Final Results

14th Jul 2008 07:00



 

IMMUNODIAGNOSTIC SYSTEMS HOLDINGS PLC

Preliminary Results for the year ended 31 March 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 unaudited preliminary results from the year ended 31 March 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 2006 the immunoassay sector of the IVD market was estimated to be worth US$ 8.0bn.

Financial Highlights:

Turnover up 88.1% to £18.66m (2007: £9.92m) - acquisitions contributed £6.98m

Gross profit up 75.8% to £11.43m (2007: £6.50m)

Profit from operations up 93.7% to £4.28m (2007: £2.21m)

Pre-tax profit up 73.1% to £3.79m (2007: £2.19m)

Fully diluted earnings per share up 23.1% to 13.49p (2007: 10.96p)

Strong balance sheet with £3m in cash (2007: £875,000)

Dividend up 20% to 1.5p (2007: 1.25p)

Operational Highlights:

Two major acquisitions of Nordic Bioscience Diagnostics and Biocode Hycel

Good progress in preparation for the launch of 3X3

Additional 3X3 Alliance Partners signed up; ongoing discussions with others

Further expansion of direct selling capability

Regarding outlook, David Evans, Chairman said:

"The trading in the current year is in line with management expectations and our core business continues to prosper due to the growing recognition of Vitamin D as a valuable marker of well-being."

"The key challenge for the Group this year will be the 3X3 launch and I am satisfied that the hurdles in front of us as we move to the point of launch are what one would determine as normal and I am confident that our first routine sales of 3X3 to end customers will be achieved by the end of this calendar year."

Contacts:

IDS	Oriel Securities Limited	Parkgreen Communications Ltd
Roger Duggan, Managing Director	(Nominated Adviser)	Paul McManus
Paul Hailes, Finance Director
	Andrew Edwards
Tel: 0191 519 0660	Gareth Price	Tel: 020 7933 8787
		Mob: 07980 541 893
http://www.ids-direct.com	Tel: 020 7710 7600	[email protected]

  Chairman's Statement

I have pleasure in reporting on a further year of progress at Immunodiagnostic Systems.

This year has seen a stepped change in the development of the Group through the two major acquisitions of Nordic Bioscience Diagnostics ("NBD") and Biocode Hycel ("BCH") for £18.8m and £19.4m respectively and this is reflected in the results below.

The key financial results are set out in the table below 

	Continuing	Acquired	Total 2008	Total 2007	% Change
Turnover (£'000)	11,678	6,982	18,660	9,922	88.1
Gross Profit (£'000)	7,831	3,600	11,431	6,502	75.8
Profit from Operations (£m)	3.14	1.14	4.28	2.21	93.7
Profit Before Tax (£m)	2.66	1.13	3.79	2.19	73.1
Profit After Tax (£m)	1.99	0.85	2.84	1.60	77.5
EPS			14.35p	11.98p	19.8
EPS Diluted			13.49p	10.96p	23.1

Results

Turnover has increased by 88.1% from £9.922m in 2007 to £18.660m in 2008 with the acquisitions of NBD and BCH

accounting for £6.982m representing 79.9% of the overall increase.

Gross Profit has increased from £6.502m in 2007 to £11.431m in 2008 an increase of 75.8%. Overall Gross Margin

percentages have declined from 65.5% to 61.2% reflecting the impact of the lower margin products within the BCH portfolio -

on a like for like basis within continuing operations margin percentages increased from 65.5% to 67.0%.

Overall profits from operations increased by 93.7% from £2.21m to £4.28m with the acquisitions contributing £1.14m of that

increase.

The Group's finance costs have increased from £39k to £614k primarily as a result of the debt finance taken on to facilitate the

acquisition of NBD.

The Group's tax charge is £954k compared to £596k in the previous year the overall percentage reduction is due to tax credits

and utilisation of tax losses brought forward by some foreign subsidiaries.

Profit after tax increased by £1.24m from £1.6m in 2007 to £2.84m an increase of 77.5%.

Earnings per share have increased from 11.98p to 14.35p on an undiluted basis and from 10.96p to 13.49p on a fully diluted

basis.

The directors are pleased to announce that a dividend of 1.5p (2007 1.25p) will be payable to all shareholders in September.

In terms of the Group's Balance Sheet I would like to highlight the following significant movements;

Goodwill arising on the acquisition of NBD and BCH of £12.5m.

The creation of Intangible assets arising on the acquisition of NBD and BCH of £21.9m as well as the capitalisation of development costs in the year on the 3X3 of £2.3m as a result of adherence to IFRS.

During the year the Group entered into a loan arrangement with Barclays plc to help fund the Nordic acquisition, this loan amounted to €14.9m and €14.1m was outstanding at the year end.

Cash and cash equivalents at the year end amounted to £3.0m

  Strategic Direction

The imperative for the Board is to ensure the successful launch of the 3X3. The progress of the 3X3 project both in technical and commercial terms continues to exceed my own personal expectations given the challenges that instrumentation development place on a previously analyte driven company. The reason that we have made such progress is down to the combined experience of the Group's personnel across all its Divisions.

Moving forward the key drivers of our future growth are based on;

Having the most comprehensive panel of bone and growth markers supported where possible by IP rights that will imbue our offering with true uniqueness and give us significant competitive advantage.

Adding not only our own analytes to the 3X3 menu but looking externally either through in-licensing or by acquisition for analytes that will enhance the strategic value of our offering.

Seeking additional companies to partner with for the addition of their tests to the 3X3 menu. We already have

Technogenetics covering the areas of Autoimmune and Infectious Disease assays and Hyphe-Biomed

covering Coagulation; and discussions continue with other potential '3X3 Alliance' partners.

Continuing to expand our direct selling capability. The current year saw expansion of our direct selling to the Nordic

region and Austria as well as strengthening our capability in France. Other territories will be added in due course.

Management

I am pleased to announce the appointment of Ian Cookson as Chief Operating Officer of the Group. Ian re-joined IDS as Operations Director in November 2007 after a thirteen year sojourn north of Hadrian's Wall with Axis-Shield. The step-up to Chief Operating Officer reflects both Ian's capabilities and the necessity to fill that position due to the increased complexity of our business as it has grown and will continue to grow.

During the year the Board was also strengthened with the appointment of Alain Rousseau as Engineering Director whose skills and experience have proved invaluable in the progress of the 3X3.

Additionally at Management level we have appointed both Drs Dagmar Kasper and Rudolf Schemer as Country Managers for the Nordic and German territories.

Outlook

The trading in the current year is in line with management expectations and our core business continues to prosper due to the growing recognition of Vitamin D as a valuable marker of well-being.

The key challenge for the Group this year will be the 3X3 launch and I am satisfied that the hurdles in front of us as we move to the point of launch are what one would determine as normal and I am confident that our first routine sales of 3X3 to end customers will be achieved by the end of this calendar year.

As well as reporting on the progress of the 3X3 I look forward to updating you on;

The divestment of our haematology division which has attracted interest from a number of different parties.

Additional partnerships for the 3X3.

Additions to our existing range of analytes either through in-licensing or by acquisition.

Further expansion of our direct sales network.

Finally the achievements over the past year would not have been possible had we not had both your support as a Shareholder and the continued dedication of all employees within the enlarged Group and I would like to formally record my gratitude for that support.

David Evans

Non-Executive Chairman

3 July 2008

  MANAGING DIRECTOR'S REVIEW

Strategy

The Financial Year 2007/8 was an extraordinary period for IDS, and will undoubtedly go down as a seminal year in the history of the IDS Group. The broad 3-pronged strategy that I have depicted in my previous two Managing Director's Reviews has stood us in good stead, namely:

To drive geographic sales growth, using our direct sales and marketing power

To accelerate New Product Development, organically and/or via licensing, and 

To embrace growth through acquisition of products or businesses

We have progressed beyond our own expectations in pursuit of 'The Strategy', with highly satisfactory organic growth enhanced by two judicious acquisitions, one delivering enabling technology in the form of instrumentation. We are now well-positioned for a period of still more accelerated growth, and to this end are strengthening the Senior Team as we consolidate the enlarged IDS Group.

We started the year in high spirits, having obtained (December 2006) an exclusive licence to put our well-established range of specialist assays on a fully-automated immunoanalyser designed and developed by the Franco-Belgian company, Biocode-Hycel. Our history to date, and our £10 million sales last year, has been based upon manual products intended for use by skilled technicians at the laboratory bench. The prospect of automating our best-selling products such as Vitamin D is extremely attractive, paving the way to gaining higher echelon accounts in the largest hospitals, reference laboratories and clinical research organisations worldwide. 

As a result, Dr Martha Garrity, IDS' Technical Director, has made the major focus of an enlarged IDS Product Development group the creation of automated formats of our Bone and Skeletal markers, recruiting additional scientists, installing machines and delivering training for speediest product conversion. Her extensive background in assay development for more than a decade at Nichols Institute Diagnostics, using identical technology, makes her ideally suited to this task. 

Acquisitions - Nordic Bioscience Diagnostics

Just months into the new financial year, we were engaged in intense acquisition activities directed towards Nordic Bioscience Diagnostics (NBD) of Copenhagen, Denmark. NBD was a highly-profitable company (an EBIT of £2.2 million on sales of £4.2 million) with strong IPR supporting a unique range of bone and cartilage biomarkers such as CTX-I and CTX-II. With the successful conclusion of this transaction, IDS gained eight highly complementary products to enhance our existing product range, with a further two products in the pipeline, and forward provision for participation in new biomarker discovery in collaboration with the vendor, Nordic Bioscience AS. It also created the opportunity to establish a further subsidiary, IDS Nordic, and we were fortunate to entice Dr Dagmar Kasper, a PhD bone biologist and experienced marketer of diagnostic products, to take the position of Country Manager. Manufacture of the existing products has been transferred to the more automated production facilities at IDS Boldon, with significant cost reduction.

Acquisitions - Biocode-Hycel

As this deal came to fruition, we were immersed in a competitive bid situation for Biocode-Hycel (BCH), which had been put up for sale by its shareholders. Such is the importance we attach to the 3X3 automation strategy, we determined that success in this acquisition was a key objective. After several rounds of bidding, IDS emerged victorious, and we found ourselves to be a company of somewhat greater complexity, but with much-enhanced opportunities and resources. Alain Rousseau, creator of the 3X3, joined the main IDS board as Engineering Director, bringing many years of experience in In Vitro Diagnostics (IVD) automation to IDS. With ownership of the 3X3 instrument, IDS became head of what we now term 'The 3X3 Alliance', whereby selected, non-competing companies with their own specialisms within the immunoassay or IVD industry all develop products for use on the 3X3. This parallel development of products greatly accelerates 'menu development', important in the placement of capital equipment, and all such products will be marketed globally by IDS.

The 3X3 represents an enabling technology, as a remarkably flexible instrument capable of performing not only fully-automated immunoassays, but also able to deliver clinical biochemistry and coagulation (haemostasis) testing. This makes the instrument suitable not only for the specialist high-throughput laboratory, but also for the small to medium size laboratory wanting to perform testing 'in-house' rather than incur the expense and inconvenience of sending samples out to a service laboratory. A further development of the instrument currently underway in Pouilly will address the requirement for higher throughput for the larger reference laboratory and Pharma markets. 

With the BCH acquisition came more than 100 employees and facilities in Paris, Pouilly and Rennes in France, and Liège in Belgium, and we are progressing integration and consolidation of the expanded IDS Group as a whole. The acquisition also brought us a running line of more than €10 million in sales, primarily in the fields of biochemistry and haematology. Whilst this has favourably boosted our revenues during the period, we have determined that haematology is not a core interest of IDS in the future, and we have accordingly put this sector up for sale as a stand-alone, coherent business unit based in Rennes. As this goes to press, we are in discussion with a number of interested parties.

Continuing operations

Throughout this period of unprecedented activity, IDS continued to meet the needs of its customers and Distributors throughout the world. Whilst we are reporting here an 88% increase in turnover for the year, which includes some contribution from NBD and BCH acquisitions, we saw a healthy organic growth of ca 20% in sales of our existing market-leading products. IDS UK and each of our subsidiaries, IDS Inc (Fountain Hills, Phoenix, AZ, USA), IDS GmbH (Frankfurt, Germany) and IDS Eurl (Paris, France) have experienced record sales, with buoyant market conditions led by a continued growth in demand for bone biomarkers in general and vitamin D testing in particular. The European Diagnostics Manufacturers Association recently reported a 57% growth in vitamin D testing in France to the year ended 31st March, 2008. IDS vitamin D sales in France in the same period rose by 114% - and this with our existing manual product. We believe that the launch in Q4 of 2008 of an automated version of our market-leading vitamin D test on the 3X3 will grow market share still more strongly in 2009. 

Geographically, the major IVD markets are in the USA (approximately 40% share), western Europe (30%) and Japan (15%). In every case, these markets are highly automated, and the advent of our proven specialist products in a bespoke automated format bodes well for increased competitiveness and future sales in these major markets. Tony Wilks, Sales & Marketing Director, placed several hundred automated immunoanalysers in Europe whilst head of the European division of his (then) US parent company, Nichols Institute Diagnostics, and this gives us great confidence in our ability to succeed with automated forms of such prestigious products such as vitamin D, Bioactive PTH and CTX-I. Just now, approximately 75% of our sales are achieved in Europe. In three to five years time, having geared-up to meet the needs of, and exploit the opportunities afforded by, each major market, it is likely that this will be reversed. The friendly rivalry that exists between our subsidiaries in Germany, France and the USA will ensure that a hot contest ensues.

Management

In November, we were joined by Ian Cookson, who took the newly-created post of Operations Director. Ian was the Managing Director with Axis-Shield Diagnostics, with full responsibility for the Dundee site with a turnover of ca £17 million and a staff of 120 people. He brings abundant skills very pertinent to the IDS of today, growing as we are in almost every dimension of business. Ian will take a still greater role in IDS going forward, as we re-structure the Senior Team. With effect from 1st August, I will take on the mantle of Chief Executive Officer, and be able to devote my time to working on, as opposed to in, the Company, with responsibilities for Group direction and leadership, business development, licensing and acquisitions. Ian will take the role of Chief Operating Officer, and will excel at dovetailing the manifold elements on the enlarged, international IDS Group, directing the key functions of the Company as we enter a particularly intense and important phase of accelerated growth.

Outlook

IDS will continue to focus on the selected areas we consider to be specialist niches capable of significant growth. Our concentration on bone and calcium metabolism for more than ten years has resulted in a position of strength in a highly competitive industry, with relatively little competition and high margin products. The aging population, the growing socio-economic cost of osteoporosis and other skeletal disorders such as osteoarthritis and rheumatoid arthritis, and the increasing availability of effective (but costly) treatments all contribute to above-average market growth for IDS' enhanced range of products.

With the acquisition of NBD, we enter fully into the realm of cartilage biology, an area with hitherto few convincing biomarkers available for the researcher and diagnostician. We believe that, in this respect, cartilage biology is in a similar state to that of bone biology a decade ago, and is therefore set for considerable growth. IDS intends to be at the forefront of this growth.

IDS continues to embrace change, an absolute necessity in a dynamic industry experiencing not only the ongoing technological revolution that is modern medicine, but also the commercial athleticism required to survive and thrive. You will see for the first time, within our Annual Report, the launch of a new corporate image for the IDS Group, introduced to reflect our commitment to change and the desire to embrace the more recent members of the IDS fold. 

Summary

We are, collectively, in excellent shape to meet the demands of the marketplace, and will pursue the same overall strategy of the last two years, but with larger weapons and more ammunition. I have little doubt that this time next year I will be regaling you with further accounts of opportunities identified, grasped, and converted to increased shareholder value.

Roger Duggan, PhD Managing Director

1 July 2008

  FINANCIAL REVIEW

Financial Highlights

A successful year for the company with impressive growth in both sales and profitability.

Turnover

Turnover increased by 88% to £18,660,000 (2007: £9,922,000). Direct sales into the USA and mainland Europe experienced significant growth helped by the two acquisitions made during 2007.

Gross Margin

Our gross margin decreased for the twelve month period to 61.26% (gross profit £11,431,000) from 65.53% in 2007 (gross profit £6,502,000.) This decrease reflects the impact of one of our acquisitions (Biocode Hycel) which as a business currently experiences a significantly lower gross profit percentage than the rest of the Group. However, as can be seen from our Chairman's statement our gross profit % from our continuing operations actually increased by 1.53% to 67.06%. This increase is due to a better product mix and the strengthening of the Euro during the second half of 2007.

Operating Costs and Profits

Our R&D expenditure for 2008 increased as expected with the acquisitions of Nordic Bioscience and Biocode Hycel to £2,246,000 up from £706,000 in 2007. However, the majority of this expenditure is focused on product development (rather than research) relating to developing IDS manual products to the 3X3 automated platform and as a group our accounting treatment of this expenditure is as per IFRS.

Distribution and Administrative expenses increased by £2,734,000 to £7,150,000 compared to £4,416,000 in 2007. This increase was entirely expected as we grow the business both organically and by acquisition.

The charge for depreciation and amortisation of intangibles was £933,000 compared to £262,000 in 2007, a direct result of our two acquisitions.

EBITDA

The Group reports an increase in earnings before interest, tax, depreciation and amortisation (EBITDA) from £2,477,000 in 2007 to £5,279,000, an increase of 113%.

Turnover by Product Area

Year ending 31st March:	2008		2007		Change
	£'000		£'000		%
Vitamin D	6,897		5,358		28.72%
Octeia	1,378		1,416		-2.68%
Gamma B	213		182		17.03%
Other	467		290		61.03%
Total of IDS Products	8,955		7,246		23.59%
Distribution of third party sales	2,723		2,676		1.76%
Nordic Bioscience	2,614
Biocode Hycel	4,368
Total Turnover	18,660		9,922		88.07%

  Cash Flow

The Company's continued improvement at generating cash has once again provided resource to help grow the business:

		£
Net cash flow from operating activities was		846,000
Net of investments and servicing finance		(490,000)
Taxation		(677,000)
Capital expenditure etc.		(20,758,000)
Dividend		(202,000)
Financing		25,129,000
Exchange rate difference		(1,834,000)

This has led to an increase in cash and cash equivalents of £2,014,000 and a net cash position of £2,973,000 as at 31 March 2008.

Dividend Policy and Dividend

The Board is proposing a dividend for the year of 1.50p (2007: 1.25p); subject to the approval of shareholders at the Annual

General Meeting, the dividend per share will be paid on 19th September 2008 to shareholders on the register at the close of

business on 22 August 2008.

Balance Sheet

The Group's fixed assets at 31 March 2008 were £46,238,000 (2007: £2,532,000), which consisted of tangible assets of

£3,066,000, intangible assets of £43,168,000 and investments of £4,000. The intangible assets principally relate to the

patents and goodwill acquired on acquisitions.

Stocks have increased to £6,222,000 (2007: £915,000) and debtors have increased to £4,826,000 (2007: £2,108,000) while

current creditors have increased to £8,807,000 (2007: £2,014,000). Creditors due after one year have increased to

£15,562,000 (2007: £71,000) as a direct result of a loan taken out to finance one of the acquisitions.

Financial Instruments

This report shows the Group has had a very good year with record sales and profitability. A major contributor to this success

has been the increase in both the number of orders received and the number of active customers who purchase product. As

we develop and introduce new products we expect this growth to continue.

There are of course always risks associated with a business and as the in-vitro diagnostic market develops there is the possibility that increasing competition from larger companies with greater financial and other resources than those directly available to the Group will appear. The directors are aware of this and are looking to work closely with these larger companies in an attempt to make them customers for the Group's products rather than direct competitors.

Our progress on our strategic objectives is monitored by the Board of Directors by reference to seven key performance indicators applied on a Group-wide basis. The Group's performance for 2008 and 2007 is shown below:

Financial KPI	2008	2007	Variance
Annual increase in sales:	88%	22%	66%
Number of net invoices issued	10,399	8,898	1,501
Gross margin	61.26%	65.53%	(4.27)%
Profit after tax	15.20%	16.11%	(0.91)%
Basic earnings per share	14.346p	11.975p	2.371p
Diluted earnings per share	13.489p	10.955p	2.534p

Paul Hailes

Finance Director

1 July 2008  CONSOLIDATED INCOME STATEMENT

for the year ended 31 March 2008

		Continuing
		operations	Acquisitions	Total	Total
		2008	2008	2008	2007
		£	£	£	£
REVENUE		11,678,041	6,981,971	18,660,012	9,922,427
Cost of sales		(3,847,286)	(3,381,788)	(7,229,074)	(3,420,075)
Gross profit		7,830,755	3,600,183	11,430,938	6,502,352
Distribution costs		(2,185,290)	(1,142,571)	(3,327,861)	(1,540,068)
Administrative expenses		(2,510,051)	(1,312,371)	(3,822,422)	(2,875,488)
Other operating income		-	-	-	127,486
PROFIT FROM OPERATIONS		3,135,414	1,145,241	4,280,655	2,214,282
Finance income		86,845	37,474	124,319	19,099
		3,222,259	1,182,715	4,404,974	2,233,381
Finance costs		(565,450)	(48,890)	(614,340)	(39,238)
PROFIT BEFORE TAX		2,656,809	1,133,825	3,790,634	2,194,143
Income tax expense		(668,606)	(285,336)	(953,942)	(596,117)
PROFIT FOR THE YEAR ATTRIBUTABLE  TO EQUITY HOLDERS OF PARENT		1,988,203	848,489	2,836,692	1,598,026
EARNINGS PER SHARE
Basic				14.346p	11.975p
Diluted				13.489p	10.955p

All transactions in 2007 arose from continuing operations.

  CONSOLIDATED BALANCE SHEET

As at 31 March 2008

		2008	2007
		£	£
ASSETS
NON-CURRENT ASSETS
Property, plant and equipment		3,066,410	1,136,701
Goodwill		14,557,818	-
Other intangible assets		28,609,885	1,392,468
Investments		3,696	3,000
Deferred tax asset		671,466	-
		46,909,275	2,532,169
CURRENT ASSETS
Inventories		6,221,897	914,640
Trade and other receivables		4,825,529	2,107,859
Cash and cash equivalents		2,973,452	959,842
		14,020,878	3,982,341
TOTAL ASSETS		60,930,153	6,514,510
LIABILITIES
CURRENT LIABILITIES
Short term portion of long term borrowings		3,370,313	69,283
Trade and other payables		5,426,707	1,658,897
Income tax liabilities		10,062	285,567
		8,807,082	2,013,747
NET CURRENT ASSETS		5,213,796	1,968,594

NON-CURRENT LIABILITIES
Long term borrowings		9,840,897	15,521
Provisions		5,127,823	27,140
Deferred tax liabilities		-	7,957
Deferred income		593,368	20,378
		15,562,088	70,996
TOTAL LIABILITIES		24,369,170	2,084,743
NET ASSETS		36,560,983	4,429,767

TOTAL EQUITY

Called up share capital		479,453	266,893
Share premium account		25,543,742	935,701
Other reserves		5,478,460	802,937
Retained earnings		5,065,863	2,430,771
		36,567,518	4,436,302
Treasury shares		(6,535)	(6,535)
EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF PARENT		36,560,983	4,429,767

  CONSOLIDATED CASH FLOW STATEMENT

for the year ended 31 March 2008

			2008	2007
			£	£
OPERATING ACTIVITIES
Cash generated from operations			845,828	2,147,436
Income taxes paid			(676,748)	(428,328)
Interest paid			(614,340)	(39,238)
NET CASH (USED BY)/FROM OPERATING ACTIVITIES			(445,260)	1,679,870
INVESTING ACTIVITIES
Acquisition of subsidiaries, net of cash acquired			(17,453,286)	-
Acquisition of investments in associates			(696)	-
Purchases of other intangible assets			(2,371,176)	(245,975)
Purchases of property, plant and equipment			(932,802)	(544,638)
Interest received			124,319	19,099
NET CASH USED BY INVESTING ACTIVITIES			(20,633,640)	(771,514)
FINANCING ACTIVITIES
Proceeds from issue of shares for cash			12,002,550	-
Proceeds of new borrowings			13,195,689	-
Repayments of borrowings			-	(589,906)
Repayments of hire-purchase obligations			(69,283)	(98,834)
Dividends paid			(201,600)	(133,447)
NET CASH FROM/(USED BY) FINANCING ACTIVITIES			24,927,356	(822,187)
EFFECT OF EXCHANGE RATE DIFFERENCES			(1,834,846)	(11,421)
NET INCREASE IN CASH AND CASH EQUIVALENTS			2,013,610	74,748
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR			959,842	885,094
CASH AND CASH EQUIVALENTS AT END OF YEAR			2,973,452	959,842

  CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

for the year ended 31 March 2008

	Called up share capital	Share premium account	Other reserves	Retained earnings	Treasury shares	Total
	£	£	£	£	£	£
At 1 April 2006	266,893	935,701	737,528	966,192	(2,270)	2,904,044
Profit for the year				1,598,026		1,598,026
Foreign exchange translation differences on foreign currency net investment in subsidiaries			(11,421)			(11,421)
Share based payments			76,830			76,830
Dividends paid				(133,447)		(133,447)
Increase in treasury shares					(4,265)	(4,265)
At 31 March/1 April 2007	266,893	935,701	802,937	2,430,771	(6,535)	4,429,767
Profit for the year				2,836,692		2,836,692
Foreign exchange translation differences on foreign currency net investment in subsidiaries			4,606,116			4,606,116
Share based payments			69,407			69,407
Dividends paid				(201,600)		(201,600)
Shares issued in the period (net of expenses)	212,560	24,608,041				24,820,601
At 31 March 2008	479,453	25,543,742	5,478,460	5,065,863	(6,535)	36,560,983

  NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the year ended 31 March 2008

1 ACCOUNTING POLICIES 

a) BASIS OF ACCOUNTING

The consolidated financial statements are prepared under the historical cost convention in accordance with applicable International Financial Reporting Standards (IFRS) as adopted by the European Union and issued by the International Accounting Standards Board (IASB). IFRS includes all IFRS, IAS, ISCs and IFRICs and the financial statements have been prepared in accordance with those parts of the Companies Act 1985 applicable to companies reporting under IFRS. The measurement basis and principal accounting policies are set out below.

The policies have changed from the previous year when the financial statements were prepared under applicable United Kingdom Generally Accepted Accounting Principles (UK GAAP). The comparative information has been restated in accordance with IFRS. The changes to accounting policies are explained in note 39, together with a reconciliation of opening balances. The date of transition to IFRS is 1 April 2006.

b) BASIS OF PREPARATION

The financial statements are prepared on the historical cost basis except for certain financial assets which are stated at their fair values.

The preparation of financial statements in conformity with IFRS requires the directors to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expense. The estimates and judgements are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making judgements about carrying amounts of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. The accounting policies set out below have, unless otherwise stated, been applied consistently to all periods presented in these financial statements.

c) APPLICATION OF IFRS1

Under the first time adoption procedures set out in IFRS1, the Company is required to establish IFRS accounting policies as at 31 March 2008 and to apply these retrospectively in the determination of prior period comparatives from 1 April 2006, the date of transition. The accounting policies set out below have been applied consistently to all of the periods covered in the financial statements.

There are a number of optional exemptions to this general principle, the most significant of which are set out below:

IFRS 3, Business Combinations

The Group has elected not to restate business combinations prior to the date of transition. Accordingly, the balance sheet at 1 April 2006 incorporates the financial statements of its subsidiary undertaking Immunodiagnostic Systems Limited using the merger method of accounting and the subsidiary's subsidiary undertakings using the acquisition method of accounting. Goodwill previously recognised on consolidation has been reviewed for impairment as at 1 April 2006 and has been fully written off as at that date. Associates have been deemed wholly immaterial and are treated as investments in the Group accounts.

IAS 32, Financial Instruments: Disclosure and Presentation and 

IAS 39, Financial Instruments: Recognition and Measurement

The Group has elected to adopt IAS 32 and IAS 39 from 1 April 2006 and not to restate prior period comparatives.

d) BASIS OF CONSOLIDATION

The consolidated financial statements incorporate the financial statements of the Company and its subsidiary undertakings,

with the exception of Immunodiagnostic Systems Limited, using the acquisition method of accounting, and the consolidated

results of its subsidiary undertaking, Immunodiagnostic Systems Limited, using the merger method of accounting. The

difference between the cost of acquisition of shares in subsidiaries and the fair value of the separable net assets acquired is

capitalised and tested annually for impairment.

The results of businesses acquired or disposed of are consolidated from or to the effective dates of acquisition or disposal. On the acquisition of subsidiary undertakings or businesses, the acquisition cost is allocated against the fair value of net assets acquired, after adjustments to bring accounting policies into line with those of the Group.

2 SEGMENTAL INFORMATION

For management purposes, the Group is currently organised into three geographical operating regions, UK, Europe and USA. These regions are the basis on which the Group reports, by origin, its primary segment information.

The main activity of the Group is the manufacturing and distributing of medical diagnostic products. No separate business segments have been identified for management purposes.

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

Year ended 31 March 2008:

REVENUE

	UK £000	Europe £000	USA £000	Adjustments £000	Consolidated £000
External sales	6,932	8,866	2,862	-	18,660
Inter-segment sales	3,770	1,894	-	(5,664)	-
TOTAL REVENUE	10,702	10,760	2,862	(5,664)	18,660

RESULT

Profit from operations	3,467	552	432	(170)	4,281
Investment income	82	328	4	(289)	124
Finance costs	(2,085)	(344)	-	1,814	(614)
Profit before tax	1,464	536	436	1,355	3,791
Income tax expense	(319)	(42)	(166)	(427)	(954)
Profit after tax	1,145	494	270	928	2,837

Capital additions	1,190	25,128	10	-	26,328
Depreciation and amortisation	285	643	5	-	933

BALANCE SHEET

Segment assets	57,702	27,249	681	(24,702)	60,930
Segment liabilities	(26,689)	(15,264)	(244)	17,828	(24,369)
	31,013	11,985	437	(6,874)	36,561

  Year ended 31 March 2007

REVENUE

	UK £000	Europe £000	USA £000	Adjustments £000	Consolidated £000
External sales	5,736	2,658	1,528	-	9.922
Inter-segment sales	2,341	225	-	(2,556)	-
TOTAL REVENUE	8,077	2,883	1,528	(2,556)	9,922

RESULT

Profit from operations	2,082	(14)	164	(18)	2,214
Investment income	16	-	3	-	19
Finance costs	(31)	(8)	-	-	(39)
Profit before tax	2,067	(22)	167	(18)	2,194
Income tax expense	(532)	-	(64)	-	(596)
Profit after tax	1,535	(22)	103	(18)	1,598

BALANCE SHEET

	UK £000	Europe £000	USA £000	Adjustments £000	Consolidated £000
Segment assets	8,320	865	295	(2,965)	6,515
Segment liabilities	(2,928)	(966)	(123)	1,932	(2,085)
	5,392	(101)	172	(1,033)	4,430

Capital additions	906	38	7	-	951
Depreciation and amortisation	212	38	3	-	253

3 EARNINGS PER ORDINARY 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 31 December 2007, 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.

	2008	2007
	£	£
Profit on ordinary activities after tax	2,836,692	1,598,026
	No.	No.
Weighted average no of shares:
For basic earnings per share	19,773,787	13,344,667
Effect of dilutive potential ordinary shares:
-Share Options	1,256,494	1,242,392
For diluted earnings per share	21,030,281	14,587,059
Basic earnings per share	14.346p	11.975p
Diluted earnings per share	13.489p	10.955p

4 RECONCILIATION OF PROFIT BEFORE TAX TO NET CASH GENERATED FROM OPERATIONS

	2008	2007
	£	£
Profit before tax	3,790,634	2,194,143
Adjustments for:
Depreciation of property, plant & equipment	506,133	212,295
Amortisation of intangible assets	426,474	41,162
Share-based payment charge	69,407	76,830
Release of deferred grants	(179,724)	(3,939)
Investment income	(124,319)	(19,099)
Finance costs	614,340	39,238
Operating cash flows before movements in working capital	5,102,945	2,540,630
Increase in inventories	(5,307,257)	(109,437)
Decrease in receivables	(2,717,670)	(545,166)
Increase in payables	3,767,810	261,409
Cash generated by operations	845,828	2,147,436

  5 ACQUISITIONS

The Group acquired 100% of the share capital of Nordic Bioscience Diagnostics A/S (NBD) and 99.93% of the share capital of Biocode Hycel S.A. (BCH) during the year. The book and fair values acquired were as follows:

		NBD			BCH
	Book value	Fair value adjustment	Fair value	Book value	Fair value adjustment	Fair value	Total
	£	£	£	£	£	£	£
Intangible assets	-	5,711,786	5,711,786	4,518,175	11,705,191	16,223,366	21,935,152
Property, plant and equipment	14,497	-	14,497	1,380,845	64,961	1,445,806	1,460,303
Inventories	596,364	329,951	926,315	3,659,866	-	3,659,866	4,586,181
Receivables	1,173,528	-	1,173,528	6,071,827	-	6,071,827	7,245,355
Cash and cash equivalents	1,228,156	-	1,228,156	(16,722)	-	(16,722)	1,211,434
Payables	(726,935)		(726,935)	(12,325,708)	1,220,637	(11,105,071)	(11,832,006)
Deferred tax	-	(479,182)	(479,182)	-	1,538,262	1,538,262	1,059,080
	2,285,610	5,562,555	7,848,165	3,288,283	14,529,051	17,817,334	25,665,499
Goodwill			10,910,789			1,557,423	12,468,212
Consideration			18,758,954			19,374,757	38,133,711
Consideration satisfied by
Shares			6,902,584			7,465,725	14,368,309
Cash (including expenses)			11,856,370			6,808,349	18,664,719
Earn-out provision			-			5,100,683	5,100,683
			18,578,954			19,374,757	38,133,711

The consideration for the acquisition of NBD was partially satisfied by the issue of 2,783,000 ordinary shares of 2p each and the consideration for the acquisition of BCH was partially satisfied by the issue of 2,839,719 ordinary shares of 2p each, the shares being valued at the market bid price on the date of acquisition, being 248p and 227p respectively.

The earn-out provision (see note 24) represents consideration contingent on future sales of the automated instrument being developed by BCH in the period to 31 December 2010. This amount represents the best estimate at the date of acquisition of the present value of the consideration payable.

Nordic Bioscience Diagnostics A/S contributed £2,556,292 of revenue and £1,596,108 of net profit for the period between the date of acquisition, 30 June 2007, and the balance sheet date. If this acquisition had occurred on 1 April 2007, the contribution to Group revenue would have been £2,518,014 and net profit £2,177,603.

The goodwill is attributable to the synergies that arise in the post acquisition period and access to the acquired company's market and product range. The value of these benefits was not recognised as a separable intangible asset on the basis that it could not be separated from the value generated by the business as a whole.

Biocode Hycel S.A and its subsidiary Biocode Hycel France S.A contributed £4,454,090 of revenue and £650,156 of net loss for the period between the date of acquisition, 31 August 2007, and the balance sheet date. If this acquisition had occurred on 1 April 2007, the contribution to Group revenue would have been £7,845,901 and net loss £2,187,866.

ENDFR SFDFWFSASEDW

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