Final Results

25 June 2012

Immunodiagnostic Systems Holdings PLC

Preliminary Results for the year ended 31 March 2012

Progress against strategic goals in a challenging environment

Immunodiagnostic Systems Holdings plc ("IDS" or "the Company"), a leading producer of manual and automated specialist diagnostic testing kits and instrumentation for the clinical and research markets today announces its preliminary results for the year ended 31 March 2012.

Financial Highlights

·; Continued revenue growth up 7% to £53.7m (2011: £50.2m)

- Automated revenues (IDS-iSYS), 34% of revenues, increased by 57% to £18.2m (2011: £11.6m)

- Revenues from manual tests, 66% of revenues, decreased by 8% to £35.4m (2011: £38.6m)

·; Gross margin stable at 74.7% (2011: 74.7%)

·; Adjusted PBT decreased by 9.5% to £14.9m (2011: £16.5m) before charging -

- Non-recurring items of £5.2m (2011: £nil)

- Changes in accounting estimates of £2.5m (2011: £nil)

·; PBT decreased to £7.3m (2011: £16.5m)

·; Adjusted basic EPS before exceptional costs of 34.6p (2011: 46.1p).

·; Basic EPS of 16.7p (2011: 46.1p)

·; Proposed dividend up 10.0% to 2.75p (2011: 2.5p)

·; Cash generated of £7.0m during the financial year, closing net cash of £6.9m (2011: Net debt £0.1m)

Operational Highlights

·; Revenue from vitamin D franchise grew in the face of increased competition

·; Maintained vitamin D pricing despite challenging market conditions

·; Increased the number of IDS-iSYS system placements by 52% to 367 (2011 : 241)

·; Launched 2 IDS-iSYS assays. PTH 1-34 assay for the quantitative determination of parathyroid hormone levels in human serum or plasma and 1,25 dihydroxy vitamin D assay. IDS-iSYS is the only automated system that can run both 25 hydroxy vitamin D and 1,25 dihydroxy vitamin D

Post-Period Developments

·; Today we announce that Ian Cookson is stepping down with immediate effect as Chief Executive Officer. The Board is currently in discussions with a candidate who has substantial diagnostic and international industry experience and expects to announce an appointment to the role of CEO in the near future

·; Launch of two specialist assays for hypertension, renin and aldosterone

·; Total of 13 specialist immunoassays now available on the IDS-iSYS system

Dr Anthony Martin, Non-executive Chairman of IDS, said: "The Board is working hard to continue to build the Company and increase shareholder value in what is a challenging business environment. Despite the much more competitive market, we have increased revenues from our vitamin D product range while at the same time diversifying our overall product range to broaden the appeal of our IDS-iSYS system. We continue to monitor costs to ensure resources are targeted at the key drivers for the business.

The Board continues to believe that revenues in the current year will show similar year on year growth to those achieved in the year ended 31 March 2012. As a result of the competitive change in the vitamin D market, the Group's trading so far this financial year is at a lower level than last year, but is in line with the Board's expectations. Revenue growth through the year is anticipated to be weighted to the second-half of the financial year reflecting the Board's expectation of increasing demand for existing and recently launched assays driven by an installed base of IDS-iSYS instruments that is also anticipated to continue to increase throughout the year. The full benefit of recent cost saving initiatives is not expected to be fully realised until the second half of the current financial year.

"The Board has taken steps to address this challenging new business environment and is implementing the necessary strategic changes. We believe that IDS is now in a better position to capitalise on the recent progress made and to drive future revenues."

For further information:

Chairman's report

This is my first year reporting as Chairman of the Company and despite a challenging year, we are pleased to report an increase in revenue of £3.5m to £53.7m (2011: £50.2m), up 7%. This growth has been achieved through an increase in revenue of 9% from our total range of vitamin D products and by the Group's products based on our automated IDS-iSYS testing system continuing to gain traction. The Group's adjusted profit before tax has decreased by 9.5% during the year to £14.9m (2011: £16.5m) before charging £5.2m (2011: £nil) of non-recurring items and £2.5m (2011: £nil) relating to changes in accounting estimates.

Market dynamics and strategy

Our shareholders will be aware of the significant developments in the vitamin D market that have largely fuelled the last five years growth of the Group. Whilst the vitamin D market continues to grow, albeit at a slower rate to that witnessed in the past, the entry of a number of the industry majors has slowed the rate of placement of IDS-iSYS systems and also resulted in increased pricing pressure in the marketplace. In response, the Group has re-focused its efforts in sales and marketing and is targeting key customer groups in small to medium sized labs which we believe are best suited to the IDS-iSYS platform and our growing range of assays. The Group's existing menu of specialist assays and those in the pipeline are particularly suited to these labs where the specialized nature of the testing lends itself to a smaller instrument testing system like the IDS-iSYS, as opposed to larger workhorse instruments supplied by other operators that are more suited to higher throughput testing.

Continued price pressures in vitamin D testing will remain a challenge, but we have a strategy to deliver an impressive pipeline of new products that will assist in 'anchoring' existing IDS-iSYS placements and facilitate the placement of new ones. The Group's automated 1,25-Dihydroxy vitamin D product is a world first and a natural twin with 25-Hydroxy vitamin D. The recent launch of our automated hypertension panel of aldosterone and total renin means that the IDS-iSYS system now supports a total of 13 specialist immunoassays. We have further product launches scheduled for later this year.

Our two current OEM partners for the IDS-iSYS have both made progress in the year. Technogenetics of Italy has increased the number of system placements and is expected to launch a new range of infectious disease tests in the current financial year. Omega Diagnostics Group plc expect to launch their allergy tests on the IDS-iSYS in the next 12 months. Further OEM opportunities, using the IDS-iSYS system in other diagnostic areas, continue to be sought.

Board and Management

During the year, David Evans stepped down as Chairman, Paul Hailes retired as Chief Financial Officer and was replaced by Gerard Murray on 1 April 2012 and Roland Sackers joined the Board as a Non-executive Director.

Today we announce that Ian Cookson is stepping down with immediate effect as Chief Executive Officer. The Board is currently in discussions with a candidate who has substantial diagnostic and international industry experience and hopes to announce an appointment to the role of CEO in the near future.

All our thanks go to David, Ian and Paul for their years of service to the Company.

Group restructuring

We also successfully executed a restructuring programme during the last quarter of the financial year to effect a reduction in our cost base in non-market facing operational areas. This is an on-going process but we are targeting a reduction of some £2.0m from our operating costs, which has incurred a non-recurring charge of £1.3m this year.

Strategic review

A strategic review began in the last quarter of the year ended 31 March 2012 with the intention to put in place an accelerated product development plan to deliver both specialist biomarkers with patent protection and more established targets such as a comprehensive diabetes panel. The expansion and diversification of the IDS-iSYS test menu remains the core strategy of the Group, together with geographic expansion into new markets and a focus on those small to medium sized laboratories that can best take advantage of the system. The Group has a strong balance sheet having paid off its outstanding debt since the financial year end and will seek to use this cash generation to fund the accelerated development programme.

Financial reporting

Elsewhere in this report, we have detailed some specific changes to a number of our accounting policies as well as the impact that a number of recent developments have had on our balance sheet. These issues have given rise to a number of adjustments to our financial statements to both the current and prior years. Whilst the combined impact of these changes is significant, in terms of reported profit before operations, a large proportion of the costs being recognised are one-off and non-cash items. The Board believes that these adjustments are appropriate and will allow shareholders to understand our business more clearly.

It is important to state that the Group remains profitable and many of the accounting adjustments do not adversely impact future cash flows. The on-going cash generative capacity of the Group is reflected by the fact that the bank loan of £4.1m that was outstanding at 31 March 2012 has subsequently been discharged in full and the Group has cash balances of approximately £9.2m as of today compared to net cash (after deducting the value of the bank loan) of £6.9m at 31 March 2012.

Dividend

The Board remains confident about the market opportunities that are available to the Group and this is reflected in the strong cash generation nature of the business. Consequently the Board has recommended a dividend of 2.75p (2011:2.5p).

Outlook

Trading for the first three months of the current financial year is in line with management expectations and we have continued to place additional IDS-iSYS systems. More recently we have secured new accounts for both our automated IDS-iSYS test for 1,25 dihydroxy vitamin D and also for our new hypertension assays launched within the past few weeks.

Your Board is working hard to continue to build the Company and increase shareholder value in what is a challenging business environment. Despite the much more competitive market, we have increased our vitamin D revenues while at the same time diversifying the product range to broaden the appeal of the IDS-iSYS system and reduce the influence of changes in the vitamin D market.

Costs are being continuously monitored to ensure resources are targeted at the key drivers for the business which are development productivity and niche marketing and sales activities to target the customer base benefiting most from the Group's products.

Following a challenging year, the Board has implemented the necessary changes and believes that the Group is now in a better position to capitalise on the progress made during the recent period. The Board continues to believe that revenues in the current year will show similar year on year growth to those achieved in the year ended 31 March 2012. As a result of the competitive change in the vitamin D market the Group's trading so far this financial year is at a lower level than last year, but is in line with the Board's expectations. Revenue growth through the year is anticipated to be weighted to the second-half of the financial year reflecting the Board's expectation of increasing demand for existing and recently launched assays driven by an installed base of IDS-iSYS instruments that is also anticipated to continue to increase throughout the year. The full benefit of recent cost saving initiatives is not expected to be fully realised until the second half of the current financial year.

Finally, I would like to formally thank both our employees worldwide for their commitment and our shareholders for their continued support over the past year.

Anthony Martin

Chairman

22 June 2012

Operational Review

Despite difficult trading conditions the Group has continued to make progress throughout the year. Revenues grew by 7%, IDS-iSYS system revenues increased by 57%, the number of IDS-iSYS placements increased by 52% and two additional tests were added to the IDS-iSYS menu during the financial year. The Group's revenues show a degree of weighting towards the second half which has not been apparent in previous years due to very high growth rates in vitamin D testing more than compensating for any such effect. It is expected such a second-half weighting to our revenues will remain a feature in the current financial year as the recently launched assays are expected to contribute more growth in revenue in the second-half as they become established in the market.

Product development

The Group continues to pursue its strategy of developing and marketing a range of specialist tests in areas not well served by existing providers in order to differentiate the Group from its competitors. The IDS-iSYS system and its test menu fulfil a significant unmet market need and are particularly suited for the small to medium sized laboratories. Increasing the range of tests available will enhance the value and appeal of the system and during the last year we expanded the IDS-iSYS product menu by launching a further two assays including 1,25 dihydroxy vitamin D (1,25 diOH vit D), the first ever automated test for this important analyte.

The assay addresses a market where approximately five million 1,25 diOH vit D tests are performed annually across Europe and USA. Compared to existing manual tests, both time to first result and test throughput are significantly improved. The availability of both 25 hydroxy- and 1,25 dihydroxyvitamin D on the same automated system should improve efficiencies in vitamin D testing for laboratories and increase the value of the IDS-iSYS systems already in place, as well as supporting new system placements. The launch of this assay, announced on 4 April 2012 brought the total menu to 11, seven of which are available in the USA, at the end of the financial year.

Since the end of the financial year, a further two IDS-iSYS tests have been launched, both for investigating the cause of hypertension. One out of three people world-wide suffers from hypertension, and for the population over 50 years of age, the prevalence is increased to one out of two people. The IDS-iSYS aldosterone assay is, we believe, the only automated assay on the market, and together with the IDS-iSYS renin assay makes the IDS-iSYS the only system on which this complementary pair of assays is available. Together they have a specific role in diagnosing the most prevalent form of secondary hypertension (Conn's syndrome or primary aldosteronism). The prevalence of primary aldosteronism is 10-13% of total hypertensive patients.

The current market value (Europe & USA) is estimated at over £8m for renin testing, and over £10m for aldosterone testing. The Board believes that the increased convenience of having both assays on one system, and the potential time saving compared to manual methods, will increase adoption of these tests, potentially more than doubling the number of laboratories performing these assays over a three year period.

In addition the Group expects to launch up to three more new tests in the new financial year in the areas of bone, hypertension and diabetes, further expanding the menu and differentiating the platform. The Group will also continue to pursue additional out-licensing opportunities for the IDS-iSYS technology.

Manual test revenue

Revenue from manual tests representing 66% (2011: 73%) of Group revenue reduced by 8% compared to the previous year at £35.4m (2011: £38.6m) primarily due to manual vitamin D sales, £25.8m (2011: £28.3m), which accounted for over £2.5m of this fall in revenue. The pricing environment was relatively stable for the period with overall volume of unit tests sold falling by 11%.

Vitamin D

Despite declining manual revenues in vitamin D, total vitamin D revenues increased by 9% to £37.0m (2011: £34.1m) due to increased automated testing on the IDS-iSYS.

Due to the well-publicised arrival of additional competitors in both the European and US markets the Board expects the pressure on vitamin D revenues to persist as alternative products, both manual and automated, increase competition and reduce unit pricing. Consequently manual vitamin D revenue is expected to show continued decline in the medium term while we continue to make additional automated vitamin D sales. This will be achieved by concentrating our sales focus on those small to medium sized laboratories, which are particularly well suited to the IDS-iSYS. Laboratories previously choosing not to test vitamin D in-house represent the largest single group of IDS-iSYS adopters and it is expected this will continue to be the case. Typically these laboratories are smaller users in terms of volume but allow more attractive pricing than larger users.

IDS-iSYS system

Revenue derived from the Group's automated IDS-iSYS testing system increased by 57% to £18.2m (2011: £11.6m), equating to 34% (2011: 23%) of total Group revenue. This increased proportion of Group revenue reflects good progress in transitioning the Group's business model to be based on its own automated testing system.

A total of 79 (2011: 81) instruments (net of returns) have been sold or placed through our direct sales operation, similar to the previous year. A total of 19 systems were returned, including eight sub-contracted to a competitor on a fixed term basis while they were unable to supply their own customers. The other returned systems were largely early placements made in France without regulated contracts into private laboratories which have been subject to subsequent consolidation.

The total number of IDS-iSYS systems placed or sold as at 31 March 2012 was 367 units (net of returns) which has been achieved since its launch in February 2009.

The average annualised reagent revenue for systems placed by our direct sales teams was £84,000 (2011: £102,000). This reduction in average revenue per system had been expected because in periods prior to the year ended 31 March 2011, a number of early IDS-iSYS system placements were made to high throughput customers. This has been followed by placements in laboratories with lower rates of test throughput in the year ended 31 March 2012 which has lowered the average revenue per instrument. While the majority of IDS-iSYS revenues currently come from vitamin D testing, the continuing expansion of the IDS-iSYS test menu will provide the opportunity for non-vitamin D focused customers to take system placements.

Sales of IDS-iSYS systems to our distributors were 8 (2011: 27) and to OEM customers, 39 (2011: 58). This was lower than in the previous year and we are working with our distributors on ways to make it easier for them to place the IDS-iSYS system. Our main OEM customer, Technogenetics of Italy, marketing its IDS-iSYS based tests for autoimmune disease through Menarini, has increased its placements to end users throughout the year and expects further growth in revenue when it launches a range of infectious disease tests on the system in September 2012. Co-marketing of the Technogenetics/ Menarini products onto the Group's IDS-iSYS placements in France has started and we expect this to increase the utility of systems already installed.

Our other OEM partner, Omega Diagnostics Group PLC, is making good progress in adapting its allergy products for use on the IDS-iSYS system and is planning to launch the system within the next 12 months.

Sales organisation

The Group's major direct sales operations in the USA and Europe (which excludes Spain and Italy) continued to grow during the year with the USA revenues increasing by 19% and our direct European revenues growing by just under 1%.

Revenue from the Group's network of distributors was 2% lower than the previous year at £8.8m (2011: £9.0m) as their manual and automated vitamin D sales came under competitive pressure. Additional support has been allocated to the Export operation and initiatives to improve distributor performance are on-going. A number of additional distributors for the IDS-iSYS have been identified.

In terms of the emerging economies, revenue in India increased by 13% over the previous year and in China, although lower than the previous year because of delays in re-registration of a number of our products, recovered well in the second half of the year once re-registration was achieved. The Group continues to work on increasing our presence in emerging economies.

The Group is strengthening its sales and marketing organisation. Both sales management and direct sales teams have been expanded in the USA and greater sales effort is being placed on those territories supported by our distributors. A new business unit focused on sales of our Research Use Only products to the pharmaceutical industry has also been created. Our German direct sales and service organization has been expanded to cover Poland, Czech Republic, Central European and Balkan states. In addition the Nordic sales and service team is being integrated into our German operation.

Operations

With three manufacturing sites for Group products (one each for manual reagents, automated reagents and IDS-iSYS system production) a single location able to supply all products to our customers was needed. During the financial year we established such a site in Germany serving all European end users.

As a result of the above mentioned changes in the competitive environment a review of all operating costs was undertaken during the final quarter of the financial year. Whilst maintaining investment in both product development and sales channels, the Group headcount was reduced from 330 Full Time Equivalents (FTE) at the end of the first half of the financial year to 315 FTEs at the financial year end. There have been further reductions in the first quarter of the new financial year to bring the current level of FTEs to 302 as of today. In total, operating costs have been reduced by £2.0m on an annualised basis, primarily through headcount restructuring and savings on facility and travel costs. The non-recurring charge for the year ending 31 March 2012 for the realignment of the cost base is £1.3m.

IDS Connect

The selection and implementation of a new Group-wide integrated systems architecture has progressed satisfactorily during the financial year and will become operational in the majority of sites during the new financial year. The solution which is built on a Microsoft SQL platform and based around a leading mid-market ERP system (Infor Syteline) coupled with Microsoft Sharepoint will facilitate a significant advance in the operational efficiency of the Group.

The OneIDS programme continues to be the focus for our cultural integration activities, aimed at achieving a joined-up international organisation which reflects our business values and flexibility to meet our customer needs. Various activities throughout the year have contributed well to this aim, despite the inevitable difficulties associated with the recent restructuring programme.

Health, Safety and Environment

We continue to take seriously our responsibilities to staff, contractors and community and this year the significant investment in facilities and training has resulted in a satisfactory reduction in our already low levels of key incident statistics.

Summary

In a difficult trading period the Group continued to make progress against its strategic goals.

·; Grew aggregate vitamin D revenue despite increased competition.

·; Maintained our vitamin D pricing relative to the challenging market conditions.

·; Maintained gross margin despite pricing pressure.

·; Increased the number of IDS-iSYS system placements.

·; Increased the number of tests available on the IDS -iSYS system.

In addition the diversification of the IDS-iSYS product menu, into new areas such as hypertension and diabetes, we believe, will help solidify the overall value of the IDS-iSYS system with customers and provide a system to help differentiate the Group's offering from that of its competitors.

Financial Review

Profit before tax

The Group's adjusted profit before tax decreased by 9.5% to £14.9m (2011: £16.5m) before charging £5.2m (2011: £nil) with respect to non-recurring items and £2.5m (2011: £nil) in connection with changes in accounting estimates. The background to the non-recurring items and changes in accounting estimates is set out below. The Group's profit before tax on a statutory basis decreased to £7.3m (2011: £16.5m).

Revenue

Group revenue increased by 7% to £53.7m (2011: £50.2m) and measured at constant exchange rates the increase was 8%. An increasing component of Group revenue is generated through the placement of IDS-iSYS systems and as a consequence of this the Group has reviewed the interpretation of IFRIC 4 to determine whether a lease component exists within Group customer contracts. This review concluded that the characteristics of these contracts do result in an operating lease component associated with the placement of IDS-iSYS systems and as such the Group has adopted IAS 17 when determining the relevant proportions of automated assay revenues and operating lease rental payments.

The composition of Group revenue between geographic territories and products (including operating lease rentals) is set out below -

Revenue by sales territory

Revenue by product group

The Group's strategy is based on developing a specialised immunoassay menu to be used on its proprietary automated IDS-iSYS testing system. As this menu matures the Group's proportion of revenue being derived from automated assays is expected to increase. During the financial year ended 31 March 2012 automated revenues comprised 34% (2011: 23%). The Board also recognises the pre-eminence of vitamin D assays as a proportion of the Group's revenue. The stated strategy of building a specialised assay menu will ultimately reduce the Group's dependency on vitamin D products. During the year financial year ended 31 March 2012 total vitamin D revenue (manual and automated) represented 69.0% (2011: 68.0%) of Group revenue. The increase has arisen as the Group's overall vitamin D revenue increased by 9% compared to Group revenue increase of 7%. Going forward it is expected that the vitamin D proportion of Group revenue will decline as other automated revenues are launched for the IDS-iSYS installed base to utilise.

Operating expenses

The Group's total operating expenses comprise -

Operating expenses (including intangible amortisation) increased by 60% to £32.6m (2011: £20.4 million) of which the largest proportion of this increase relates to exceptional costs of £5.2m and changes in accounting estimates of £2.5m. Adjusting for these items the increase in operating expenses is 22%.

Non-recurring items

The Group has incurred a number of non-recurring items during the year ended 31 Marchcomprising -

Provision against BH Holdings SAS ("BHH") receivable

In December 2008 the Group disposed of its Haematology Division as it was considered a non-core business operation. This business was originally acquired in 2007 as part of the Biocode Hycel acquisition. The sale agreement incorporated deferred consideration of €3.2m due from the purchaser, BHH, and guaranteed by its ultimate parent company Escalon Medical Corporation. Following an agreed restructuring of the deferred repayments terms in May 2011, BHH later went into administration. The Board continues to pursue a course of action that it believes will optimise the recoverability of the receivable but feels that given this change in circumstances during the year and the resultant default, it is appropriate to provide for this receivable in full.

Retirement of development costs

The development of the IDS-iSYS system continues each year to meet the technical requirements of the assays that are being developed and the needs of the customer base. Development costs incurred on specific IDS-iSYS projects continue to be capitalised in line with IAS 38. During the current year costs that were previously incurred on earlier projects have been retired where appropriate.

Impairment of assay development costs

The annual review of the assay register to identify any risk of impairment determined that some assays that had commenced the development phase had subsequently shown weakening in demand due to other alternative solutions available to customers. As a consequence, the development costs that had been capitalised in connection with these assets have been impaired until such time as the market conditions give rise to certainty over future revenues from the relevant assays.

Restructuring costs

In response to the changing market conditions that the Group experienced with respect to its major product, vitamin D, the Board instigated an initiative to streamline the organisation and enhance profitability across the business. The purpose of the programme is to more closely align the Group's cost base with current and expected market conditions, whilst continuing to maintain investment in new product development and strengthening the sales and marketing organisation.

The programme has identified approximately £2.0m of annualised cost savings (equivalent to approximately 10% of operating overheads excluding depreciation and amortisation). The implementation of this restructuring gave rise to one-off costs of approximately £1.3m. The full benefit of the annualised savings is expected to be seen during the financial year ending 31 March 2013.

Effect of changes in accounting estimates

The Board has reviewed the amortisation periods that have historically been applied to development costs and other intangibles, principally license and patent agreements. With respect to the amortisation period applied to internally generated development costs, this has been reduced from 18 years to 10 years on a prospective basis. The effect on the amortisation charge during the year ended 31 March 2012 was to increase this charge by £1.0m.

The amortisation periods for a number of external licenses and patents were linked to the expected periods that economic benefits were expected to accrue to the Group from associated products that have been developed by utilising these licenses and patents. These periods have been adjusted on a prospective basis to reflect only the period that the Group is entitled to access the intellectual property granted in the license or the patent. The effect on the amortisation charge for the year ended 31 March 2012 was to increase this charge by £1.1m. The Group has reviewed the components of costs directly related to development spend and have removed some costs capitalised on an ongoing basis resulting in an additional charge of £0.5m in the current year.

Furthermore the Board has assessed the level of inventory with respect to instrument manufacturing against expected medium term sales forecasts against a background of a lean supply chain that is available to the Group. The assessment has resulted in the current year inventory provision of £0.8m (2011: £0.5m) which is reflected in the Group's cost of sales.

Other operating expenses

The Group's other operating expenses have increased by 23% to £20.4m (2011: £16.6m). The largest proportion of this increase relates to staff costs which grew by £1.9m reflecting the Group's increase in resources in anticipation of continued growth in revenue at historical rates. Other employment activity, principally travel and premises costs represented a further £0.8m of the increase. The restructuring exercise undertaken during the last quarter of the financial year has focused on reducing operating costs in those areas that required realigning with the Group's more recent revenue growth.

Taxation

The Group's effective tax rate is a blend of corporation tax rates ranging from 25% in the Denmark through to 40% in the USA combined with dedicated R&D tax credit schemes in the UK and France. The Group's effective tax rate for the current year is 35% (2011: 22%) with the increase being attributable the incidence of non-recurring items being incurred in Immunodiagnostic Systems SAS its French subsidiary undertaking. The cumulative tax loss in this jurisdiction has led the Board to not recognise the full deferred tax asset associated with these losses until there is more certainty with recoverability. If the deferred tax credit associated with these costs had been recognized in full the effective tax rate would have been 21%.

Earnings per share

Adjusted earnings per share is calculated using profit after tax based adjusted to exclude the after tax effect of charges for non-recurring costs and changes in accounting estimates.

Adjusted basic earnings per share are 34.6p (2011: 46.1p).

Basic earnings per share calculated on profit after tax has reduced to 16.7p (2011: 46.1p) principally due to the non-recurring costs and the change in accounting estimates.

Dividend

The Board is proposing a dividend for the year of 2.75p (2011: 2.50p) subject to the approval of shareholders at the Annual General Meeting. The dividend per share will be paid on 28 September 2012 to shareholders on the register at the close of business on 7 September 2012.

Balance Sheet

The Group's shareholders' funds at 31 March 2012 were £72.3m (2011: £72.5m). The lack of growth in shareholders' funds reflects a number of non-cash accounting adjustments that have been made during the year ended 31 March 2012 which the Board believe will assist in a better understanding of the Group's financial results going forward. The underlying intellectual property that the Group possesses through patents, know-how and its own testing instrument remains strong and this is reflected in the positive cash flows.

Cash flow

The Group continues to generate strong positive cash flows from its operations with a net increase in cash of £4.7m (2011: £1.1m) over the year after discharging loan repayments of £2.0m (2011: £4.9m). This cash generation has continued since the end of the financial year such that the outstanding bank debt at 31 March 2012 of £4.2m has been repaid in full and at the date of this report the Group has £9.2m in cash.

Prior period adjustments

Walloon Government grants

The Group acquired the whole of the share capital of Immunodiagnostic Systems SA (formerly Biocode Hycel SA) on 31 August 2007. Prior to the acquisition this subsidiary undertaking had received grants from the Walloon Regional Government towards the development of certain automated immunoassays ("the products"). The terms of the agreements provide for future repayment of the grant received in the event that the products are being commercialised.

A review of the agreements has shown that the majority of products for which the grants had been received have since been abandoned. It has, however, come to light that the Walloon Regional Government was notified of the intended commercialisation of a small number of products in the financial year ended 31 March 2010, at which point the grant became repayable in its entirety. As a result of this event the grant must be recognised as a liability in accordance with IAS 20. As the event giving rise to the repayment obligation occurred in the financial year ended 31 March 2010, the recognition of the liability, which had previously been disclosed as a contingent liability, has been treated as a prior period adjustment.

Remuneration bonus payments

The Group operates various performance bonus schemes for Directors and senior management, some of which are contractual in nature and some of which are discretionary. In accordance with IAS 19, only those payments for which the Group has a contractual or constructive obligation at the balance sheet date and which can be reliably measured at the time of issue of the financial statements are recognised as liabilities. A review of those bonus agreements which had previously been treated as discretionary, and therefore recognised in profit or loss in the period in which they were paid, has concluded that in the majority of cases, the terms of the agreements are such as to justify that the bonus should have been accrued. This change has been applied retrospectively by way of a prior period adjustment.

Capital management

The Board's objective is to maintain a balance sheet that is efficient in terms of providing long term returns to shareholders whilst at the same time safeguards the Group's financial position through variable economic cycles. As at the 31 March 2012 the Group had net cash (after deducting borrowings) of £6.9m (2011: Net debt £0.1m) and combined with cash generated in the year of £7.0m the Board considers its objective is being achieved.

The Group can vary its capital structure by adjusting the level of dividends paid to shareholders, by issuing new share capital and by arranging new debt facilities.

Gerard Murray

Finance Director

22 June 2012

CONSOLIDATED INCOME STATEMENT

for the year ended 31 March 2012

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

for the year ended 31 March 2012

CONSOLIDATED BALANCE SHEET

31 March 2012

CONSOLIDATED STATEMENT OF CASH FLOWS

for the year ended 31 March 2012

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

for the year ended 31 March 2012

prior PERIOD adjustment

Walloon Regional Government grants

The Group acquired the whole of the share capital of Immunodiagnostic Systems SA (formerly Biocode Hycel SA) on 31 August 2007. Prior to the acquisition this subsidiary undertaking had received grants from the Walloon Regional Government towards the development of certain automated immunoassays ("the products"). The terms of the agreements provide for future repayment of the grant received in the event that the products which are being developed and for which the grants were received enter commercial production.

The amount and timing of any repayment is dependent on the future revenues generated from product sales, and represents a percentage of such revenue subject to an annual minimum payment that commences at the moment the products enter commercial production. In accordance with IAS 37, this was previously disclosed as a contingent liability.

A review of the agreements has shown that the majority of products for which the grants had been received have since been abandoned, and there are ongoing technical discussions as to whether the products which did enter commercial production are the same as those for which the grants were received. Negotiations have commenced with the Walloon Regional Government concerning the technical issues over the product development. It has, however, come to light that the Walloon Regional Government was notified of the intended commercialisation of these products in the financial year ended 31 March 2010, at which point the grant became repayable in its entirety and, as a result of this event, must be recognised as a liability in accordance with IAS 20. The amount recognised as a liability is the present value of the minimum repayments, which are the amounts the Directors expect to be paid subject to the outcome of the aforementioned negotiations.

As the event giving rise to the repayment obligation occurred in the financial year ended 31 March 2010, the recognition of the liability has been treated as a prior period adjustment.

Bonus payments

The Group operates various bonus schemes, some of which are contractual in nature and some of which are discretionary. In accordance with IAS 19, only those payments for which the Group has a contractual or constructive obligation at the balance sheet date and which can be reliably measured at the time of issue of the financial statements are recognised as liabilities. A review of those bonus agreements which had previously been treated as discretionary, and therefore recognised in profit or loss in the period in which they were paid, has concluded that in the majority of cases, the terms of the agreements are such that the bonus should have been accrued. This change has been applied retrospectively by way of a prior period adjustment.

The effects of the prior period adjustments on retained earnings is as detailed below. The income statement for the year ended 31 March 2011, as well as the balance sheets as at 31 March 2010 and 31 March 2011 have been restated accordingly.

The effect on individual line items in the financial statements is as follows:

SEGMENTAL INFORMATION

For management purposes, the Group is currently organised into three operating regions: direct sales operations in the USA, Europe (excluding Spain, Italy and Portugal) and distributor sales operations in the Rest of the World . These regions are the basis on which the Group reports its segment information.

The main activity of the Group is the manufacturing and distributing of medical diagnostic products.

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.

PROFIT FROM OPERATIONS

Profit from operations is stated after charging (crediting):

TAXATION ON ORDINARY ACTIVITIES

Analysis of charge in the year

Factors affecting tax charge

The tax assessed for the period is higher than the standard rate of corporation tax in the UK (26%; 2011: 28%). The differences are explained below:

DEFERRED TAXATION

All deferred tax balances are expected to reverse after more than one year. Outstanding tax losses for which no deferred tax asset has been recognised amounted to £1,500,000 (2011: £nil). Based on current forecasts, the Directors believe the deferred tax assets recognised for accumulated losses in respect of subsidiary undertakings that made a loss in the financial year ended 31 March 2012 to be recoverable in full.

EARNINGS PER ORDINARY SHARE

Basic earnings per share is calculated by dividing the earnings attributable to holders of Ordinary shares 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 March 2012, 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.

Adjusted earnings per share is calculated using profit after tax based adjusted to exclude the after tax effect of charges for non-recurring costs and changes in accounting estimates.

OTHER FINANCIAL ASSETS

Other financial assets are made up of trade and other receivables and cash and cash equivalents.

Trade and other receivables are as follows:

The average credit period taken on sale of goods is 44 days (2011: 42 days). An allowance has been made for estimated irrecoverable amounts from sale of goods of £138,000 (2011: £138,000).

This allowance has been based on the knowledge of the financial circumstances of individual receivables at the balance sheet date. Credit terms are negotiated individually for major customers; at the balance sheet date there are no material receivables which can be classified as overdue, other than those for which an allowance has been made.

An allowance of £2,795,000 has been made in respect of an amount receivable in respect of the sale of the haematology business by ImmunoDiagnostic Systems France SAS in the financial year ended 31 March 2010. The acquiring company has liquidity difficulties at present, and therefore the Directors, whilst pursuing receipt of the amount in whole, have decided to provide for the entire amount of capital and accrued interest.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the year ended 31 March 2012

Extract from Annual Report and Financial Statements

The financial information set out above does not constitute the Group's statutory financial statements for the years ended 31 March 2012 or 2011 but is derived from those financial statements. Statutory financial statements for 2011 have been delivered to the registrar of companies, and those for 2012 will be delivered in due course. The auditors have reported on those financial statements; their reports were (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006. The annual report and financial statements for the year ended 31 March 2012 will be posted to shareholders in July 2012. The results for the year ended 31 March 2012 were approved by the Board of Directors on 22 June 2012 and are audited.

Basis of preparation

The preliminary announcement has been prepared under the historical cost convention on a going concern basis and in accordance with the recognition and measurement principles of International Financial Reporting Standards and IFRIC interpretations as adopted by the EU ("IFRS").

The preliminary announcement has been prepared on the basis of the same accounting policies as published in the audited financial statements of the Group for the year ended 31 March 2011 and the accounting policies to be adopted in the audited financial statements of the Group for the year ended 31 March 2012.

Internally-generated intangible assets are amortised, once the product is available for use, on a straight-line basis over their useful lives. Initial development expenditure incurred on the automation of automated assay products for the IDS-iSYS system is amortised over the average remaining life of the patents relating to the IDS-iSYS from the date the product commences commercial production. At the time of the launch of the first IDS-iSYS products in March 2009 this period was 18 years. As from the current financial year, all development costs related to the IDS-iSYS are being amortised over 10 years. This change in accounting estimate has increased the amortisation charge for the year by £1.0.