Final Results

RNS Number : 2094I

Omega Diagnostics Group PLC

01 July 2013

 



                                                                                                                                                              AIM: ODX

OMEGA DIAGNOSTICS GROUP PLC

("Omega" or the "Company" or the "Group")

FINAL RESULTS

FOR THE YEAR ENDED 31 MARCH 2013

Omega, the medical diagnostics company focused on allergy, food intolerance and infectious disease, announces final results for the year ended 31 March 2013.

Omega is one of the UK's leading companies in the fast growing area of food intolerance and also operates in markets supplying tests for allergies and autoimmune diseases and specific infectious diseases through a strong distribution network in over 100 countries, a direct presence in Germany and India, and with a growing network of global partnerships.

Financial Highlights:

·      Turnover up 1% to £11.3m (2012: £11.1m)

·      Food Intolerance revenue up 13% to £4.39m (2012: £3.90m)

·      Allergy and autoimmune revenue down 7% to £4.16m (2012: £4.48m)

·      Infectious disease/other revenue down 1% to £2.71m (2012: £2.75m)

·      Gross profit up 1% to £7.1m (2012: £7.0m)

·      Adjusted profit before tax down by 22% to £0.78m (2012: £1.00m)

·      Adjusted EPS 1.3p (2012: 1.2p)

·      Net debt at the period end of £0.7m (2012: £0.1m)

Operational highlights:

·      CD4 technical transfer from the Burnet Institute nearing completion and grant of US patent for CD4

·      iSYS Allergy programme on track, with assay protocol finalised, to launch 40 allergen test menu by end of March 2014

·      Strong performance from direct selling operations in India and exclusive distribution agreement for Food Detective® signed with Super Religare Laboratories

·      Strong performance from Food Intolerance segment with Food Detective® sales exceeding £1m for the first time and registration of Food Detective® in China

Post Period End:

·      Agreement intending to appoint Immunodiagnostics Systems Holdings plc ('IDS') as exclusive allergy distributor in IDS' core markets

·      Grant of US patent for CD4

·      Strengthening of the Board with key appointment of Bill Rhodes as Non-Executive Director

·      Successful equity placing to raise £4m completed and over-subscribed

Annual General Meeting

·      The Company's AGM will be held at Omega House, Hillfoots Business Village, Clackmannanshire, FK12 5DQ on 28 August 2013 at 11.00 a.m.

Commenting, David Evans, Chairman, said:

"More than half of Group turnover is generated in the UK and Europe, predominantly through the Food Intolerance and Allergy/Autoimmune divisions. The economic uncertainty in this region has led to a slowdown in growth in European in vitro diagnostics ("IVD") markets and the ability to grow our own business is not immune from the broader landscape.  To counter risk in these areas, we have a strategy to focus on the emerging BRIC markets and our success in growing revenue in the year ahead will be dependent on whether sales into these higher growth territories can compensate for the pressures being experienced in Europe and elsewhere.

Beyond the immediate term, our ability to drive growth will be best delivered through the successful commercialisation of the CD4 test and automated allergy tests on the IDS-iSYS instrument.  A significant amount of progress has been made in the past year and it is now time to deliver on these strategies."

Contacts: 

Omega Diagnostics Group PLC	Tel: [phone]
Andrew Shepherd, Chief Executive
Kieron Harbinson, Group Finance Director    Jag Grewal, Group Sales and Marketing Director	www.omegadiagnostics.com
finnCap Ltd	Tel: [phone]
Geoff Nash/Christopher Raggett (Corporate Finance) Stephen Norcross/Mia Gardner (Corporate Broking)
Walbrook PR Limited	Tel: [phone] or [e-mail]
Paul McManus	Mob: [phone]
Lianne Cawthorne	Mob: [phone]

Chairman's Statement

The Group has taken a number of positive steps, both during the financial year and since the year-end.

Achievements during the financial year

·  Pre-launch of Visitect^® CD4 in Washington, USA and Cape Town, South Africa.

· Commencement of direct selling operations in India and exclusive distribution agreement for Food Detective^® signed with Super Religare Laboratories.

·  Award of grant funding of up to £0.15m from Scottish Enterprise.

·  Registration of Food Detective^® in China.

·  Increase in average revenue per Genarrayt^® system (excluding Spain) by 19% to £12,885.

·  Food Detective^® sales exceed £1m for the first time.

Achievements since the year-end

·  Agreement intending to appoint Immunodiagnostic Systems Holdings plc ("IDS") as exclusive allergy distributor in IDS' core markets.

·  Appointment of Bill Rhodes as a non‑executive director.

·  Grant of US patent for CD4.

·  Successful institutional placing raising £4m before expenses.

Financial performance

Turnover

Turnover for the Group showed a slight increase on the prior year at £11.26 million (2012: £11.12 million). Our Food Intolerance division grew turnover by 13% with continued growth in Genarrayt^® revenue, with France becoming the largest market by sales. Food Detective^® also performed well, exceeding the £1m sales barrier for the first time. As reported at the half-year stage, the Allergy and Autoimmune division, particularly in Germany, was affected by the weaker pollen season and Euro exchange rate. A part recovery in the second half meant that turnover reduced by 7% for the year. Infectious Disease turnover was broadly unchanged, showing a slight decline of 1%, due mainly to a loss of revenue (approximately £0.2 million) following a ban of blood-based TB tests by the Indian government.

Gross profit

Gross profit amounted to £7.05 million (2012: £7.00 million) and the gross margin was practically unchanged at 62.6% compared to 63.0% in the previous year. This level of gross profit was in line with expectation as the Food Intolerance and Allergy/Autoimmune divisions generate similar levels of gross profit.

Adjusted Profit before Taxation

The Group generated an adjusted profit before tax ("adjusted PBT") of £0.78 million compared to £1.00 million in the previous year. The reduction was mainly due to two reasons; firstly, the effect of increased costs associated with the direct subsidiary operation in India occurring at the same time as the loss of revenue from TB tests referred to above; and secondly, due to a reduced contribution from the Omega GmbH allergy business in Germany, for the reasons referred to above. There is a reconciliation between adjusted PBT and statutory PBT below the income statement.

Taxation

The Group continues to benefit from an enhanced level of R&D tax allowances. Due to the increase in capitalised development expenditure, which qualifies for the aforementioned tax allowances, there is a tax credit of £0.31 million in the year compared to £0.05 million in the previous year.

Adjusted EPS

Given the tax credit situation above, the Group achieved an adjusted profit after tax of £1.09 million (2012: £1.05 million) resulting in adjusted earnings per share of 1.3p (2012: 1.2p).

Balance sheet

Assets

Intangible assets increased to £10.35 million (2012: £9.14 million) reflecting the level of capitalised development expenditure, offset by amortisation of intangible assets. There have been no impairment charges against goodwill or intangible assets throughout the year.

Inventory levels increased marginally to £1.83million (2012: £1.69 million) and reflect the additional need to carry inventory within our Indian subsidiary.

Cash at the year-end reduced to £0.16 million (2012: £1.16 million) reflecting the level of investment in development activity and loan repayments collectively exceeding cash generated from operating activities.

Liabilities

Trade and other payables increased to £1.68 million (2012: £1.45 million).

Total borrowings and other financial liabilities reduced to £1.35 million (2012: £1.43 million) due mainly to repayment of loans of £0.5m and settlement of an IDS-iSYS licence fee instalment of £0.13 million, offset by the creation in the year of the liability for the final licence fee payment of £0.5 million due to IDS.

Funding

During the financial year, the Company negotiated an increase to its overdraft facility from £0.7 million to £1.7 million, repayable on demand. The facility was renewed at the beginning of May for one year, prior to the institutional placing announced on 24 May 2013. Further to the approval of shareholders given at the general meeting on 10 June, the Group raised £4million before expenses through the issue of 23,529,412 new ordinary shares at 17p per share. The placing was oversubscribed and we are very grateful for the support of existing and new shareholders alike. The additional funds will enable us to implement our main strategies below.

Product strategy

Visitect^® CD4

Feedback from the global HIV/AIDS healthcare community continues to underpin the significance of the opportunity represented by the Company's Point-of-Care ("POC") Visitect^® CD4 test. Subject to a successful completion of the technology transfer from the Burnet Institute to the Company, a large part of the placing proceeds (see Funding above) will be used both to scale up the manufacturing and inventory-build of CD4 to meet the potential demand that undoubtedly exists for a POC product solution and to undertake in-country field evaluations that are planned with major organisations, active in the HIV/AIDS arena. The early feasibility work undertaken to develop a smartphone App reader is also promising in scope and applicability in parts of the world where Visitect^® CD4 is expected to have most impact. This remains the most significant near-term opportunity for the Group to achieve growth in shareholder value and is expected to lead to a longer term strategy for POC product opportunities in emerging and developing world infectious diseases.

Allergy automation

The Group remains focused on launching a panel of approximately 40 allergy tests on the automated IDS-iSYS instrument by the end of March 2014 and the recently announced achievement of finalising the assay protocol on which all remaining development will take place, along with the intention to appoint IDS as distributor in their core markets of the UK, Germany, France, the Nordic regions and the USA means we remain committed to building a significant presence in the growing automated allergy testing market.

Market strategy - BRIC focus

The IVD industry as a whole has seen a slowdown in growth during 2012 as the major European, US and Japanese markets have experienced increased pressure on reimbursement levels and cuts in national health expenditure. By contrast, the emerging markets, particularly India and China, have continued to experience double-digit growth rates. The Group's decision to set up its own subsidiary in India nearly two years ago appears prescient against this backdrop and is expected to achieve growth both with our existing Food Intolerance products and the recently launched Allergodip^® doctor's office test. Both China and Brazil are top-five markets, ranked by sales of Food Detective^® and the relationship with HOB Biotech in China is expected to deliver further growth in this market.

Board and employees

I am very pleased that we have been able to attract and appoint Bill Rhodes as a non-executive director to the Board and look forward to working with him, given his knowledge and experience built up over many years, particularly with Becton Dickinson, as we implement our strategies outlined above. Mike Gurner has decided to retire and step down from the Board with immediate effect.  I would like to thank Mike for his contribution over the many years since the Group became a public Company and I, on behalf of the Board, wish him all the best in his retirement.

Outlook

More than half of Group turnover is generated in the UK and Europe, predominantly through the Food Intolerance and Allergy/Autoimmune divisions. The economic uncertainty in this region has led to a slowdown in growth in European IVD markets and the ability to grow our own business is not immune from the broader landscape. In Germany in particular, the reimbursement picture remains uncertain and the early pollen season has once more suffered from some of the wettest weather seen in Northern Germany for many years. Sales in the Middle East have also got off to a slower start, in part, linked to the political situation. To counter risk in these areas, we have a strategy to focus on the emerging BRIC markets and our success in growing revenue in the year ahead will be dependent on whether sales into these higher growth territories can compensate for the pressures being experienced in Europe and elsewhere.

Beyond the immediate term, our ability to drive growth will be best delivered through the successful commercialisation of the CD4 test and automated allergy tests on the IDS-iSYS instrument. A significant amount of progress has been made in the past year and it is now time to deliver on these strategies.

David Evans

Non-Executive Chairman

28 June 2013

Chief Executive's review

The Group has seen a marginal increase in revenue for the year to £11.26 million, slightly ahead of last year's figure (2012: £11.12 million).

It is pleasing to have managed to retain profitability in turbulent economic times. Our decision to go direct in the Indian market has been vindicated with a strong performance from the new team. With Visitect^® CD4, we have been making steady progress, with the technology transfer process nearing completion and the latest results looking very encouraging. In addition, our allergy test development programme with the IDS-iSYS instrument has also made good progress.

Food Intolerance

The Food Intolerance market has continued to grow despite the obvious pressures on consumer spending in Europe and the segment has continued to perform very well with sales growing by 13% to £4.39 million for the year ended 31 March 2013 (2012: £3.90 million).

Sales of Food Detective^® grew by 27% to £1.25 million (2012: £0.98 million) with Poland continuing as the Group's largest market for this product. The number of countries in which we have now sold product has continued to increase to 72 (2012: 68) with an increase in volumes to 85,214 kits (2012: 60,782). The top five markets account for just over 50% of sales with good growth in China and Brazil which fits with the Group's strategic focus on BRIC countries. Product registration in China finally concluded in December 2012 and as a result, we expect sales in China to increase. The signing of an exclusive distribution agreement with Super Religare Laboratories, India's largest independent laboratory chain, should also lead to good sales growth going forward.

Sales of Genarrayt^® reagents have increased by 18% to £1.84 million (2012: £1.56 million) with France overtaking Spain to become the largest single market by sales. Revenue per instrument (excluding Spain) increased by 19% to £12,885 (2012: £10,783) and 11 Genarrayt^® systems (2012: 13 systems) were sold in the year bringing the total global placements to 119 systems.

Sales of Foodprint^® tests through the CNS testing laboratory have grown to £0.61 million (2012: £0.48 million). The testing services for food intolerance and other related tests have shown an increase in business to £0.65 million (2012: £0.62 million).

The progress with registration of Food Detective^® in the United States has continued to be slow and the FDA has recently confirmed that they will require either a 510(k) or PMA application to be filed. The 510(k) route is considered to be the more unlikely option due to the lack of a suitable predicate device. As such, the timeline to registration remains uncertain. The whole business area of Food Intolerance testing in the US is under review and other additional routes to market are being explored, particularly for the Genarrayt^® laboratory testing system which we believe has good potential and could be subject to a less onerous regulatory environment.

Allergy and Autoimmune

This segment has seen a reduction in sales of 7% to £4.16 million (2012: £4.48 million).

Sales for Omega Diagnostics GmbH ('Omega GmbH'), our German subsidiary, fell by 7% to £3.59 million (2012: £3.86 million). As reported at the interim results, the first half saw a weaker pollen season due to unseasonably wet weather. A weaker Euro also contributed to the lower result. This segment performed better in the second half, helped by the launch of an Indian version of Allergodip^®. The Company has also launched a new liquid format of the Allergozyme^® product range which is expected to contribute to Omega GmbH's export performance in the new financial year.

Sales of autoimmune tests reduced by 7% to £0.57 million (2012: £0.62 million). We previously reported that the current range of autoimmune test kits were limited to small labs with manual test systems. Continued consolidation in developed country laboratory markets means that they require even more automation and menu driven solutions which has outpaced our own ability to invest in developing revised kit formats. Therefore the decision was taken to direct resources to the IDS-iSYS project. However, in India, a market dominated by many small, manual testing laboratories with less dependency on automated systems, we have seen an increase in business and we expect to see further growth in the new financial year.

Infectious Disease/Other

Sales of infectious disease products fell slightly by 1% to £2.71 million (2012: £2.75 million). This is despite the loss of annual sales of approximately £0.2 million in India due to a Government ban on the import of blood-based TB tests. The market for the current range still remains highly competitive but we believe that the CD4 opportunity will be the step change in activity and focus required to transform this segment.

CD4

The CD4 test, branded as Visitect^® CD4, was pre-launched at the 19th International AIDS Conference, AIDS 2012, in Washington DC, USA on 22-27 July 2012 and the response to the product was extremely encouraging with a high level of interest being shown by various Governments, Non-Governmental Organisations (NGOs) and large multinational diagnostics companies. From the responses received we believe that we are closest to bringing a CD4 Point-of-Care test to market amongst other groups working in this area. This first to market advantage will add extra impetus to the introduction of the commercial product when it becomes available.

The project to transfer the technology from the Burnet Institute to Omega is in its final stages and, despite it taking longer than we first envisaged, we are now in the process of selecting the final, highly scalable manufacturing protocol. Evaluation sites in HIV Reference Laboratories in the UK, US and India are already established as well as a field trial site in Mozambique and other countries through various NGOs.

Visitect^® CD4 was also showcased at the African Society for Laboratory Medicine meeting in Cape Town, South Africa in December 2012 and the response to the product mirrored that in Washington. This meeting also gave us the opportunity to gain further intelligence as to the market potential for the product. The global CD4 need is expected to grow substantially over the next 8 years as countries scale up their HIV/AIDS treatment programmes.  The number of tests is expected to rise from current 2012 levels of just over 30 million to nearly 60 million tests by 2020.

The recent grant of a US Patent for the CD4 technology also underlines the strong IP position for the test which extends the current patent protection in South Africa and the member states of the African Intellectual Property Organisation, with patents pending in many other territories.

We have also been looking to enhance the value of our Visitect^® CD4 product offering by responding to requests from Key Opinion Leaders to provide a 'connectivity solution' so that results can be transmitted from rural test sites to city-based Ministry locations. Although the test does not need an instrument to read the result, we have recently completed a feasibility study in using a smartphone camera to capture the result and then to transmit the result to management centres. While removing any operator subjectivity in interpreting the results, it could also provide additional benefits such as disease demographic studies and supply chain logistics, a common problem found in resource-poor countries.

Distribution network

Sales growth has been recorded in most geographic regions of the world with the exception of Europe which reduced by 1% to £6.41 million (2012: £6.48 million) and the Africa/Middle East region which dropped by 4% to £1.56 million (2012: £1.63 million). These reductions were more than offset by good growth in the Asia/Far East markets with sales rising by 9% to £1.44 million (2012: £1.32 million) and in the North American market by sales rising 6% to £0.35 million (2012: £0.33 million). Sales to South/Central America rose by 16% to £0.51 million (2012: £0.44 million).

BRIC Strategy

In the year, we have further concentrated our efforts on expanding our business in the BRIC group of countries and we have met with some success. In Brazil we increased sales by 10% to £0.29 million (2012: £0.26 million); in China we increased sales by 49% to £0.18 million (2012: £0.12 million) but in Russia sales decreased by 31% to £0.10 million (2012: £0.15 million) which was due to the timing of contract deliveries and the introduction of competitive automated systems.

Direct sales in India commenced at the end of July last year and the team has achieved an impressive sales performance which, when aggregated with the final sales made by the old distributor in the three months of April-June 2012, meant total Indian sales of approximately £0.40m for the year. This compares to a prior year like-for-like sales figure of approximately £0.20 million (which excludes the TB product sales noted earlier).

Discussions have also been taking place with other IVD companies with a view to representing them in the Indian market and two distribution agreements have already been signed with others in early stage discussions.

Research and development

IDS-iSYS

During the year, our development efforts have focussed on a core set of assays with the first group of 10 allergens completing optimisation. However, during that process, certain imprecision issues were identified with the assay protocol which, whilst taking longer to resolve than first anticipated, have now been resolved. This protocol will now be used throughout the remaining development programme and the claim support phase with the first 10 allergens has now commenced. The previous problem with the sourcing of sufficient patient serum samples has now been resolved with enough material in stock to undertake the optimisation and claim support work for a further 30 allergens. Therefore, with the reproducibility of the chosen protocol, overall, we now anticipate launching a panel of 40 allergens by the end of March 2014.

In our last Annual Report we commented on efforts to either source or develop a multiplex testing platform for allergen specific IgE testing. Whilst those initial tests were encouraging, no further efforts have been made on this project as we decided to concentrate our development resources on the iSYS programme.

Infectious Disease

At the same time as we licensed the CD4 test from the Burnet Institute we also licensed a second test technology for a POC test for detecting active Syphilis infection which is a major public health problem in developing countries. Progress with the technology transfer of this product has not advanced due to the time, effort and concentration being expended on CD4. We expect to renew our efforts with this test upon completion of the technology transfer of the CD4 test.

Outlook

The new financial year presents some challenges for the management team in terms of market and overall economic conditions. With new product introductions into key markets such as India and further growth in Food Intolerance in China and Brazil we expect to be able to respond positively to these challenges. The 'game changing' growth potential of the Visitect^® CD4 product is expected to make a major impact in global health markets as this test satisfies a current unmet clinical need.

Over the last year, we have been given deep insight into the NGO/Aid-related business sector which is where the Visitect^® CD4 test is targeted. Until now, this sector has not been at the forefront of our commercial focus but we are reviewing this part of our strategy with a view to identifying other opportunities that would fit into this sector. One such opportunity that may exist is in the area of HIV Viral Load testing, an area which is highly complementary to CD4 testing.

We have been delighted at the support received from existing shareholders and new investors for our recent oversubscribed fundraising and while there are challenges in the Eurozone countries, we believe our continued focus on new products such as CD4 and the BRIC markets should result in further profitable growth.

Andrew Shepherd

Chief Executive

28 June 2013

Financial review

Financial performance

Turnover for the Group increased marginally by 1% to £11.26 million (2012: £11.12 million). The Food Intolerance division increased turnover to £4.39 million (2012: £3.90 million) with Genarrayt^® reagent sales per instrument of £12,885, compared to £10,783 in the previous year and Food Detective^® kits generating revenue of £1.25 million (2012: £0.98 million). Allergy and Autoimmune turnover fell to £4.16 million (2012: £4.48 million) due mainly to a weaker euro against sterling, as compared to the prior year, but also due to wet weather, as reported at the half-year, affecting the pollen season resulting in fewer patient visits to doctors. Turnover in the Infectious Disease division reduced slightly to £2.71 million from £2.75 million in the year before.

Gross profit has remained fairly constant at £7.05 million (2012: £7.0 million) and similarly, gross margin has been maintained at 62.6% (2012: 63.0%).

Administration costs have reduced marginally by £22k to £4.45 million (2012: £4.47 million). An increase of £0.15 million relating to costs incurred in being fully operational through Omega Dx (Asia) in India has been offset by a reduction, mainly relating to uncapitalised development/technical expenditure, of approximately £0.27 million. One-off restructuring costs of approximately £0.1 million were incurred during the first half of the year.

Sales and marketing costs have increased by £0.28 million to £2.30 million (2012: £2.02 million). £0.26 million of this increase reflects a full year's charge in the current year for four UK-based headcount positions recruited at varying stages in the prior year; one at Director level, one at Business Development director level and two product manager positions. The remaining increase of £18k reflects additional sales force costs incurred in India.

Adjusted profit before tax reduced by 22.5%, to £0.78 million (2012: £1.0 million). A reconciliation between statutory profit before tax and adjusted profit before tax is shown at the foot of the income statement.

Taxation

There has been a significant increase in the tax credit position resulting in a credit of £306k (2012: £48k) in the year. Of this credit, £16k relates to HMRC rebates and the majority, of £290k, relates to movements in deferred tax. The deferred tax asset has grown significantly, mainly reflecting an increase in tax losses carried forward as a result of enhanced tax credits available on development expenditure. The deferred liability has increased during the year as a result of a timing difference arising on capitalised development expenditure. Prior year adjustments to the tax charge arise when there are differences between estimated figures chargeable to tax and final tax computations.

Earnings per share

Adjusted profit after tax ("PAT") of £1.08 million (2012: £1.05 million) is arrived at by taking adjusted profit before tax of £0.78 million (2012: £1.0 million) plus the tax credit of £0.30 million (2012: £48k).

Adjusted earnings per share amounted to 1.3p (2012: 1.2p) and is arrived at by taking the adjusted PAT of £1,085k and dividing by 85,268,960 (2012: 85,238,746) being the weighted average number of shares in issue for the year. Statutory profit for the year amounted to £582k (2012: £527k) which resulted in earnings per share of 0.7p versus earnings per share of 0.6p in the previous year.

Operational performance

Food Intolerance

The Food Intolerance division continued to perform well with growth in turnover of 13% to £4.39 million (2012: £3.90 million). Genarrayt^® reagent sales continued to rise across the installed instrument base with a 19% increase in average revenue per instrument to £12,885 (2012: £10,783) in all markets excluding Spain. A further 11 systems were installed in the year increasing total placements to 119. Total reagent sales grew to £1.84 million (2012: £1.56 million) with France becoming the number one market, ranked by sales, ahead of Spain.

Sales of Food Detective^® performed strongly with an increase in turnover of 27% to £1.25 million (2012: £0.98 million) with another exceptional performance in Poland where sales grew by a further £0.1 million to £0.3 million. The overall average price per kit (excluding China) also increased to £22.01 from £21.64 the year before, showing a level of resilience in a consumer market environment.

The Foodprint^® laboratory recorded another year of revenue growth of 26% with sales up to £0.61 million (2012: £0.48 million).

The adjusted PBT for this division grew to £1.23 million from £1.14 million the year before.

Allergy and Autoimmune

Turnover in the Allergy and Autoimmune division fell by 7%, with sales of £4.16 million (2012: £4.48 million). Sales in Germany fell by 2% in constant currency terms due to a weaker pollen season, with a further 5% reduction due to a weaker euro, on average throughout the year, against sterling as compared with the year before. Therefore, sales through Omega GmbH were £3.59 million compared to £3.86 million a year earlier. Sales of autoimmune products also fell by 7% to £0.57 million (2012: £0.62 million). Approximately half of the restructuring costs referred to earlier (so approx. £50k) related to this division and, alongside the reduced sales, led to an adjusted loss before tax of £20k (2012: profit of £134k).

Infectious Disease/Other

Turnover in the Infectious Disease division was effectively flat with sales of £2.71 million, compared to £2.75 million in the prior year. This result is despite the loss of TB sales in India due to a government ban on the import of all blood-based TB tests and which, in the prior year, accounted for approximately £0.2 million of the Company's revenue. The increased level of administration costs incurred through the Indian subsidiary has resulted in adjusted PBT falling to £0.17 million from £0.32 million the year before.

Corporate costs

Net centralised costs include costs not allocated to any specific division and, where the Group makes internal arrangements to fund divisions via intercompany loans, interest is charged to the specific division and the corresponding interest income is netted off through Corporate costs. Net centralised corporate costs for the year of £0.60 million were in line with last year (2012: £0.58 million).

Treasury operations

Currency management

The Group continues to transact operations in three main currencies being sterling, euros and US dollars. In the case of transactions in euros and US dollars, the Group may be exposed to fluctuations in the rates of exchange against sterling. Where possible, the Group operates a natural hedge by entering into transactions of both a buying and selling nature that limits the risk of adverse exchange rate losses. The Company generates a net surplus of US dollars from its trading activities. The exchange rate between sterling and the US dollar has been relatively stable throughout the year such that a translation loss of £1k (2012: £1k) was recorded on US dollar borrowings held throughout the first half of the year but now repaid in full, along with a loss on trading operations of £2k (2012: £22k) included within Administration costs.

The Group's net investment in and funding of Omega GmbH is in euros, which will give rise to foreign exchange variations from one period to another. In the year, a foreign exchange gain of £27k (2012: loss of £271k), which has arisen due to a stronger euro (as measured at year-end rates), has been included within other comprehensive income.

Interest rate management

During the first half of the year, the Group operated certain derivative financial instruments for its sterling and US dollar borrowings. In the case of its sterling loan, the Group operated an instrument to cap interest at 5.5% and in the case of the US dollar loan, the Group operated instruments to cap the interest rate based on US Libor at 5% and one to operate a floor rate on US Libor of 2.25%. These instruments terminated on repayment of the associated borrowings.

During the year, there was a fair value adjustment gain through the income statement of £1k (2012: £3k).

Cash flow and net debt

Net cash flow generated from operations improved significantly to £1.01 million (2012: £0.69 million), despite a reduction in operating profit, through a more efficient handling of working capital. The Group spent a net £1.49million (2012: £1.20 million) on investing activities, of which £1.18 million (2012: £0.75 million) was on intangible assets and £0.31 million (2012: £0.45 million) was on property, plant and equipment. Loan repayments included the final repayments of the bank loans taken out in 2007 and a first instalment of £0.36 million was repaid in September 2012 on the vendor loan note. Cash balances at the year-end amounted to £0.16 million (2012: £1.16 million) and the net debt position was £0.69 million (2012: £0.14 million).

Financing

Just after the year-end, the Company renewed its £1.7million overdraft facility on the same terms as before and it remains annually renewable and repayable on demand. In June, approval was received in General Meeting for the allotment of 23,529,412 new ordinary shares at 17p per share which were admitted to trading on AIM. This follows a successful equity placing to existing and new institutional shareholders to raise £4 million (before expenses of approximately £0.24 million). The placing was oversubscribed and we are grateful for the good level of support shown for the Group's strategy. This leaves the Group with a very strong cash position.

Capital management

The financial performance of the Group is measured and monitored on a monthly basis through a combination of management reporting and KPIs. The Group manages its working capital requirements to ensure it continues to operate within the covenant limits applicable to any borrowing facilities whilst safeguarding the ability to continue to operate as a going concern. The Group funds its operations with a mixture of short and long-term borrowings or equity as appropriate with a view to maximising returns for shareholders and maintaining investor, creditor and market confidence. The use of funds for acquisitions is closely monitored by the Board so that existing funds are not adversely impacted by such activity and the Board reviews and approves an annual budget to help ensure it has adequate facilities to meet all its operational needs and to support future growth in the business.

Kieron Harbinson

Group Finance Director

28 June 2013

Consolidated Statement of Comprehensive Income

for the year ended 31 March 2013

2013 2012 £ £ Continuing operations Revenue 11,262,898 11,124,053 Cost of sales (4,209,905) (4,120,259) 62.6% 63.0% Gross profit 7,052,993 7,003,794 Administration costs (4,448,646) (4,471,381) Selling and marketing costs (2,297,702) (2,015,300) Other income - government grants and related assistance Operating profit 306,645 517,113 Finance costs (32,914) (48,542) Finance income - interest receivable 2,493 10,856 Profit before taxation 276,224 479,427 Tax credit 306,042 47,556 Profit for the year 582,266 526,983 Other comprehensive income Exchange differences on translation of foreign operations 26,970 (271,130) Actuarial (loss) / gain on defined benefit pensions (50,439) 56,000 Tax credit 7,978 16,585 Other comprehensive income for the year (15,491) (198,545) Total comprehensive income for the year 566,775 328,438 Earnings Per Share (EPS) Basic and Diluted EPS on profit for the year 0.7p 0.6p Adjusted Profit before Taxation For the year ended 31 March 2013 2013 2012 £ £ Profit before taxation 276,224 479,427 IFRS related discount charges (included within Finance costs) 25,046 45,225 Fair value adjustments to financial derivatives (included within Finance costs) (454) (2,981) Amortisation of intangible assets (included within Administration costs) 406,553 415,419 Share based payment charges (included within Administration costs) 71,193 29,716 Acquisition costs (included within Administration costs) 0 37,461 Adjusted profit before taxation 778,562 1,004,267 Earnings Per Share (EPS) Adjusted EPS on profit for the year 1.3p 1.2p

Consolidated Balance Sheet

as at 31 March 2013

		2013		2012
ASSETS		£		£
Non-current assets
Intangibles		10,347,876		9,136,072
Property, plant and equipment		2,116,286		2,068,509
Deferred taxation		553,647		150,332
Retirement benefit surplus		31,886		85,639
		13,049,695		11,440,552
Current assets
Inventories		1,833,887		1,689,549
Trade and other receivables		2,556,762		2,417,500
Income tax receivable		7,106		4,054
Cash and cash equivalents		160,693		1,159,132
		4,558,448		5,270,235
Total assets		17,608,143		16,710,787
EQUITY AND LIABILITIES
Equity
Issued capital		12,977,107		12,977,107
Retained earnings		985,371		347,403
Total equity		13,962,478		13,324,510
Liabilities
Non-current liabilities
Long-term borrowings		484,472		794,389
Deferred taxation		609,395		503,728
Derivative financial instruments		-		454
Total non-current liabilities		1,093,867		1,298,571
Current liabilities
Short-term borrowings		367,649		509,811
Trade and other payables		1,684,149		1,453,018
Other financial liabilities		500,000		124,877
Total current liabilities		2,551,798		2,087,706
Total liabilities		3,645,665		3,386,277
Total equity and liabilities		17,608,143		16,710,787

Consolidated Statement of Changes in Equity

for the year ended 31 March 2013

	Share		Share		Retained
	capital		premium		earnings		Total
	£		£		£		£
Balance at 31 March 2011	4,145,580		8,831,527		(10,751)		12,966,356
Profit for the year ended 31 March 2012	-		-		526,983		526,983
Other comprehensive income - net exchange adjustments	-		-		(271,130)		(271,130)
Other comprehensive income - actuarial gain on defined benefit pensions	-		-		56,000		56,000
Other comprehensive income - tax credit	-		-		16,585		16,585
Total comprehensive income for the year	-		-		328,438		328,438
Share-based payments	-		-		29,716		29,716
Balance at 31 March 2012	4,145,580		8,831,527		347,403		13,324,510
Profit for the year ended 31 March 2013	-		-		582,266		582,266
Other comprehensive income - net exchange adjustments	-		-		26,970		26,970
Other comprehensive income - actuarial loss on defined benefit pensions	-		-		(50,439)		(50,439)
Other comprehensive income - tax credit	-		-		7,978		7,978
Total comprehensive income for the year	-		-		566,775		566,775
Share-based payments	-		-		71,193		71,193
Balance at 31 March 2013	4,145,580		8,831,527		985,371		13,962,478

Consolidated Cash Flow Statement

for the year ended 31 March 2013

	2013		2012
	£		£
Cash flows generated from operations
Profit for the year	582,266		526,983
Adjustments for:
Taxation	(306,042)		(47,556)
Finance costs	32,914		48,542
Finance income	(2,493)		(10,856)
Operating profit before working capital movement	306,645		517,113
Increase in trade and other receivables	(139,262)		(47,799)
Increase in inventories	(144,338)		(186,890)
Increase/(decrease) in trade and other payables	231,132		(37,697)
Loss / (gain) on sale of property, plant and equipment	1,010		(283)
Depreciation	268,699		264,710
Amortisation of intangible assets	406,553		415,419
Share-based payments	71,193		29,716
Taxation received / (paid)	13,321		(143,306)
Cash flow from operating activities	1,014,953		810,983
Settlement of acquisition related liability	-		(125,000)
Net cash flow from operating activities	1,014,953		685,983
Investing activities
Finance income	2,493		10,856
Purchase of property, plant and equipment	(308,876)		(454,179)
Purchase of intangible assets	(1,185,133)		(768,968)
Sale of property, plant and equipment	-		13,681
Net cash used in investing activities	(1,491,516)		(1,198,610)
Financing activities
Finance costs	(6,107)		(12,563)
Loan repayments	(497,377)		(272,832)
Finance lease repayments	(18,759)		(60,030)
Net cash from financing activities	(522,243)		(345,425)
Net decrease in cash and cash equivalents	(998,806)		(858,052)
Effects of exchange rate movements	367		(37,693)
Cash and cash equivalents at beginning of year	1,159,132		2,054,877
Cash and cash equivalents at end of year	160,693		1,159,132

Notes to the Preliminary Announcement

for the year ended 31 March 2013

1. Basis of preparation

The financial information set out in this preliminary announcement does not constitute statutory accounts as defined in Section 434(3) of the Companies Act 2006.

The consolidated balance sheet at 31 March 2013 and the consolidated statement of comprehensive income, consolidated cash flow statement, consolidated statement of changes in equity and associated notes for the year then ended have been extracted from the Group's financial statements which were approved by the Board of Directors on 28 June 2013 and are audited. The comparative consolidated financial information for the year ended 31 March 2012 is based on an abridged version of the Group's published financial statements for that year, which contained an unqualified audit report and which have been filed with the Registrar of Companies. 

The statutory accounts for 2013 will be finalised on the basis of the financial information presented in this preliminary announcement and will be delivered to the registrar of companies following the company's annual general meeting.

The consolidated financial statements have been prepared in accordance with IFRS as adopted by the European Union as they apply to the financial statements of the Group for the year ended 31 March 2013.

Basis of consolidation

The Group financial statements consolidate the financial statements of Omega Diagnostics Group PLC and the entities it controls (its subsidiaries). Control comprises the power to govern the financial and operating policies of the investee so as to obtain benefit from its activities and is achieved through direct or indirect ownership of voting rights. Subsidiaries are consolidated from the date of acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date that such control ceases. The financial statements of the subsidiaries used in the preparation of the consolidated financial statements are based on consistent accounting policies. All intercompany balances and transactions, including unrealised profits arising from them, are eliminated.

2. Segment information

	Allergy and		Food		Infectious/
	Autoimmune		Intolerance		Other		Corporate		Group
2013	£		£		£		£		£
Statutory presentation
Revenue	4,254,313		5,222,919		2,869,053		-		12,346,285
Inter-segment revenue	(93,304)		(833,232)		(156,851)		-		(1,083,387)
Total revenue	4,161,009		4,389,687		2,712,202		-		11,262,898
Operating costs	(4,391,981)		(3,258,964)		(2,559,475)		(745,833)		(10,956,253)
Operating profit/(loss)	(230,972)		1,130,723		152,727		(745,833)		306,645
Net finance (costs)/income	(72,362)		513		(4,868)		46,296		(30,421)
Profit/(loss) before taxation	(303,334)		1,131,236		147,859		(699,537)		276,224
Adjusted profit before taxation
Profit/(loss) before taxation	(303,334)		1,131,236		147,859		(699,537)		276,224
IFRS-related discount charges	-		-		-		25,046		25,046
Fair value adjustments to financial derivatives	-		-		-		(454)		(454)
Amortisation of intangible assets	282,412		98,866		25,275		-		406,553
Share-based payment charges	-		-		-		71,193		71,193
Adjusted profit/(loss) before taxation	(20,922)		1,230,102		173,134		(603,752)		778,562
	Allergy and		Food		Infectious/
	Autoimmune		Intolerance		Other		Corporate		Group
2012	£		£		£		£		£
Statutory presentation
Revenue	4,488,210		4,456,689		2,762,572		-		11,707,471
Inter-segment revenue	(11,436)		(555,984)		(15,998)		-		(583,418)
Total revenue	4,476,774		3,900,705		2,746,574		-		11,124,053
Operating costs	(4,616,762)		(2,863,458)		(2,450,586)		(676,134)		(10,606,940)
Operating profit/(loss)	(139,988)		1,037,247		295,988		(676,134)		517,113
Net finance costs	(72,095)		(197)		-		34,606		(37,686)
Profit/(loss) before taxation	(212,083)		1,037,050		295,988		(641,528)		479,427
Adjusted profit before taxation
Profit/(loss) before taxation	(212,083)		1,037,050		295,988		(641,528)		479,427
IFRS-related discount charges	12,344		-		-		32,881		45,225
Fair value adjustments to financial derivatives	-		-		-		(2,981)		(2,981)
Amortisation of intangible assets	296,667		98,748		20,004		-		415,419
Acquisition costs	37,461		-		-		-		37,461
Share-based payment charges	-		-		-		29,716		29,716
Adjusted profit/(loss) before taxation	134,389		1,135,798		315,992		(581,912)		1,004,267

3. Finance costs

		2013		2012
		£		£
Interest payable on loans and bank overdrafts		6,471		14,862
Exchange difference on loans		927		577
Unwinding of discounts		21,732		32,880
Fair value adjustment to financial derivatives		(454)		(2,981)
Finance leases		4,238		3,204
		32,914		48,542

4. Earnings per share

Basic Earnings per share are calculated by dividing net profit for the year attributable to ordinary equity holders of the Group by the weighted average number of ordinary shares outstanding during the year.

Diluted earnings per share are calculated by dividing the net profit attributable to ordinary equity holders of the Group by the weighted average number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would be issued on the conversion of all the dilutive potential ordinary shares into ordinary shares. Diluting events are excluded from the calculation when the average market price of ordinary shares is lower than the exercise price.

		2013 £		2012 £
Profit attributable to equity holders of the Group		582,266		526,983

		2013 Number		2012 Number
Basic average number of shares		85,216,257		85,216,257
Share options		52,703		22,489
Diluted weighted average number of shares		85,268,960		85,238,746

Adjusted Earnings per share on profit for the year

The Group presents adjusted earnings per share which is calculated by taking adjusted profit before taxation and adding the tax credit or deducting the tax charge in order to allow shareholders to understand better the elements of financial performance in the year, so as to facilitate comparison with prior periods and to assess better trends and financial performance.

		2013 £		2012 £
Adjusted profit attributable to equity holders of the Group		1,084,604		1,051,823

6. Annual General Meeting

The Annual General Meeting will be held at Omega House, Hillfoots Business Village, Clackmannanshire, FK12 5DQ on 28 August at 11am.

7. Annual Report

The annual report will be sent to shareholders on 12 July 2013 and will also be available at the registered office of Omega Diagnostics Group plc at: 

One London Wall, London, EC2Y 5AB

and will be made available on the Company's website at:

www.omegadiagnostics.com

 

END

 

 

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