TIDMIDH
RNS Number : 1582Q
Immunodiagnostic Systems Hldgs PLC
17 June 2020
17 June 2020
Immunodiagnostic Systems Holdings PLC
Final Results for year ended 31 March 2020
highlights 2020
% Change
GBPm 2020 2019 % Change LFL*
---------------------------------------- ---- ---- ---------- ----------
Group Revenue 39.3 38.5 2% 2%
---------------------------------------- ---- ---- ---------- ----------
Automated Business Revenue 23.4 22.6 3% 4%
---------------------------------------- ---- ---- ---------- ----------
25-OH Vitamin D 4.8 5.5 * 13% * 14%
---------------------------------------- ---- ---- ---------- ----------
Other Speciality - IDS 14.1 13.7 3% 3%
---------------------------------------- ---- ---- ---------- ----------
Other Speciality - Partners 2.3 1.3 71% 74%
---------------------------------------- ---- ---- ---------- ----------
Instrument Sales and Service 2.2 2.0 8% 9%
---------------------------------------- ---- ---- ---------- ----------
* 8%
Manual Business Revenue 11.4 12.3 * 8%
---------------------------------------- ---- ---- ---------- ----------
Technology Business Revenue 4.6 3.6 29% 30%
---------------------------------------- ---- ---- ---------- ----------
Adjusted EBITDA ** 6.1 4.8 26% 26%
---------------------------------------- ---- ---- ---------- ----------
Adjusted EBITDA pre IFRS 16 impact***** 5.4 4.8 14% 13%
---------------------------------------- ---- ---- ---------- ----------
Profit from Operations 1.3 0.4 210%
---------------------------------------- ---- ---- ---------- ----------
Adjusted Earnings per Share*** 7.4p 2.4p 208%
---------------------------------------- ---- ---- ---------- ----------
Free Cashflow to Equity**** 0.1 1.2 * 88%
---------------------------------------- ---- ---- ---------- ----------
Closing Cash and Cash Equivalents 27.6 27.7 0%
---------------------------------------- ---- ---- ---------- ----------
The table above presents a number of alternative performance
measures which the Directors believe reflect the underlying
performance of the business.
* Like for like ('LFL') numbers have been adjusted to remove the
impact of foreign exchange movements in the year by restating the
prior years' performance using the exchange rates during
FY2020.
** Before exceptional operating income of GBPnil (2019:
exceptional operating income of GBP0.1m) - see reconciliation in
Financial and Operations Review.
*** Before exceptional finance income of GBP1.2m (2019: before
exceptional operating income of GBP0.1m).
**** See reconciliation in Financial and Operations Review.
***** Adjusted to exclude the impact of IFRS16 of GBP0.6m in
2020 and before exceptional operating income of GBPnil (2019:
GBP0.1m). See reconciliation in Financial and Operations Review
Operational summary
-- Our target of maintaining LFL revenue growth was met. Group
revenue increased by 2% LFL to GBP39.3m, our second consecutive
year of revenue growth.
-- Automated business revenue increased by 4% LFL, driven by
higher sales of speciality assays. Revenue for autoimmune and
infectious disease assays grew 74% LFL. Revenue from our automated
distribution channels grew 30% LFL.
-- The Manual business declined by 8% LFL due to lower sales in direct European markets.
-- The Technology business generated GBP4.6m of revenue, a LFL increase of 30%.
-- Total gross instrument sales/placements across our Automated
and Technology business units reached 150 (2019: 127), the
strongest performance since 2012.
- Placements in our direct markets were 43 (2019: 37) with
returns of 25 (2019: 24). As a result, net placements in our direct
markets increased to 18 (2019: 13).
- Instrument sales to distributors increased to 50 (2019:
47).
- Instrument sales to OEM customers in our Technology business
unit increased to 57 (2019: 43).
-- Gross margin improved to 44% (2019: 43%) due to cost
efficiency efforts, which were partially offset by an adverse sales
mix. Adjusted EBITDA increased to GBP6.1m (2019: GBP4.8m).
-- At the end of FY2020, we have a total of 141 (2019: 135)
CE-marked assays available for sale on IDS analysers,
22 (2019: 22) of which are in-house developments.
Jaap Stuut, CEO of IDS, commented:
"During FY2020 we delivered a second consecutive year of like
for like revenue growth, with revenue increasing by 2% to GBP39.3m.
We also increased the number of analysers sold or placed to 150,
compared to 127 in FY2020. Adjusted EBITDA improved to GBP6.1m from
GBP4.8m in the prior year. Our results in Q1 of FY2021 will be
significantly impacted by reduced laboratory testing volumes,
however once the pandemic subsides, we believe we are in a strong
position to continue our revenue growth. Additionally, we have an
opportunity to commercialise our range of automated and manual
SARS-CoV-2 antibody testing kits, which we plan to launch during
June 2020".
Annual report
The annual report will be sent to shareholders shortly and will
also be available at the registered office of Immunodiagnostic
Systems Holdings PLC at: 10 Didcot Way, Boldon Business Park,
Boldon, Tyne and Wear NE35 9PD. It will be made available on the
Company's website at: www.idsplc.com .
Notes:
Immunodiagnostic Systems Holdings plc ("IDS", "the Group" or
"the Company"), is a specialist in-vitro diagnostic solution
provider to the clinical laboratory market and producer of manual
and automated diagnostic testing kits and instruments for the
clinical and research markets.
For further information:
Immunodiagnostic Systems Holdings Tel : +44 (0)191 519 0660
PLC
Jaap Stuut, CEO
Paul Martin, Finance Director
Peel Hunt LLP (Nominated Adviser Tel : +44 (0)20 7418 8900
and Broker)
James Steel, Oliver Jackson
Chairman's Statement
1. Introduction
For IDS, FY2020 was the second consecutive year of revenue
growth with an increase of 2% (2019: 1%) on a like for like ('LFL')
basis. Thus, the Group met its stated target of LFL revenue growth.
Our Automated business returned to growth, with revenues improving
4% LFL (2019: 1% LFL decline). This was further supported by the
continued strong performance of our Technology business unit, with
revenues growing 30% LFL (2019: 32% LFL growth).
In FY2020, management focused on re-igniting growth. I would
like to highlight the following aspects:
a) The opportunity in Autoimmune ('AI') diseases became a focal
point of our sales efforts in areas where we can sell with a
CE-mark, i.e. Europe and a large part of the distributor universe.
In the previous year, the sales organisation had collected
information on users of these tests, generating information to
improve the lead identification and lead qualification in our CRM
system. In the current year, we focused on delivering these sales
opportunities and were able to place 42 instruments in laboratories
with an AI focus, via our direct and distribution sales
channels.
Our generic advantage is that the IDS analyser is one of very
few random-access instruments used in this field. In addition, we
learned that many users like to run AI tests in conjunction with
tests for endocrinology markers. To our knowledge we are the only
supplier with a menu covering both areas, giving us a unique market
proposition.
b) A second thrust for accelerating growth has been the
geographical expansion of the IDS business. We have successfully
expanded our automated distribution footprint through a network of
new distributors, and expanded business with our historical
distribution partners. In particular, during FY2020, we have been
successful growing this business in South America. Revenue through
this channel has almost doubled since 2017.
Beyond these initiatives for the acceleration of growth, the
Executive Management Team continued to work on the internal
projects as set out in the Annual Report and Accounts 2019, in
particular a culture change with more value put on personal
responsibility, accountability and upgrading our talent pool.
Further detail on these activities is set out in the CEO's
report.
2. Key performance indicators ('KPIs')
Jaap will give you an update on the performance of the business
in the CEO's report. Below I have just summarised the key
points:
Key Achievements:
a) Placements: We achieved 150 instrument sales or placements
(2019: 127) in all channels, i.e. direct sales territories, sales
to distributors and to OEM partners;
b) Menu: Our total menu increased to 141 assays (2019: 135),
driven by additional partner assays; and
c) Regulatory approvals: We registered one more product in the
US and submitted a second for approval. We also created a new team
who have made good progress to ensure our assays are IVDR compliant
by May 2022, when these new regulations are scheduled to be
implemented.
We missed on the following goals:
a) Product development: While we released improved versions of
two of our key automated assays, we did not release any new
endocrinology assays. This was mainly due to slippage in the
development timelines. We believe the new development process,
implemented part way through the year, will improve the speed of
our development. We have reviewed our capabilities in this area,
and made some changes, and this will be a core focus in FY2021.
b) Corporate development: Despite investigating a number of
acquisition opportunities, we were not able to close any deals.
Undertaking an appropriate acquisition remains central to IDS's
growth strategy. We will continue discussions with one of the
targets we approached during FY2020, and will also seek new
acquisition opportunities. We feel the double challenges the
industry faces in terms of COVID-19 and IVDR implementation may
impact valuations in FY2021 and provide opportunity for IDS in this
area.
3. Financials
Paul will give you an in-depth review of the financials for
FY2020 in the Financial and Operations Review. I would like to
highlight the following points:
Key achievements
a) Revenue LFL growth: We were able to accelerate Group LFL
revenue growth slightly from 1% in FY2019 to 2% in FY2020. This was
mainly due to a strong growth in the second half of the year, where
the business grew 7% LFL versus the second half of FY2019;
b) Gross margin: Gross margin improved by 1%, from 43% in FY2019
to 44% in FY2020; and
c) Opex: Operating costs declined by 2%, leading to an adjusted
EBITDA improvement from 12% in FY2019 to 15% in FY2020.
What we did not achieve?
a) Productivity/benchmarking: While we improved some cost
metrics in the last financial year there is still a significant gap
to the best-in-class competitors.
b) Free cash flow: We were not able to grow our cash balance,
due to an increase in working capital requirements, mainly driven
by the phasing of revenue towards the end of the year, meaning the
related debtors balances had not been collected by year end.
4. Board matters
4.1 Board composition
There were no changes in our Executive Board: Jaap continues as
Chief Executive Officer, delivering on the strategy of putting the
Group back on a path of growth.
Jaap could not have achieved this goal without the support of
Paul Martin, our Group Finance Director. In FY2020 Paul was still
significantly involved in operational projects. During H2 FY2020,
we recruited a Group Operations Director so Paul should be able to
re-focus on the core financial themes as well as Corporate
Development.
There is no change in the Non-executive Director team, and I
believe the Board continues to work efficiently.
4.2 Board process in FY2020
During FY2020 the Board had five meetings, four of which took
place in person while the meeting scheduled for March 2020 was held
by conference call.
4.3 Ownership of IDS shares by Board Members
A number of Board members continued to invest in the IDS
business during the year, a summary of their holdings is set out
below. I like the notion of having 'skin in the game', so I take
this as a sign of confidence in the business by the people who are
close to it:
Holding at Holding at
31 Mar 20 31 Mar 19
------------------ ---------- ----------
Dr B Wittek 7,971,530 7,971,530
------------------ ---------- ----------
Mr J Stuut 7,500 5,000
------------------ ---------- ----------
Mr P J Martin 22,350 19,350
------------------ ---------- ----------
Dr K P Kaspar 18,100 18,100
------------------ ---------- ----------
Mr P J Williamson 45,000 40,000
------------------ ---------- ----------
5. Dividend and share buybacks
Our stated dividend policy is to pay out 25-30% of adjusted
basic EPS as dividends. Adjusted basic EPS in FY2020 was 7.4p
(2019: 2.4p). Thus, the Board proposes a dividend of 1.9p (2019:
0.7p) - implying a pay-out ratio of 26% (2019: 29%) Based on our
closing share price on 31 March 2020 this implies a dividend yield
of circa 0.9%. The total amount payable to our shareholders is
circa GBP0.5m.
There were no share buy backs performed during the year.
6. Employees
I would like to thank all of our staff for their effort and
commitment in the last year. We will continue to need you and your
commitment to make IDS a company which will be a stronger and a
more successful competitor going forward. Reaching a second year of
LFL revenue growth is a significant success for a company which
faced significant headwinds for a four-year period before this. I
hope you have the same feeling of pride that I do when looking back
to over the achievements of the last 12 months.
7. Outlook
FY2020 was the second consecutive year of LFL revenue growth. We
also improved several operational KPIs which suggest positive
momentum, e.g. placements which will become fully effective next
financial year.
The COVID-19 pandemic will impact our ability to continue on
this trajectory. Whilst we saw a significant decline in demand for
in-vitro testing during April and May as healthcare providers
focused on treating COVID-19 patients, recent trading is improving.
The Impact of the pandemic will be temporary, and once the pandemic
becomes under control we should be able to harvest the benefits of
the actions taken in FY2020 in order to accelerate our growth.
We are working to manufacture and commercialise CLIA and ELISA
tests to detect SARS-CoV-2 antibodies, combining our resources and
capabilities with partners who complement our skill set with their
virology know-how. A summary of the opportunities we are working on
is set out in Jaap's CEO report, and we will update the market via
RNS if there is any significant news in this area.
What has not changed, though, is my conviction that IDS
continues to be a good business: the automated part of the IDS
business is a razor/razorblade-type business with recurring
revenues at a very predictable rate.
Dr Burkhard Wittek
Chairman
CEO's Report
1. Overview
During FY2020, total Group revenues increased by 2% on a LFL
basis to GBP39.3m, as well as delivering the strongest instrument
placement performance since 2014.
I was pleased to see that everyone in the IDS team put in
significant effort to deliver a second consecutive year of LFL
revenue growth. I would like to thank all the employees at IDS for
their efforts and going the extra mile in achieving this result,
despite the challenges caused by COVID-19 towards the end of the
year.
Our Automated business recorded LFL revenue growth of 4%. This
was established using our offering of a full random-access system
with a combined menu of endocrinology, autoimmunity and infectious
disease assays. Within our Automated business unit, autoimmunity
and infectious disease sales have grown 74% on a LFL basis.
Performance of our Automated business in our distribution markets
was particularly strong, with these territories delivering 30% LFL
growth.
We also achieved strong growth within our Technology business,
which exhibited 30% LFL revenue growth.
Instrument sales/placement performance resulted in a total of
150 instruments being placed or sold across both the Automated and
Technology business units, an increase of 18% year on year.
Disappointingly, our Manual business revenue declined by 8% LFL,
due to lower sales of ELISA's in our direct markets, which was not
offset by the growth in our distribution markets.
On the people side, a strong focus on the IDS culture and values
was combined with improving our efforts to set clear targets for
all team members. A continual review of the performance and talents
of all customer-facing team members was an area of focus in the
year, and where needed improvements were made. This approach will
be adopted across all teams in FY2021.
Changes we made in our regulatory approval process have
delivered progress in obtaining regulatory approvals both in the US
and China. We have also made considerable progress in our
preparation for the implementation of the new IVDR regulatory
framework that will be imposed in May 2022.
Unfortunately, we did not see improvements within our internal
assay research and development function, with no new assays
released during the year. However, we did progress a number of
assays along the research and development stage gate process, and
released improved versions of two of our key assays.
Looking forward, FY2021 will be affected by the COVID-19
pandemic. We have put our employee's safety and wellbeing first
whilst we take care to ensure continuous product supply and service
for our customers. We will continue to intensify our efforts to
generate new business and reduce our costs. Furthermore, we will
continue to pursue our successful growth strategy via clear target
setting and customer focus in all departments and adapt to the
COVID-19 circumstances as required.
2. Automated business unit
2.1 Business segment revenue
2019 LFL
2020 LFL 2019 change Change
GBP000 GBP000 GBP000 % %
-------------- ------- ------- ------- ---------- ----------
25-OH Vitamin
D 4,822 5,581 5,537 * 14% * 13%
Speciality
- IDS 14,083 13,659 13,737 3% 3%
Speciality
- Partners 2,282 1,314 1,332 74% 71%
Instrument
Sales and
Service 2,197 2,012 2,029 9% 8%
-------------- ------- ------- ------- ---------- ----------
Total 23,384 22,566 22,635 4% 3%
-------------- ------- ------- ------- ---------- ----------
In FY2020, Automated business revenues increased by 4% LFL. This
business unit accounts for 59% (2019: 59%) of Group revenues.
25-OH Vitamin D assay revenues continued to decline driven by
the general reduction in demand and lower reimbursement levels for
25-OH Vitamin D assays, along with the consolidation of this test
onto workhorse analysers. Additionally, in the US there has been a
significant drop in the reimbursement rate
for this test, with it falling by 27% over the last three years.
Revenue reduced by 14% versus the prior year on a LFL basis, mainly
driven by a decline in the US, which we expect to continue.
Speciality - IDS revenues (i.e. from assays developed by IDS)
increased by 3%. Strong growth in our distribution channels,
coupled with modest growth in our main European direct sales
markets, was offset by revenue declines in the US and Brazil.
Brazil faced the impact of the loss of one high volume customer at
the start of the year, but subsequently enlarged their installed
base during the remainder of the year by signing several new
customers which will show an increased assay demand during
FY2021.
Speciality - Partners revenue encompasses the sales of IDS
branded assays developed and manufactured by IDS's partners, and
mainly comprises revenue from our autoimmune product portfolio. Our
combined endocrinology/autoimmune panel continues to be well
received in the market, generating LFL revenue growth of 74% in
this segment. We will focus on leveraging our increased installed
base and intensify our efforts both from our sales team and our
autoimmune clinical application specialists (CAS) to find new
business.
Income from instrument sales has grown 9% year-on-year on a LFL
basis. This is driven through an increase in analysers sold during
the year into distribution channels, coupled with increased
instrument spare parts orders arising from the larger installed
base in distribution markets.
2.2 Key success factors
2.2.1 Completion of endocrinology reagent portfolio
The endocrinology assay menu of IDS remains specialised but
lacks some critical assays to offer a complete testing suite for
certain indication areas. Thus, we remain focused on the completion
of our hypertension and fertility/steroids panels.
While assays progressed through the stage-gate based development
process, we did not meet our expectations for new assay releases
during the year. However, we successfully released two improved
versions of key assays, and our new automated cortisol assay is due
to be released imminently.
During the year we obtained FDA approval for an additional
assay, bringing the total number of assays available for sale in
the US to 11. Our US endocrinology menu, however, remains
sub-critical in size. In the mid-term we will be looking to expand
this panel through approval of additional IDS assays, as well as
working with our partners to obtain FDA approval for their assays.
One further assay was submitted for approval in FY2020, and we
target this to be available for sale in the US during FY2021.
In China we have four assays registered. The Chinese regulators
(NMPA) require medical devices to be re-registered on a periodic
basis, and we substantially completed this re-registration process
for our on-market assays and instruments during the year. We have
appointed specialist registration agents in China, a role
previously fulfilled by our local distributor. As a result, we have
seen an acceleration in registration progress, and are now well
advanced with the registration of our 25-OH Vitamin D assay which
was submitted to the Chinese regulators for approval in FY2020. We
target this assay being available for sale during FY2021, followed
rapidly by further endocrinology panel assays which will give us
additional growth potential in China.
As a result, the number of automated endocrinology assays
produced internally by IDS is:
Assays Assays
end end
Regulatory approval of FY2020 of FY2019
-------------------------- ---------- ----------
Assays with the CE mark 22 22
Assays with FDA approval 11 10
Assays with NMPA approval 4 4
-------------------------- ---------- ----------
New assay launches 2016 2017 2018 2019 2020
------------------- ---- ---- ---- ---- ----
CE-marked 1 4 3 0 0
------------------- ---- ---- ---- ---- ----
FDA approved 2 1 1 0 1
------------------- ---- ---- ---- ---- ----
2.2.2 Other assay fields
One of the highlights of the year has been the growth we have
achieved in sales of assays outside our historical key market of
endocrinology. This revenue is shown under the 'Speciality
Partners' caption.
We work with partners, who are experts in their respective
fields, to develop and commercialise assays which can be run on the
IDS instrument. The partner typically develops and manufactures the
assays, while IDS applies for regulatory approval and provides the
commercial route to market for the products.
These relationships take several years to generate commercial
benefit because individual assays typically take a couple of years
for our partners to develop, then a sufficiently large assay panel
needs to be developed to provide hospitals and laboratories with a
compelling commercial proposition. We are now starting to see the
fruits of these efforts, with revenues in these fields growing 74%
LFL to GBP2.3m.
During the year we have continued to enhance our levels of
co-operation with our partners, and we would like to thank them for
their continued support and commitment to the IDS platform. A
summary of progress in each of these fields is set out below:
Autoimmune and infectious disease
Most of the revenue growth was generated from our autoimmune
assay panel. During the year IDS has strengthened our internal
competencies in this field, and the combined IDS endocrinology and
autoimmune panel is gaining increasing credibility and traction in
the market. We look forward to working with our partner,
Technogenetics, to continue this success into FY2021, and in
particular to our collaboration on our new SARS-CoV-2 assay.
Allergy
We have seen the first sales of these products in FY2020, which
are manufactured and developed by our partner Omega Diagnostics. As
noted in last year's CEO report we need a suitable panel of
screening assays, before we can gain significant commercial
traction in this field. While we will continue to work with Omega
Diagnostics, during FY2021 we will explore additional avenues to
accelerate development of the screening assays we require.
Monitoring of biotherapy treatment
In March 2020, our partner Theradiag, successfully CE-marked the
first four products in their automated biotherapy monitoring range.
These products run on the iTrack10 analyser, manufactured by IDS.
During FY2021, we will work closely with Theradiag to support their
roll out of this new and exciting product range, and IDS will
distribute these products in various territories not serviced by
Theradiag. Our sales and clinical application specialists have been
trained in these products, and customer roadshows have been
performed to facilitate market uptake.
In summary the total number of assays available on the IDS
instrument platform is:
Assays Available
Indication Area with CE Mark
------------------------- ----------------
Speciality endocrinology 22
------------------------- ----------------
Infectious disease 23
------------------------- ----------------
Autoimmune 29
------------------------- ----------------
Allergy 67
------------------------- ----------------
Total Portfolio 141
------------------------- ----------------
2.2.3 Instrument placements
The number of machines installed is a critical KPI, as each
machine will generate future recurring assay revenue. The total
number of machines placed or sold increased to 93 (FY2019: 84),
representing the highest level of placements/sales since FY2012.
This performance is summarised in the table below:
2020 2019
----------------------------- ---- ----
Direct - gross placements 43 37
Direct - gross returns (25) (24)
Direct - net placements 18 13
----------------------------- ---- ----
Distributor sales 50 47
----------------------------- ---- ----
Total gross placements/sales 93 84
----------------------------- ---- ----
Instrument returns in the year were adversely impacted by the
loss of one major customer who ran a single assay across four
instruments. The net result of an increase of 18 instruments in the
installed base in our direct markets is the strongest result since
FY2014.
The number of sales to distributors would have been
significantly higher had the COVID-19 pandemic not interrupted the
sale of a significant number of machines to one of our
distributors. This shipment has been rescheduled by our distributor
for H1 of FY2021.
The average number of assays being run on an instrument has
continued to increase - moving from 5.1 to 5.9 over the year. This
trend is driven by the upsell of additional assays onto existing
installed machines, coupled with the fact that newly installed
instruments typically run a combination of endocrinology and
autoimmunity assays. This means newly installed machines typically
run many more assays than legacy machines, albeit in lower
volumes.
Average revenue per direct instrument ('ARPI') was GBP48,000
(2019: GBP52,000) per annum, calculated on a rolling 12-month
basis. The decrease in ARPI was mainly due to the loss of a few
high-volume single assay systems in the Americas, coupled with the
fact that machines running combined endocrinology/ autoimmune
assays are typically placed in laboratories where volume demands
are lower.
2.2.4 Sales team
During FY2020 we achieved a level of stability within our direct
sales team, while continuing to focus resources, both sales and
technical support, on our growing distribution business. We have
completed the recruitment of a number of autoimmune application
specialists, with specific product knowledge in this field, to help
support our sales team grow this business. The improving instrument
placement and sales trends in both the direct and distribution
markets are evidence that we are starting to see initial success
with this relatively new structure.
Our main challenge continues to be in the US, due to the limited
size of the IDS panel available for sale. As noted earlier there is
no short-term solution to this, though we target expanding this
assay panel in the mid-term by obtaining FDA clearance for both IDS
and partner speciality assays. During the year we commenced
projects with our partners with the goal of obtaining the
validation data required to register their speciality assays in the
US.
Our automated distribution sales team had a successful year,
growing sales by 30% LFL, and opening up new distribution markets
in South America and the Middle East.
2.2.5 - IVD Regulations
The new IVD regulations are scheduled to come into effect from
26 May 2022. This means, rather than self-certifying assays as
organisations currently do under the CE-mark certification, our
assays will require third party CE certification and audit by a
notified body. To comply with the new IVD regulations the
analytical performance, scientific validity and clinical
performance of our assays will require significant supporting
evidence. This will apply to all IDS assays, existing or new,
automated and manual. We have created a team of 11 people to ensure
we are prepared for this transition and believe that while a huge
amount of effort will be required, this change in regulations will
not pose a material risk for IDS. Indeed, IVDR may be an
opportunity for IDS due to industry consolidation, as many smaller
IVD organisations that lack the regulatory resources could struggle
to meet the more stringent requirements.
3. Manual business unit
2019 LFL
2020 LFL 2019 change Change
GBP000 GBP000 GBP000 % %
----------------- ------- ------- ------- ---------- ----------
25-OH Vitamin * 9%
D 969 1,076 1,061 * 10%
Other Speciality * 4%
- IDS 4,979 5,213 5,179 * 5%
Other Speciality
- purchased 1,658 2,067 2,058 * 20% * 19%
* 6%
Diametra 3,770 3,983 4,024 * 5%
----------------- ------- ------- ------- ---------- ----------
* 8%
Total 11,376 12,339 12,322 * 8%
----------------- ------- ------- ------- ---------- ----------
In FY2020, our Manual business unit ('MBU') revenue declined 8%
on a LFL basis which was below our expectations of flat revenues in
this business. The business unit now accounts for 29% (2019: 32%)
of Group revenues.
Distribution sales, which make up just under half of the volumes
in this business unit, showed slight growth, and were in line with
our target. The shortfall to prior year occurred in our direct
sales markets. The focus of the MBU team has been on halting the
historical decline in our distribution markets, where they have
been successful. However, it is clear that during FY2021 more
attention needs to be focused on our direct markets where gross
margins are significantly higher. Therefore, we are in the process
or redeploying resources to achieve this and will likely make some
targeted hires to increase our technical sales capabilities and
enhance our abilities to make direct sales of ELISA assays to
research institutions and laboratories. We believe these measures
will enable us to achieve our target of returning this business to
annualised revenue levels in excess of GBP12m once the COVID-19
pandemic passes.
4. Technology business unit
2019 LFL
2020 LFL 2019 change Change
GBP000 GBP000 GBP000 % %
------------------ ------- ------- ------- ----------- -----------
Royalty income - 38 35 * 100% * 100%
Technology income 4,587 3,485 3,521 32% 30%
------------------ ------- ------- ------- ----------- -----------
Total 4,587 3,523 3,556 30% 29%
------------------ ------- ------- ------- ----------- -----------
In FY2020 Technology business unit sales exhibited a LFL
increase of 30%, to reach GBP4.6m. This represents record levels of
non-royalty derived technology income.
During the year we successfully diversified this business, and
now generate significant revenues from three different partners who
purchase our analysers and related ancillary products. We sold 57
instruments, mainly IDS i10 derivatives, to OEM customers in the
year.
We aim to expand the number of partners who utilise our
technology, to enable continued revenue growth and reduce our
reliance on a handful of partners. The long-term future of this
business is dependent on the development by our partners of their
respective assay panels for the IDS analysers, and the success of
these new panels in the market.
5. Culture and values
The growth of our revenue and placements for a second
consecutive year has shown evidence that IDS has progressed in our
chosen journey from a scientifically focused organisation towards a
commercial, customer-focused organisation which produces high
quality IVD products underpinned by excellent science and
services.
Also, I was pleased to see the improvement in results obtained
from our annual employee engagement survey. The IDS results for
FY2020 were not materially impacted by COVID-19, due to the hard
work and extra efforts of the entire IDS team. The fact that we
were able to keep all our sites operational, and overcome the
obstacles thrown up by the pandemic during March, is testament to
the engagement of our team, and the passion they have to ensure IDS
is successful. I am very proud of the results we delivered during
FY2020 despite the challenges and believe the entire IDS team
should feel the same. I would like to thank them sincerely for
their efforts during FY2020.
6. COVID-19 update
Thanks to the dedication of the IDS team, our manufacturing
locations in Italy, France, Belgium and the UK have continuously
remained operational during the COVID-19 crisis. We were able to
overcome any disruption in the final quarter of FY2020 caused by
the virus. One exception was that we were required to delay the
planned sale of a significant number of analysers to one
distributor from FY2020 into FY2021.
When lockdown measures start to be slowly lifted, we are
increasingly confident we will be able to maintain continuity in
our business. The safety of our people has been, and will continue
to be, our top priority. Thus, we are following all relevant
government regulations, including those related to social
distancing and good hygiene practices. During the peak of the
crisis, all employees not directly involved in the manufacture of
our products were asked to work from home. We are now implementing
a phased return to work for those employees who need access to IDS
facilities to perform their role effectively, though all other
staff are being encouraged to remain working from home. This
approach will enable IDS to adhere to the social distancing
guidance issued by each government in the territories where we
operate.
Opportunities
We are currently in negotiations with a number of partners to
manufacture and commercialise COVID-19 antibody test kits in both
ELISA and CLIA formats.
We are currently working to manufacture and commercialise
COVID-19 antibody test kits in both ELISA and CLIA formats,
combining our resources and capabilities with partners who have
knowledge in virology and infectious diseases. Our development
partner, Technogenetics, has developed a COVID-19 IgG assay to
detect SARS-CoV-2 antibodies. This quantitative automated assay
which runs on the IDS-iSYS analyser, should be available for sale
by IDS before the end of June, in Europe and distribution regions
whose regulatory regime is based on the CE-mark.
In addition, we have agreed commercial terms with a UK based
specialist medical diagnostics company to produce components of
their COVID-19 ELISA manual assay. Finally, we are working with a
number of partners with expertise in virology and immunology to
provide a route to market for ELISA-based COVID-19 assays,
utilising our direct sales organisation as well as our extensive
distribution network.
7. Outlook
We have seen a significant reduction in revenue during the first
quarter of FY2021 versus the same period last year, driven by a
reduction in routine medical testing in hospitals and laboratories
across the world, whose focus has been on COVID-19 treatment and
testing. Large laboratories have stated that in April testing
volumes dropped to around 50-60% of normal levels. We have taken
appropriate action to minimise our costs during this period of
uncertainty. From a liquidity perspective, IDS is in a very strong
position with cash holdings of almost GBP28m at year end.
During FY2021 we will continue our drive to ensure all IDS team
members have specific objectives which are aligned to the Group
goals of improving revenue, analyser placements and profit. We will
enhance focus, especially under the current difficult circumstances
caused by the pandemic, on our teams' ability to hit agreed
objectives. It is through this result-oriented approach we will
support our customers best, and achieve success.
We have significantly increased our installed analyser base as
well as the panel of assays available on our analysers. We have
successfully diversified away from being a `Vitamin D and Bone
marker' focused organisation, to a more rounded specialised
customer-driven organisation, underpinned by strong scientific
ability. Our balance sheet continues to remain strong, with IDS
holding almost GBP28m cash at year end. Thus, we believe IDS is
well positioned to weather the storm of the COVID-19 pandemic.
Over the last two years we have made good progress in addressing
some of the fundamental challenges facing IDS, we have improved our
main processes and addressed several areas where we had
deficiencies in talents and skills. During FY2020 we were able to
focus more efforts on accelerating our business growth, and once
the challenges of COVID-19 subside, we should be able to harvest
the fruits of these efforts and see a further acceleration of
growth. In the short term we will also focus on commercialising
opportunities arising from Increased levels of SARS-CoV2 antibody
testing using a range of automated and manual test kits which we
expect to launch during Q1 FY2021.
We will provide an update on trading in Q1 FY2021 at our AGM on
23 July 2020. However, we are confident once the global situation
improves, we are well positioned to continue our trajectory of
growth, leveraging our increasing installed instrument base and
assay menu.
Jaap Stuut
Chief Executive
Financial and Operations Review
1. Overview
IDS has achieved a second consecutive year of revenue growth,
with revenue increasing by 2% on a LFL basis to GBP39.3m. It is
encouraging to see that the growth we are now generating arises in
the areas of business where we have invested most, namely automated
speciality assays and sales of our analyser technology. Growth in
these areas is now offsetting declines in the other areas of the
business.
As set out in more detail later in this report, our efforts to
improve our process and operational efficiency have started to be
reflected in our financial performance. This is particularly
evident in our gross margin, which increased by 1%, despite a
greater proportion of the Group's sales being generated through
lower margin distribution sales channels. Operating costs remained
under tight control, decreasing 1% on a LFL basis.
As a result, adjusted EBITDA, our core metric for measuring
underlying profitability, increased from GBP4.8m to GBP6.1m.
Adjusted EBITDA in FY2020, excluding the impact of IFRS 16 was
GBP5.4m (2019: GBP4.8m). I will comment on the impact of IFRS 16, a
new accounting standard which impacts EBITDA, below.
Cash and cash equivalents decreased by GBP0.1m to GBP27.6m
(2019: GBP27.7m).
2. Revenue analysis
Group revenue of GBP39.3m (2019: GBP38.5m) increased by GBP0.8m,
or 2% on both a reported and LFL basis.
2.1 Revenue by geography
2020 2019 LFL
GBP000 GBP000 change Change
--------------- ------- ------- ---------- ---------
Direct markets
- US 6,655 7,215 * 11% * 8%
Direct markets
- Europe 22,594 22,416 2% 1%
Rest of world 10,098 8,882 15% 14%
--------------- ------- ------- ---------- ---------
Group revenue 39,347 38,513 2% 2%
--------------- ------- ------- ---------- ---------
Our US business suffered a revenue decline of 11% on a LFL
basis, which was driven by declines in both automated and manual
revenues. The decline in automated revenues is due to the sub-scale
automated assay menu, which makes it difficult to win new business.
This also means it is relatively easy for laboratories to
consolidate the limited number of tests being run on the IDS
analyser onto other platforms, making retention of contracts coming
up for renewal more challenging. The decline in the Manual business
was due to a lower level of ELISA sales related to research
projects.
Revenue in the European business grew 2% versus the prior year
on a LFL basis. Growth in the Technology business unit, where
revenues are predominantly generated in Europe, offset declines in
the Manual business in our direct European sales territories. The
Automated business performed in line with the prior year.
As with FY2019, our best regional performance was in the Rest of
world region, where revenue is mainly delivered through our
distribution network. The growth was generated through our
Automated business unit, where we saw strong growth in sales of our
autoimmune products, were able to gain a foothold in South America,
as well as growing our Middle Eastern business. The performance of
our Manual business distribution network was consistent with the
previous year.
3. Profit and loss performance and comparison with
best-in-class
3.1 Summary income statement and peer comparison
% of revenue
--------------
2020 2019
GBP000 GBP000 2020 2019
----------------------- -------- -------- ------ ------
Revenue 39,347 38,513 100.0% 100.0%
Cost of Goods
Sold (21,971) (21,817) 55.8% 56.6%
Gross profit 17,376 16,696 44.2% 43.4%
Sales and marketing (8,890) (9,075) 22.6% 23.6%
Research and
development
(net) (1,926) (2,444) 4.9% 6.3%
General and
administrative
expenses (5,232) (4,837) 13.3% 12.6%
Total operating
costs pre-exceptional (16,048) (16,356) 40.8% 42.5%
Exceptional
items - 89 0.2%
Profit from
operations 1,328 429 3.4% 1.1%
----------------------- -------- -------- ------ ------
Add Back:
Depreciation
and amortisation 4,722 4,457 12.0% 11.6%
Exceptional
items - (89) 0.0% 0.2%
----------------------- -------- -------- ------ ------
Adjusted EBITDA 6,050 4,797 15.4% 12.5%
----------------------- -------- -------- ------ ------
During FY2020, IDS delivered improving revenue performance, and
translated this into EBITDA growth, with EBITDA increasing to 15%
of revenue (2019: 12% of revenue). However, it should be noted that
this comparison is slightly flattered by the implementation of IFRS
16 as set out below. If this change is stripped out, EBITDA would
have equated to 14% of revenue in FY2020.
3.2 Change in accounting policy
The introduction of IFRS 16 `Leases' means that leases held by
IDS, which were previously defined as operating leases, are now
deemed to be finance leases. This means that costs previously
classified as rental expenditure are now included within
depreciation and interest, and as a result EBITDA is favourably
impacted by GBP604,000 during FY2020, with depreciation increasing
by a similar amount. The introduction of IFRS 16 did not materially
impact reported gross profit or operating profit. This is
summarised in the table below which restates the FY2020 results as
if IFRS 16 had not been implemented:
2020 2020
2020 IFRS 16 Pre IFRS
As reported impact 16 impact
GBP000 GBP000 GBP000
-------------------- ------------ -------- ----------
Revenue 39,347 - 39,347
Cost of Goods
Sold (21,971) (16) (21,987)
Gross profit 17,376 (16) 17,360
Sales and marketing (8,890) 4 (8,886)
Research and
development
(net) (1,926) 3 (1,923)
General and
administrative
expenses (5,232) 6 (5,226)
Total operating
costs (16,048) 13 (16,035)
Profit from
operations 1,328 (3) 1,325
-------------------- ------------ -------- ----------
Add Back:
Depreciation
and amortisation 4,722 (601) 4,121
EBITDA 6,050 (604) 5,446
-------------------- ------------ -------- ----------
Additionally, the implementation of this new standard led to an
increase in fixed assets of GBP1,524,000, with a corresponding
increase in finance lease liabilities of GBP1,524,000.
The FY2019 results have not been restated to reflect the impact
of adopting IFRS 16 as IDS transitioned using the modified
retrospective approach
3.3 Comparison with best-in-class performance
The improvements in financial performance are a step in the
right direction. However, our ultimate goal is to be in-line with
the best-in-class industry performance, and for that we undertake
regular benchmarking against selected peers. This ensures we focus
on our goal of closing the gap to best in class financial
performance and embed the ambition in our team members to 'play in
the top league' of our industry.
As in previous years, we have compared the IDS financial
performance with DiaSorin and Qiagen. DiaSorin is the most
successful competitor we face in the field of automated
endocrinology, and Qiagen are a world class molecular diagnostics
organisation.
The following table shows the cost structures of these
best-in-class companies, as a percentage of revenues, compared to
IDS:
Cost Research General
of goods Sales and development and
Costs as % of revenue sold & marketing (gross) administrative
---------------------- --------- ------------ ---------------- ---------------
IDS 56% 23% 9% 13%
Qiagen 34% 26% 10% 9%
DiaSorin 31% 20% 9% 10%
---------------------- --------- ------------ ---------------- ---------------
As I noted in the Annual Report and Accounts 2019, the key area
where IDS lags behind these organisations is in terms of our level
of cost of goods sold ('COGS'). The deficiency in other cost
categories is less pronounced. Therefore, improving our COGS metric
was a key area of focus in FY2020. During the year we were
successful in reducing our COGS from 57% to 56% despite a high
proportion of low margin distribution sales. However we still have
a long way to go to reach best-in-class performance. A summary of
the key initiatives undertaken is set out in the next section.
Additionally, we have strengthened the leadership within our
operations organisation, with the new team members being tasked to
continue to improve our levels of operating efficiency and to help
bridge the gap to best-in-class performance.
4. Gross profit and operational performance
Gross profit in the year was GBP17.4m (2019: GBP16.7m), an
increase of GBP0.7m, from the prior year. Gross margin increased to
44% (2019: 43%), despite a continuing revenue mix swing from higher
margin direct business, to lower margin distribution business.
Distribution business accounted for 27% of Group revenue (2019:
23%).
Initiatives to reduce our COGS, and hence improve our gross
profit, were focused on our Automated business, which from an
operational perspective comprises the instrument manufacturing site
in Pouilly and the assay manufacturing site in Liége.
Pouilly
The site in Pouilly benefited from the leverage effect of
producing more instruments, with 168 instruments being produced
versus 134 in the previous year. This was achieved with minimal
increase in the operating cost base. During the year we invested in
expanding the size of this factory, thus ensuring we are well
placed to deal with the expected increase in instrument demand in
future years.
Liége
A formal project management framework has been implemented in
Liége, with many of the projects focused on generating cost
efficiencies through improved processes and controls.
Significant savings have been made by reducing scrap costs,
reducing the internal consumption of manufactured products, scaling
up the size of our production batches, and increasing assay shelf
lives where possible. These projects remain ongoing. During FY2020,
we focused on the 'low hanging fruit' but there is still much
opportunity to generate further efficiencies moving forward.
Savings scorecard and moving forward
Overall the Group met the cost savings targets we set for
ourselves at the start of the year, thanks to the efforts of many
individuals within the IDS team. However, as demonstrated earlier,
we have a long way still to go to reach best in class performance.
Therefore, looking into FY2021, improving operational efficiency
will remain a key priority of the Group.
We also expect to see cost improvement benefits from two further
Group-wide initiatives. Firstly, towards the end of FY2020 we
created a Group purchasing function, which consolidated the
disparate purchasing functions located in each site. We envisage
this will enable us to take a more coordinated approach to supplier
management, as well as pooling the experience of our team and
making sharing of best practise easier. Secondly, we are
implementing a continuous improvement programme, where technicians
will be rewarded for suggesting and implementing process changes
which lead to efficiency gains in our production processes. This is
a process, which in previous organisations I was involved in,
generated many small gains which quickly added up to a material
cost saving.
5. Operating costs
Once all the recognition criteria of IAS 38 Intangible Assets
related to the capitalisation of product development costs are met,
the relevant expenditure related to instrument and new assay
developments is capitalised. The total amount of costs capitalised
decreased from GBP2.4m in FY2019 to GBP1.9m in FY2020, reflecting
the slower than anticipated progress with various internal
development projects. We review projects on which costs have been
capitalised on a periodic basis throughout the financial year and
the costs are impaired if a project no longer meets the required
capitalisation criteria.
As can be seen in the table in section 3.1, operating costs
before exceptional items were GBP16.0m (FY2019: GBP16.4m), a
decrease of 1% on a LFL basis.
6. Foreign exchange
Movements in foreign exchange rates have not materially impacted
the Group operating results year on year, with
the weakening of the GBP against the USD offsetting its
strengthening against the Euro. The table below shows the average
exchange rates during the year:
Strengthening
/(weakening)
Average exchange of Sterling
rates 2020 2019 %
----------------- ---- ---- -------------
Pound Sterling: * 3%
US Dollar 1.28 1.32
----------------- ---- ---- -------------
Pound Sterling:
Euro 1.15 1.13 1%
----------------- ---- ---- -------------
In the year 69% (2019: 67%) of the Group's revenues were billed
in Euros and 20% (2019: 20%) were billed in US Dollars.
7. Segmental reporting
Automated Manual Technology Total
2020 2020 2020 2020
GBP000 GBP000 GBP000 GBP000
------------------- --------- ------- ---------- -------
Revenue 23,384 11,376 4,587 39,347
------------------- --------- ------- ---------- -------
Gross profit 11,072 4,572 1,732 17,376
------------------- --------- ------- ---------- -------
Adjusted EBITDA 3,389 1,977 684 6,050
------------------- --------- ------- ---------- -------
Adjusted EBITDA
% 14.5% 17.4% 14.9% 15.4%
------------------- --------- ------- ---------- -------
Adjusted EBITDA
before adoption
of IFRS 16 2,947 1,827 672 5,446
------------------- --------- ------- ---------- -------
Adjusted EBITDA
% before adoption
of IFRS 16 12.6% 16.1% 14.7% 13.8%
------------------- --------- ------- ---------- -------
Automated Manual Technology Total
2019 2019 2019 2019
GBP000 GBP000 GBP000 GBP000
---------------- --------- ------- ---------- -------
Revenue 22,635 12,322 3,556 38,513
---------------- --------- ------- ---------- -------
Gross profit 10,054 5,584 1,058 16,696
---------------- --------- ------- ---------- -------
Adjusted EBITDA 1,898 2,755 144 4,797
---------------- --------- ------- ---------- -------
Adjusted EBITDA
% 8.4% 22.4% 4.0% 12.5%
---------------- --------- ------- ---------- -------
Adjusted EBITDA margin in our Automated business increased to
14.5% (12.6% EBITDA margin excluding the impact of IFRS 16) from
8.4% in the prior year. Adjusted EBITDA was favourably impacted by
the leverage effect of higher revenues, and the cost savings
generated by the initiatives set out in section 4 of this report.
These improvements were partially offset by the impact of higher
levels of sales generated through distribution channels, which
attract a lower margin than direct sales.
In our Manual business the adjusted EBITDA margin reduced to
17.4% (16.1% excluding the Impact of IFRS 16) (2019: 22.4%) due to
the decline in sales revenue year on year. While in our Technology
business, adjusted EBITDA grew to 14.9% (2019: 4.0%) due to the
leverage effect of higher revenues.
8. Headcount and productivity
8.1 Headcount
An analysis of the Group's headcount, on a FTE basis, is set out
below:
31 March 31 March
2020 2019
--------------------------- -------- --------
Operations 136 130
--------------------------- -------- --------
Sales and marketing 77 78
--------------------------- -------- --------
thereof field sales
force 23 24
--------------------------- -------- --------
Research and development 47 40
--------------------------- -------- --------
General and administrative 35 35
--------------------------- -------- --------
Total 295 283
--------------------------- -------- --------
The increase in headcount is mainly due to IDS creating a team
tasked with ensuring that our assays will comply with the future
IVD Regulations, which will come into effect in May 2022. These FTE
are split across the operations and research and development
categories.
8.2 Labour productivity
The most appropriate way to measure the overall productivity of
IDS is the revenue per employee. During the year, IDS revenue per
employee rose to GBP140,000 (2019: GBP137,000) - the best
performance in five years.
2016 2017 2018 2019 2020
Revenue per employee GBP000 GBP000 GBP000 GBP000 GBP000
--------------------- ------- ------- ------- ------- -------
IDS 117 137 134 137 140
Qiagen 184 214 235 227 228
DiaSorin 219 254 295 300 313
--------------------- ------- ------- ------- ------- -------
NB: DiaSorin and Qiagen results are for year ended 31 December
2019. IDS are for year ended 31 March 2020.
9. Exceptional operating items
In FY2020, there were no exceptional operating items. In FY2019,
there was an exceptional credit of GBP0.1m due to the reversal of
restructuring provisions related to our France and Italy operations
which were not utilised.
10. Profit from operations
Profit from operations ('EBIT') was GBP1.3m (2019: GBP0.4m), the
rise being mainly due to the improved revenue and cost performance
of the business as set out in this report.
11. Net finance income
Net finance income was GBP1.9m (2019: income of GBP0.4m).
Included within net finance income is a foreign exchange gain of
GBP0.7m (2019: gain of GBP0.3m), which arises from the translation
of non-Pound Sterling denominated intercompany balances and a
foreign exchange gain from the liquidation of a subsidiary of
GBP1.2m (2019: nil). The gain from the liquidation of the
subsidiary has been treated as exceptional finance income as it is
non-recurring in nature.
12. Taxation
The tax credit of GBP0.1m (2019: charge of GBP0.05m) gives a
full-year effective rate of -2.9% (2019: 5.5%). It comprises a
current tax credit of GBP0.1m and a deferred tax charge of GBPnil.
The current tax credit arises mainly due to research and
development tax claims in UK and France, and a prior year over
provision reversal in France, partially offset by profits
chargeable in overseas territories taxable at a higher rate than UK
corporation tax.
Total gross tax losses carried forward amount to GBP22.3m (2019:
GBP20.3m) of which GBPnil (2019: GBP3.2m) has been recognised as an
asset in the balance sheet.
13. Earnings per share
Adjusted earnings per share is calculated using profit after tax
adjusted to exclude the after-tax effect of both exceptional
operational and finance income. Adjusted basic earnings per share
are 7.4p (2019: 2.4p). Basic earnings per share are 11.6p (2019:
2.7p).
14. Balance sheet and cashflow
14.1 Equity
The Group's shareholders' funds at 31 March 2020 were GBP57.1m
(2019: GBP55.3m).
14.2 Working capital
The Group net working capital was GBP14.1m at 31 March 2020
(GBP12.6m at 31 March 2019). This represents 36% of revenue (2019:
33%). A summary of the working capital movements is as follows:
-- Inventory increased mainly due to the number of completed
analysers held in stock. At the end of FY2019 we had no completed
analysers on hand. A large proportion of these relate to a
postponed order by one of our distributors, and we expect these
will be sold during H1 of FY2021.
-- Trade debtors increased; however, this was due to strong
trading in Q4, rather than a significant increase in debtor days,
which equated to 58 days of sales (2019: 53 days).
-- These were offset by an increase in trade creditors, mainly
due to the timing of receipt of invoices from our assay partners,
coupled with amounts owed related to our Pouilly building
expansion.
14.3 Cash flow summary
A summary of the Group's cash flow statement for the year is
shown below:
2020 2019
GBP000 GBP000
------------------------------ ------- -------
Profit before tax 3,254 842
Depreciation and amortisation 4,723 4,457
Income taxes received 788 838
Other adjusting items (1,908) (589)
Movements in working
capital (1,314) 232
------------------------------ ------- -------
Cash generated from
operating activities 5,543 5,780
Cash used in investing
activities (4,663) (4,426)
Cash used in financing
activities (938) (2,019)
------------------------------ ------- -------
Net decrease in cash
and cash equivalents (58) (665)
------------------------------ ------- -------
Add back
Share buy back - 1,358
Dividends 201 500
------------------------- --- -----
Free cash flow to equity 143 1,193
------------------------- --- -----
Cash generated from operating activities decreased to GBP5.5m
(2019: GBP5.8m). The increased profit in the year was offset by the
higher working capital requirements. Free cash flow to equity was
an inflow of GBP0.1m (2019: inflow of GBP1.2m), the reduction being
driven by higher capital investment and finance lease
repayments.
15. Dividend and share buy back
There was no share buyback activity during the year (2019:
612,297 shares were bought back at an average GBP2.20 per share).
Dividend payments, which related to the final dividend for 2019,
reduced to GBP0.2m (2019: GBP0.5m related to the final dividend for
2018).
The Group has a policy to pay out between 25% to 30% of its
adjusted earnings per share as a dividend. In FY2020 adjusted
earnings per share was 7.4p (2019: 2.4p) thus the Board is
proposing a dividend for the year of 1.9p (2019: 0.7p) subject to
the approval of shareholders at the Annual General Meeting on 23
July 2020. If approved, the dividend will be paid on 14 August 2020
to shareholders on the register at the close of business on 17 July
2020.
16. Key risks
COVID-19
As set out in the CEO's Report, the business was able to
successfully mitigate the impact of the COVID-19 pandemic during
FY2020. During the first half of FY2021, we expect that we will see
a significant impact on revenues due to the lower levels of routine
testing being undertaken by laboratories and hospitals around the
world. At the time of writing, it is very difficult to determine
when testing levels will return to normal. However, our expectation
is that once patients feel comfortable to visit hospitals, the
bounce back in testing volumes, and hence IDS revenues, will be
relatively swift.
IDS is well positioned to ride out the challenges of the
pandemic, with almost GBP28m of cash on hand at year end.
Nevertheless, we are monitoring the situation closely, taking the
relevant cost control steps across all areas of the organisation,
minimising the costs of running the business during this period of
uncertainty, to alleviate the impact of the reduced revenue on the
bottom line.
Brexit
While Brexit has taken a backseat due to the COVID-19 pandemic,
the transition period is currently scheduled to end on 31 December
2020. There is a risk that a deal is not reached by then, and the
UK reverts to WTO trade terms with the EU. We have now had two
'practice runs' at preparing for a no deal Brexit, firstly at the
end of March 2019 and then at the end of October 2019. Thus, we
believe that we have the appropriate processes in place to ensure
that a 'no deal' scenario at the end of the transition period will
not materially impact the performance of IDS.
Paul Martin
Group Finance Director
17 June 2020
Consolidated Income Statement for the year ended 31 March
2020
2020 2019
Notes GBP000 GBP000
------------------------------------------- ----- -------- --------
Revenue 1 39,347 38,513
Cost of sales (21,971) (21,817)
------------------------------------------- ----- -------- --------
Gross profit 17,376 16,696
Sales and marketing (8,890) (9,075)
Research and development (1,926) (2,444)
General and administrative expenses (5,232) (4,837)
------------------------------------------- ----- -------- --------
Operating costs pre-exceptional items (16,048) (16,356)
------------------------------------------- ----- -------- --------
Exceptional items
Restructuring credit - 89
------------------------------------------- ----- -------- --------
Total exceptional items - 89
------------------------------------------- ----- -------- --------
Operating costs (16,048) (16,267)
------------------------------------------- ----- -------- --------
Profit from operations 2 1,328 429
------------------------------------------- ----- -------- --------
Finance income
Finance income pre exceptional items 891 495
Exceptional finance income 1,226 -
------------------------------------------- ----- -------- --------
Total finance income 2,117 495
------------------------------------------- ----- -------- --------
Finance costs (191) (82)
Profit before tax 3,254 842
Income tax income/(charge) 3 94 (46)
------------------------------------------- ----- -------- --------
Profit for the year attributable to owners
of the parent 3,348 796
------------------------------------------- ----- -------- --------
Earnings per share
Adjusted basic 4 7.4p 2.4p
Adjusted diluted 4 7.4p 2.4p
Basic 4 11.6p 2.7p
Diluted 4 11.6p 2.7p
------------------------------------------- ----- -------- --------
All results relate to continuing operations.
Consolidated Statement of Comprehensive Income for the year
ended 31 March 2020
2020 2019
GBP000 GBP000
------------------------------------------------------------------ ------- -------
Profit for the year 3,348 796
------------------------------------------------------------------ ------- -------
Other comprehensive expense to be reclassified to profit
or loss in subsequent periods
Currency translation differences (137) (505)
Exchange differences classified to profit and loss on
liquidation of foreign subsidiary (1,226) -
------------------------------------------------------------------ ------- -------
Other comprehensive expense to be reclassified to profit
or loss in subsequent periods, before tax (1,363) (505)
Tax relating to other comprehensive income to be reclassified
to profit or loss in subsequent periods - -
------------------------------------------------------------------ ------- -------
Other comprehensive expense not to be reclassified to
profit or loss in subsequent periods
Remeasurement of defined benefit plan (8) (40)
------------------------------------------------------------------ ------- -------
Other comprehensive expense not to be reclassified to
profit or loss in subsequent periods, before tax (8) (40)
Tax relating to other comprehensive income not to be reclassified
to profit or loss in subsequent periods (5) 14
------------------------------------------------------------------ ------- -------
Other comprehensive expense net of tax (1,376) (531)
------------------------------------------------------------------ ------- -------
Total comprehensive income for the year attributable to
owners of the Parent 1,972 265
------------------------------------------------------------------ ------- -------
Consolidated balance sheet at 31 March 2020
2020 2019
GBP000 GBP000
-------------------------------------------- ------- -------
Assets
Non-current assets
Property, plant and equipment 9,806 6,852
Other intangible assets 11,162 11,177
Deferred tax assets 116 70
Other non-current assets 289 283
--------------------------------------------- ------- -------
21,373 18,382
-------------------------------------------- ------- -------
Current assets
Inventories 10,740 7,819
Contract assets 317 380
Trade and other receivables 11,153 8,958
Income tax receivable 2,140 2,667
Cash and cash equivalents 27,584 27,713
--------------------------------------------- ------- -------
51,934 47,537
-------------------------------------------- ------- -------
Total assets 73,307 65,919
--------------------------------------------- ------- -------
Liabilities
Current liabilities
Lease liabilities 833 82
Trade and other payables 9,494 6,511
Contract liabilities 209 278
Income tax payable 485 369
Provisions 76 46
Government grants 22 33
--------------------------------------------- ------- -------
11,119 7,319
-------------------------------------------- ------- -------
Net current assets 40,815 40,218
--------------------------------------------- ------- -------
Non-current liabilities
Lease liabilities 2,724 1,092
Employee benefit obligations 360 363
Provisions 969 846
Deferred tax liabilities 1,046 996
--------------------------------------------- ------- -------
5,099 3,297
-------------------------------------------- ------- -------
Total liabilities 16,218 10,616
--------------------------------------------- ------- -------
Net assets 57,089 55,303
--------------------------------------------- ------- -------
Called up share capital 589 589
Share premium account 32,345 32,345
Other reserves 3,297 4,660
Retained earnings 20,858 17,709
--------------------------------------------- ------- -------
Equity attributable to owners of the Parent 57,089 55,303
--------------------------------------------- ------- -------
Consolidated statement of cash flows for the year ended 31 March
2020
2020 2019
GBP000 GBP000
----------------------------------------------- ------- -------
Operating activities
Cash generated from operations 4,755 5,089
Cash outflow related to exceptional costs - (147)
Income taxes received 788 838
------------------------------------------------ ------- -------
Net cash from operating activities 5,543 5,780
------------------------------------------------ ------- -------
Investing activities
Purchases of other intangible assets (2,198) (2,492)
Purchases of property, plant and equipment (2,638) (2,122)
Net proceeds from disposals of property, plant
and equipment - 26
Interest received 173 162
------------------------------------------------ ------- -------
Net cash used by investing activities (4,663) (4,426)
------------------------------------------------ ------- -------
Financing activities
Principal element of lease payments (546) (79)
Interest paid (191) (82)
Dividends paid (201) (500)
Purchase of own shares - (1,358)
------------------------------------------------ ------- -------
Net cash used by financing activities (938) (2,019)
Net decrease in cash and cash equivalents (58) (665)
Effect of exchange rate differences (71) (155)
Cash and cash equivalents at beginning of year 27,713 28,533
------------------------------------------------ ------- -------
Cash and cash equivalents at end of year 27,584 27,713
------------------------------------------------ ------- -------
Consolidated statement of changes in equity for the year ended
31 March 2020
Share
Share premium Other Retained
capital account reserves earnings Total
GBP000 GBP000 GBP000 GBP000 GBP000
------------------------------------- -------- -------- --------- --------- -------
At 1 April 2018 589 32,345 5,165 18,773 56,872
Profit for the year - - - 796 796
Other comprehensive (expense)/income
Foreign exchange translation
differences on foreign currency
net investment in subsidiaries - - (505) - (505)
Remeasurement of defined benefit
plan - - - (40) (40)
Tax effect on remeasurement
of defined benefit plan - - - 14 14
------------------------------------- -------- -------- --------- --------- -------
Total comprehensive (expense)/income - - (505) 770 265
Transactions with owners
Share-based payments - - - 24 24
Dividends paid - - - (500) (500)
Purchase of own shares - - - (1,358) (1,358)
------------------------------------- -------- -------- --------- --------- -------
At 31 March 2019 589 32,345 4,660 17,709 55,303
------------------------------------- -------- -------- --------- --------- -------
At 1 April 2019 589 32,345 4,660 17,709 55,303
Profit for the year - - - 3,348 3,348
Other comprehensive (expense)/income
Foreign exchange translation
differences on foreign currency
net investment in subsidiaries - - (137) - (137)
Exchange differences classified
to retained earnings on liquidation
of foreign subsidiary - - (1,226) - (1,226)
Remeasurement of defined benefit
plan - - - (8) (8)
Tax effect on remeasurement
of defined benefit plan - - - (5) (5)
------------------------------------- -------- -------- --------- --------- -------
Total comprehensive (expense)/income - - (1,363) 3,335 1,972
Transactions with owners
Share-based payments - - - 15 15
Dividends paid - - - (201) (201)
------------------------------------- -------- -------- --------- --------- -------
At 31 March 2020 589 32,345 3,297 20,858 57,089
------------------------------------- -------- -------- --------- --------- -------
Notes to the consolidated financial statements for the year
ended 31 March 2020
1. Segmental information
The Group applies IFRS 8 Operating Segments. IFRS 8 provides
segmental information for the Group on the basis of information
reported internally to the chief operating decision-maker for
decision-making purposes. The Group considers that the role of
chief operating decision-maker is performed by the Board of
Directors.
Analysis of revenue is prepared and monitored on a geographical
basis due to the organisation of the sales teams as well as by
product type. However, earnings on a geographical basis are not
considered the most appropriate measure of performance given the
differing nature of operations across the different
territories.
2020 2019
GBP000 GBP000
------------------------- ------- -------
UK (country of domicile) 1,383 2,082
US 6,659 7,204
Germany 8,877 8,937
France 4,890 4,421
Other 17,538 15,869
------------------------- ------- -------
Total revenues 39,347 38,513
------------------------- ------- -------
IDS reports profit from operations for the three segments shown
below. This is monitored by the chief operating decision-maker
quarterly.
All balance sheet and cash flow information received and
reviewed by the Board of Directors is prepared at a Group
level.
Automated Manual Technology Total
31 March 31 March 31 March 31 March
2020 2020 2020 2020
GBP000 GBP000 GBP000 GBP000
------------------------------------ --------- --------- ---------- ---------
Revenue 23,384 11,376 4,587 39,347
Cost of Sales (12,312) (6,804) (2,855) (21,971)
------------------------------------ --------- --------- ---------- ---------
Gross profit 11,072 4,572 1,732 17,376
Sales and marketing (6,821) (1,630) (439) (8,890)
Research and development (1,758) 26 (194) (1,926)
General and administrative expenses (3,220) (1,476) (536) (5,232)
------------------------------------ --------- --------- ---------- ---------
Operating costs pre-exceptional
items (11,799) (3,080) (1,169) (16,048)
------------------------------------ --------- --------- ---------- ---------
Adjusted EBIT (727) 1,492 563 1,328
------------------------------------ --------- --------- ---------- ---------
Exceptional items
Restructuring costs -
Total exceptional items -
------------------------------------ --------- --------- ---------- ---------
EBIT 1,328
------------------------------------ --------- --------- ---------- ---------
Finance income
Finance income pre exceptional
items 891
Exceptional finance income 1,226
------------------------------------ --------- --------- ---------- ---------
Total finance income 2,117
Finance costs (191)
Profit before tax 3,254
------------------------------------ --------- --------- ---------- ---------
Adjusted EBIT (727) 1,492 563 1,328
Add: depreciation & amortisation 4,116 485 121 4,722
------------------------------------ --------- --------- ---------- ---------
Adjusted EBITDA 3,389 1,977 684 6,050
------------------------------------ --------- --------- ---------- ---------
Automated Manual Technology Total
31 March 31 March 31 March 31 March
2019 2019 2019 2019
GBP000 GBP000 GBP000 GBP000
------------------------------------ --------- --------- ---------- ---------
Revenue 22,635 12,322 3,556 38,513
Cost of Sales (12,581) (6,738) (2,498) (21,817)
------------------------------------ --------- --------- ---------- ---------
Gross profit 10,054 5,584 1,058 16,696
Sales and marketing (6,920) (1,761) (394) (9,075)
Research and development (2,333) - (111) (2,444)
General and administrative expenses (2,947) (1,456) (434) (4,837)
------------------------------------ --------- --------- ---------- ---------
Operating costs pre-exceptional
items (12,200) (3,217) (939) (16,356)
------------------------------------ --------- --------- ---------- ---------
Adjusted EBIT (2,146) 2,367 119 340
------------------------------------ --------- --------- ---------- ---------
Exceptional items
Restructuring credit 89
Total exceptional items 89
------------------------------------ --------- --------- ---------- ---------
EBIT 429
------------------------------------ --------- --------- ---------- ---------
Finance income 495
Finance costs (82)
Profit before tax 842
------------------------------------ --------- --------- ---------- ---------
Adjusted EBIT (2,146) 2,367 119 340
Add: depreciation and amortisation 4,044 388 25 4,457
------------------------------------ --------- --------- ---------- ---------
Adjusted EBITDA 1,898 2,755 144 4,797
------------------------------------ --------- --------- ---------- ---------
2. Profit from operations
Profit from operations is stated after charging/(crediting):
2020 2019
GBP000 GBP000
-------------------------------------------------------- ------- -------
Restructuring (credit) - (89)
-------------------------------------------------------- ------- -------
Total exceptional items - (89)
-------------------------------------------------------- ------- -------
Amortisation of other intangible assets 2,255 2,270
Loss on disposal of owned plant, property and equipment 3 36
Depreciation of owned plant, property and equipment 1,735 2,053
Depreciation on right-of-use assets 733 134
Operating lease costs 157 746
Share-based payments 15 24
Other staff costs 15,671 15,606
Cost of inventories recognised as an expense 7,867 7,637
Write downs of inventories recognised as an expense 335 799
Auditor's remuneration (see below) 184 178
-------------------------------------------------------- ------- -------
Amounts payable to PricewaterhouseCoopers LLP (2019:
PricewaterhouseCoopers LLP, GBP143,000 & Ernst & Young LLP
GBP35,000) and their associates in respect of both audit and
non-audit services:
2020 2019
GBP000 GBP000
------------------------------------------------------------ ------- -------
Audit services PricewaterhouseCoopers LLP
* statutory audit of parent and consolidated financial
statements 67 61
* statutory audit of subsidiary financial statements 114 82
Audit services Ernst & Young LLP
* statutory audit of subsidiary financial statements - 35
Non-audit services PricewaterhouseCoopers LLP
Taxation services 3 -
------------------------------------------------------------ ------- -------
184 178
------------------------------------------------------------ ------- -------
In FY2020, there were no exceptional operating items.
Exceptional finance income relates to foreign exchange gains from
the liquidation of immunodiagnostic Systems Nordic A/S.
In FY2019, the exceptional credit was due to a GBP0.1m reversal
of restructuring provisions relating to our French and Italian
operations which were no longer required.
3. Taxation on ordinary activities
a) Analysis of credit in the year
2020 2019
GBP000 GBP000
----------------------------------------------------- ------- -------
Current tax:
UK Corporation tax (334) (480)
Adjustment in respect of prior periods (78) (96)
Foreign tax charge on income 319 413
----------------------------------------------------- ------- -------
Total current tax credit (93) (163)
----------------------------------------------------- ------- -------
Deferred tax:
Excess of taxation allowances over depreciation
on fixed assets (8) (58)
Other (5) 1
Tax losses utilised (1) (76)
Adjustment in respect of prior periods 13 342
----------------------------------------------------- ------- -------
Total deferred tax charge (1) 209
----------------------------------------------------- ------- -------
Tax (credit)/charge on profit on ordinary activities (94) 46
----------------------------------------------------- ------- -------
In addition, total current and deferred tax of GBP5,000 (2019:
GBPnil) was debited to equity.
'Other' in the current and prior year relates to the reversal of
short-term timing differences.
b) Factors affecting tax charge
The tax assessed for the period is lower (2019: lower) than the
standard rate of corporation tax in the UK, 19% (2019: 19%).
Taxation for other jurisdictions is calculated at the rates
prevailing in the respective jurisdictions.
The standard rate of UK corporation tax will no longer reduce to
17% from 1 April 2020. These proposed changes, which were
substantively enacted when the Finance Bill 2016 received Royal
Assent on 15 September 2016, were changed on 17 March 2020 when the
Government utilised the Provisional Collection of Taxes Act 1968 to
maintain the main UK corporation tax rate at 19%. UK deferred tax
liabilities which were recognised at 17% at the prior year balance
sheet date have been recognised at 19% at 31 March 2020.
There were no significant tax reforms impacting the Group in the
current year.
The (credit)/charge for the year can be reconciled to the profit
per the income statement as follows:
2020 2019
GBP000 GBP000
------------------------------------------------------ ------- -------
Profit on ordinary activities before taxation 3,254 842
------------------------------------------------------ ------- -------
Profit on ordinary activities by rate of tax in
the UK of 19% (2019: 19%) 618 160
Expenses not deductible for tax purposes 81 44
Income not taxable (3) (39)
Additional relief for research and development
expenditure (642) (774)
Foreign profits taxable at different rates 225 113
Losses carried forward 511 485
Losses brought forward utilised (876) (176)
Effect of change in tax rate on deferred tax balances 57 (13)
Adjustment in respect of prior periods (65) 246
------------------------------------------------------ ------- -------
Total tax (credit)/charge at an effective rate
of -2.9% (2019: 5.5%) (94) 46
------------------------------------------------------ ------- -------
4. 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 dilutive
potential Ordinary shares relating to contingently issuable shares
under the Group's share option scheme. At 31 March 2020, the
performance criteria for the vesting of certain 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.
2020 2019
GBP000 GBP000
---------------------------------------- ------- -------
Profit on ordinary activities after tax 3,348 796
---------------------------------------- ------- -------
Weighted average number of shares: No. No.
---------------------------------------------------- ---------- ----------
For basic earnings per share 28,784,097 29,034,539
Effect of dilutive potential Ordinary shares:
* Share options 24,608 16,806
---------------------------------------------------- ---------- ----------
For diluted earnings per share 28,808,705 29,051,345
---------------------------------------------------- ---------- ----------
Basic earnings per share 11.6p 2.7p
Diluted earnings per share 11.6p 2.7p
---------------------------------------------------- ---------- ----------
2020 2019
GBP000 GBP000
---------------------------------------------------- ---------- ----------
Profit on ordinary activities after tax as reported 3,348 796
---------------------------------------------------- ---------- ----------
Exceptional items after tax (1,226) (89)
---------------------------------------------------- ---------- ----------
Profit on ordinary activities after tax as adjusted 2,122 707
---------------------------------------------------- ---------- ----------
Adjusted basic earnings per share 7.4p 2.4p
Adjusted diluted earnings per share 7.4p 2.4p
---------------------------------------------------- ---------- ----------
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
2020 or 2019 but is derived from those financial statements.
Statutory financial statements for FY2019 have been delivered to
the registrar of companies, and those for FY2020 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 2020 will be posted to shareholders on
24 June 2020. This final results announcement and results for the
year ended 31 March 2020 were approved by the Board of Directors on
16 June 2020 and are audited.
Basis of preparation
The final results announcement has been prepared under
historical cost convention on a going concern basis and in
accordance with the recognition and measurement principles of
International Reporting Standards and IFRIC interpretations as
adopted by the EU ("IFRS").
The final results 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 2019, with the
exception of the accounting policies adopted in the audited
financial statements of the Group for the year ended 31 March
2020.
Adoption of the new lease standard, IFRS 16 has been applied
using the modified retrospective approach, meaning comparatives for
FY2019 have not been restated.
Annual report
The annual report will be sent to shareholders shortly and will
also be available at the registered office of Immunodiagnostic
Systems Holdings PLC at: 10 Didcot Way, Boldon Business Park,
Boldon, Tyne and Wear NE35 9PD. It will be made available on the
Company's website at: www.idsplc.com .
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR SFAFWMESSESM
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June 17, 2020 02:00 ET (06:00 GMT)
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