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FY2020 Trading Update

Immunodiagnostic Systems Holdings PLC 

17 April 2020

Immunodiagnostic Systems Holdings PLC

FY20 Trading Update - Continued Growth in Revenue and Installed Analyser Base

Immunodiagnostic Systems Holdings PLC ("IDS" or "the Group"), a specialist producer of manual and automated diagnostic testing kits and instruments for the clinical and research markets, today provides an unaudited trading update for the Financial Year ended 31 March 2020 ("FY20") as well as an update on the impact of COVID-19.

We are pleased to report that unaudited Group revenues for FY20 are expected to be £39.3m, which represents a 2% growth over the previous year. On a like for like ("LFL") basis (i.e. on the basis of constant exchange rates and scope) growth was also 2%.

Revenue performance in FY20

The table below summarises the unaudited revenue performance of the core segments of the Group, and their evolution over the last three years.

Automated business

The Automated business performed very strongly during the second half of the year, and as a result generated LFL growth of 4% to revenue of £23.4m for the full year, the highest ever in our Automated business. A review of this business by key product segment is set out below:

25-OH Vitamin D assay revenues continue to decline driven by the general reduction in demand and lower reimbursement levels for 25-OH Vitamin D assays, along with the consolidation of this test onto workhorse analysers. Both trends have impacted this business segment for several years. Revenue reduced by 14% versus the prior year on a LFL basis, mainly driven by a decline in the US, which we expect to continue.

Speciality - IDS revenues (i.e. from assays developed by IDS) increased by 3%. Strong growth in our distribution channels, coupled with modest growth in our main European direct sales markets, was offset by revenue declines in the US and Brazil.

Speciality - Partners revenue encompasses the sales of IDS branded assays developed and manufactured by IDS's partners, and mainly comprises revenue from our Autoimmune product portfolio. Our combined Endocrinology/Autoimmune panel continues to be well received in the market, generating LFL growth of 74% in this segment.

The other KPIs in the Automated business unit developed as follows:

a) During the year we obtained FDA approval for an additional assay, bringing the total number of assays available for sale in the US to 11. We experienced further delays in our in-house development process, with the assays scheduled for release in the second half of FY20 being delayed until FY21. As at the end of FY20, we have a total of 141 CE-marked assays available for sale on IDS analysers, comprising:

b) We achieved sales or placements of 93 (FY19: 84) analysers in our direct and distribution businesses, our strongest performance since 2012.

In our direct sales territories, total placements were 43 (FY19: 37) with instrument returns of 25 (FY19: 24). Thus in our direct sales territories, net placements were 18 (FY19: 13), the highest level since 2014. Instrument returns in the year were adversely impacted by the loss during H1 of one major customer who ran a single assay across multiple machines.

Within our distribution markets we sold 50 (FY19: 47) instruments, the highest number of sales ever in this channel. There were no returns in this channel.

c) The average number of assays run per instrument continues to grow to 5.9 (FY19: 5.1), reflecting successful cross-selling coupled with IDS's repositioning from an "Endocrinology only" supplier, to a supplier of assays across the fields of Endocrinology, Autoimmune and Infectious Disease.

Manual business

During FY20 our Manual business declined 8% on a LFL basis, which was below our expectations. The decline was mainly due to a reduction in business in our direct sales markets in Europe. We aim to redeploy resources to enable a greater sales focus on our Manual product portfolio in these markets. Our approach will focus on specific accounts, where with better lead qualification, we are confident there is still demand for our product portfolio.

Technology business

LFL growth in the Technology business was 30%. During the year we successfully diversified this business, and now generate significant revenues from three different partners who purchase our analysers and related ancillary products. We aim to expand the number of partners who utilise our technology, to enable continued revenue growth and reduce our reliance on a handful of partners. The long-term future of this business is dependent on the development by our partners of their respective assay panels for the IDS analysers, and the success of these new panels in the market.

Cash position

Closing cash and cash equivalents were £27.6m at 31 March 2020 (31 March 2019: £27.7m).

COVID-19 update

Actions taken

We are pleased to say all our manufacturing locations have remained operational due to the dedication of the IDS team. The safety of our people is the top priority thus we are following all relevant government regulations, including those related to social distancing and good hygiene practices. Employees not directly involved in the manufacture of our products are working remotely. IDS management, and our internal COVID-19 task force, are closely following all COVID-19 updates provided by governments in the jurisdictions in which we operate, and will ensure we continue to comply with all relevant regulations as and when they are released.

Our procurement team is working closely with our supply chain to ensure continuity of supply, and to date we have not had significant issues which impact our operational capabilities. We are hopeful the measures we have taken will enable us to maintain the operational status of our manufacturing facilities.

We are in constant contact with our Italian partner responsible for manufacturing our range of Autoimmune and Infectious Disease products. To date they have also maintained their operational capabilities.

We were able to overcome any disruption in the final quarter of FY20 due to the COVID-19 outbreak. One exception was that we were required to delay the planned sale of a significant number of analysers to our Chinese distributor into FY21.

Looking forward

So far in April 2020 we have seen a reduction in revenue versus the same period last year, caused by a reduction in routine medical testing in hospitals and laboratories as their focus has been on COVID-19 treatment and testing. IDS intend to take appropriate action, including utilising the various schemes available from governments to provide business support, to minimise our costs during this period of uncertainty. From a liquidity perspective, IDS is in a very strong position with cash holdings of almost £28m.

We are offering our production facilities, and sales network, to several new and existing partners who are in the process of developing COVID-19 test kits.

IDS team

At 31 March 2020 the Group employed 295 people on a full-time equivalent basis (31 March 2019: 283 persons). The increase is mainly due to IDS creating a team tasked with ensuring that our assays will comply with the future IVDR regulations, which will come into effect in May 2022.

We would like to thank each and every employee of IDS who worked tirelessly despite the difficult circumstances arising from the COVID-19 virus at the end of the year, to ensure that IDS has now posted two consecutive years of revenue growth.

The continued improvement in overall business performance is mirrored by a substantially improved level of employee engagement, as measured by our annual engagement survey. More details will be provided in our Annual Report and Accounts 2020.

Outlook

During FY20 we achieved our goal of delivering a second year of LFL revenue growth. The return to growth of our Automated business, coupled with increasing numbers of instrument placements is very encouraging, as is the continued strong growth of our Technology business. While the results of our manual business were below expectations, we have identified the causes and defined a course of action to improve the performance of this business.

Looking forward, as mentioned earlier, the COVID-19 situation means there is some uncertainty surrounding the expected revenue performance in H1 of FY21 and we are therefore unable to provide guidance at this time. However, we are confident once the global situation improves, we are well positioned to continue a path of revenue growth, leveraging our increasing installed instrument base and assay menu.

Preliminary results

We expect to announce preliminary results for the year ended 31 March 2020 on 17 June 2020. However, as explained in the AIM notice of 26th March 2020, there are many logistical challenges arising due to the COVID-19 situation regarding the completion and audit of annual reports. We will provide a further update if any of these will impact the announcement date.

For further information:

Immunodiagnostic Systems Holdings PLC  Tel : +44 (0)191 519 0660

Jaap Stuut, Chief Executive Officer

Paul Martin, Group Finance Director

Peel Hunt LLP  Tel : +44 (0)207 418 8900

James Steel

Oliver Jackson