Half Yearly Report

30th Nov 2009 07:00



 

IMMUNODIAGNOSTIC SYSTEMS HOLDINGS PLC

Unaudited Interim Results for the Six-Month Period to 30 September 2009

Immunodiagnostic Systems Holdings plc ("IDS" or the "Company" or the "Group"), a leading producer of diagnostic testing kits for the clinical and research markets, announces its interim results for the six month period to 30 September 2009.

IDS operates in the in-vitro diagnostics ("IVD") market. The Company designs, manufactures and sells immunoassay kits which are used to measure or detect particular substances within a sample, thus aiding the diagnosis or monitoring of a disease or providing information for research studies.  In 2007 the immunoassay sector of the IVD market was estimated to be worth US$ 10bn.

Financial Highlights:

Revenue up 56% to £16.9m (2008: £10.8m);

Gross profit up 88% to £12.3m (2008: £6.5m);

EBITA up 181% to £6.0m (2008: £2.1m);

Pre-tax profit up 188% to £4.6m (2008: £1.6m);

Earnings per share (diluted) up 190% to 12.1p (2008: 4.2p)

Operational Highlights:

Sales of flagship Vitamin D products up 104% year on year

Launch of unique PINP and human GH products on IDS-iSYS

Geographic reach of the IDS-iSYS extended through an OEM deal with Technogenetics

Consolidation of R&D operations into Boldon and Liège

Commenting on Outlook, David Evans, Chairman said:

"Traditionally the revenues are weighted to the second-half of the financial year and the Board sees this year as no exception.

"Overall the prospects for the Group remain bright and we continue to forge ahead with our plans for growth both organically and where we may deem it appropriate by acquisition.

"Trading in the year to date is in line with management expectations."

Contacts:

IDS	Brewin Dolphin Investment Banking	Walbrook PR Ltd
Roger Duggan, CEO	Andrew Emmott	Paul McManus
Paul Hailes, Finance Director	Sean Wyndham-Quin
Tel: 0191 519 0660	Tel: 0845 213 4730	Tel: 020 7933 8787
		Mob: 07980 541 893
http://www.idsplc.com		[email protected]

 

 Chairman's and Chief Executive's Report

Introduction

Our shareholders will be aware that H1 of 2009/10 was a very important 6 months for IDS. Having launched our fully-automated immunoanalyser, the IDS-iSYS, towards the end of Q4 of FY2008/9, 'proof of the pudding' time was at hand. The instrument, the first reagents, the preparations in the field with product support engineers and the like, were all to be put to the test. It was also beholden on us not to slacken or fall short in the prosecution of our burgeoning 'manual' assay business world-wide. A tense and testing time.

How did we fare?

Activities in the Period

Demand for IDS products has continued to grow, and whilst this is particularly so for our Vitamin D products (for which revenues have more than doubled), we have enjoyed rising sales in each major product range. Year-on-year growth for the period in excess of 50% is very pleasing in the light of the difficult ongoing financial conditions that had seen a slowdown of decision-making in many businesses. Our subsidiaries in the USA, Germany, France and Scandinavia have performed above expectations, with increased sales of manual products being achieved even as they put their shoulders to the wheel of automation and IDS-iSYS sales. It clearly signifies the strength of our existing business, and as we enter the much larger field of automated immunoassay adds to our confidence that IDS-iSYS revenues will be predominantly additive to ongoing manual sales.

The vitamin D testing market remains phenomenal, with market research data suggesting year-on-year growth in excess of 50%. The sustained interest in determining the adequacy of a patient's vitamin D status continues to drive demand for testing in many countries. The relationship between inadequate vitamin D status and increased predisposition to disease strengthens as papers continue to appear in learned peer-reviewed scientific journals. A seemingly ever-lengthening list of conditions, both life-threatening and those representing 'quality of life' issues, suggests that the upward trend will continue for some time to come. Articles are now also appearing frequently in high profile publications such as the Financial Times1 and in widely-available free-to-view publications2 reflecting enhanced public awareness.

It is the strength of the vitamin D market and the high regard in which IDS' expertise in vitamin D testing is held that enabled us to launch a brand-new machine (the IDS-iSYS) with a single product, the new automated methodology for 25-hydroxy vitamin D. Our approach to entering the automated market with this singular offering has been controlled and cautious. In preparation, we have recruited a number of highly-experienced personnel with solid backgrounds in automation, and this has undoubtedly stood us in good stead in launching the IDS-iSYS.

Our experiences in H1 have been instructive and rewarding. Whilst the times for 'accounts to go live' have been a little slower than originally anticipated, feedback from a very discerning customer base has been positive, both for the performance of the instrument itself in terms of speed, reliability and precision, and in terms of the vitamin D assay performance, particularly regarding reproducibility between runs and inter-laboratory precision. These are critical parameters in the evaluation of an analytical tool, particularly in the clinical setting, and we are therefore very satisfied that the results meet both our own and our customers' expectations.

Evaluations in potential customers' laboratories have taken longer than anticipated, largely due to the IDS-iSYS being a brand new instrument with no 'track record' as such, coming as it does from a company with little historical presence in the automated immunoassay market. We have had to work assiduously to overcome the natural caution of laboratory managers to introduce a replacement method whilst under continual pressure to report results on time.

Post launch we have placed or sold 43 IDS-iSYS machines, of which 27 relate to the period up to 30th September. In terms of machine numbers we were approximately two months behind-where we had hoped to be at the end of H1, however average revenue per machine is ahead of our initial expectations at around £86,000 in the UK and €76,000 in Europe.  These compare favourably to original expectations and management believe that these revenues can be improved upon by "up-selling" our expanding range of new products onto a growing instrument base.

In October we announced a new OEM agreement with one of our key partners, Technogenetics, granting them marketing rights for their autoimmune and infectious disease tests on the IDS-iSYS throughout Europe and the former Soviet Union. We have now received an initial order for 20 instruments from them.

Entering H2, we believe that we have gained significant presence and visibility in a number of prestigious laboratories, including those of some 'opinion leaders', which will facilitate the ongoing process. H2 has historically outpaced H1 and we have every confidence that the rate of placements will accelerate as our marketing efforts intensify and the performance of the IDS-iSYS spreads by word of mouth between laboratories. This will also be facilitated as the menu of IDS-iSYS kits is enhanced by successive product launches.

Vitamin D launched to high acclaim in February 2009, and was followed by PINP (a bone formation marker) in July and a very discriminating human Growth Hormone (hGH) assay in September. In the months to come, we will be releasing Parathyroid hormone (PTH), Insulin-like Growth Factor I (IGF-I), Osteocalcin and Bone-specific Alkaline Phosphatase (BAP). The complementary nature of these products and the creation and expansion of specialist panels of disease-related analytes will greatly enhance the attraction of the IDS-iSYS to the specialist endocrine laboratory - PTH is very frequently required to be measured together with vitamin D, and similarly IGF-I is commonly measured alongside hGH.

And as in the instances of PINP and hGH, we have elected not simply to 'tick the box' in terms of product availability but have very deliberately 'raised the bar' to our competitors in quality terms. The IDS-iSYS PINP and hGH products both offer unique capabilities with clear performance benefits over those of our competitors.

In order to launch in the USA, we are required to obtain what is known as 510(k) market clearance from the United States Food and Drug Administration (US FDA). Our submission is under consideration at this time, and we anticipate completion of the process within the next few weeks to support a scheduled launch of the IDS-iSYS in the USA during December/January.

During the period we consolidated our R&D operations by the closure of our site in Finland and transferring their work to Boldon and Liège with resulting cost savings.

The Board remains confident of the Group's prospects for the remainder of the year.

Financial

Profit and Loss Account

Turnover for the period increased to £16.9m from £10.8m an increase of 56% reflecting the significant contribution of our manual products and revenues from our recently launched automated system the IDS-iSYS.

Gross Profit increased to £12.3m from £6.5m an increase of 88%. The overall margin percentage increased to 72.9% from 60.4%. 

Total group research and development expenditure for the period was £1.7m of which £1.6m related to product development and was capitalised.

Profit from operations increased to £4.9m from £1.9m an increase of 165%.

Net financing costs increased to £0.4m from £0.3m. 

The charge to taxation increased to £1,165k from £528k leaving a profit attributable to ordinary shareholders of £3,411k (2008: £1,061k).

Overall EPS increased to 12.900p from 4.424p and on a fully diluted basis to 12.148p from 4.195p.

Balance Sheet

At 30 September cash at bank amounted to £3.5m (2008: £0.9m)

Group debt at period end totalled £13.2m up £0.3m.

Net debt amounted to £9.7m ( 2008: £12.1m)

Included in debtors is an amount due from Escalon Medical Corporation in respect of the divestment of the haematology division last year together with some post-transaction trading receivables. In light of a note in their most recently published annual report, to which their auditors specifically refer, the Board of IDS has reviewed the ultimate recoverability of this debt. After extensive discussion with Escalon Medical Corporation we have reached a judgement that no provision should be made against this amount at this time. Should we become aware of any information that changes our view then we will duly inform the market.

Board Composition

During the summer Will Dracup stepped down from the Board after nearly five years of service to the Company and we would like to thank Will for his contribution over that period of time. Our relationship with Will continues in a collaborative agreement with his company Biosignatures Limited for the development of novel biomarkers in certain disease areas.

We are at the final stages of selecting Will's replacement and we will announce this as soon as possible.

Additionally we have appointed Dr Burkhard Wittek to the Board. Burkhard is employed by the Forumgruppe which has a ca 25% holding in the Company. Burkhard brings to the Board a wealth of experience and analytical insight and discipline particularly from the perspective of a shareholder. We welcome this fresh perspective and contribution.

Outlook

The Group continues to make good progress on all fronts.

Traditionally the revenues are weighted to the second-half of the financial year and the Board sees this year as no exception.

The absolute extent of the growth in revenues is dependent upon the following;

The rate of placement of IDS-iSYS instruments. Whilst the rate of placements has been slower than earlier expectations we remain confident that the issue is one of timing. As we are perceived as the new entrant to the market, the precise timing of sales is difficult to predict. We reiterate our belief that it is not a question of whether the IDS-iSYS will be successful, but how successful it will be. Indeed since the half-year end the rate of placements has increased and is trending in line with our expectations.

 

The timing of the clearance to market our iSYS system in the USA. The submission for 510(k) clearance is currently with the US FDA and the application is in process.

 

The value of associated reagent sales per machine. To date the rate of revenue per machine is running ahead of our expectations and has more than compensated for the slightly slower than expected pace of roll-out. We will continue to take a conservative view on future expected reagent sales.

 

Trading in the year to date is in line with management expectations.

Overall the prospects for the Group remain bright and we continue to forge ahead with our plans for growth both organically and where we may deem it appropriate by acquisition.

We look forward to continuing to update you on the progress of the Group over the coming months.

David Evans Roger Duggan

Chairman Chief Executive Officer

  Unaudited consolidated interim balance sheet

As at 30 September 2009

	6 Months	6 Months	Year ended
	ended	ended	31 March
	30 Sept 2009	30 Sept 2008	2009
	£'000	£'000	£'000
Assets
Non-current assets
Property, plant and equipment	4,688	3,169	3,945
Goodwill	19,618	18,608	19,464
Other intangible assets	38,017	30,664	37,139
Investments	218	264	220
	62,541	52,705	60,768
Current assets
Inventories	6,043	5,083	5,737
Trade and other receivables	10,142	4,952	8,598
Income tax assets	0	0	560
Cash and cash equivalents	3,475	880	4,456
	19,660	10,915	19,351
Assets held for sale
Property, plant and equipment	0	363	0
Inventories	0	1,272	0
Trade receivables	0	348	0
	0	1,983	0
Total assets	82,201	65,603	80,119
Liabilities
Current liabilities
Short term portion of long term borrowings	3,748	4,925	2,634
Trade and other payables	5,173	5,052	5,884
Income tax liabilities	1,693	-	1,250
	10,614	9,977	9,768
Net current assets	9,046	2,921	9,583
Non-current liabilities
Long term borrowings	9,432	8,005	11,292
Provisions	3,534	5,445	3,521
Deferred tax liabilities	2,562	4,032	4,447
Deferred income	398	461	378
	15,926	17,943	19,638
Total liabilities	26,540	27,920	29,406
Net assets	55,661	37,683	50,713
Total equity
Called up share capital	529	480	528
Share premium account	28,512	25,573	28,500
Other reserves	14,127	5,902	12,166
Retained earnings	12,500	5,735	9,526
Treasury shares	-7	-7	-7
Equity attributable to equity holders of the parent	55,661	37,683	50,713

  

Unaudited consolidated interim income statement

For the six month period to 30 September 2009 

	6 Months	6 Months	Year ended
	ended	ended	31 March
	30 Sept 2009	30 Sept 2008	2009
	£'000	£'000	£'000
Revenue	16,898	10,832	24,937
Cost of Sales	-4,573	-4,285	-8,357
Gross Profit	12,325	6,547	16,580
Distribution costs	-2,709	-2,161	-4,601
Administrative expenses	-4,685	-2,523	-6,613
Profit from operations	4,931	1,863	5,366
Finance income	130	21	118
	5,061	1,884	5,484
Finance costs	-485	-295	-703
Profit before tax	4,576	1,589	4,781
Income tax expense	-1,165	-528	-585
Profit for the period from continuing activities	3,411	1,061	4,196
Profit for the period from discontinued activities	0	-32	624
Profit for the period
attributable to equity holders of the parent	3,411	1,029	4,820
Earnings per share
From continuing operations
- basic	12.900p	4.424p	16.918p
- diluted	12.148p	4.195p	16.166p
From continuing and discontinued operations
- basic	12.900p	4.291p	19.433p
- diluted	12.148p	4.069p	13.489p

  Unaudited consolidated interim cash flow statement

For the six month period to 30 September 2009

	6 Months	6 Months	Year ended
	ended	ended	31 March
	30 Sept 2009	30 Sept 2008	2009
	£'000	£'000	£'000
Profit from operations from continuing activities	4,931	1,863	5,366
Profit from operations from discontinued activities	0	3	1,017
Profit from operations	4,931	1,866	6,383
Adjustments for:
Depreciation and amortisation	1,589	635	1,428
Share based payment expense	148	109	218
Release of deferred grants	-20	-134	-285
Interest paid	-450	-330	-754
Operating cash flows before movements in working capital	6,198	2,146	6,990
Movement in inventories	-495	-99	1,416
Movement in receivables	-1,900	303	-2,782
Movement in payables	-535	-99	-11
Income taxes paid	-87	-75	-302
Net cash from / (used by) operating activities	3,181	2,176	5,311
Investing activities
Acquisition of investments in subsidiaries (net of cash acquired)	0	-23	-52
Purchases of other intangible assets	-2,369	-2,241	-4,326
Purchases of property, plant and equipment	-1,420	-1,077	-1,423
Interest received	130	21	117
Net cash used by investing activities	-3,659	-3,320	-5,684
Financing activities
Proceeds from issue of shares for cash	13	30	3,005
Proceeds of new borrowings	0	1,405	1,405
Repayments of borrowings	-698	-1,693	-2,699
Dividends paid	-437	-360	-360
Net cash from / (used by) financing activities	-1,122	-618	1,351
Effect of exchange rate differences	619	-331	505
Net increase / (decrease) in cash and cash equivalents	-981	-2,093	1,483
Cash and cash equivalents at beginning of period	4,456	2,973	2,973
Cash and cash equivalents at end of period	3,475	880	4,456

  Unaudited consolidated statement of changes in equity

	Share Capital	Share premium account	Other reserves	Retained earnings	Treasury shares	Total
	£'000	£'000	£'000	£'000	£'000	£'000
At 1 April 2009	528	28,500	12,166	9,526	-7	50,713
Profit for the period				3,411		3,411
Foreign exchange translation differences on foreign currency net investment in subsidiaries			27			27
Share based payments charged to equity reserves			148			148
Deferred tax effect of share based payments charged to equity reserves			1,786			1,786
Dividend Paid				-437		-437
Shares issued in the period (net of expenses)	1	12				13
At 30 September 2009	529	28,512	14,127	12,500	-7	55,661
At 1 April 2008	479	25,544	5,909	5,066	-7	36,991
Profit for the period				1,029		1,029
Foreign exchange translation differences on foreign currency net investment in subsidiaries			-116			-116
Share based payments charged to equity reserves			109			109
Dividend Paid				-360		-360
Shares issued in the period (net of expenses)	1	29				30
At 30 September 2008	480	25,573	5,902	5,735	-7	37,683
At 1 April 2008	479	25,544	5,909	5,066	-7	36,991
Profit for the period				4,820		4,820
Foreign exchange translation differences on foreign currency net investment in subsidiaries			6,039			6,039
Share based payments charged to equity reserves			218			218
Dividend Paid				-360		-360
Shares issued in the period (net of expenses)	49	2,956				3,005
At 31 March 2009	528	28,500	12,166	9,526	-7	50,713

  Notes to the Interim Financial Statements

For the period to 30 September 2009

1 Basis of preparation

This interim statement for the six month period to 30 September 2009 is unaudited and was approved by the Directors on 27 November 2009. The financial information contained in the interim report has been prepared in accordance with the accounting policies set out in the annual report and accounts for the year ended 31 March 2009.

The financial information contained in the interim report does not constitute statutory accounts as defined in Section 240 of the Companies Act 1985. The financial information for the full preceding year is based on the statutory accounts for the year ended 31 March 2009. Those accounts, upon which the auditors, Baker Tilly UK Audit LLP, issued an unqualified audit opinion, have been delivered to the Registrar of Companies.

As permitted, this interim report has been prepared in accordance with AIM Rule 18 and not in accordance with IAS 34 "Interim Financial Reporting" therefore it is not fully in compliance with IFRS.

2 Assets held for sale and discontinued operations

As at 30 September 2008, the Group was actively seeking a buyer for the haematology activities, which had been acquired as part of Biocode Hycel, as a stand-alone business. In accordance with IFRS 5, the assets to be sold as part of that business had been designated a disposal group and classified as assets held for sale. As the fair value of the assets was higher than their carrying amount at the time of reclassification, no revaluation was necessary at that time. The disposal was completed in the year ended 31 March 2009. The results attributable the discontinued activities were as follows:

	6 Months	6 Months	Year ended
	ended	ended	31 March
	30 Sept 2009	30 Sept 2008	2009
	£'000	£'000	£'000
Revenue	0	1,650	2,449
Total expenses	0	-1,682	-2,467
Profit before tax	0	-32	-18
Income tax expense	0	0	0
Trading result after tax	0	-32	-18
Gain on disoposal	0	0	642
Profit for from discontinued activities	0	-32	624

 

3 Revenue and segmental information

Revenue and profit before tax relate principally to the main activity of the manufacturing and distributing of medical diagnostic products, and are attributable to the continuing operations of the Group.

Geographical analysis of turnover by origin:

	6 Months	6 Months	Year ended
	ended	ended	31 March
	30 Sept 2009	30 Sept 2008	2009
	£'000	£'000	£'000
UK	4,811	3,546	7,789
Europe	6,876	4,954	10,972
USA	5,211	2,332	6,176
	16,898	10,832	24,937

Geographical analysis of profit before tax by origin:

UK	4,175	1,861	4,984
Europe	-257	-402	-680
USA	1,013	404	1,062
Profit from operations	4,931	1,863	5,366
Finance Costs (net)	-355	-274	-585
Profit before tax	4,576	1,589	4,781

Geographical analysis of net assets/(liabilities) by origin:

UK	36,540	24,814	23,754
Europe	17,318	12,155	25,594
USA	1,803	714	1,365
	55,661	37,683	50,713

4 Earnings per share

Basic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the year.

For diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all dilutive potential ordinary shares. The Group has two classes of dilutive potential ordinary shares: those share options granted to employees where the exercise price is less than the average market price of the Company's ordinary shares during the year and the contingently issuable shares under the Group's share option scheme. At 30 September 2009, the performance criteria for the vesting of the awards under the option scheme had been met and consequently the shares in question are included in the diluted EPS calculation. 

  The calculations of earnings per share are based on the following profits and numbers of shares.

	6 Months	6 Months	Year ended
	ended	ended	31 March
	30 Sept 2009	30 Sept 2008	2009
	£	£	£
From continuing and discontinued operations:
Profit after tax	3,410,745	1,029,264	4,819,957
	No.	No.	No.
Weighted average no of shares:
For basic earnings per share	26,440,813	23,987,972	24,802,348
Effect of dilutive potential ordinary shares:
-Share Options	1,635,202	1,307,537	1,154,875
For diluted earnings per share	28,076,015	25,295,509	25,957,223
Basic earnings per share	12.900p	4.291p	19.433p
Diluted earnings per share	12.148p	4.069p	18.569p
From continuing operations:	£	£	£
Profit after tax	3,410,745	1,061,214	4,196,177
Weighted average no of shares as above
Basic earnings per share	12.900p	4.424p	16.918p
Diluted earnings per share	12.148p	4.195p	16.166p

5 Taxation

Taxation for the 6 months ended 30 September 2009 is based on the effective rates of taxation in each jurisdiction which are estimated to apply for the year ended 31 March 2010.

6 Other reserves

The other reserves consist of the merger reserve, the foreign currency translation reserve and the reserve for shares to be issued under employee share option plans.

The merger reserve arises on consolidation of the results of Immunodiagnostic Holdings PLC and the consolidated results of Immunodiagnostic Systems Limited. The reserve represents the difference arising on consolidation between the nominal value of shares issued by Immunodiagnostic Holdings PLC in consideration for 100% of the share capital of Immunodiagnostic Systems Limited and the nominal value of the shares acquired, plus the share premium account relating to those shares.

7 Interim results

These results were approved by the Board of Directors on Friday 27 November 2009. Copies of this interim report will be available to the public from the Group's registered office and www.idsplc.com.

ENDIR PUGCAGUPBGQM

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