21 Nov 2016 07:00
21 November 2016
OMEGA DIAGNOSTICS GROUP PLC
("Omega" or the "Company" or the "Group")
INTERIM RESULTS
FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2016
Omega (AIM: ODX), the medical diagnostics company focused on allergy, food intolerance and infectious disease, announces its unaudited interim results for the six months ended 30 September 2016.
Omega is one of the UK's leading companies in the fast growing area of food intolerance testing 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.
Financial Highlights:· Revenue 11% ahead of last year at £6.83m (2015: £6.15m)
· Gross profit increased by 15% on the same period last year at £4.47m (2015: £3.89m)
· Gross margin increased by 2.2% on the same period last year at 65.5% (2015: 63.3%)
· Adjusted profit before tax1 ("PBT") of £0.56m (2015: £0.52m)
· Adjusted earnings per share1 maintained at 0.6p (2015: 0.6p)
· Cash at the period end of £0.8m (2015: £1.6m)
1Adjusted for share based payments, IFRS-related discount unwinds and amortisation of intangible assets
Operational Highlights:
· Automated Allergy development programme CE-Marking 41 allergens which are now available for sale
· Pune facility expected to contribute to Group revenues by the end of the current financial year
· Food Intolerance segment continues to deliver the fastest growth in revenue at the highest gross margin
· Significant progress with our chosen Visitect CD4 test design with a clear roadmap to complete the technical work needed to achieve commercial launch
· Proposed change to relationship with Allersys licensor
Regarding outlook, David Evans, Chairman, said:
"We have made good progress on our key Visitect® CD4 development project and we have also covered much ground in bringing our Pune facility to a state of operational readiness and these activities are expected to contribute to growth in shareholder value over the shorter term.
"We have recently been approached by our Allersys licensor (Immunodiagnostic Systems Holdings plc "IDS") with a view to changing the nature of the commercial relationship with the Company. This could extend to the acquisition of all or part of our Allergy Business.
"We will update the market as soon as we have a clearer understanding of IDS' intentions but as things stand, the outlook for the rest of the financial year is encouraging within our core business with revenue and adjusted profit before tax expected to be at the higher end of market expectation due, in part, to favourable currency movements."
Contacts:
Omega Diagnostics Group PLC | Tel: 01259 763 030 |
Andrew Shepherd, Chief Executive | www.omegadiagnostics.com |
Kieron Harbinson, Group Finance Director | |
Jag Grewal, Group Sales and Marketing Director | |
finnCap Ltd | Tel: 020 7220 0500 |
Geoff Nash/James Thompson (Corporate Finance) | |
Mia Gardner (Corporate Broking) | |
Walbrook PR Limited | Tel: 020 7933 8780 or omega@walbrookpr.com |
Paul McManus | Mob: 07980 541 893 |
Anna Dunphy | Mob: 07876 741 001 |
Chairman's Statement
Financial performance
Trading in our core business during the first half of the year has seen increases in revenue in all three segments, helped by a favourable currency impact. Total revenue increased by 11% to £6.83m (2015: £6.15m) with the weaker effect of Sterling increasing reported revenue by approximately £0.5m in the current period (3% increase in revenue on a constant currency basis).
Our Food Intolerance revenue grew again, increasing by 15% to £3.84m (2015: £3.34m). Our microarray-based Foodprint® system has achieved particularly good growth in revenue, increasing by 46% to £2.2m (2015: £1.52m) including one account win in North America, a market which is seen as increasingly important for longer term growth. Food Detective® revenue fell by 22% to £0.93m (2015: £1.20m) as we took a conscious decision to reduce pipeline stocking in two of our key markets. However, we did still record growth in revenue in half of our top ten markets.
Our Allergy/Autoimmune revenue increased by 11% to £1.76m (2015: £1.59m) which was, in the main, due to a favourable currency impact from our domestic German allergy business deriving its sales in euros. In constant currency terms, revenue was stable in Germany compared to the prior period which is in contrast to a recent history of decline due to reimbursement pressures.
Our Infectious Disease segment continues to be the most price-competitive in which we operate with gains in some regions being offset by regional reductions elsewhere. A small percentage reduction in revenue in actual terms has been positively impacted by the weaker position of Sterling, resulting in a revenue increase of 1% to £1.23m (2015: £1.22m).
Gross profit increased by 15% to £4.47m (2015: £3.89m) and gross margin percentage increased by just over two percentage points to 65.5% (2015: 63.3%) reflecting the increased mix of higher margin products from our food intolerance business. Adjusted profit before tax (statutory profit before tax of £0.38m with add backs for amortisation of intagibles, share-based payment charges and IFRS-related discount charges) increased marginally to £0.56m (2015: £0.52m), reflecting investment in additional resource in UK based businesses and in our facility in Pune, India. A reduced tax credit of £77k (2015: £135k) has resulted in adjusted earnings per share being maintained at 0.6p (2015: 0.6p). Statutory basic earnings per share were 0.4p (2015: 0.3p).
Strategy
Point-of-care (POC) testing
In the trading update on 17 October 2016, we confirmed we have been successful in eliminating an ambient temperature effect when tested on over 100 HIV-positive samples at a UK hospital. We also have data on a further 400 samples and results overall indicate we are meeting our design goals of sensitivity and specificity.
We are now in a period of formal design control which means we now have the device format which we expect to take to the market. The remaining work we plan to do will be undertaken to confirm this is the case. We have now manufactured all the components necessary to assemble a scaled-up batch size of 10,000 devices which will be used in external trials and for assay robustness studies.
Rapid test manufacturing
Further to our trading update in October, we intend to complete all stages of the BSI Quality Management System review to ISO 9001:2008 and ISO 13485:2012 for our facility in Pune and remain on course to achieve CE-Marked malaria and pregnancy tests available for sale in the final quarter of the current financial year.
Allergy Automation
In October we successfully CE-Marked our allergy launch panel comprising 41 allergens which are capable of being run on the IDS-iSYS instrument and whose performance matches that of the market-leading product. We are also finalising a long-term supply contract with our first customer in Germany.
We have initiated recruitment of skilled project managers and leaders into the scientific team that is responsible for delivering menu expansion, beyond the initial launch panel. We have been able to do this thanks to the Scottish Enterprise research and development grant of £1.8m announced in August 2016.
Outlook
We have made good progress on our key Visitect® CD4 development project and we have also covered much ground in bringing our Pune facility to a state of operational readiness and these activities are expected to contribute to growth in shareholder value over the shorter term.
We have recently been approached by our Allersys licensor (Immunodiagnostic Systems Holdings plc "IDS") with a view to changing the nature of the commercial relationship with the Company. This could extend to the acquisition of all or part of our Allergy Business.
Given the lack of clarity on IDS's intentions, we continue to reflect the carrying value of the Allergy Business in line with our Accounting Policies.
Under the terms of the 2011 agreement, the license can be terminated by IDS should they wish to do so. We believe that it is in both parties' interests to explore all the possibilities of a new commercial relationship and to avoid a situation whereby there are no winners should IDS exercise their right to terminate the contract/license.
We will update the market as soon as we have a clearer understanding of IDS' intentions but as things stand, the outlook for the rest of the financial year is encouraging within our core business with revenue and adjusted profit before tax expected to be at the higher end of market expectation due, in part, to favourable currency movements.
David Evans
Non-Executive Chairman
21 November 2016
INDEPENDENT REVIEW REPORT TO OMEGA DIAGNOSTICS GROUP PLC
Introduction
We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 September 2016 which comprises the Consolidated Statement of Comprehensive Income, Consolidated Balance Sheet, Consolidated Statement of Changes in Equity, Consolidated Cash Flow Statement and the related explanatory notes 1 to 7. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.
This report is made solely to the company in accordance with guidance contained in International Standard on Review Engagements 2410 (UK and Ireland) "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our work, for this report, or for the conclusions we have formed.
Directors' Responsibilities
The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the Interim Report in accordance with the AIM Rules issued by the London Stock Exchange which require that it is presented and prepared in a form consistent with that which will be adopted in the company's annual accounts having regard to the accounting standards applicable to such annual accounts.
As disclosed in Note 1, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with the AIM Rules issued by the London Stock Exchange.
Our Responsibility
Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.
Scope of Review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 September 2016 is not prepared, in all material respects, in accordance with the accounting policies outlined in Note 1, which comply with IFRSs as adopted by the European Union and in accordance with the AIM Rules issued by the London Stock Exchange.
Ernst & Young LLP
Glasgow
21 November 2016
Consolidated Statement of Comprehensive Income | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
for the six months ended 30 September 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Adjusted PBT stated before share-based payments, IFRS-related discount unwinds and amortisation of intangible assets.
Consolidated Balance Sheet | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Consolidated Statement of Changes in Equity for the six months ended 30 September 2016 |
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Consolidated Cash Flow Statement | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
for the six months ended 30 September 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Notes to the Interim Report
for the six months ended 30 September 2016
1. BASIS OF PREPARATION
For the purpose of preparing the March 2016 annual financial statements the Directors used IFRS as adopted by the EU and in accordance with the AIM Rules issued by the London Stock Exchange. In preparing these interim financial statements, the same accounting policies have been used as set out in the Group's Annual Report for the year ended 31 March 2016. The Group has not applied IAS 34 Interim Financial Reporting, which is not mandatory for AIM companies, in the preparation of these interim financial statements.
The interim financial statements are unaudited but have been formally reviewed by the auditors and their report is unqualified. The information shown in the consolidated balance sheet as at 31 March 2016 does not constitute statutory accounts as defined in Section 435 of the Companies Act 2006 and has been extracted from the Group's 2016 Annual Report which has been filed with the Registrar of Companies. The report of the auditors on the financial statements contained within the Group's 2016 Annual Report was unqualified and did not contain a statement under sections 498 (2) and 498 (3) of Chapter 3, Part 16 of the Companies Act 2006. These interim financial statements were approved by the Board of Directors on 21 November 2016.
The Group has a £1.7 million overdraft facility expiring in May 2017 which is fully expected to be renewed. This, together with the award of a £1.8m grant from Scottish Enterprise, a cash-generative core business and the application of working capital discipline, allows the Group to maintain cash levels within its business to meet its short and longer-term objectives. As a consequence, the Directors believe that the Group is well placed to manage its business risks successfully and capitalise on the new product opportunities despite continued uncertainties with the macroeconomic outlook. The Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis of accounting in preparing the interim financial statements.
2. SEGMENT INFORMATION
For management purposes the Group is organised into three operating divisions: Allergy and Autoimmune, Food Intolerance and Infectious Disease and Other.
The Allergy and Autoimmune division specialises in the research, development, production and marketing of in-vitro allergy and autoimmune tests used by doctors to diagnose patients with allergies and autoimmune diseases.
The Food Intolerance division specialises in the research, development and production of kits to aid the detection of immune reactions to food. It also provides clinical analysis to the general public, clinics and health professionals as well as supplying the consumer Food Detective test.
The Infectious Diseases division specialises in the research, development and production and marketing of kits to aid the diagnosis of infectious diseases.
Corporate consists of centralised corporate costs which are not allocated across the three business divisions.
Inter segment transfers or transactions are entered into under the normal commercial conditions that would be available to unrelated third parties.
BUSINESS SEGMENT INFORMATION
Allergy and | Food | Infectious/ | |||||||
6 months to | Autoimmune | Intolerance | Other | Corporate | Group | ||||
30 September 2016 | £ | £ | £ | £ | £ | ||||
Statutory presentation | |||||||||
Revenue | 1,814,283 | 4,465,506 | 1,309,431 | - | 7,589,220 | ||||
Inter-segment revenue | (49,372) | (629,055) | (77,087) | - | (755,514) | ||||
Total revenue | 1,764,911 | 3,836,451 | 1,232,344 | - | 6,833,706 | ||||
Operating costs | (1,860,193) | (2,231,841) | (1,371,761) | (1,055,595) | (6,519,390) | ||||
Operating profit/(loss) | (95,282) | 1,604,610 | (139,417) | (1,055,595) | 314,316 | ||||
Net finance income/(costs) | (339) | (1,874) | (7,945) | 1,289 | (8,869) | ||||
Profit/(loss) before taxation | (95,621) | 1,602,736 | (147,362) | (1,054,306) | 305,447 | ||||
Adjusted profit before taxation | |||||||||
Profit/(loss) before taxation | (95,621) | 1,602,736 | (147,362) | (1,054,306) | 305,447 | ||||
Amortisation of intangible assets | 55,586 | 49,465 | 6,306 | - | 111,357 | ||||
Share-based payment charges | - | - | - | 143,775 | 143,775 | ||||
Adjusted profit/(loss) before taxation | (40,035) | 1,652,201 | (141,056) | (910,531) | 560,579 | ||||
Allergy and | Food | Infectious/ | |||||||
6 months to | Autoimmune | Intolerance | Other | Corporate | Group | ||||
30 September 2015 | £ | £ | £ | £ | £ | ||||
Statutory presentation | |||||||||
Revenue | 1,643,897 | 4,139,338 | 1,309,064 | - | 7,092,299 | ||||
Inter-segment revenue | (51,274) | (804,877) | (89,013) | - | (945,164) | ||||
Total revenue | 1,592,623 | 3,334,461 | 1,220,051 | - | 6,147,135 | ||||
Operating costs | (1,747,087) | (2,240,446) | (1,412,068) | (570,938) | (5,970,539) | ||||
Operating profit/(loss) | (154,464) | 1,094,015 | (192,017) | (570,938) | 176,596 | ||||
Net finance income/(costs) | 2 | 52 | (11,651) | 12,361 | 764 | ||||
Profit/(loss) before taxation | (154,462) | 1,094,067 | (203,668) | (558,577) | 177,360 | ||||
Adjusted profit before taxation | |||||||||
Profit/(loss) before taxation | (154,462) | 1,094,067 | (203,668) | (558,577) | 177,360 | ||||
Amortisation of intangible assets | 119,417 | 49,439 | 4,709 | - | 173,565 | ||||
Share-based payment charges | - | - | - | 168,610 | 168,610 | ||||
Adjusted profit/(loss) before taxation | (35,045) | 1,143,506 | (198,959) | (389,967) | 519,535 |
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3. REVENUES
| 6 months | 6 months | ||||||||||||
to 30 Sept | to 30 Sept | |||||||||||||
2016 | 2015 | |||||||||||||
£ | £ | |||||||||||||
UK | 513,785 | 487,258 | ||||||||||||
Germany | 1,443,331 | 1,297,412 | ||||||||||||
Rest of Europe | 1,633,896 | 1,628,236 | ||||||||||||
North America | 925,357 | 383,779 | ||||||||||||
South/Central America | 513,551 | 473,083 | ||||||||||||
Asia and Far East | 892,985 | 1,049,962 | ||||||||||||
Africa and Middle East | 910,801 | 827,405 | ||||||||||||
6,833,706 | 6,147,135 | |||||||||||||
4. FINANCE COSTS
6 months | 6 months | |||||||
to 30 Sept | to 30 Sept | |||||||
2016 | 2015 | |||||||
£ | £ | |||||||
Interest payable on loans | 932 | 1,655 | ||||||
Finance charges payable under finance leases | 9,320 | 9,996 | ||||||
10,252 | 11,651 | |||||||
5. TAX CREDIT
6 months | 6 months |
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to 30Sept2016 | to 30 Sept 2015 |
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£ | £ |
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Tax credit in the income statement | |||||||||||||||||
Current tax - current year | - | -- |
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Current tax - prior year adjustment | - | - |
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Deferred tax - current year | 76,018 | 137,197 |
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Deferred tax - prior year adjustment | 950 | (2,016) |
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76,968 | 135,181 |
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Tax relating to items charged to other comprehensive income | |||||||||||||||
Deferred tax on net exchange adjustments | (38,143) | (3,772) |
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(38,143) | (3,772) |
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Reconciliation of total tax credit | ||||||||
Factors affecting the tax credit for the period: | ||||||||
Profit before tax | 305,447 | 177,360 | ||||||
Effective rate of taxation | 20% | 20% | ||||||
Profit before tax multiplied by the effective rate of tax | 61,089 | 35,472 | ||||||
Effects of: | ||||||||
Expenses not deductible for tax purposes and permanent differences | 32,006 | 35,648 | ||||||
Research and development tax credits | (53,735) | (182,410) | ||||||
Tax under provided in prior years | (950) | 2,016 | ||||||
Adjustment due to different overseas tax rate | (30,580) | (25,907) | ||||||
Impact of UK rate change on deferred tax | (84,798) | - | ||||||
Tax credit for the period | (76,968) | (135,181) | ||||||
6. EARNINGS PER SHARE
6 months to 30 Sept 2016 | 6 months to 30 Sept 2015 | |
£ | £ | |
Profit attributable to equity holders of the Group | 382,415 | 312,541
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2016 Number | 2015 Number | |
Weighted average number of shares |
108,745,669 |
108,745,669 |
Share options | 658,726 | 859,473 |
Diluted weighted average number of shares | 109,404,395 | 109,605,142 |
The number of shares in issue at the period end was 108,745,669. Basic earnings per share are calculated by dividing 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 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.
Adjusted Earnings per share on profit for the period
The Group presents adjusted earnings per share which is calculated by taking adjusted profit before taxation and adding the tax credit 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 in financial performance.
6 months to 30 Sept 2016 | 6 months to 30 Sept 2015 | |
£ | £ | |
Adjusted profit before taxation |
560,579 |
519,535 |
Tax credit | 76,968 | 135,181 |
Adjusted profit attributable to equity holders of the Group | 637,547 | 654,716 |
7. POST BALANCE SHEET EVENT
We have recently been approached by our Allersys licensor (Immunodiagnostic Systems Holdings plc "IDS") with a view to changing the nature of the commercial relationship with the Company. This could extend to the acquisition of all or part of our Allergy Business.
Given the lack of clarity on IDS's intentions, we continue to reflect the carrying value of the Allergy Business in line with our Accounting Policies.
Under the terms of the 2011 agreement, the license can be terminated by IDS should they wish to do so. We believe that it is in both parties' interests to explore all the possibilities of a new commercial relationship and to avoid a situation whereby there are no winners should IDS exercise their right to terminate the contract/license.