7 Jul 2015 07:00
OMEGA DIAGNOSTICS GROUP PLC
("Omega" or the "Company" or the "Group")
FINAL RESULTS
FOR THE YEAR ENDED 31 MARCH 2015
Omega (AIM: ODX), the medical diagnostics company focused on allergy, food intolerance and infectious disease, announces final results for the year ended 31 March 2015.
Omega is one of the UK's leading companies in the fast growing area of food intolerance and also operates in markets supplying tests for allergies and autoimmune diseases and specific infectious diseases through a strong distribution network in over 100 countries, a direct presence in Germany and India, and with a growing network of global partnerships.
Financial highlights:
· Turnover up 4% to £12.1m (2014: £11.6m)
· Food Intolerance revenue up 15% to £5.95m (2014: £5.18m)
· Allergy and autoimmune revenue down 9% to £3.61m (2014: £3.97m)
· Infectious disease/other revenue up 4% to £2.55m (2014: £2.45m)
· Gross profit up 4% to £7.7m (2014: £7.4m)
· Adjusted profit before tax* up by 25% to £1.37m (2014: £1.10m)
· Adjusted EPS 1.3p (2014: 1.2p)
· Cash at the period end of £2.0m (2014: £3.1m)
* Adjusted for amortisation of intangible assets, share based payment charges and fair value adjustments to financial derivatives
Operational highlights:
· Visitect® CD4 test manufacturing process fully in-house following further recruitment to the scientific team
· Engagement with experts in lateral flow diagnostics and completion of investigation phase for Visitect® CD4
· Visitect® CD4 final product stability being evaluated prior to further field evaluation
· Continuing progress with allergy development programme with 32 allergens now optimised
· Finished kits for 27 allergens available on the shelf and external site evaluations started
· Appointment of Colin King as Chief Operating Officer from 3 August 2015
· Manufacturing facility in Pune, India, progressing with fit out substantially completed
Commenting, David Evans, Chairman, said:
"Trading in our core business in the new financial year to date is in line with management expectations. We continue to foresee growth opportunities in Food Intolerance which will mitigate the ongoing pressures of reimbursement for our Allergy business in Germany.
"Since our last update on Visitect® CD4 confirming completion of the internal investigation phase, we moved into the process of verification and validation. This includes testing the longer-term stability of in-house manufactured finished devices, and as such, could not commence until the manufacturing process had been selected. We have determined within the last few days that there is a stability issue with finished product that manifests after a period of five weeks of storage at room temperature. This requires further investigation as to root cause, which is being undertaken now. Verification and validation is a necessary process undertaken to establish finished product performance and we will not put product back into field evaluation until we have addressed this issue and the product meets the needs of the target market.
"We have continued to demonstrate that the combination of an increasing number of Allersys® reagents on IDS' automated analyser can achieve comparable performance with the market-leading predicate instrument and we have recently commenced the first of our external evaluations using product manufactured in-house with validated manufacturing methods.
"Our future prospects will be improved considerably by the successful outcomes to our two key strategic projects. Whilst we still face technical challenges, I am confident that we now have the right team to deliver the inherent value that exists within both these strategic opportunities."
Contacts:
Omega Diagnostics Group PLC | Tel: 01259 763 030 | |
Andrew Shepherd, Chief Executive |
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Kieron Harbinson, Group Finance Director | www.omegadiagnostics.com | |
Jag Grewal, Group Sales and Marketing Director |
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finnCap Ltd | Tel: 020 7220 0500 | |
Geoff Nash/James Thompson (Corporate Finance) |
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Mia Gardner (Corporate Broking) |
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Walbrook PR Limited | Tel: 020 7933 8780 or omega@walbrookpr.com | |
Paul McManus | Mob: 07980 541 893 | |
Lianne Cawthorne | Mob: 07584 391 303 | |
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Chairman's Statement
Strategy
Point-of-care (POC) testing
The Group's strategy remains undiminished in wanting to become a market leader in the provision of POC testing for infectious diseases in large parts of the world where resources remain constrained and where there are substantial unmet needs. Our strategic priority for the year was to establish that our Visitect® CD4 test was capable of achieving acceptable performance in a field setting.
Following a three-batch validation in February 2014, the Visitect® CD4 test underwent pilot studies in India and Kenya in the first half of the year. The results from the Indian study showed acceptable performance whereas the results from Kenya were sub-optimal, as compared to our design goals. In order to determine the cause behind the Kenyan results, further batches were made which, when tested on samples in the UK, demonstrated unacceptable levels of batch-to-batch variability.
We decided that we needed to make a number of changes to the programme to determine the root cause of variability. Firstly, we brought the previously outsourced manufacturing process in-house. Secondly, we engaged with experts in lateral flow device development and manufacture who were able to investigate the issues with co-inventors from the Burnet Institute. Thirdly, we shifted internal management responsibility to our Development team from Operations. Finally, we agreed access to a local hospital with a much higher throughput of patient samples.
During the second half of the year, we sought to manufacture the test using the benchtop methods exactly as developed by the Burnet Institute and, in the process, we have been able to deconstruct and reconstruct the test and to characterise fully all the key components. We have been able to make thousands of devices, tested on hundreds of samples, which has resulted in the recent achievement of confirming that we now have a process of making test devices which is capable of meeting certain design goals. We have now moved into a period of verification and validation and we are concentrating our efforts on overcoming a stability issue that has become evident, that manifests after a period of five weeks of storage at room temperature. This requires further investigation as to root cause, which is being undertaken now. Verification and validation is a necessary process undertaken to establish finished product performance and we will not put product back into field evaluation until we have addressed this issue and the product meets the needs of the target market. Once resolved, we will restart the earlier field trials.
Allergy automation
Our strategic aim in Allergy remains unaltered: to launch a panel of 40 allergens on the automated IDS/Allersys® system followed by a programme of menu extensions to achieve a number two market position. During the year, we transferred the optimisation work from our external contractor to a newly recruited in-house scientific team. Our external contractor remains a key contributor and retains responsibility for the claim support work. In total, we have six IDS/Allersys® instruments across two sites supporting the work programmes.
Following a successful pilot study in June 2014, comparing the performance of eight Allersys® allergens with the predicate device, ThermoFisher's ImmunoCAP® system, the results were presented in June this year at the European Academy of Allergy and Clinical Immunology (EAACI) annual meeting in Barcelona which has generated a lot of follow-on interest.
We now have a fully validated in-house manufacturing system with finished kits for 27 allergens available on the shelf. All these kits have recently begun external evaluations at sites in Spain and Italy and will provide performance data for the technical file needed to support CE marking the product. Commercialisation discussions continue, both with IDS in markets where it has a direct presence, and with IDS' partners, which have developed a complementary range of autoimmune tests on the IDS/Allersys® platform.
Financial performance
The Group has seen growth in revenue of 4%, achieving £12.1 million for the year (2014: £11.6 million). This is despite the weaker euro exchange rate against sterling throughout the year. Revenue would have been £0.4 million higher on a constant currency basis. Gross profit increased to £7.7 million (2014: £7.4 million) and adjusted profit before tax (our preferred measure of profit) increased by 25% to £1.4 million (2014: £1.1 million). Adjusted earnings per share was 1.3 pence (2014: 1.2 pence), the smaller rate of growth reflecting the higher average number of shares in issue throughout the current year.
The Group's cash position remains strong with cash reserves of £2.0 million (2014: £3.1 million) at the year end following another year of efficient working capital management in the conversion of operating profit into operating cash.
Corporate governance
The size and structure of the Board and its committees are kept under review to ensure an appropriate level of governance operates throughout the year. The Board comprises two Non-executive Directors and three Executive Directors, with one more Executive Director joining the Board on 3 August 2015 (see below), who meet frequently during the year to discuss strategy and to review progress and outcomes against objectives. Whilst, as an AIM-quoted company, the Group is not required to comply with the full requirements of the UK Corporate Governance Code, we believe the Board has a good mix of skills and experience and a culture that easily enables the Non-executive members of the Board to challenge and advise the Executive team as appropriate.
The Audit Committee and the Remuneration Committee are comprised of the two Non-executive Directors and the Board believes the current make-up and the number of committees remain appropriate for a group of our size.
Board and employees
In transitioning through to our next phase of growth, I am very pleased that Colin King has agreed to join the Board as Chief Operating Officer, joining us from the Alere Group. Colin's appointment will take effect from 3 August 2015 and a separate announcement with the relevant AIM disclosures will be made at that time. I have known Colin for many years and he has a wealth of experience in managing change, leading teams and delivering to targets. I am sure he will prove to be a valuable addition to our team at this exciting phase of our development.
Andrew Shepherd, whilst retaining his overall CEO remit and focus on delivering CD4 to the market, has been given responsibility for identifying new product opportunities in global health with a focus on achieving new product launch targets.
Last but not least, I would like to thank all our employees, who work very hard to deliver improving results year after year, and much of our progress is down to a team effort across the Group as a whole.
Outlook
Trading in our core business in the new financial year to date is in line with management expectations. We continue to foresee growth opportunities in Food Intolerance which will mitigate the ongoing pressures of reimbursement for our Allergy business in Germany.
Since our last update on Visitect® CD4 confirming completion of the internal investigation phase, we moved into the process of verification and validation. This includes testing the longer-term stability of in-house manufactured finished devices, and as such, could not commence until the manufacturing process had been selected. We are now concentrating our efforts on overcoming the stability issue and we will put the product back into field evaluation only once we have addressed this issue.
We have continued to demonstrate that the combination of an increasing number of Allersys® reagents on IDS' automated analyser can achieve comparable performance with the market-leading predicate instrument and we have recently commenced the first of our external evaluations using product manufactured in-house with validated manufacturing methods.
Our future prospects will be improved considerably by the successful outcomes to our two key strategic projects. Whilst we still face technical challenges, I am confident that we now have the right team to deliver the inherent value that exists within both these strategic opportunities.
David Evans
Non-executive Chairman
6 July 2015
Chief Executive's Review
Dear fellow shareholder
During the year we made progress with the core business, mostly driven by the Food Intolerance division, which delivered another good year of growth and profitability. Although we faced challenging issues with the production transfer of the CD4 product, it also gave us the opportunity to review our overall operation to make it more efficient.
Operations and organisational change
The CD4 opportunity remains the major factor in what we see as the potential for transformational growth in the near future but, in acknowledging the issues that we faced with the technology transfer and subsequent initial trial results in India and Kenya, we clearly had to make some internal changes to how we work.
As David has mentioned in his Chairman's Statement, additional important changes have been made to the technical management of the CD4 programme with all technical activity now falling under the control of our R&D Director, Dr Edward Valente. As reported elsewhere we have recently encountered a stability issue which still needs to be resolved and I am confident we have the right team in place to do that.
We have also established a new division, Global Health, reporting directly to me, which encompasses all aspects of the CD4 product roll-out and promotion along with assessment and development of new product opportunities. This new division has a dedicated team of sales and product specialists who have built up extensive experience in the global health arena over the last few years. It also includes market development and promotional activities for the schistosomiasis and syphilis POC products.
In January 2015 we appointed Dr Nigel Abraham as Group Scientific Director for Food Intolerance Products and Services. A fellow of the Institute of Biomedical Science for over 30 years, Nigel joins us from Genova Diagnostics Europe, where he was Scientific Director and Board Member. Nigel is a specialist in allergy and food intolerance and has been involved in extensive research in the field of chemical mediators of allergic disease. His extensive knowledge and expertise will bring support to new product development as we extend our range, ongoing assay improvement programmes and customer service.
In appreciating the challenges ahead of us, we have expanded and broadened our Board Executive team with the appointment of Colin King as Chief Operating Officer (COO). We are all looking forward to Colin joining the Board in August 2015. His wealth of relevant industry experience and his depth and breadth of knowledge of the in-vitro diagnostics sector will greatly benefit the Company going forward.
In addition to the strengthened Board we have a high quality senior management team, consisting of site managers from our subsidiary operations and other key managers from Operations, Development and Sales. This group meets on a regular basis to discuss and troubleshoot and contribute to the overall strategic goals of the Group.
Core business
Segmental revenue performance
Food Intolerance
The Food Intolerance division has consistently performed well since we acquired the Genesis/CNS business in 2007 and has maintained a 17.5% compound annual growth rate in revenue over the last six years. For this year, total Food Intolerance sales increased by 15% to £5.95 million (2014: £5.18 million).
Sales of Food Detective® grew by a further 23% in the year to £2.08 million (2014: £1.69 million) with impressive growth performances in Poland, Brazil and China. Total volumes achieved were just over 163,000 units (2014: 106,000 units). Excluding component sales to China, the average selling price per kit was £20.66 (2014: £22.55), the fall over the previous year reflecting targeted promotional activities in Poland.
Sales of Genarrayt®/Foodprint® reagents grew by 19% to £2.52 million (2014: £2.12 million) with strong performances in Spain, France, Canada and Brazil. Spain and France both exceeded annual revenues of £0.5 million and the next five markets measured by revenue all exceeded £0.1 million each. The Group sold a further 18 instruments in the year, taking the cumulative number of installations to 150 instruments in 38 countries, and revenue per instrument (excluding Spain) increased by 4% to £14,354 (2014: £13,746). The lower percentage growth rate of revenue per instrument (as compared to the overall growth in reagent sales) reflects the investment being made into newer Far Eastern markets.
Our CNS laboratory service achieved a modest increase of 3% in sales to £0.65 million (2014: £0.64 million), dominated by the markets in the UK and Ireland. We produced and sold 8,241 patient reports in the year (2014: 7,985), maintaining an average price of £79.33 per report (2014: £79.55).
As our Food Intolerance business continues to be a key growth driver and contributor to the bottom line, it has become increasingly clear that we need the right resource to provide high level scientific and technical support for the CNS product range. The clear strategic intention is to continue on a growth trajectory with this core business supported by increasing the range of products in the health and well-being market, which now extends beyond 75 countries.
Allergy and Autoimmune
Sales for the Allergy and Autoimmune division are comprised of Allergy sales of £3.08 million (2014: £3.52 million) and sales of Autoimmune products of £0.53 million (2014: £0.45 million). The Allergy sales continue to be derived almost exclusively from our Omega GmbH business in Germany, which has experienced a reduction in sales due to continued reimbursement restrictions in all but five of the 17 regions we operate in. The overall reduction in Omega GmbH allergy sales was limited to 6% in euro terms. In reported sterling terms, the reduction was 13% due to the weakening of the euro against sterling rate throughout most of the year, the average rate being 1.275 (2014: 1.186). The strategy remains to focus on retaining customer relationships through training, service and education. The modest growth in Autoimmune sales reverses a recent downward trend due principally to growth in the Middle East.
Significant efforts continue to be made with the Allersys® Allergy development programme with steady progress having been made towards commercial launch. With 32 allergens having been optimised and showing equivalent performance to the market leader and with external site evaluations still to be concluded there is still some work ahead of us but we have confidence that when we launch the test platform it will be well accepted.
Infectious Diseases
Infectious Diseases sales increased by 4% to £2.55 million (2014: £2.45 million). The increase is principally down to two factors. First, the recovery in business fortunes of a UK customer that, in the previous year, experienced financial difficulties but which has now secured a more stable footing. Second, a combination of improved market and product mix in Africa and Asia has more than mitigated for some reductions in the Middle East.
Whilst remaining in a very competitive environment we foresee a future increase in sales coming from the introduction of new products such as CD4 and other products coming through the Global Health programme.
Global Health
Visitect® CD4
Over the last year, there has been a tremendous effort made by the technical team in resolving the production issues surrounding the test following the results of earlier trials in India and Kenya. With assistance from the inventor scientists from the Burnet Institute together with additional support from expert consultants in rapid diagnostic test (RDT) development, we have now reached the point where all of the potential variables have been analysed and investigated, effectively rebuilding the test from base raw materials to finished product. Whilst we have successfully made three pilot batches we have yet to complete verification and validation studies to confirm robustness and manufacturing at scale. A repeat of the earlier field trials in India and Kenya to demonstrate utility in field conditions will only commence once the stability issue is resolved. Several other evaluation sites are under discussion with other NGO partners as the interest in the test remains very high.
In addition to full scale production in the UK, our production facility in Pune, India, is taking shape with a completion date expected within the next six months. This will eventually provide us with capacity of 2 million tests per annum in addition to the 2.5 million tests able to be produced in a single shift in the Alva (UK) facility.
Commercialisation
Efforts in priming the market for the test entry onto the market have continued unabated throughout the year and we are at a stage where all the major groups in this field recognise and appreciate that Visitect® CD4 is going to fulfil a vital role in initiating antiretroviral treatment for millions of people living with HIV. Visitect® CD4 is still the only instrument-free, disposable CD4 test available in the world.
Visitect® CD4 is planned to be initially introduced and implemented in 13 countries in Sub-Saharan Africa through working with major NGO networks.
As part of the commercialisation process there are certain regulatory hurdles to overcome in addition to gaining the CE mark approval for the test itself. WHO Prequalification (WHO PQ) for the test which aims to promote and facilitate access to safe, appropriate and affordable in-vitro diagnostics of good quality in an equitable manner. Focus is placed on in-vitro diagnostics for priority diseases such as HIV (including CD4) and their suitability for use in resource-limited settings. We are already engaged with WHO to gain PQ for Visitect® CD4 but the timescale for this is likely to be in excess of one year. In the absence of WHO PQ approval there is also Expert Review Panel for Diagnostics (ERPD), which aims to provide guidance to procurement agencies. ERPD has been designed to assess the risks associated with procurement of diagnostic products that have high public health impact, but that have not yet undergone assessment by WHO or a stringent national regulatory authority (SRA) such as the US FDA.
It is not intended to replace WHO PQ or stringent regulatory assessment. Rather, it provides an interim assessment decision, valid for a time-limited period, in anticipation of completion of stringent regulatory review. The short-term goal is to obtain ERPD approval for Visitect® CD4 well in advance of WHO PQ, which will allow the earliest procurement of product.
mHealth
The field trials of the Android smartphone app to record and transmit Visitect® CD4 test results have also been delayed during the CD4 investigation phase but will be capable of being recommenced once the results from India and Kenya show that the test device itself works in the field. NGOs and global health organisations are very enthusiastic as the test/app combination offers a complete information solution from test site to management headquarters. Our activities and involvement with the GSMA (Groupe Speciale Mobile Association) consortium continue to attract attention from major players in Africa such as mining companies which operate across the continent and in areas which are remote and have poor healthcare facilities and a high HIV burden.
Outlook
This last year has been challenging for the Company and frustrating for staff and shareholders alike with the delays in the launch of the CD4 test. However, we have made good progress over the last few months to have a test which is capable of being made which meets certain design goals, but technical challenges remain. Once we resolve these issues we will repeat the earlier field trials in Kenya and India and are confident that we will deliver a product which meets the demands of the Global Health community.
Our core business has performed well again despite some headwinds in relation to foreign exchange issues which brought our turnover down by £0.4 million. However, once again, Food Intolerance kept up its good performance for both principal products, Food Detective® and Genarrayt®/ Foodprint®, which we expect to see continuing this coming year.
However, we all appreciate that the focus is on Visitect® CD4 as this product has the ability to be truly transformational for the Group. I would like to thank all the Group employees who have made great efforts throughout the year.
Andrew Shepherd
Chief Executive
6 July 2015
Financial review
Financial performance
Our core business has continued to perform well against currency and reimbursement headwinds in Germany. Total revenue was up by 4.4% to £12.1 million (2014: £11.6 million), with our Food Intolerance division delivering another strong performance, maintaining its year-on-year growth. But for weaker exchange rates during the year, compared to the prior year, reported sales would have been £0.4 million higher. Gross profit increased by 4.1% to £7.7 million (2014: £7.4 million), with the gross margin being maintained at 63.4% (2014: 63.6%).
Costs, net of other operating income, have risen slightly to £7.0 million (2014: £6.8 million), the principal reasons being an increase in costs related to Visitect® CD4, a near full-year charge for the manufacturing space in Pune, India, and investment in regulatory staff, offset by true savings in Omega GmbH coupled with a positive exchange effect in German overheads. Adjusted profit before tax increased significantly to £1.4 million compared to £1.1 million the year before. The lack of profitability in segmental performance as presented in the notes to the financial statements will be addressed by the opportunities outlined throughout this Strategic Report. The UK companies continue to benefit from the enhanced R&D tax credit system and a net tax credit of £0.1 million (2014: £0.15 million) has been recognised in the year. Accordingly, adjusted profit after tax of £1.43 million (2014: £1.25 million), on a fully diluted 109.5 million shares in issue, resulted in adjusted earnings per share of 1.3 pence (2014: 1.2 pence).
Other operating income of £173k through the income statement comprised a credit of £74k from the UNITAID grant received at the end of last year. Further income of £54k from a Scottish Enterprise Regional Selective Assistance grant awarded in 2012 was credited on the attainment of additional employment targets and capital expenditure incurred. The balance of £45k relates to compensation received from Lloyds Bank for previous hedging products that the Company was required to take out as part of borrowings entered into in 2007.
Research and development
Total investment in research and development was £1.81 million (2014: £1.61 million) representing 15% of Group turnover. Expenditure continues to be focused on our two key strategic opportunities. Expenditure on our Allersys® project increased to £0.98 million (2014: £0.93 million), the marginal increase reflecting additional staff costs in expanding our in-house scientific team. Expenditure on our Visitect® CD4 project increased to £0.48 million (2014: £0.43 million) as we progressed and completed our internal investigation phase. The total expenditure of £1.5 million has been capitalised on the balance sheet in accordance with IAS 38 - Development Costs. Earlier stage R&D expenditure amounted to £0.31 million (2014: £0.24 million), which has been expensed through the income statement.
Intangible assets
The Group's intangible asset bank has grown to £12.1 million (2014: £11.3 million), comprising goodwill of £4.5 million, separately identifiable intangible assets of £3.4 million and capitalised development costs of £4.2 million.
Goodwill
There has been no impairment of goodwill on any of the acquisitions to date. A reduction of total goodwill to £4.5 million (2014: £4.7 million) in the year relates to a £0.2 million retranslation of goodwill to £1.1 million (2014: £1.3 million) in acquiring the Allergy IVD business in Germany in 2010. £0.4 million arose on acquiring Co-Tek in 2009 and £3.0 million arose on acquiring Genesis/CNS in 2007.
Intangible assets
Separately identifiable intangible assets have been recognised on acquisition: £2.0 million on Genesis/CNS, of which £0.7 million has been amortised to date; £0.1 million on Co-Tek, which has been fully amortised; and £1.7 million on Omega GmbH, of which £1.1 million has been amortised to date. A purchased licence of £1.5 million relates to the exclusive global access rights to the IDS-iSYS platform for allergy testing, which, to date, has not been amortised.
Capitalised development costs
£1.5 million of capitalised development costs have been incurred in the year (as outlined above), bringing the cumulative spend to date to £3.1 million on the Allergy iSYS project and £1.1 million on the Visitect® CD4 project, neither of which has been amortised to date. The amortisation of these capitalised development costs, along with the purchased licence referred to above, will only start after commercialisation of these assets. As stated last year, this particular subset of amortisation charges will not be added back in the computation of the Group's routinely reported adjusted profit before tax.
Property, plant and equipment
The Group has invested £0.7 million (2014: £0.5 million) in the year across all its operations. This included a further £0.3 million in Alva on expanding its Visitect® CD4 manufacturing assembly facility following the decision to bring the entire process in-house, of which 90% has been funded through an asset finance facility. In India, £0.1 million has been paid on account to the contractor responsible for the fit-out of the new manufacturing facility in Pune. Approximately £0.2 million has been invested in Genesis/CNS to ensure it keeps pace with the growth experienced in our Food Intolerance business. The balance of expenditure covers normal replacement of smaller laboratory equipment items.
Financing
The Group continues to enjoy a good relationship with its principal bankers and, in May of this year, we renewed our £1 million overdraft facility for a further year; this remains undrawn and, accordingly, the Group remains in a strong position to fund its two key strategic objectives.
Operating cash flow
The Group always aims to manage its working capital efficiently and generated operating cash of £1.25 million (2014: £1.67 million) in the year. The Group has achieved a conversion rate of adjusted operating profit (operating profit plus amortisation of intangible assets plus share-based payments) to operating cash of 93% (2014: 122%). The reduction in percentage from the prior year is principally attributable to the intentional decision to lock in and hold key raw materials for our Visitect® CD4 test, worth £0.3 million (2014: £Nil) at the year end. Overall, we ended the year with cash reserves of £1.97 million (2014: £3.12 million).
Foreign exchange
The Group has investments in overseas operations and conducts trading transactions in currencies other than sterling. The principal currencies used and the average foreign exchange rates in the year are as follows:
| 2014/15 | 2013/14 |
Sterling/US dollar | 1.60 | 1.60 |
Sterling/euro | 1.275 | 1.186 |
Sterling/Indian rupee | 98.57 | 96.33 |
Profit and loss account
The Group has foreign-denominated bank accounts to allow for the receipt and settlement of amounts in connection with its normal trading operations. These transactions are subject to timing differences between when they are transacted and when they are settled, which can give rise to foreign exchange differences. Foreign-denominated receivables, payables and bank balances are restated into sterling at closing balance sheet dates, which also gives rise to foreign exchange differences. During the year, the Group benefited from an exchange gain of £6,000 (2014: £74,000 exchange loss) on these transactions which has been credited through the income statement.
Other comprehensive income
The Group has net assets in Germany and India, held in fully owned subsidiaries. The original investments in these subsidiaries are held at historic exchange rates. The difference between these historic balances and their restated amounts at the most recent closing balance sheet rates gives rise to movements which are recorded through other comprehensive income and carried as a balance sheet reserve. During the year, there has been a charge of £524,000 (2014: £127,000) on the retranslation of foreign operations.
Kieron Harbinson
Group Finance Director
6 July 2015
Consolidated Statement of Comprehensive Income
for the year ended 31 March 2015
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Consolidated Balance Sheet
as at 31 March 2015
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| 2015 |
| 2014 |
|
| £ |
| £ |
ASSETS |
|
|
|
|
Non-current assets |
|
|
|
|
Intangibles |
| 12,104,723 |
| 11,259,215 |
Property, plant and equipment |
| 2,429,233 |
| 2,283,911 |
Deferred taxation |
| 1,530,777 |
| 1,138,404 |
Retirement benefit surplus |
| - |
| 84,370 |
|
|
|
|
|
|
| 16,064,733 |
| 14,765,900 |
|
|
|
|
|
Current assets |
|
|
|
|
Inventories |
| 2,062,095 |
| 1,692,941 |
Trade and other receivables |
| 2,539,851 |
| 2,415,917 |
Cash and cash equivalents |
| 1,972,137 |
| 3,116,013 |
|
|
|
|
|
|
| 6,574,083 |
| 7,224,871 |
|
|
|
|
|
Total assets |
| 22,638,816 |
| 21,990,771 |
|
|
|
|
|
EQUITY AND LIABILITIES |
|
|
|
|
Equity |
|
|
|
|
Issued capital |
| 16,727,516 |
| 16,727,516 |
Retained earnings |
| 2,792,842 |
| 1,914,405 |
Other reserves |
| (707,208) |
| (183,352) |
|
|
|
|
|
Total equity |
| 18,813,150 |
| 18,458,569 |
|
|
|
|
|
Liabilities |
|
|
|
|
Non-current liabilities |
|
|
|
|
Long-term borrowings |
| 315,446 |
| 319,044 |
Deferred taxation |
| 1,266,213 |
| 1,042,925 |
Deferred income |
| 83,394 |
| - |
Retirement benefit deficit |
| 192,907 |
| - |
|
|
|
|
|
Total non-current liabilities |
| 1,857,960 |
| 1,361,969 |
|
|
|
|
|
Current liabilities |
|
|
|
|
Short-term borrowings |
| 237,772 |
| 427,823 |
Trade and other payables |
| 1,542,059 |
| 1,386,358 |
Deferred income |
| 187,875 |
| 356,052 |
|
|
|
|
|
Total current liabilities |
| 1,967,706 |
| 2,170,233 |
|
|
|
|
|
Total liabilities |
| 3,825,666 |
| 3,532,202 |
|
|
|
|
|
Total equity and liabilities |
| 22,638,816 |
| 21,990,771 |
Consolidated Statement of Changes in Equity
for the year ended 31 March 2015
| Share |
| Share |
| Retained |
| Translation |
|
|
| capital |
| premium |
| earnings |
| reserve |
| Total |
| £ |
| £ |
| £ |
| £ |
| £ |
|
|
|
|
|
|
|
|
|
|
Balance at 31 March 2013 | 4,145,580 |
| 8,831,527 |
| 1,042,209 |
| (56,838) |
| 13,962,478 |
|
|
|
|
|
|
|
|
|
|
Issue of share capital for cash consideration | 941,176 |
| 3,058,824 |
| - |
| - |
| 4,000,000 |
|
|
|
|
|
|
|
|
|
|
Expenses in connection with share issue | - |
| (249,591) |
| - |
| - |
| (249,591) |
|
|
|
|
|
|
|
|
|
|
Profit for the year ended 31 March 2014 | - |
| - |
| 692,851 |
| - |
| 692,851 |
|
|
|
|
|
|
|
|
|
|
Other comprehensive income - net | - |
| - |
| - |
| (126,514) |
| (126,514) |
exchange adjustments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income - actuarial |
|
|
|
|
|
|
|
|
|
gain on defined benefit pensions | - |
| - |
| 51,941 |
| - |
| 51,941 |
|
|
|
|
|
|
|
|
|
|
Other comprehensive income - tax credit | - |
| - |
| 1,417 |
| - |
| 1,417 |
|
|
|
|
|
|
|
|
|
|
Total comprehensive income for the year | - |
| - |
| 746,209 |
| (126,514) |
| 619,695 |
|
|
|
|
|
|
|
|
|
|
Share-based payments | - |
| - |
| 125,987 |
| - |
| 125,987 |
|
|
|
|
|
|
|
|
|
|
Balance at 31 March 2014 | 5,086,756 |
| 11,640,760 |
| 1,914,405 |
| (183,352) |
| 18,458,569 |
|
|
|
|
|
|
|
|
|
|
Profit for the year ended 31 March 2015 | - |
| - |
| 739,046 |
| - |
| 739,046 |
|
|
|
|
|
|
|
|
|
|
Other comprehensive income - net | - |
| - |
| - |
| (523,856) |
| (523,856) |
exchange adjustments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income - actuarial |
|
|
|
|
|
|
|
|
|
loss on defined benefit pensions | - |
| - |
| (270,128) |
| - |
| (270,128) |
|
|
|
|
|
|
|
|
|
|
Other comprehensive income - tax credit | - |
| - |
| 114,296 |
| - |
| 114,296 |
|
|
|
|
|
|
|
|
|
|
Total comprehensive income for the year | - |
| - |
| 583,214 |
| (523,856) |
| 59,358 |
|
|
|
|
|
|
|
|
|
|
Share-based payments | - |
| - |
| 295,223 |
| - |
| 295,223 |
|
|
|
|
|
|
|
|
|
|
Balance at 31 March 2015 | 5,086,756 |
| 11,640,760 |
| 2,792,842 |
| (707,208) |
| 18,813,150 |
Consolidated Cash Flow Statement
for the year ended 31 March 2015
| 2015 |
| 2014 |
| £ |
| £ |
|
|
|
|
Cash flows generated from operations |
|
|
|
Profit for the year | 739,046 |
| 692,851 |
Adjustments for: |
|
|
|
Taxation | (54,788) |
| (149,810) |
Finance costs | 30,620 |
| 28,975 |
Finance income | (41,908) |
| (44,691) |
|
|
|
|
Operating profit before working capital movement | 672,970 |
| 527,325 |
(Increase) / decrease in trade and other receivables | (123,934) |
| 140,845 |
(Increase) / decrease in inventories | (369,154) |
| 140,946 |
Increase / (decrease) in trade and other payables | 155,701 |
| (297,791) |
Gain on sale of property, plant and equipment | (1,777) |
| (11,224) |
Depreciation | 324,967 |
| 265,553 |
Amortisation of intangible assets | 378,680 |
| 414,308 |
Movement in grants | (84,783) |
| 356,052 |
Share-based payments | 295,223 |
| 125,987 |
Taxation received | - |
| 7,106 |
|
|
|
|
Cash flow from operating activities | 1,247,893 |
| 1,669,107 |
|
|
|
|
|
|
|
|
Investing activities |
|
|
|
Finance income | 41,908 |
| 44,691 |
Purchase of property, plant and equipment | (701,565) |
| (478,968) |
Purchase of intangible assets | (1,394,146) |
| (1,880,845) |
Sale of property, plant and equipment | 8,367 |
| 32,500 |
|
|
|
|
Net cash used in investing activities | (2,045,436) |
| (2,282,622) |
|
|
|
|
Financing activities |
|
|
|
Finance costs | (21,793) |
| (13,057) |
Proceeds from issue of share capital | - |
| 4,000,000 |
Expenses of share issue | - |
| (249,591) |
Loan repayments | (360,000) |
| (360,000) |
Finance lease repayments | (89,976) |
| (43,538) |
|
|
|
|
Net cash (used in) / from financing activities | (224,269) |
| 3,616,179 |
|
|
|
|
Net (decrease) / increase in cash and cash equivalents | (1,021,812) |
| 3,002,664 |
Effects of exchange rate movements | (122,064) |
| (47,344) |
Cash and cash equivalents at beginning of year | 3,116,013 |
| 160,693 |
|
|
|
|
Cash and cash equivalents at end of year | 1,972,137 |
| 3,116,013 |
Notes to the Preliminary Announcement
for the year ended 31 March 2015
1. Basis of preparation
The financial information set out in this preliminary announcement does not constitute statutory accounts as defined in Section 434(3) of the Companies Act 2006.
The consolidated balance sheet at 31 March 2015 and the consolidated statement of comprehensive income, consolidated cash flow statement, consolidated statement of changes in equity and associated notes for the year then ended have been extracted from the Group's financial statements which were approved by the Board of Directors on 6 July 2015 and are audited. The comparative consolidated financial information for the year ended 31 March 2014 is based on an abridged version of the Group's published financial statements for that year, which contained an unqualified audit report and which have been filed with the Registrar of Companies.
The statutory accounts for 2015 will be finalised on the basis of the financial information presented in this preliminary announcement and will be delivered to the registrar of companies following the company's annual general meeting.
The consolidated financial statements have been prepared in accordance with IFRS as adopted by the European Union as they apply to the financial statements of the Group for the year ended 31 March 2015.
Basis of consolidation
The Group financial statements consolidate the financial statements of Omega Diagnostics Group PLC and the entities it controls (its subsidiaries). Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Subsidiaries are consolidated from the date of acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date that such control ceases. The financial statements of the subsidiaries used in the preparation of the consolidated financial statements are based on consistent accounting policies. All intercompany balances and transactions, including unrealised profits arising from them, are eliminated.
2. Segment information
|
|
|
|
|
|
|
|
|
|
| Allergy and |
| Food |
| Infectious/ |
|
|
|
|
| Autoimmune |
| Intolerance |
| Other |
| Corporate |
| Group |
2015 | £ |
| £ |
| £ |
| £ |
| £ |
|
|
|
|
|
|
|
|
|
|
Statutory presentation |
|
|
|
|
|
|
|
|
|
Revenue | 3,698,302 |
| 7,449,037 |
| 2,712,236 |
| - |
| 13,859,575 |
Inter-segment revenue | (84,478) |
| (1,502,610) |
| (167,168) |
| - |
| (1,754,256) |
Total revenue | 3,613,824 |
| 5,946,427 |
| 2,545,068 |
| - |
| 12,105,319 |
Operating costs | (3,851,938) |
| (3,873,796) |
| (2,812,507) |
| (894,108) |
| (11,432,349) |
Operating profit/(loss) | (238,114) |
| 2,072,631 |
| (267,439) |
| (894,108) |
| 672,970 |
Net finance (costs)/income | (61,172) |
| 169 |
| (21,794) |
| 94,085 |
| 11,288 |
Profit/(loss) before taxation | (299,286) |
| 2,072,800 |
| (289,233) |
| (800,023) |
| 684,258 |
|
|
|
|
|
|
|
|
|
|
Adjusted profit before taxation |
|
|
|
|
|
|
|
|
|
Profit/(loss) before taxation | (299,286) |
| 2,072,800 |
| (289,233) |
| (800,023) |
| 684,258 |
IFRS-related discount charges | - |
| - |
| - |
| 14,941 |
| 14,941 |
Amortisation of intangible assets | 261,171 |
| 98,901 |
| 18,608 |
| - |
| 378,680 |
Share-based payment charges | - |
| - |
| - |
| 295,223 |
| 295,223 |
Adjusted profit/(loss) before taxation | (38,115) |
| 2,171,701 |
| (270,625) |
| (489,859) |
| 1,373,102 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allergy and |
|
Food |
|
Infectious/ |
|
|
|
|
| Autoimmune |
| Intolerance |
| Other |
| Corporate |
| Group |
2014 | £ |
| £ |
| £ |
| £ |
| £ |
|
|
|
|
|
|
|
|
|
|
Statutory presentation |
|
|
|
|
|
|
|
|
|
Revenue | 4,086,060 |
| 6,307,793 |
| 2,616,700 |
| - |
| 13,010,553 |
Inter-segment revenue | (119,442) |
| (1,130,298) |
| (166,943) |
| - |
| (1,416,683) |
Total revenue | 3,966,618 |
| 5,177,495 |
| 2,449,757 |
| - |
| 11,593,870 |
Operating costs | (4,033,421) |
| (3,618,695) |
| (2,558,105) |
| (856,324) |
| (11,066,545) |
Operating profit/(loss) | (66,803) |
| 1,558,800 |
| (108,348) |
| (856,324) |
| 527,325 |
Net finance (costs)/income | (69,812) |
| 323 |
| (12,859) |
| 98,064 |
| 15,716 |
Profit/(loss) before taxation | (136,615) |
| 1,559,123 |
| (121,207) |
| (758,260) |
| 543,041 |
|
|
|
|
|
|
|
|
|
|
Adjusted profit before taxation |
|
|
|
|
|
|
|
|
|
Profit/(loss) before taxation | (136,615) |
| 1,559,123 |
| (121,207) |
| (758,260) |
| 543,041 |
IFRS-related discount charges | - |
| - |
| - |
| 12,575 |
| 12,575 |
Amortisation of intangible assets | 288,989 |
| 98,885 |
| 26,434 |
| - |
| 414,308 |
Share-based payment charges | - |
| - |
| - |
| 125,987 |
| 125,987 |
Adjusted profit/(loss) before taxation | 152,374 |
| 1,658,008 |
| (94,773) |
| (619,698) |
| 1,095,911 |
|
|
|
|
|
|
|
|
|
|
3. Revenues
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 2015 |
| 2014 |
|
|
|
|
|
| £ |
| £ |
|
|
|
|
|
|
|
|
|
UK |
|
|
|
|
| 979,964 |
| 841,880 |
Germany |
|
|
|
|
| 3,074,157 |
| 3,503,074 |
Rest of Europe |
|
|
|
| 3,381,582 |
| 3,084,683 | |
North America |
|
|
|
| 515,963 |
| 393,761 | |
South/Central America |
|
|
| 904,276 |
| 714,672 | ||
India |
|
|
|
| 480,138 |
| 450,805 | |
Asia and Far East |
|
|
|
| 1,439,271 |
| 1,094,649 | |
Africa and Middle East |
|
|
| 1,329,968 |
| 1,510,346 | ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 12,105,319 |
| 11,593,870 |
4. Finance costs
|
| 2015 |
| 2014 |
|
| £ |
| £ |
|
|
|
|
|
Interest payable on loans and bank overdrafts |
| 4,708 |
| 6,872 |
Unwinding of discounts |
| 7,792 |
| 13,118 |
Finance leases |
| 18,120 |
| 8,985 |
|
|
|
|
|
|
| 30,620 |
| 28,975 |
5. Tax credit
|
|
|
|
|
| 2015 |
| 2014 |
| ||||||||||||
|
|
|
|
|
| £ |
| £ |
| ||||||||||||
Tax credit in the income statement |
|
|
|
|
|
| |||||||||||||||
Deferred tax - current year |
|
|
| 62,161 |
| 316,525 |
| ||||||||||||||
Deferred tax - prior year adjustment |
|
| (7,373) |
| (166,715) |
| |||||||||||||||
|
|
|
|
|
|
|
|
|
| ||||||||||||
|
|
|
|
|
| 54,788 |
| 149,810 |
| ||||||||||||
Tax relating to items charged or credited to other comprehensive income |
|
|
| ||||||||||||||||||
Deferred tax on actuarial loss/(gain) on retirement benefit obligations |
|
|
| 58,228 |
| (12,071) |
| ||||||||||||||
Deferred tax on net exchange adjustments |
|
|
| 56,068 |
| --13,488 |
| ||||||||||||||
|
|
|
|
|
|
|
|
|
| ||||||||||||
|
|
|
|
|
| 114,296 |
| 1,417 |
| ||||||||||||
|
|
|
|
|
|
| ||||||||||||
Reconciliation of total tax charge |
|
|
|
|
|
|
|
| ||||||||||
Factors affecting the tax charge for the period: |
|
|
|
|
|
|
| |||||||||||
Profit before tax |
|
|
|
|
| 684,258 |
| 543,041 |
| |||||||||
|
|
|
|
|
|
|
|
|
| |||||||||
Effective rate of taxation |
|
|
|
|
| 21% |
| 23% |
| |||||||||
|
|
|
|
|
|
|
|
|
| |||||||||
Profit before tax multiplied by the effective rate of tax |
|
| 143,694 |
| 124,899 |
| ||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||
Effects of: |
|
|
|
|
|
|
|
|
| |||||||||
Expenses not deductible for tax purposes and permanent differences |
| 65,054 |
| 4,191 |
| |||||||||||||
Other timing differences |
| - |
| 28,977 |
| |||||||||||||
Research and development and deferred tax credits |
|
|
|
| (362,447) |
| (319,240) |
| ||||||||||
Movement on deferred tax arising from share-based payments |
|
|
| 125,613 |
| (125,613) |
| |||||||||||
Tax under provided in prior years |
|
|
| 7,373 |
| 166,715 |
| |||||||||||
Adjustment due to different overseas tax rate |
|
|
| (29,449) |
| (9,512) |
| |||||||||||
Impact of UK rate change on deferred tax |
|
|
| (4,626) |
| (20,227) |
| |||||||||||
Tax credit for the period |
|
|
|
| (54,788) |
| (149,810) |
| ||||||||||
6. Earnings per share
Basic Earnings per share are calculated by dividing net profit for the year attributable to ordinary equity holders of the Group by the weighted average number of ordinary shares outstanding during the year.
Diluted earnings per share are calculated by dividing the net profit attributable to ordinary equity holders of the Group by the weighted average number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would be issued on the conversion of all the dilutive potential ordinary shares into ordinary shares. Diluting events are excluded from the calculation when the average market price of ordinary shares is lower than the exercise price.
|
| 2015 £ |
| 2014 £ |
|
|
|
|
|
Profit attributable to equity holders of the Group |
| 739,046 |
| 692,851 |
|
|
|
|
|
|
| 2015 Number |
| 2014 Number |
|
|
|
|
|
Basic average number of shares |
| 108,745,669 |
| 104,052,644 |
Share options |
| 821,093 |
| 1,043,840 |
|
|
|
|
|
Diluted weighted average number of shares |
| 109,566,762 |
| 105,096,484 |
Adjusted Earnings per share on profit for the year
The Group presents adjusted earnings per share which is calculated by taking adjusted profit before taxation and adding the tax credit or deducting the tax charge in order to allow shareholders to understand better the elements of financial performance in the year, so as to facilitate comparison with prior periods and to assess better trends and financial performance.
|
| 2015 £ |
| 2014 £ |
|
|
|
|
|
Adjusted profit before taxation |
| 1,373,102 |
| 1,095,911 |
Tax credit |
| 54,788 |
| 149,810 |
|
|
|
|
|
Adjusted profit attributable to equity holders of the Group |
| 1,427,890 |
| 1,245,721 |
7. Annual General Meeting
The Annual General Meeting will be held at Omega House, Hillfoots Business Village, Clackmannanshire, FK12 5DQ on 7 September 2015 at 12 noon.
8. Annual Report
The annual report will be sent to shareholders on 22 July 2015 and will also be available at the registered office of Omega Diagnostics Group PLC at:
One London Wall, London, EC2Y 5AB
and will be made available on the Company's website at:
www.omegadiagnostics.com