10 Dec 2008 15:26
IMMUNODIAGNOSTIC SYSTEMS HOLDINGS PLC
Unaudited Interim Results for the Six-Month Period to 30 September 2008
Immunodiagnostic Systems Holdings plc ("IDS" or the "Company" or the "Group"), a leading producer of diagnostic testing kits for the clinical and research markets, announces its interim results for the six month period to 30 September 2008.
IDS operates in the in-vitro diagnostics ("IVD") market. The Company designs, manufactures and sells immunoassay kits which are 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. In 2007 the immunoassay sector of the IVD market was estimated to be worth US$ 10bn.
Financial Highlights:
Revenue up 84% to £12.48m (2007: £6.77m);
Gross profit up 72% to £7.41m (2007: £4.32m);
EBITA up 39% to £2.14m (2007: £1.54m);
Pre-tax profit up 16% to £1.56m (2007: £1.34m);
Operational Highlights:
Sales of flagship Vitamin D product up 65% compared to same period last year;
Transfer of manufacturing from Nordic acquisition completed;
Good progress on IDS iSYS automated Vitamin D assay, launch expected in FQ4 '08;
As announced separately today, Placing to raise £3.12m to fund IDS iSYS instrument placements.
In his statement to shareholders, David Evans, Chairman said:
"We believe that IDS is extremely well positioned to sustain its position at the forefront of the specialist immunoassay market, with the forward potential to enter the still more lucrative automated market and gain significant market share."
"We look forward to describing the successful launch of the IDS iSYS and its warm reception in our next report to shareholders."
Contacts:
| IDS | Oriel Securities Ltd | Parkgreen Communications Ltd |
| Roger Duggan, CEO | Andrew Edwards | Paul McManus |
| Paul Hailes, Finance Director | ||
| Tel: 0191 519 0660 | Tel: 020 7710 7600 | Tel: 020 7933 8787 |
| Mob: 07980 541 893 | ||
| http://www.idsplc.com | paul.mcmanus@parkgreenmedia.com |
Chairman's and Chief Executive's Report
Introduction
This has been a period of steady consolidation, forward planning and investment in the future. The acquisitions of Nordic Bioscience Diagnostics (NBD) and Biocode Hycel (BCH) are behind us, but deriving maximum value from these new assets has been both challenging and instructive. Meanwhile, demand for IDS products has continued to grow, to the delight of all in the IDS Group, surrounded as we are by more sombre commercial environments.
Activities in the Period
The transfer of production of NBD products to our highly-efficient Boldon facility is complete, and the emergent IDS Nordic sales and marketing operation is growing in confidence and competence throughout the Scandinavian markets. Reduced costs and increased margins are our reward.
The BCH acquisition secured for us the fully-automated analyser known as the 3X3, and most of our physical and intellectual resources have been directed towards readying the instrument, now re-named the IDS iSYS, and associated reagents for launch. This is a tremendously exciting programme, bringing together the combined resources of the IDS teams in Boldon (UK), Pouilly (France) and Liège (Belgium) as mainstream players, with Alliance and academic partners in Italy, France, Germany and the USA working independently but simultaneously on reagent development. Our flagship product, Vitamin D, will launch in Financial Year Q4 '08, and we have a number of laboratories eagerly awaiting delivery.
During the period the Group sought to divest its haematology division as it was seen as being non-core to the overall Group. With scarce capital resource it was clear that capital could not be allocated to this unit ahead of the IDS iSYS with a net consequence that we were not in a position to sustain any competitive advantage. We are in the final stages of divestment as notified to the market last month.
Market conditions for the expanded range of IDS specialised products remain buoyant, and have created a sustained rise in demand for our tests in essentially all markets. The increasing requirement for Vitamin D testing within the Healthcare industry generally is remarkable. Published figures for the marketing of Vitamin D in the USA indicates growth in sales of 90% by LabCorp, 80% by Quest Laboratories and 74% by Mayo Clinic1, and 57% in France2. Overall our Vitamin D sales rose by 65% compared to the same 6 month period in the previous year3. This buoyancy is reflected in the performance figures (below) for the IDS Group subsidiaries in the USA, Germany, France and Scandinavia. Our renewed direct sales initiative in Austria is also beginning to deliver, with several prestigious accounts won in the last six months.
We believe that IDS is extremely well positioned to sustain its position at the forefront of the specialist immunoassay market, with the forward potential to enter the still more lucrative automated market and gain significant market share.
Our planning for market entry is now advanced, with the necessary resources in place or scheduled for timely introduction. We look forward to describing the successful launch of the IDS iSYS and its warm reception in our next report to shareholders.
Financial
Turnover for the period increased from £6.77m to £12.48m an increase of 84% reflecting the significant contribution of BCH and NBD but also the continued growth of the core business.
Gross Profit increased from £4.32m to £7.41m an increase of 72%. Overall margin percentages declined from 63.8% to 59.3% reflecting the greater proportion of sales from the acquired products of BCH as an overall part of the mix. In addition there was a stock write-off of circa £300k relating to the transfer of production to Boldon of the products acquired from Nordic Bioscience Diagnostics.
Total group research and development expenditure for the period was £1.8m of which £1.6m related to product development and was capitalised (bringing total development spend to date on the IDS iSYS to £10.6m which is included in intangible assets in the Balance Sheet; of this, £4.7m has been incurred since the acquisition of BCH). Additional IP of £0.7m was created with the acquisition of a licence agreement from a pharmaceutical company to develop an automated product for sale on the IDS iSYS system.
Group debt at period end totalled £13m down £0.2m. The movement comprised of payments totalling £1.6m plus an additional loan of £1.4m for the IP licence mentioned above.
Overall profit from operations increased from £1.46m to £1.87m an increase of 28%.
Financing costs increased from £130k to £330k reflecting the increased level of gearing relating to the acquisition of NBD.
The charge to taxation increased from £398k to £528k leaving a profit attributable to ordinary shareholders of £1,029k (2007: £944k).
Overall EPS declined from 6.059p to 4.291p and on a fully diluted basis from 5.604p to 4.069p.
Placing
In a separate statement we today announced the raising of £3.12m before expenses (£2.95m net) through a Placing of 2,397,268 new ordinary shares at a price of 130 pence per share by Oriel Securities Limited.
The net proceeds will be used to fund a change in method of placement of the IDS-iSYS to a reagent rental model, primarily as a result of a change in end user preference. This is expected to lead to a fast roll-out of instruments, secure long term revenues and increase profitability.
Further information on the use of funds can be found in the separate announcement.
Outlook
The second-half of our financial year has always been stronger than the first-half of the year and this current financial year is looking to continue the same trend. As mentioned above, we have seen strong growth in market demand for Vitamin D testing and within the last three months, IDS has gained a number of prestigious accounts, with manual products, simply on the quality of product performance. Sales for the months of October and November total £4.61m.
A key part of the growth in the final quarter of this financial year will stem from the launch of the IDS iSYS instrument which will launch in Financial Year Q4 '08 with our flagship Vitamin D product being the first assay. That growth will be sustained in the next financial year by the rapid placement of instruments and it is envisaged that the majority of those instruments will now be sold on a reagent-rental basis with the consequential impact on working capital.
We are in the final stages of the divestment of the haematology division, a process which has been conducted against a backcloth of a challenging economic climate from which the IVD Industry is not immune. Whilst the divestment will not be immediately cash generative it will free management resource to concentrate on the launch and future sales of IDS iSYS.
The Group continues to look to strengthen its IP offering where appropriate in order that its ultimate menu offering on the IDS iSYS offers unparalleled competitive advantage. In particular, the Company is considering the opportunity to acquire a licence to a patent for a new product focussing on Chronic Kidney Disease.
The Board remains confident of the Group's prospects for the remainder of the year.
David Evans Roger Duggan
Chairman Chief Executive Officer
End notes:
1. all in USA Today, 13th July 2008
2. SFRI
3. from management accounts Unaudited consolidated interim balance sheet
As at 30 September 2008
| 6 Months ended 30 Sept 2008 £'000 | 6 Months ended 30 Sept 2007 £'000 | Year ended 31 March 2008 £'000 | ||
| Assets | ||||
| Non-current assets | ||||
| Property, plant and equipment | 3,429 | 2,876 | 3,066 | |
| Goodwill | 18,608 | 18,629 | 18,838 | |
| Other intangible assets | 30,664 | 21,510 | 28,610 | |
| Investments | 4 | 3 | 4 | |
| Deferred tax asset | - | - | - | |
| 52,705 | 43,018 | 50,518 | ||
| Current assets | ||||
| Inventories | 5,083 | 5,637 | 6,222 | |
| Trade and other receivables | 4,952 | 4,244 | 4,763 | |
| Cash and cash equivalents | 880 | 4,404 | 2,973 | |
| 10,915 | 14,285 | 13,958 | ||
| Assets held for sale | ||||
| Property, plant and equipment | 363 | - | - | |
| Inventories | 1,272 | - | - | |
| Trade receivables | 348 | - | - | |
| 1,983 | - | - | ||
| Total assets | 65,603 | 57,303 | 64,476 | |
| Liabilities | ||||
| Current liabilities | ||||
| Short term portion of long term borrowings | 4,925 | 1,836 | 3,370 | |
| Trade and other payables | 5,052 | 5,086 | 5,427 | |
| Income tax liabilities | - | 118 | 10 | |
| 9,977 | 7,040 | 8,807 | ||
| Net current assets | 2,558 | 7,245 | 5,151 | |
| Non-current liabilities | ||||
| Long term borrowings | 8,005 | 10,500 | 9,841 | |
| Provisions | 5,445 | 6,177 | 5,128 | |
| Deferred tax liabilities | 4,032 | 3,719 | 3,116 | |
| Deferred income | 461 | 20 | 593 | |
| 17,943 | 20,416 | 18,678 | ||
| Total liabilities | 27,920 | 27,456 | 27,485 | |
| Net assets | 37,683 | 29,847 | 36,991 | |
| Total equity | ||||
| Called up share capital | 480 | 479 | 479 | |
| Share premium account | 25,573 | 25,432 | 25,544 | |
| Other reserves | 5,902 | 770 | 5,909 | |
| Retained earnings | 5,735 | 3,173 | 5,066 | |
| Treasury shares | (7) | (7) | (7) | |
| Equity attributable to equity holders of the parent | 37,683 | 29,847 | 36,991 |
Unaudited consolidated interim income statement
For the six month period to 30 September 2008
| 6 Months ended 30 Sept 2008 £'000 | 6 Months ended 30 Sept 2007 £'000 | Year ended 31 March 2008 £'000 | ||
| Revenue | ||||
| Continuing | 12,482 | 5,295 | 11,678 | |
| Acquisitions | - | 1,472 | 6,982 | |
| 12,482 | 6,767 | 18,660 | ||
| Cost of Sales | (5,072) | (2,445) | (7,229) | |
| Gross Profit | 7,410 | 4,322 | 11,431 | |
| Distribution costs | (2,656) | (1,117) | (3,328) | |
| Administrative expenses | (2,888) | (1,742) | (3,822) | |
| Profit from operations | 1,866 | 1,463 | 4,281 | |
| Finance income | 21 | 9 | 124 | |
| 1,887 | 1,472 | 4,405 | ||
| Finance costs | (330) | (130) | (614) | |
| Profit before tax | 1,557 | 1,342 | 3,791 | |
| Income tax expense | (528) | (398) | (954) | |
| Profit for the period attributable to equity holders of the parent | 1,029 | 944 | 2,837 | |
| of which relating to discontinued operations | (105) | (27) | (5) | |
| Earnings per share | ||||
| - basic | 4.291p | 6.059p | 14.346p | |
| - diluted | 4.069p | 5.604p | 13.489p |
Unaudited consolidated interim cash flow statement
For the six month period to 30 September 2008
| 6 Months ended 30 Sept 2008 £'000 | 6 Months ended 30 Sept 2007 £'000 | Year ended 31 March 2008 £'000 | ||
| Profit from operations | 1,866 | 1,463 | 4,281 | |
| Adjustments for: | ||||
| Depreciation and amortisation | 635 | 167 | 933 | |
| Share based payment expense | 109 | 29 | 69 | |
| Release of deferred grants | (134) | (2) | (180) | |
| Interest paid | (330) | (130) | (614) | |
| Operating cash flows before movements in working capital | 2,146 | 1,527 | 4,489 | |
| Movement in inventories | (99) | (165) | (5,307) | |
| Movement in receivables | 303 | 2,836 | (2,718) | |
| Movement in payables | (99) | (3,541) | 3,768 | |
| Income taxes paid | (75) | (1,135) | (677) | |
| Net cash from / (used by) operating activities | 2,176 | (478) | (445) | |
| Investing activities | ||||
| Acquisition of investments in subsidiaries (net of cash acquired) | (23) | (18,234) | (17,453) | |
| Acquisition of investments in associates | - | - | (1) | |
| Purchases of other intangible assets | (2,241) | (836) | (2,371) | |
| Purchases of property, plant and equipment | (1,077) | (425) | (766) | |
| Interest received | 21 | 9 | 124 | |
| Net cash used by investing activities | (3,320) | (19,486) | (20,467) | |
| Financing activities | ||||
| Proceeds from issue of shares for cash | 30 | 11,359 | 12,003 | |
| Proceeds of new borrowings | 1,405 | 12,251 | 13,728 | |
| Repayments of borrowings | (1,693) | (602) | ||
| Dividends paid | (360) | (202) | (202) | |
| Net cash from / (used by) financing activities | (618) | 23,408 | 24,927 | |
| Effect of exchange rate differences | 17 | - | (2,002) | |
| Net increase / (decrease) in cash and cash equivalents | (1,745) | 3,444 | 2,013 | |
| Cash and cash equivalents at beginning of period | 2,973 | 960 | 960 | |
| Cash and cash equivalents at end of period | 1,228 | 4,404 | 2,973 |
Unaudited consolidated statement of changes in equity
| Share capital £'000 | Share premium account £'000 | Other reserves £'000 | Retained earnings £'000 | Treasury shares £'000 | Total £'000 | |
| At 1 April 2008 | 479 | 25,544 | 5,909 | 5,066 | (7) | 36,991 |
| Profit for the period | 1,029 | 1,029 | ||||
| Foreign exchange translation differences on foreign currency net investment in subsidiaries | (116) | (116) | ||||
| Share based payments charged to equity reserves | 109 | 109 | ||||
| Dividend Paid | (360) | (360) | ||||
| Shares issued in the period (net of expenses) | 1 | 29 | 30 | |||
| At 30 September 2008 | 480 | 25,573 | 5,902 | 5,735 | (7) | 37,683 |
| Share capital £'000 | Share premium account £'000 | Other reserves £'000 | Retained earnings £'000 | Treasury shares £'000 | Total £'000 | |
| At 1 April 2007 | 267 | 936 | 803 | 2,431 | (7) | 4,430 |
| Profit for the period | 944 | 944 | ||||
| Foreign exchange translation differences on foreign currency net investment in subsidiaries | (62) | (62) | ||||
| Share based payments charged to equity reserves | 29 | 29 | ||||
| Dividend Paid | (202) | (202) | ||||
| Shares issued in the period (net of expenses) | 212 | 24,496 | 24,708 | |||
| At 30 September 2007 | 479 | 25,432 | 770 | 3,173 | (7) | 29,847 |
| Share capital £'000 | Share premium account £'000 | Other reserves £'000 | Retained earnings £'000 | Treasury shares £'000 | Total £'000 | |
| At 1 April 2007 | 267 | 936 | 803 | 2,431 | (7) | 4,430 |
| Profit for the year | 2,837 | 2,837 | ||||
| Foreign exchange translation differences on foreign currency net investment in subsidiaries | 5,037 | 5,037 | ||||
| Share based payments charged to equity reserves | 69 | 69 | ||||
| Dividend Paid | (202) | (202) | ||||
| Shares issued in the period (net of expenses) | 212 | 24,608 | 24,820 | |||
| At 31 March 2008 | 479 | 25,544 | 5,909 | 5,066 | (7) | 36,991 |
Notes to the Interim Financial Statements
For the period to 30 September 2008
1 Basis of preparation
This interim statement for the six month period to 30 September 2008 is unaudited and was approved by the Directors on 10 December 2008. The financial information contained in the interim report has been prepared in accordance with the accounting policies set out in the annual report and accounts for the year ended 31 March 2008.
The financial information contained in the interim report does not constitute statutory accounts as defined in Section 240 of the Companies Act 1985. The financial information for the full preceding year is based on the statutory accounts for the year ended 31 March 2008. Those accounts, upon which the auditors, Baker Tilly UK Audit LLP, issued an unqualified audit opinion, have been delivered to the Registrar of Companies.
The financial information for the corresponding period of the preceding financial year is based on the interim financial statements for that period. During the preparation of the annual financial statements for the year ended 31 March 2008, the goodwill recognised on the acquisition of two subsidiaries during the period was revised in accordance with IFRS 3. The effect was to increase other intangible assets by £13,864k and to reduce goodwill by £9,584k. Deferred tax liabilities increase by £9,584. This adjustment is reflected in the figures presented as corresponding amounts for the period ended 30 September 2007. This adjustment has had no effect on reported profits.
As permitted, this interim report has been prepared in accordance with AIM Rule 18 and not in accordance with IAS 34 "Interim Financial Reporting" therefore it is not fully in compliance with IFRS.
2 Assets held for sale and discontinued operations
As at the balance sheet date, the Group was actively seeking a buyer for the haematology activities, which had been acquired as part of Biocode Hycel, as a stand-alone business. In accordance with IFRS 5, the assets to be sold as part of that business have been designated a disposal group and classified as assets held for sale. As the fair value of the assets was higher than their carrying amount at the time of reclassification, no revaluation was necessary for the purpose of these interim financial statements. The revenue, expenses and result of the discontinued activities were as follows:
| 6 Months ended 30 Sept 2008 | 6 Months ended 30 Sept 2007 | Year ended 31 Mar 2008 | |
| £'000 | £'000 | £'000 | |
| Revenue | 1,635 | 1,884 | 266 |
| Total expenses | (1,740) | (1,911) | (271) |
| Profit before tax | (105) | (27) | (5) |
| Income tax expense | - | - | - |
| Profit after tax | (105) | (27) | (5) |
3 Revenue and segmental information
Revenue and profit before tax relate principally to the main activity of the manufacturing and distributing of medical diagnostic products, and are attributable to the continuing operations of the Group.
Geographical analysis of turnover by origin:
| | 6 Months ended 30 Sept 2008 | 6 Months ended 30 Sept 2007 | Year ended 31 Mar 2008 |
| | £'000 | £'000 | £'000 |
| UK | 3,546 | 3,012 | 6,932 |
| Europe | 6,604 | 2,646 | 8,866 |
| USA | 2,332 | 1,109 | 2,862 |
| | 12,482 | 6,767 | 18,660 |
Geographical analysis of profit before tax by origin:
| 6 Months ended 30 Sept 2008 | 6 Months ended 30 Sept 2007 | Year ended 31 Mar 2008 | |
|
| £'000 | £'000 | £'000 |
| UK | 1,861 | 1,200 | 3,467 |
| Europe | (399) | 138 | 382 |
| USA | 404 | 125 | 432 |
| Profit from operations | 1,866 | 1,463 | 4,281 |
| Finance Costs (net) | (309) | (121) | (490) |
| Profit before tax | 1,557 | 1,342 | 3,791 |
Geographical analysis of net assets/(liabilities) by origin:
| 30 Sept 2008 | 30 Sept 2007 | 31 Mar 2008 | |
|
| £'000 | £'000 | £'000 |
| UK | 24,814 | 23,298 | 24,570 |
| Europe | 11,948 | 6,308 | 11,985 |
| USA | 714 | 241 | 437 |
| 37,476 | 29,847 | 36,992 |
4 Earnings per share
Basic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders 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 two classes of dilutive potential ordinary shares: those share options granted to employees where the exercise price is less than the average market price of the Company's ordinary shares during the year and the contingently issuable shares under the Group's share option scheme. At 30 September 2008, 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.
| 6 Months ended 30 Sept 2008 | 6 Months ended 30 Sept 2007 | Year ended 31 Mar 2008 | |
| £ | £ | £ | |
| Profit after tax | 1,029,264 | 943,898 | 2,836,692 |
| No. | No. | No. | |
| Weighted average no of shares: | |||
| For basic earnings per share | 23,987,972 | 15,579,053 | 19,773,787 |
| Effect of dilutive potential ordinary shares: | |||
| -Share Options | 1,307,537 | 1,264,571 | 1,256,494 |
| For diluted earnings per share | 25,295,509 | 16,843,624 | 21,030,281 |
| Basic earnings per share | 4.291p | 6.059p | 14.346p |
| Diluted earnings per share | 4.069p | 5.604p | 13.489p |
5 Taxation
Taxation for the 6 months ended 30 September 2008 is based on the effective rate of taxation which is estimated to apply to the year ended 31 March 2009.
6 Other reserves
The other reserves consist of the merger reserve, the foreign currency translation reserve and the reserve for shares to be issued under employee share option plans.
The merger reserve arises on consolidation of the results of Immunodiagnostic Holdings PLC and the consolidated results of Immunodiagnostic Systems Limited. The reserve represents the difference arising on consolidation between the nominal value of shares issued by Immunodiagnostic Holdings PLC in consideration for 100% of the share capital of Immunodiagnostic Systems Limited and the nominal value of the shares acquired, plus the share premium account relating to those shares.