and we would expect some downward trend in ARPI to continue in 2013/14. However, we remain confident that the return on capital and overall margin achieved from these instrument placements remains attractive.

Manual test revenue

The majority of the decline in manual revenues to £25.3m (2012: £33.8m) was a result of the decline in manual 25OH vitamin D revenues to £12.1m (2012: £19.4m). This was primarily due to reduced volumes, as customers switched to using an automated platform. However, there was also a level of price erosion seen in this market. We saw some benefit from this switching coming through in our automated test volumes for 25OH vitamin D although much of this volume was also lost to competition. Aside from manual 25OH vitamin D, our portfolio of other manual products performed reasonably with revenues of £13.2m (2012: £14.4m).

It is critical that we continue to defend our position in the manual market and maximise our sales potential. We continue to review our sales strategy for this product portfolio as the market develops. One recent outcome of this review process was the appointment, in March 2013, of Oxford Biosystems Cadama as the official UK sales and marketing partner of IDS for all manual assays.

Instrument revenue

The Group generated £2.9m of revenue (2012: £2.8m) from the sale of instruments to OEM partners and distributors.

Other income

Other income grew strongly to £3.1m (2012: £2.1m) and represented 6.2% of total revenue (2012: 4.0%). This was primarily due to one partner achieving a significant increase in volumes of its sales which in turn generated a consequent rise in royalty income for the Group. We anticipate the royalty income from this partner will continue in the current financial year, however, there is the potential over the medium term for this income stream to be eroded or removed if the partner no longer requires access to our intellectual property. The Stago licence fee of €2m agreed in February 2013 made limited contribution to the Other income the Group recognised in 2012/13 as it is spread over the first 14 months of the agreement.

Operations

IDS operates three manufacturing sites: (primarily) manual reagents (Boldon, UK); automated reagents (Liege, Belgium); and IDS-iSYS system production (Pouilly, France) as well as four sales offices: Paris, France (covering UK, France, North Africa); Frankfurt, Germany (covering Germany, Scandinavia and the Baltics); Boldon, UK (Rest of World distribution) and Scottsdale, Arizona (North America).

During the year ended 31 March 2013, the average Group headcount was 307 full-time equivalents (2012: 324).

We are focused on improving operational efficiency across the Group and we are committed to continuously appraising our cost base to ensure that the right resources are dedicated to the right areas. A number of areas of the Group's sales and marketing organisation in our core markets require strengthening and we will make targeted recruitment to fill these gaps.

IDS Connect

Implementation of the new Group-wide integrated systems architecture has progressed during the financial year with one site becoming operational in 2012/13 and two sites in early 2013/14. Further sites are planned to become operational during the course of the current financial year. The solution, which is built on a Microsoft SQL platform and based around a leading mid-market ERP and CRM system (Infor Syteline) coupled with Microsoft Sharepoint, will facilitate a significant advance in the operational efficiency of the Group.

Summary

In a challenging environment IDS continued to make progress by:

·; Stabilising the business with solid revenues, profitability and cash flow

·; Setting out a clear strategic plan with a focus on building the Group's automated platform

·; Strengthening the management team to accelerate strategy execution and drive change

·; Enhancing the medium-term assay pipeline through internal development and partnership

·; Commencing the development of the next generation of IDS-iSYS instrument

·; Expanding the geographic presence into the BRIC countries

We are pleased with the progress made to date but the Group is in the early stages of a strategic journey to refocus the business towards its automated platform and niche clinical areas. We will continue to focus on executing our strategic plan and driving change within the business in the current year and beyond.

Patrik Dahlen

Chief Executive

Financial Review

The Group achieved £10.0m of profit before tax (2012: £7.3m) in 2013. We will continue to focus on improving our operating efficiency to deliver sustainable savings which can be reinvested in building the Group's sales and marketing capabilities.

Cash generated from operations in 2013 was strong at £21.4m (2012: £18.6m). As a result of this strong cash flow, net funds increased from £6.9m as at 31 March 2012 to £19.6m as at 31 March 2013.

Group revenue of £49.8m (2012: £53.7m) reduced by 7.3% with strong automated revenue growth (23.7%) and other income growth (44.9%), partly offsetting continued declines in manual revenues (25.1%).

Gross profit of £36.4m (2012: £40.1m) was down 9.3% as a result of lower revenues. Gross margin percentage of 73.1% was an underlying decrease of 1.6%, reflecting the change in revenue mix.

Overheads

The Group's total overheads comprise:

Operating overheads decreased by 8.7% to £22.2m (2012: £24.3m). Recurring payroll costs represent approximately 61% of recurring operating overheads (2012: 58%). The decrease in recurring operating overheads was primarily the result of lower headcount with average overhead headcount reducing from an average of 324 in the year ended 31 March 2012 to 307 in the year ended 31 March 2013.

The Group capitalised a number of development projects during the year including both instrument and new assay developments. Costs are capitalised once all the recognition criteria of IAS 38 Intangible Assets are met. The total amount of development cost overheads capitalised reduced from £2.0m in 2012 to £1.6m in 2013. These developments are reviewed on a periodic basis throughout the financial year and the costs are impaired if a development no longer meets the required criteria. In addition, if commercial or technical changes result in capitalised developments no longer being commercially feasible, then their associated costs will be impaired. As set out in exceptional items below, this ongoing review resulted in a number of previously capitalised costs being written off during the financial year.

Overall, pre-exceptional overheads decreased by 2.9% to £26.6m (2012: £27.4m).

Finance income/(cost)

Net finance income was £0.0m (2012: net cost £0.3m).

Exceptional items

The Group incurred a number of exceptional items during the current and previous financial year:

Provision against BH Holdings SAS ("BHH") receivable

In March 2012, the Group fully provided for a €3.2m deferred payment from BHH, the purchaser of the Group's haematology division in December 2008, following BHH going into administration. In 2013, €1.9m was recovered from Escalon Medical Corporation, BHH's ultimate parent, as full and final settlement of the receivable. This led to an exceptional gain of £1.5m being recorded in 2013 as a result of this agreement.

Retirement of development costs

The development of the IDS-iSYS system continues each year in order to meet the technical requirements of the assays that are being developed and the needs of the customer base. Development costs incurred on specific IDS-iSYS projects continue to be capitalised in line with IAS 38. During the current year £0.5m of capitalised costs that were previously incurred on earlier projects have been retired where appropriate. £0.3m of assay development costs were also retired.

Impairment of assay development costs

The bi-annual review of the assay register to identify any risk of impairment determined that some assays that had commenced the development phase had subsequently failed to meet the requirements of IAS 38 due to changes in the market or technical issues arising during the development phase. As a consequence, the development costs that had been capitalised in connection with these assets have been impaired.

Taxation

The tax charge of £2.2m (2012: £2.5m) results from a full year effective tax rate of 22.3% (2012: 34.6%). This comprises a tax charge of £2.4m that arose in the year and a deferred tax credit of £0.2m. The Group continues to provide £2.0m (2012: £1.5m) against the deferred tax asset of £2.8m, relating mainly to losses attributable to the Group's French and Belgian subsidiaries, given the uncertainty as to the recoverability of these losses.

The total tax charge includes a charge of £0.2m, relating to exceptional items. This equates to a pre-exceptional tax rate of 21.3% (2012: 33.5%).

Earnings per share

Adjusted earnings per share is calculated using profit after tax adjusted to exclude the after tax effect of exceptional items. Adjusted basic earnings per share is 27.2p (2012: 29.2p).

Basic earnings per share has increased to 27.5p (2012: 16.7p).

Balance sheet

The Group's shareholders' funds at 31 March 2013 were £79.8m (2012: £72.3m).

The fixed assets of the Group consist primarily of property (2013: £0.8m, 2012: £1.3m), IDS-iSYS instruments (2013: £6.7m, 2012: £5.6m) and other tangible fixed assets (2013: £2.5m, 2012: £2.6m), goodwill (2013: £16.3m, 2012: £16.8m), capitalised development costs (2013: £15.6m, 2012: £17.7m) and other intangible fixed assets (2013: £18.3m, 2012: £19.1m).

The decrease in capitalised development costs was largely the result of the combined impact of higher amortisation, impairment and retirement of development costs (2013: £3.7m, 2012: £2.4m) and lower capitalised costs in the year (2013: £1.6m, 2012: £2.0m).

As at 31 March 2013, the Group had net funds of £19.6m (2012: £6.9m). The Group's financial position remains robust. IDS will invest its capital as appropriate in executing the strategic plan, whilst ensuring returns generated from such investment are appropriate and deliver shareholder value. In addition, the Group can vary its capital structure by adjusting the level of dividends paid to shareholders, by issuing new share capital and by arranging new debt facilities.

Cash flow

IDS generated strong cash flows from operations of £21.4m (2012: £18.6m). The cash position benefited from the impact of two notable items, namely the recovery of the BHH receivable (£1.5m) and the Stago licence fee (£1.7m). Excluding these items the Group generated cash inflow from operations of £18.2m.

Foreign exchange

In the period 44% of the Group's revenues were denominated in US Dollars, 44% Euros, 10% Sterling and 2% Other currencies.

The average exchange rates used to translate revenue in the year are:

The effect of these exchange rate changes on the results for the year is to decrease reported revenue by £2.6m.

Dividend

The Board is proposing a dividend for the year of 3.0p (2012: 2.75p) subject to the approval of shareholders at the Annual General Meeting. The dividend will be paid on 23 August 2013 to shareholders on the register at the close of business on 26 July 2013.

Chris Yates

Group Finance Director

Consolidated income statement for the year ended 31 March 2013

Consolidated statement of comprehensive income for the year ended 31 March 2013

Consolidated balance sheet

31 March 2013

Consolidated statement of cash flows for the year ended 31 March 2013

Consolidated statement of changes in equity

for the year ended 31 March 2013

Notes to the consolidated financial statements for the year ended 31 March 2013

1) Segmental information

For management purposes, the Group is currently organised into three operating regions: direct sales operations in the United States, Europe (excluding Spain, Italy and Portugal) and distributor sales operations in the Rest of World. These regions are the basis on which the Group reports its segment information.

The main activity of the Group is the manufacturing and distributing of medical diagnostic products.

Inter-segment sales are priced based on the market selling price for the individual item obtainable by the purchasing segment, reduced by a margin equivalent to the gross margin that would be expected to have been achieved by purchasing the item on the local wholesale market.

2) Profit from operations

Profit from operations is stated after charging (crediting):

Amounts payable to Ernst & Young LLP (2012: Baker Tilly UK Audit LLP and their associates) in respect of both audit and non-audit services:

3) Taxation on ordinary activities

a) Analysis of charge in the year

In addition, total current and deferred tax of £171,000 (2012: £2,253,000) has been charged to equity in respect of items credited/charged directly to equity.

b) Factors affecting tax charge

The tax assessed for the period is lower (2012: higher) than the standard rate of corporation tax in the UK (24%; 2012: 26%). The differences are explained below.

4) Earnings per Ordinary Share

Basic earnings per share is calculated by dividing the earnings attributable to holders of Ordinary shares by the weighted average number of Ordinary shares outstanding during the year.

For diluted earnings per share, the weighted average number of Ordinary shares in issue is adjusted to assume conversion of all dilutive potential Ordinary shares. The Group has dilutive potential Ordinary shares relating to contingently issuable shares under the Group's share option scheme. At 31 March 2013, the performance criteria for the vesting of the awards under the option scheme had been met and consequently the shares in question are included in the diluted EPS calculation.

The calculations of earnings per share are based on the following profits and numbers of shares.

Extract from Annual Report and Financial Statements

The financial information set out above does not constitute the Group's statutory financial statements for the years ended 31 March 2013 or 2012 but is derived from those financial statements. Statutory financial statements for 2012 have been delivered to the registrar of companies, and those for 2013 will be delivered in due course. The auditors have reported on those financial statements; their reports were (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006. The annual report and financial statements for the year ended 31 March 2013 will be posted to shareholders in June 2013. This final results announcement and results for the year ended 31 March 2013 were approved by the Board of Directors on 14 June 2013 and are audited.

Basis of preparation

The final results announcement has been prepared under the historical cost convention on a going concern basis and in accordance with the recognition and measurement principles of International Financial Reporting Standards and IFRIC interpretations as adopted by the EU ("IFRS").

The final results announcement has been prepared on the basis of the same accounting policies as published in the audited financial statements of the Group for the year ended 31 March 2012 and the accounting policies adopted in the audited financial statements of the Group for the year ended 31 March 2013.

Annual report

The annual report will be sent to shareholders shortly and will also be available at the registered office of

Immunodiagnostic Systems Holdings PLC at: 10 Didcot Way, Boldon Business Park, Boldon, Tyne & Wear NE35 9PD. It will be made available on the Company's website at: www.idsplc.com