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IDH Immunodiagnostic Systems Holdings Plc

378.00
0.00 (0.00%)
28 Mar 2024 - Closed
Delayed by 15 minutes
Share Name Share Symbol Market Type Share ISIN Share Description
Immunodiagnostic Systems Holdings Plc LSE:IDH London Ordinary Share GB00B01YZ052 ORD 2P
  Price Change % Change Share Price Bid Price Offer Price High Price Low Price Open Price Shares Traded Last Trade
  0.00 0.00% 378.00 0.00 00:00:00
Industry Sector Turnover Profit EPS - Basic PE Ratio Market Cap
0 0 N/A 0

Immunodiagnostic Systems Hldgs PLC Half-year Report (1593Q)

25/11/2016 8:00am

UK Regulatory


Immunodiagnostic Systems (LSE:IDH)
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TIDMIDH

RNS Number : 1593Q

Immunodiagnostic Systems Hldgs PLC

25 November 2016

25 November 2016

Immunodiagnostic Systems Holdings PLC

Interim Results for the six month period ended 30 September 2016

Immunodiagnostic Systems Holdings plc ("IDS", "the Group" or "the Company"), a specialist producer of manual and automated diagnostic testing kits and instruments for the clinical market, today announces its unaudited interim results for the six month period ended 30 September 2016 ("H1 2017").

Financial Summary

-- Revenue was GBP19.5m in H1 2017 (H1 2016: GBP19.4m), an increase of 1%. On a like for like basis (i.e. eliminating changes in scope and at constant exchange rates* ("CER")) this represents a revenue decrease of 9%.

-- Revenues in our Automated CLIA business were GBP9.9m (H1 2016: GBP9.2m), an increase of 8%. At CER this represents a decline of 2%.

-- At CER automated 25-OH Vitamin D revenues declined by 25%, similar to the rate of decline experienced on H1 2016. This was in line with our expectations and is mainly due to our main laboratory customers transferring this assay to workhorse analysers.

-- This decline was offset by growth of 16% at CER in our speciality assay business, i.e. CLIA products excluding 25-OH Vitamin D. This growth rate is higher than we had forecasted and is significantly ahead of the 3% growth seen in these products during FY2016.

-- Revenues in our Manual business were GBP6.2m, a decline of 2%. At CER this represents a revenue decrease of 11%. This can be broken down into a decrease of 40% in manual 25-OH Vitamin D revenue, while the remainder of the business remained stable.

-- Revenues in our Licensing and Technology business were GBP2.0m, a decline of 28%. At CER this represents a revenue decrease of 35%. The reduction is due to the expected loss of royalty business from a major customer.

-- Adjusted EBITDA was broadly flat at GBP4.2m (H1 2016: GBP4.3m), before exceptional costs of GBP1.3m (H1 2016: GBPnil).

   --      PBT was GBP0.5m (H1 2016: GBP0.8m). 
   --      Basic EPS increased to 5.0p (H1 2016: 4.0p). 
   --      Net cash flow from operations was GBP3.7m (H1 2016: GBP3.1m). 
   --      Closing cash and cash equivalents increased to GBP28.7m (31 March 2016: GBP26.6m). 

*CER has been calculated by applying the prior period foreign exchange rates to the current period results.

Operational Summary

-- 17-OH Progesterone automated assay released, followed by our Total Testosterone assay in mid-October. These are the first products in our IDS-iSYS fertility panel.

-- Total assay menu increased to 17 assays (March 16: 15) in Europe and 10 (March 16: 9) in the USA.

-- Improvement in instrument placement performance versus the same period in the prior year. Total gross instrument placements in direct sales territories increased to 15 (H1 2016: 9). Net direct placements were 5 versus 10 net direct returns in H1 2016.

-- Completion of the restructuring of the IDS operations in France leading to a reduction in headcount of over 20 employees. Transfer of automated assay manufacturing to Liege on track for completion by year end.

-- Other cost efficiency initiatives are running according to plan, and we are targeting a full year cost saving of GBP3.5m (at CER) versus FY2016.

Patricio Lacalle, CEO of IDS, commented:

"As expected we have continued to suffer significant declines in our 25-OH Vitamin D assay sales as well as our royalty income. This was offset by encouraging growth in our Speciality automated business and the favourable foreign exchange impact of the weaker Pound. We are continuing to implement the four pillars of our strategy as previously communicated and have embedded these within each of our three business units. The development of our assay pipeline is taking longer than expected, though we are pleased to have introduced two new fertility assays since the end of FY2016. We will continue to focus our efforts on improving our sales processes and capabilities, as well as strengthening our product pipeline through internal development and external partnerships."

For further information:

 
 Immunodiagnostic Systems Holdings   Tel : +44 (0)191 
  PLC                                 519 0660 
 Patricio Lacalle, CEO 
  Paul Martin, Finance Director 
 
 Peel Hunt LLP                       Tel : +44 (0)20 
                                      7418 8900 
 James Steel /Oliver Jackson 
 

The information contained within this announcement may constitute inside information stipulated under the Market Abuse Regulation (EU) No. 596/2014.

Chief Executive's Statement

On a like for like basis (i.e. at constant scope and CER) revenue declined by 9% in H1 2017.

Sales of our 25-OH Vitamin D product, across both our manual and automated businesses, declined by 30% at CER. Additionally, as previously anticipated, royalty income has declined by 35% at CER. This is as a result of a major customer transitioning their 25-OH Vitamin D assay away from IDS technology.

On a more positive note, sales in our other speciality automated assays grew by 16% at CER, which is an acceleration compared to the growth rate of 3% achieved in FY 2016.

An overview of the performance of our three business units is set out below:

Automated Business

   1.     Revenue Performance 
 
                     H1 2017   H1 2016   FY 2016   Change      Change 
                      GBP000    GBP000    GBP000        %    % at CER 
------------------  --------  --------  --------  -------  ---------- 
 25-OH Vitamin 
  D                    3,239     3,898     7,232    (17%)       (25%) 
------------------  --------  --------  --------  -------  ---------- 
 Other Speciality      6,231     4,841    10,076      29%         16% 
------------------  --------  --------  --------  -------  ---------- 
 Instrument 
  Sales                  441       418       983       5%        (5%) 
------------------  --------  --------  --------  -------  ---------- 
 Total                 9,911     9,157    18,291       8%        (2%) 
------------------  --------  --------  --------  -------  ---------- 
 

At CER, automated 25-OH Vitamin D revenue declined 25% compared to H1 2016. This is similar to the rate of decline experienced in FY 2016, and was in line with our revenue plan. This decrease is mainly a result of our main laboratory customers continuing to transfer this assay to workhorse analysers after termination of their contractual obligations with the Group.

At CER Other Speciality income (which relates mainly to our Endocrinology Excellence menu) increased by 16% at CER. Whilst most segments showed double digit growth, the areas which contributed most were Calcium Metabolism, Bone Metabolism and Growth.

Instrument sales, which include sales of spare parts and services, remained consistent compared with the same period last year.

   2.     Placements / iSYS Sales 
 
                            H1 2017   H1 2016   FY 2016 
 Direct - Gross 
  Placements                     15         9        31 
 Direct - Gross 
  Returns                      (10)      (19)      (43) 
 Direct - Net Placements 
  / (Returns)                     5      (10)      (12) 
-------------------------  --------  --------  -------- 
 
 Distributor Sales                2         3         8 
-------------------------  --------  --------  -------- 
 

Direct instruments are those sold or placed with reagent rental IDS end-user customers in the Group's core markets of the USA and Europe (excluding distributor territories of Spain and Italy).

Gross instrument placements improved mainly due to improved sales performance in the USA and France. These regions generated a combined 4 net placements in H1 2017, compared to 13 net returns in H1 2016.

Average revenue per direct instrument ("ARPI") was GBP52,000 per annum (calculated on a rolling 12-month basis) (H1 2016: GBP50,000, FY 2016: GBP48,000), the increase being mainly due to the impact of the weaker Pound which leads to USD and Euro denominated iSYS revenue being worth more when converted into Pounds Sterling.

   3.     Sales Process 

The CRM system, which was introduced during H1 FY2016, is now fully embedded in all our major sales regions. We are focusing on 3 areas: target qualification, opportunity management and call preparation. Over the last 15 months each sales person has qualified a large number of targets in their respective sales territory. The resulting opportunities are being followed up together with the field sales manager. We have further focused on increasing the quality of calls by improving our planning cycle. As a result we reduced travel time, increased customer facing time and provided a more focused approach, driving customer benefits.

The system is now providing the key data to drive a quantitative, performance based measurement of the sales team achievements. It is also allowing us to generate deeper insight into our customer requirements, thereby allowing us to more accurately target customers who have a requirement for IDS's niche speciality assay offering.

In addition to the detailed insight of our customers' operations, we can much better focus on supporting sales representative performance. We are confident that in the end the benefits and the dynamics we gain in turning opportunities into results will speak for itself.

   4.     Assay Development 

In H1 2017 we released one new automated assay, 17-OH Progesterone, followed by our Total Testosterone assay in mid-October. These are the first products in our IDS-iSYS fertility panel. This brings the total assay menu to 17 assays in Europe and 10 in the USA.

We are seeing an improvement in the speed in which we are able to launch assays. We are optimistic we will launch another one to two assays this financial year - in recent history we have not launched more than two in a full financial year. However we are still a long way short of our target of releasing six to eight assays per year.

The consolidation of the majority of our automated assay development and production into Liege, as announced in January 2016, will be completed as scheduled by December 2016.

During the period we created the new role of Operations Director, which has been filled by internal appointment.

This will allow our Technical Director, who previously also held responsibility for operations, to focus on assay development. Additionally we have recruited a second assay R&D manager, to be based in our Liege facility. We believe these personnel changes will enhance our development capacity and capabilities.

Manual Business

 
                     H1 2017   H1 2016   FY 2016   Change      Change 
                      GBP000    GBP000    GBP000        %    % at CER 
------------------  --------  --------  --------  -------  ---------- 
 25-OH Vitamin 
  D                    1,130     1,698     2,867    (33%)       (40%) 
------------------  --------  --------  --------  -------  ---------- 
 Other Speciality      3,569     3,243     6,933      10%          2% 
------------------  --------  --------  --------  -------  ---------- 
 Diametra              1,533     1,417     2,876       8%        (6%) 
------------------  --------  --------  --------  -------  ---------- 
 Total                 6,232     6,358    12,676     (2%)       (11%) 
------------------  --------  --------  --------  -------  ---------- 
 
   1.     Revenue Performance 

At CER, manual 25-OH Vitamin D declined by 40%, which was in line with our expectations. This decline is mainly due to customers continuing to migrate testing to automated analysers. At CER, revenue in the remainder of our manual business remained broadly steady.

   2.     Sales Organisation 

The main business opportunity for IDS's manual ELISA assays lies in two key areas:

-- Research only usage in developed areas of the world. This segment typically purchases low volumes of assays and is best serviced through a telesales channel.

-- Clinical use in the areas of the world which have less developed medical facilities and have not yet migrated testing to automated analysers. These regions are covered by our distribution network, which is now being managed by our newly recruited international distribution manager. I believe that the increased resources in this area give IDS a good opportunity to generate additional revenues in our manual business.

We are continuing to recruit for the position of business unit manager to head up our manual assay business to spearhead the turnaround of this business.

Licensing and Technology Business

 
               H1 2017   H1 2016   FY 2016   Change      Change 
                                                  %    % at CER 
------------  --------  --------  --------  -------  ---------- 
 Royalty 
  Income         1,977     2,733     5,121    (28%)       (35%) 
------------  --------  --------  --------  -------  ---------- 
 Technology 
  Income         1,342     1,105     2,217      21%          9% 
------------  --------  --------  --------  -------  ---------- 
 Total           3,319     3,838     7,338    (14%)       (23%) 
------------  --------  --------  --------  -------  ---------- 
 
   1.     Revenue Performance 

At CER royalty income has decreased by 35% due to the expected reduction in revenue from one major customer. We expect this rate of decline to continue into the second half of the year.

Technology income relates to revenue generated by selling the iSYS analyser and related ancillaries to partners on an OEM basis. A total of 15 instruments were sold to partners during H1 2017 (H1 2016: 8, FY 2016: 27).

   2.     Strategic Partnership Agreements 

During the period IDS have reached agreement to provide the IDS-iSYS analyser equipment to two new customers on an OEM basis. These customers will develop and commercialise proprietary assays on the analyser, and IDS will generate revenue through sales of analysers and ancillary equipment to these customers.

Cost Management

Towards the end of FY 2016 we started to take a closer look at our cost base, and this exercise has continued into FY 2017. With sales and profit dropping, we needed to look at the service provided and the organisational structures and capacities within IDS to ensure these are appropriate to drive our return to growth.

   1.     Capacity 

The IDS organisation was built to support the growth it had shown in 2010-2013, when revenue peaked at over GBP53m. We have reduced most of the overcapacity by natural attrition, with a small number of redundancies where required. We installed a hiring freeze for all but critical roles which will help drive revenue growth and increase assay development performance.

   2.     Simplifying services 

As announced in January 2016, we chose to focus production and R&D work for automated assays around our production site in Liege, Belgium. Additionally we decided to consolidate all R&D functions for our instruments into our site in Bourgogne and hence reduced the staff in Paris. Furthermore we are setting up a shared service centre based in Frankfurt for direct sales in continental Europe, with a potential to reduce staff by over 30% in this area. In our technical and field service organisation we decided to remove one management layer and adjusted the structure accordingly.

   3.     Functional Organisation 

The results achieved through a review of our sales processes have underlined the advantages of functional expertise shared globally. Hence we will continue to move towards a functional organisation, and away from an organisation built around territories.

As a result of these activities we have booked an exceptional restructuring cost, relating mainly to redundancy costs, of GBP1.3m during the period.

We will continue to investigate means to make the business more operationally efficient. While there is still significant work to do, we believe we are well on our way to restructuring the business to enable us to both serve customers better and accelerate the development of our assay pipeline.

Financial review

Group revenues were GBP19.5m, an increase of 1% compared to the revenues of GBP19.4m recorded in H1 2016. At CER revenues fell by 9%. Adjusted EBITDA (before exceptional restructuring costs of GBP1.3m related to our cost initiatives) was GBP4.2m, in line with the same period last year.

   A.    SUMMARY  OF INCOME STATEMENT 
 
                                  H1 2017    H1 2016    FY 2016 
                                   GBP000     GBP000     GBP000 
-------------------------------  --------  ---------  --------- 
 Revenue                           19,462     19,354     38,305 
-------------------------------  --------  ---------  --------- 
 Gross profit                      11,673     12,114     22,465 
 Gross margin                       60.0%      62.6%      58.6% 
 Sales and marketing              (4,365)    (4,392)    (9,233) 
 Research and development           (902)    (1,878)    (3,354) 
 General and administrative       (4,247)    (4,981)    (9,412) 
-------------------------------  --------  ---------  --------- 
 Total operating costs            (9,514)   (11,251)   (21,999) 
 Exceptional items                (1,276)          -   (37,266) 
-------------------------------  --------  ---------  --------- 
 Statutory EBIT                       883        863   (36,800) 
 
   Add back 
 Depreciation and amortisation      2,063      3,439      6,983 
 Exceptional items                  1,276          -     37,266 
-------------------------------  --------  ---------  --------- 
 Adjusted EBITDA                    4,222      4,302      7,449 
-------------------------------  --------  ---------  --------- 
 

Foreign Exchange

During the period, IDS revenues have benefitted by around GBP1.9m (or 9%) as a result of the weaker Pound. In the period 34% (H1 2016: 42%) of the Group's revenues were denominated in US Dollars and 55% (H1 2016: 48%) were in Euros. These revenues are now worth more when converted into Pounds Sterling as a result of the weaker Pound.

Conversely IDS also has a significant cost based denominated in Euros and US Dollars, thus these costs have increased compared to H1 2016 when converted back into Pounds Sterling.

The approximate net improvement in the H1 2017 EBIT as a result of movements in exchange rates is GBP0.5m.

The average exchange rates used to translate Euros and US Dollars to Pounds Sterling are as follows:

 
 
 Average exchange rates       H1   H1 2016                  FY 2016 
                            2017 
------------------------  ------  --------  ----------------------- 
 Sterling : US Dollar       1.39      1.54                     1.51 
 Sterling : Euro            1.24      1.40                     1.37 
------------------------  ------  --------  ----------------------- 
 

Gross Profit

Gross profit was GBP11.7m (H1 2016: GBP12.1m) implying a gross margin percentage of 60.0% (H1 2016: 62.6%). The decline in gross margin is mainly due to the impact of product mix and lower royalty income, offset by lower amortisation costs.

Operating costs

The Group's total operating costs (before exceptional items) comprise:

 
                               H1 2017                             H1 2016                             FY 2016 
                    Gross        Costs        Net      Gross        Costs        Net       Gross        Costs        Net 
                              capitalised                        capitalised                         capitalised 
                    GBP000      GBP000      GBP000     GBP000      GBP000       GBP000     GBP000      GBP000       GBP000 
----------------  ---------  ------------  --------  ---------  ------------  ---------  ---------  ------------  --------- 
 Sales 
  & marketing       (4,365)             -   (4,365)    (4,392)             -    (4,392)    (9,233)             -    (9,233) 
 Research 
  & development     (2,040)         1,138     (902)    (3,361)         1,483    (1,878)    (6,320)         2,966    (3,354) 
 General 
  & 
  administrative    (4,439)           192   (4,247)    (5,115)           134    (4,981)    (9,717)           305    (9,412) 
----------------  ---------  ------------  --------  ---------  ------------  ---------  ---------  ------------  --------- 
 Operating 
  costs            (10,844)         1,330   (9,514)   (12,868)         1,617   (11,251)   (25,270)         3,271   (21,999) 
----------------  ---------  ------------  --------  ---------  ------------  ---------  ---------  ------------  --------- 
 

Total spend on operating costs has declined by 16%, or GBP2.1m, to GBP10.8m (H1 2016: GBP12.9m, FY 2016: GBP25.3m), with GBP1.0m of the decrease attributable to the reduction in depreciation and amortisation as a result of the exceptional impairment charge booked at 31 March 2016. At CER total operating costs for H1 2017 would be GBP10.0m, a decline of 22%.

Cost reclassification - depreciation and amortisation

To ensure that the Group's financial performance can be more easily benchmarked with its peer group, the depreciation costs previously shown on the face of the income statement have been included within operating costs. This does not impact the profit or net assets of the group for either H1 2016 or Full Year 2016. A table detailing the impact of this reclassification is set out in note 1.

Exceptional items

During the period the Group has initiated a number of restructuring projects designed to rationalise the cost base of the business. These projects are focussed on making the organisation more efficient, while retaining the skills and competencies we need to return the business to profitable growth.

At CER we are targeting an improvement in our fixed cost base of GBP3.5m versus FY 2016.

The project to consolidate our automated assay operations into Liege is progressing well and will be completed on schedule in December 2016. Additionally at the time of writing we have substantially completed the restructure of our operations in France, where we have streamlined the iSYS manufacturing and commercial support functions so that we have a more efficient operational structure which is appropriate for the anticipated future business requirements.

Below is a summary of the exceptional items during the current and previous financial period:

 
                                        H1 2017        H1         FY 
                                         GBP000      2016       2016 
                                                   GBP000     GBP000 
 ----------------------------------------------  --------  --------- 
 Restructuring costs                    (1,276)         -      (362) 
 Repayable grant release                      -         -      1,323 
 Impairment of goodwill, intangible 
 assets and tangible fixed assets             -         -   (38,227) 
-------------------------------------  --------  --------  --------- 
 Total exceptional items                (1,276)         -   (37,266) 
-------------------------------------  --------  --------  --------- 
 
 

In H1 2017, exceptional items relate to redundancy expenses driven by our cost reduction initiatives.

In the year-ended 31 March 2016, the Group commenced the consolidation of automated product development and production into our Liege site, resulting in redundancy costs and an onerous lease provision in our Boldon location. We released a historical repayable grant amounting to GBP1.3m, upon obtaining written confirmation from the grantor that no further amount would be repayable. Additionally as a result of the annual impairment review performed at the end of FY2016 as required by IAS36, an asset impairment charge of GBP38.2m was recognised. More details on this charge can be found in notes 14 and 15 of the Annual Report and Accounts 2016.

Finance expense/income

Net finance expense was GBP0.4m (H1 2016: GBPnil, FY 2016 GBP0.2m) and relates mainly to foreign exchange gains and losses on intercompany funding and cash balances.

Taxation

The Group's effective tax rate for the current period is based on an estimate of the rate for the full financial year and is -35% (H1 2016: -42%). Before exceptional items, prior year adjustments and the effect of rate changes on deferred tax balances, the effective rate is -51% (H1 2016:-42%). The effective tax rate is reduced by 71% as a result of research and development tax relief claimed on eligible expenditure and patent box relief.

Earnings per share

Adjusted earnings per share is calculated using profit after tax adjusted to exclude the after tax effect of exceptional items. Basic earnings per share are 5.0p (H1 2016: 4.0p). Adjusted basic earnings per share are 9.3p (H1 2016: 4.0p).

Headcount

Headcount has reduced to 294 people on a full time employment basis (30 September 2015: 328, 31 March 2016: 315) as a result of projects we have implemented to improve our business efficiency.

   B.     SUMMARY OF BALANCE SHEET 

The Group's net assets at 30 September 2016 are GBP55.5m (30 September 2015: GBP81.6m). The main reason for the reduction is the asset impairment charge of GBP38.2m recognised during the second half of FY 2016. This is also the main reason non-current assets have reduced from GBP56.2m to GBP19.6m.

   C.     SUMMARY OF CASH FLOW STATEMENT 

IDS generated net cash flows from operations of GBP3.7m (H1 2016: GBP3.1m). Net cash used in investing activities was of GBP1.5m (H1 2016:GBP2.5m), which resulted in free cash flow of GBP2.1m (H1 2016: GBP0.5m).

Net cash used in financing activities was GBP0.4m (H1 2016: GBP0.9m), the decrease being mainly due to the lower dividend paid.

The majority of the cash outflow relating to the exceptional restructuring costs of GBP1.3m recognised during H1 2017 will occur during the second half of FY 2017.

As at 30 September 2016, the Group had increased cash and cash equivalents to GBP28.7m (30 September 2015: GBP23.5m; 31 March 2016: GBP26.6m). Thus despite the headwinds caused by the decline in 25-OH Vitamin D revenues it is encouraging that our cash balance has continued to grow, which allows IDS flexibility to pursue potential options within the corporate development/ partnership pillar of our strategy.

   D.    OUTLOOK 

The medium-term trading conditions for the Group remain challenging. We expect to see continued declines in our 25-OH Vitamin D and Royalty Income revenue streams during H2, however will strive to offset these losses by continuing to grow in our Other Speciality assay and Technology businesses.

Management will focus its efforts on improving our sales processes and capabilities, as well as strengthening our product pipeline through internal development and external partnerships. The next intermediate goal is to stabilize the revenue line on a like for like basis, as well as continuing efforts to make the organisation more efficient into FY 2018.

Unaudited consolidated interim income statement

For the six month period to 30 September 2016

 
                                             6 Months   6 Months   Year ended 
                                                ended      ended     31 March 
                                              30 Sept    30 Sept         2016 
                                                 2016       2015 
 
                                      Note     GBP000     GBP000       GBP000 
 
 Revenue                               2       19,462     19,354       38,305 
 Cost of Sales                                (7,789)    (7,240)     (15,840) 
 
 Gross Profit                                  11,673     12,114       22,465 
 Sales and marketing                          (4,365)    (4,392)      (9,233) 
 Research and development                       (902)    (1,878)      (3,354) 
 General and administrative                   (4,247)    (4,981)      (9,412) 
                                     -----  ---------  ---------  ----------- 
 Operating costs pre-exceptional 
  items                                       (9,514)   (11,251)     (21,999) 
 
           Restructuring costs                (1,276)          -        (362) 
           Repayable grant release                  -          -        1,323 
           Impairment of goodwill 
            and other intangibles                   -          -     (38,227) 
   Total exceptional items             3      (1,276)          -     (37,266) 
-----------------------------------  -----  ---------  ---------  ----------- 
 
 Operating Costs                             (10,790)   (11,251)     (59,265) 
 
 Profit/ (loss) from operations                   883        863     (36,800) 
 
 Finance income                                    96        104          169 
 Finance costs                                  (481)      (140)        (392) 
 
 Profit/(loss) before 
  tax                                             498        827     (37,023) 
 
 Income tax credit                     5          985        350        4,853 
 
 Profit/(loss) for the 
  period 
  attributable to owners 
   of the parent                                1,483      1,177     (32,170) 
                                     =====  =========  =========  =========== 
 
 Earnings per share 
 From continuing operations 
 Adjusted basic                        4         9.3p       4.0p         4.7p 
 Adjusted diluted                      4         9.3p       4.0p         4.7p 
 Basic                                 4         5.0p       4.0p     (109.7p) 
 Diluted                               4         5.0p       4.0p     (109.7p) 
 
 

Unaudited interim statement of other comprehensive income

For the six month period to 30 September 2016

 
                                         6 Months   6 Months       Year 
                                                                  ended 
                                            ended      ended   31 March 
                                          30 Sept    30 Sept       2015 
                                             2016       2015 
 
                                           GBP000     GBP000     GBP000 
 
 Profit/ (loss) for the period              1,483      1,177   (32,170) 
 Other comprehensive income 
  to be reclassified to profit 
  or loss in subsequent periods: 
  Currency translation differences          2,522        467      3,741 
 Other comprehensive income 
  to be reclassified to profit 
  or loss in subsequent periods, 
  before and after tax                      2,522        467      3,741 
 
 Other comprehensive income 
  not to be reclassified to 
  profit or loss in subsequent 
  periods: 
 Remeasurement of defined 
  benefit plan                                113         36        102 
                                        ---------  ---------  --------- 
 Other comprehensive income 
  not to be reclassified to 
  profit or loss in subsequent 
  periods, before tax                         113         36        102 
 
 Tax relating to other comprehensive 
  income to be reclassified 
  to profit or loss in subsequent 
  periods                                       -       (12)       (34) 
                                        ---------  ---------  --------- 
 Other comprehensive income, 
  net of tax                                2,635        491      3,809 
                                        ---------  ---------  --------- 
 
 Total comprehensive income/(expense) 
  for the period 
  attributable to owners 
   of the parent                            4,118      1,668   (28,361) 
                                        =========  =========  ========= 
 

Unaudited consolidated interim balance sheet

As at 30 September 2016

 
 
 
                                       30 September   30 September   31 March 
                                               2016           2015       2016 
                                Note         GBP000         GBP000     GBP000 
 Assets 
 Non-current assets 
 Property, plant and 
  equipment                                   9,416         10,011      9,629 
 Goodwill                                         -         15,549          - 
 Other intangible assets                      9,786         30,282      9,211 
 Deferred tax assets                             33             86         26 
 Other non-current assets                       323            276        294 
                                             19,558         56,204     19,160 
 Current assets 
 Inventories                                  8,035          7,760      7,509 
 Trade and other receivables                  7,784          7,215      6,956 
 Income tax receivable                        3,093          2,534      2,161 
 Cash and cash equivalents                   28,700         23,486     26,554 
                                             47,612         40,995     43,180 
                               -----  -------------  -------------  --------- 
 Total assets                                67,170         97,199     62,340 
                               -----  -------------  -------------  --------- 
 
 Liabilities 
 Current liabilities 
 Short-term portion of 
  long-term borrowings                           98             82         89 
 Trade and other payables                     6,378          5,289      6,287 
 Income tax payable                              48            804          3 
 Provisions                      6            1,204             83         54 
 Deferred income                                 79            137        119 
                                              7,807          6,395      6,552 
                               -----  -------------  -------------  --------- 
 Net current assets                          39,805         34,600     36,628 
                               -----  -------------  -------------  --------- 
 
 Non-current liabilities 
 Long-term portion of 
  long-term borrowings                        1,290          1,194      1,220 
 Repayable grants                                 -          1,375          - 
 Provisions                      6            1,310          1,108      1,419 
 Deferred tax liabilities                     1,400          5,507      1,551 
                                              4,000          9,184      4,190 
 Total liabilities                           11,807         15,579     10,742 
                               -----  -------------  -------------  --------- 
 Net assets                                  55,363         81,620     51,598 
                               =====  =============  =============  ========= 
 
 Total equity 
 Called up share capital         7              588            588        588 
 Share premium account           7           32,263         32,263     32,263 
 Other reserves                               4,982          (814)      2,460 
 Retained earnings                           17,530         49,583     16,287 
 Equity attributable 
  to owners of the parent                    55,363         81,620     51,598 
                               =====  =============  =============  ========= 
 

Unaudited consolidated interim cash flow statement

For the six month period to 30 September 2016

 
                                       6 Months   6 Months       Year 
                                                                ended 
                                          ended      ended   31 March 
                                        30 Sept    30 Sept       2016 
                                           2016       2015 
 
                                         GBP000     GBP000     GBP000 
 
 Profit/(loss) before tax                   498        827   (37,023) 
 Adjustments for: 
 Depreciation of property, 
  plant and equipment                     1,156      1,190      2,418 
 Amortisation of intangible 
  assets                                    907      2,249      4,565 
 Impairment of goodwill                       -          -     16,496 
 Impairment of intangible 
  assets                                      -          -     21,504 
 Impairment of property, 
  plant and equipment                         -          -        227 
 Loss/(profit) on disposal 
  of property, plant and equipment           26       (30)        157 
 Share based payment expense                  -         15         21 
 Release of repayable grant                   -          -    (1,323) 
 Finance income                            (96)      (104)      (169) 
 Finance costs                              481        140        392 
 Other exceptional items                  1,276          -        362 
 Operating cash flows before 
  movements in working capital            4,248      4,287      7,627 
 Decrease/(increase) in inventories         272      (922)      (350) 
 (Increase)/decrease in receivables       (332)        203        724 
 (Decrease)/increase in payables 
  and provisions                          (510)      (423)        100 
 Cash generated by operations             3,678      3,145      8,101 
 Cash outflow related to 
  exceptional costs                       (113)          -        (8) 
 Income taxes received/(paid)               103       (21)         95 
 Net cash from operating 
  activities                              3,668      3,124      8,188 
                                      ---------  ---------  --------- 
 Investing activities 
 Purchases of other intangible 
  assets                                (1,321)    (1,743)    (3,388) 
 Purchases of property, plant 
  and equipment                           (392)      (959)    (1,795) 
 Disposals of property, plant 
  and equipment                             158         84        188 
 Interest received                           96        104        169 
 Net cash used by investing 
  activities                            (1,459)    (2,514)    (4,826) 
                                      ---------  ---------  --------- 
 Financing activities 
 Proceeds from issue of shares 
  for cash                                    -        410        410 
 Repayments of borrowings                  (49)      (324)      (410) 
 Interest paid                             (34)      (140)      (109) 
 Dividends paid                           (353)      (876)      (876) 
 Net cash used by financing 
  activities                              (436)      (930)      (985) 
                                      ---------  ---------  --------- 
 Net increase/(decrease) 
  in cash and cash equivalents            1,773      (320)      2,377 
 Effect of exchange rate 
  differences                               373         76        447 
 Cash and cash equivalents 
  at beginning of period                 26,554     23,730     23,730 
                                      ---------  ---------  --------- 
 Cash and cash equivalents 
  at end of period                       28,700     23,486     26,554 
                                      =========  =========  ========= 
 

Unaudited consolidated statement of changes in equity

 
                                 Share     Share      Other   Retained      Total 
                               capital   premium   reserves   earnings 
                                         account 
                                GBP000    GBP000     GBP000     GBP000     GBP000 
 At 1 April 2016                   588    32,263      2,460     16,287     51,598 
 Profit for the 
  period                             -         -          -      1,483      1,483 
 Other comprehensive 
  income 
   Foreign exchange 
    translation differences 
    on foreign currency 
    net investment 
    in subsidiaries                  -         -      2,522          -      2,522 
   Remeasurement 
    of defined benefit 
    plan                             -         -          -        113        113 
   Tax effect on 
    remeasurement 
    of defined benefit 
    plan                             -         -          -          -          - 
                              --------  --------  ---------  ---------  --------- 
 Total comprehensive 
  income                             -         -      2,522      1,596      4,118 
 Transactions with 
  owners 
   Share based payments              -         -          -          -          - 
   Tax recognised 
    on share based 
    payments charged 
    to equity reserves               -         -          -          -          - 
   Dividend Paid                     -         -          -      (353)      (353) 
   Shares issued 
    in the period 
    (net of expenses)                -         -          -          -          - 
 At 30 September 
  2016                             588    32,263      4,982     17,530     55,363 
                              ========  ========  =========  =========  ========= 
 
 At 1 April 2015                   584    31,857    (1,281)     49,248     80,408 
 Profit for the 
  period                             -         -          -      1,177      1,177 
 Other comprehensive 
  income 
   Foreign exchange 
    translation differences 
    on foreign currency 
    net investment 
    in subsidiaries                  -         -        467          -        467 
   Remeasurement 
    of defined benefit 
    plan                             -         -          -         36         36 
   Tax effect on 
    remeasurement 
    of defined benefit 
    plan                             -         -          -       (12)       (12) 
                              --------  --------  ---------  ---------  --------- 
 Total comprehensive 
  income                             -         -        467      1,201      1,668 
 Transactions with 
  owners 
   Share based payments              -         -          -         15         15 
   Tax recognised 
    on share based 
    payments                         -         -          -        (5)        (5) 
   Dividend Paid                     -         -          -      (876)      (876) 
   Shares issued 
    in the period 
    (net of expenses)                4       406          -          -        410 
 At 30 September 
  2015                             588    32,263      (814)     49,583     81,620 
                              ========  ========  =========  =========  ========= 
 
 At 1 April 2015                   584    31,857    (1,281)     49,248     80,408 
 Loss for the period                 -         -          -   (32,170)   (32,170) 
 Other comprehensive 
  income 
   Foreign exchange 
    translation differences 
    on foreign currency 
    net investment 
    in subsidiaries                  -         -      3,741          -      3,741 
   Remeasurement 
    of defined benefit 
    plan                             -         -          -        102        102 
   Tax effect on 
    remeasurement 
    of defined plan                  -         -          -       (34)       (34) 
                              --------  --------  ---------  ---------  --------- 
 Total comprehensive 
  income/(loss)                      -         -      3,741   (32,102)   (28,361) 
 Transactions with 
  owners 
   Share based payments              -         -          -         21         21 
   Tax recognised 
    on share based 
    payments                         -         -          -        (4)        (4) 
   Dividend Paid                     -         -          -      (876)      (876) 
   Shares issued 
    in the year (net 
    of expenses)                     4       406          -          -        410 
 At 31 March 2016                  588    32,263      2,460     16,287     51,598 
                              ========  ========  =========  =========  ========= 
 

Notes to the Interim Financial Statements

For the six month period to 30 September 2016

1 Basis of preparation

The condensed financial statements for the six months ended 30 September 2016 have been prepared in accordance with IAS 34, 'Interim Financial Reporting', as adopted by the European Union. They do not include all the information required for full annual financial statements and should be read in conjunction with the consolidated financial statements of the Group for the year ended 31 March 2016. The condensed financial information has been prepared using the same accounting policies and methods of computation used to prepare the Group's Annual Report for the year ended 31 March 2016 that are described on pages 46 to 54 of that report which can be found on the Group's website at www.idsplc.com. The annual financial statements of the Group are prepared in accordance with IFRS as adopted by the European Union.

There are no new standards or interpretations mandatory for the first time for the financial year ending 31 March 2016 that have a material effect on the half year results. The financial information for the six months ended 30 September 2016 and the comparative financial information for the six months ended 30 September 2015 has not been audited, but has been reviewed by the auditors. The comparative financial information for the year ended 31 March 2016 has been extracted from the 2016 Annual Report & Accounts. The financial information contained in this interim report does not constitute statutory accounts as defined in section 435 of the Companies Act 2006 and does not reflect all of the information contained in the Group's Annual Report and financial statements. The annual financial statements for the year ended 31 March 2016, which were approved by the Board of Directors on 21 June 2016, received an unqualified audit report, did not contain a statement under section 498 (2) or (3) of the Companies Act 2006 and have been filed with the Registrar of Companies.

Change in accounting policy relating to presentation only: the depreciation and amortisation previously shown on the face of the income statement has now been allocated among the cost categories to which it relates. This change does not impact the group profit or net assets. The changes made are highlighted in the table below:

 
                                Before Reclassification     Reclassifications     After Reclassification 
 GBP000                                  H1       H1            H1          H1            H1           H1 
                                       2017      2016         2017        2016          2017         2016 
 Revenue                             19,462       19,354                              19,462       19,354 
 Cost of Sales                      (7,789)      (7,240)                             (7,789)      (7,240) 
                              -------------  -----------  --------  ----------  ------------  ----------- 
 Gross Profit                        11,673       12,114                              11,673       12,114 
 Sales and marketing                (4,297)      (4,330)      (68)        (62)       (4,365)      (4,392) 
 Research and development             (795)        (740)     (107)     (1,138)         (902)      (1,878) 
 General and administrative 
  expenses                          (3,766)      (4,521)     (481)       (460)       (4,247)      (4,981) 
                              -------------  -----------  --------  ----------  ------------  ----------- 
 Operating costs 
  pre-exceptional 
  items                             (8,858)      (9,591)     (656)     (1,660)       (9,514)     (11,251) 
 Exceptional items                  (1,276)            -                             (1,276)            - 
                              -------------  -----------  --------  ----------  ------------  ----------- 
 Operating Costs                   (10,134)      (9,591)     (656)     (1,660)      (10,790)     (11,251) 
 Depreciation and 
  amortisation                        (656)      (1,660)       656       1,660             -            - 
                              -------------  -----------  --------  ----------  ------------  ----------- 
 Profit from operations                 883          863         -           -           883          863 
                              -------------  -----------  --------  ----------  ------------  ----------- 
 

2 Revenue and segmental information

An analysis of the Group's revenue is as follows:

 
                                 H1 2017       H1       FY 
                                             2016     2016 
                                  GBP000   GBP000   GBP000 
------------------------------  --------  -------  ------- 
 
 25-OH vitamin D                   3,239    3,898    7,232 
 Other specialty                   6,231    4,841   10,076 
 Instrument sales                    441      418      983 
------------------------------  --------  -------  ------- 
 Total automated                   9,911    9,157   18,291 
------------------------------  --------  -------  ------- 
 Automated revenue comprises: 
 Operating lease rental            2,297    2,326    4,591 
 Reagent revenue                   7,614    6,831   13,700 
------------------------------  --------  -------  ------- 
 
 25-OH vitamin D                   1,130    1,698    2,867 
 Other specialty                   3,569    3,243    6,933 
 Diametra                          1,533    1,417    2,876 
------------------------------  --------  -------  ------- 
 Total manual                      6,232    6,358   12,676 
------------------------------  --------  -------  ------- 
 Licensing and Technology          3,319    3,838    7,338 
------------------------------  --------  -------  ------- 
 
                                  19,462   19,354   38,305 
------------------------------  --------  -------  ------- 
 

Operating lease rental relates to contracts implicit in agreements for the placing of IDS-iSYS instruments with customers and the related sale of reagents.

Revenue categories were revised during the year ending 31 March 2016 to reflect the way revenue is monitored in the business. This has resulted in some revenue in the H1 2016 results previously categorised as Automated, Instrument and Manual being reclassified as Licensing and Technology. Revenue previously disclosed as Other Income is now fully categorised as Licensing and Technology.

The main activity of the Group is the development, manufacture and distribution of medical diagnostic products. As described on page 54 of the 2016 Annual Report & Accounts, the Group has determined that it has one operating segment as defined under IFRS 8, being the whole of the Group. As a result of this, no detailed segmental information is provided.

3 Exceptional items

The Group incurred a number of exceptional items during the current and previous financial periods:

 
                                        H1 2017        H1         FY 
                                         GBP000      2016       2016 
                                                   GBP000     GBP000 
 ----------------------------------------------  --------  --------- 
 Restructuring costs                    (1,276)         -      (362) 
 Repayable grant release                      -         -      1,323 
 Impairment of goodwill, intangible 
 assets and tangible fixed assets             -         -   (38,227) 
-------------------------------------  --------  --------  --------- 
 Total exceptional items                (1,276)         -   (37,266) 
-------------------------------------  --------  --------  --------- 
 
 

In H1 2017, exceptional items relate to redundancy expenses driven by our cost reduction initiatives.

In the year-ended 31 March 2016, the Group consolidated automated product development and production into our Liege site, resulting in redundancy costs and an onerous lease provision in our Boldon location. We released a historical repayable grant amounting to GBP1.3m, upon obtaining written confirmation from the grantor that no further amount would be repayable. Additionally as a result of the annual impairment review performed at the end of FY2016 as required by IAS36, an asset impairment charge of GBP38.2m was recognised. More details on this charge can be found in notes 14 and 15 of the Annual Report and Accounts 2016.

4 Earnings per share

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

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 30 September 2016, the performance criteria for the vesting of the awards under the option scheme had been met and consequently the shares in question are included in the diluted EPS calculation.

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

 
                                6 Months     6 Months   Year ended 
                                   ended        ended     31 March 
                                 30 Sept      30 Sept         2016 
                                    2016         2015 
 
                                  GBP000       GBP000       GBP000 
 
 Profit/(loss) on ordinary 
  activities after tax             1,483        1,177     (32,170) 
                             ===========  ===========  =========== 
 
                                     No.          No.          No. 
 Weighted average no 
  of shares: 
 For basic earnings 
  per share                   29,415,175   29,248,508   29,331,842 
 Effect of dilutive 
  potential ordinary 
  shares: 
 -Share Options                        -        9,483        5,334 
 For diluted earnings 
  per share                   29,415,175   29,257,991   29,337,176 
                             ===========  ===========  =========== 
 
 Basic earnings per 
  share                             5.0p         4.0p     (109.7p) 
 Diluted earnings per 
  share                             5.0p         4.0p     (109.7p) 
 
 
                                  6 Months   6 Months       Year 
                                                           ended 
                                     ended      ended   31 March 
                                   30 Sept    30 Sept       2016 
                                      2015       2015 
 
                                    GBP000     GBP000     GBP000 
 Profit/(loss) on ordinary 
  activities after tax 
  as reported                        1,483      1,177   (32,170) 
 Exceptional items                   1,258          -     33,555 
 Profit on ordinary activities 
  after tax as adjusted              2,741      1,177      1,385 
                                 =========  =========  ========= 
 
 Adjusted basic earnings 
  per share                           9.3p       4.0p       4.7p 
 Adjusted diluted earnings 
  per share                           9.3p       4.0p       4.7p 
 

5 Taxation

The estimated tax rate for the year on profit before exceptional items of -35% (H1 2016: -42%) has been applied to the profit before exceptional items for the six months to 30 September 2016. This has been added to the tax charge on exceptional and other items relating solely to the first half year to determine the total tax charge for the six months ending 30 September 2016.

In the Budget on 16 March 2016, the Chancellor announced planned reductions in the UK Corporation tax rate to 17% by 2020. These changes were substantively enacted on 6 September 2016. This will reduce the Group's future tax charge accordingly and so has been reflected in the calculation of deferred tax.

The Group recognises certain provisions and accruals in respect of tax which involve a degree of estimation and uncertainty where the tax treatment cannot be fully determined until a resolution has been reached by the relevant tax authority. This approach resulted in providing GBP695,000 at 30 September 2016 (GBP1,305,000 at 31 March 2016). The conclusion of audits by tax authorities in the six month period ending 30 September 2016 resulted in the release of GBP708,000 of this provision.

6 Provisions

 
                                                                                           Onerous 
                                       Retirement/Leavers     Warranty    Dilapidation       Lease    Restructuring 
                                                Provision    Provision       Provision   Provision        Provision     Total 
                                                   GBP000       GBP000          GBP000      GBP000           GBP000    GBP000 
 At 1 April 2016                                      644           54             541         234                -     1,473 
  Foreign exchange movement                            64            5               -           -                -        69 
  Arising during the year                               -            -               -           -            1,104     1,104 
  Reassessment in period                             (91)            -               -        (41)                -     (132) 
 At 30 September 2016                                 617           59             541         193            1,104     2,514 
                                   ======================  ===========  ==============  ==========  ===============  ======== 
 
 
 At 1 April 2015                                      635           82             500           -                -     1,217 
  Foreign exchange movement                             9            1               -           -                -        10 
  Reassessment in period                             (36)            -               -           -                -      (36) 
 At 30 September 2015                                 608           83             500           -                -     1,191 
                                   ======================  ===========  ==============  ==========  ===============  ======== 
 
 
 At 1 April 2015                                      635           82             500           -                -     1,217 
  Foreign exchange movement                            47            4               -           -                -        51 
  Arising during the year                               -            -               -         234                -       234 
  Unwinding of discount                                 -            -              41           -                -        41 
  Reassessment in year                               (38)         (32)               -           -                -      (70) 
 At 31 March 2016                                     644           54             541         234                -     1,473 
                                   ======================  ===========  ==============  ==========  ===============  ======== 
 
 At 30 September 2016 
 Included in current liabilities                       41           59               -           -            1,104     1,204 
                     non-current 
                      liabilities                     576            -             541         193                -     1,310 
                                                      617           59             541         193            1,104     2,514 
                                   ======================  ===========  ==============  ==========  ===============  ======== 
 
 At 30 September 2015 
 Included in current liabilities                        -           83               -           -                -        83 
                     non-current 
                      liabilities                     608            -             500           -                -     1,108 
                                                      608           83             500           -                -     1,191 
                                   ======================  ===========  ==============  ==========  ===============  ======== 
 
 At 31 March 2016 
 Included in current liabilities                        -           54               -           -                -        54 
                     non-current 
                      liabilities                     644            -             541         234                -     1,419 
                                                      644           54             541         234                -     1,473 
                                   ======================  ===========  ==============  ==========  ===============  ======== 
 

The retirement/ leavers provision relates to statutory requirements in France and Italy to pay amounts to retiring/ leaving employees under certain circumstances. There is no general assumption that employees will leave within the next 12 months, except for those impacted by the French restructure, and as such the provision relating to those included in the French restructure is classified as current, while the remainder is included within non-current liabilities.

The warranty provision relates to warranties given for the first year of operation of IDS-iSYS systems. This is reassessed each year. It is expected that these costs will be incurred in line with normal warranty terms of one year from the placements of the instrument.

The dilapidations provision relates to leased buildings in Boldon, UK and at its earliest will be required to be settled in July 2020, at the first break point in a 15-year lease signed in February 2015. The discounted expected future cash flows to restore the buildings amounted to GBP541,000 at the balance sheet date.

The onerous lease provision relates to the unused proportion of the leased buildings in Boldon following the decision taken in the year ending 31 March 2016 to move automated immunoassay related activities to the Liege site. The discounted expected future lease payments to be paid up to July 2020 amounted to GBP193,000 at the balance sheet date.

The restructuring provision relates to expected redundancy and related costs arising as a result of our cost reduction projects and is expected to be settled during the next twelve months.

7 Share Capital

 
                                                                 6 Months                  6 Months         Year ended 
                                                                    ended                     ended           31 March 
                                                             30 Sept 2016              30 Sept 2015               2016 
 
                                                                   GBP000                    GBP000             GBP000 
 Equity Shares 
 Authorised: 
 75,000,000 Ordinary Shares of GBP0.02 each at 
  30 Sept 2016, 31 March 2016 and 30 September 
  2015                                                              1,500                     1,500              1,500 
                                                 ========================  ========================  ================= 
 
 
 Share Capital 
 Allotted, called up and fully paid: 
 29,415,175 in issue at 1 April 2016 (1 April 
  2015: 29,215,175)                                                   588                       584                584 
 Issued on the exercise of share options                                -                         4                  4 
 
 29,415,175 in issue at 30 Sept 2016 (30 Sep 
  2015: 29,415,175, 31 Mar 2016: 29,415,175)                          588                       588                588 
                                                 ========================  ========================  ================= 
 
 
 Share Premium 
 Balance brought forward                                           32,263                    31,857             31,857 
 Premium on shares issued during the year                               -                       406                406 
                                                                   32,263                    32,263             32,263 
                                                 ========================  ========================  ================= 
 

8 Financial assets and financial liabilities

The carrying value of the financial assets and liabilities are not materially different from their fair value.

9 Interim results

These results were approved by the Board of Directors on Thursday 24 November 2016. Copies of this interim report will be available to the public from the Group's registered office and www.idsplc.com.

Independent review report to Immunodiagnostic Systems Holdings PLC

We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 September 2016 which comprises the Consolidated Interim Income Statement, Consolidated Interim Statement of Comprehensive Income, Consolidated Interim Balance Sheet, Consolidated Interim Cash Flow Statement, Consolidated Statement of Changes in Equity and the related notes 1 to 9. We have read the other information contained in the half yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the Company in accordance with guidance contained in International Standard on Review Engagements 2410 (UK and Ireland) 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our work, for this report, or for the conclusions we have formed.

Directors' responsibilities

The half yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half yearly financial report in accordance with International Accounting Standards 34, "Interim Financial Reporting", as adopted by the European Union.

As disclosed in note 1, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half yearly financial report has been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting,' as adopted by the European Union.

Our responsibility

Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements 2410 (UK and Ireland), 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half yearly financial report for the six months ended 30 September 2016 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union.

Ernst & Young LLP

Newcastle upon Tyne

24 November 2016

This information is provided by RNS

The company news service from the London Stock Exchange

END

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