Immunodiagnostic Systems Hldgs PLC H1 Trading Update (6752E)

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RNS Number : 6752E

Immunodiagnostic Systems Hldgs PLC

19 October 2018

H1 Trading Update

Immunodiagnostic Systems Holdings PLC

19 October 2018

Immunodiagnostic Systems Holdings plc

H1 Trading Update

Immunodiagnostic Systems Holdings PLC ("IDS" or "the Group"), a specialist producer of manual and automated diagnostic testing kits and instruments for the clinical and research markets, today provides a trading update for the six months ended 30 September 2018 ("H1 FY19").

Unaudited Group revenues for H1 FY19 are expected to be GBP18.5m, 1% lower than the same period last year. On a like for like basis ("LFL"), that is at constant exchange rate and scope, Group revenues were in line with the same period last year.

Revenue Performance in H1 FY19

The table below summarises the unaudited revenue performance of the core segments of the Group. The right-hand column shows developments in FY 2018 vs. FY 2017 to provide a view of the underlying momentum.

 
                                                          Revenue                              LFL Change 
                                                          H1 FY19                 H1 FY19 v                FY18 v FY17 
                                                                                   H1 FY18 
                                           -----------------------  -----------------------  ------------------------- 
              Group                                      GBP18.5m                    0%                        -8% 
                                           -----------------------  -----------------------  ------------------------- 
 
              Automated Business                         GBP10.8m                    -6%                       4% 
                                           -----------------------  -----------------------  ------------------------- 
                  Automated 25-OH Vitamin 
                   D                                      GBP2.8m                   -12%                       -8% 
                                           -----------------------  -----------------------  ------------------------- 
                  Speciality - IDS                        GBP6.7m                    -2%                       5% 
                                           -----------------------  -----------------------  ------------------------- 
                  Speciality - Partners                   GBP0.6m                    17%                       24% 
                                           -----------------------  -----------------------  ------------------------- 
                  Instrument Sales and 
                   Service                                GBP0.7m                   -26%                       43% 
                                           -----------------------  -----------------------  ------------------------- 
 
              Manual Business                             GBP6.1m                    2%                        -6% 
                                           -----------------------  -----------------------  ------------------------- 
              Technology Business                         GBP1.6m                    51%                      -55% 
                                           -----------------------  -----------------------  ------------------------- 
 

Automated business

Total automated revenue declined by 6% on a LFL basis, and is driven by the same reasons announced previously - namely:

-- 25-OH Vitamin D revenue declined due to a reduction in 25-OH Vitamin D assay volumes and analyser returns in the US.

-- Speciality- IDS revenues declined due to a small number of machine returns from customers running one speciality assay.

Speciality - Partners revenue encompasses the sales of assays developed by IDS's partners. During H1 FY19 we obtained CE marking under the IDS brand for our Autoimmune and Infectious Disease assay ranges, which in total comprise 51 assays. Revenue in this segment grew by 17% on a LFL basis. We will target accelerating this growth during the remainder of the year as we now have access to IDS labelled product which we have the rights to sell on a global basis.

The other KPIs in this business unit developed as follows:

a) Disappointingly we did not release any new endocrinology assays in the period. We target the release of two or three new assays during the second half of the year.

b) During H1 we placed or sold 15 machines (H1 FY18: 18) in our direct sales territories. Returns in H1 in our direct sales territories were 12 (H1 FY18: 9) meaning that in our direct sales territories net new placements were 3 (H1 FY18: net placements of 9).

Within our distribution market we sold 13 (H1 FY18: 17) instruments. There are no returns in this channel.

Thus total gross instrument sales/placements during H1 are 28 (H1 FY18: 35).

In terms of net new placements, our European business performed well. We have substantially completed the rebuilding of our sales team in Europe, and hence expect a stronger performance in Europe during H2 FY19.

In the US, IDS continues to suffer from a limited menu of 10 FDA-approved assays. This makes it more difficult to renew analyser placements at the end of their contract and win new customers willing to invest in the space and process requirements for a new instrument. In the period we have strengthened our regulatory affairs team to accelerate our FDA registration process, which will impact the medium-term performance of the region.

c) The average number of assays run per instrument increased to 4.8 (H1 FY18: 4.3), reflecting successful cross-selling

Manual business

The Manual business performed strongly in H1 FY19, exhibiting 2% LFL growth, after several years of decline. During H1 FY19 the new business unit commercial team have been successfully reactivating dormant accounts and adding distributors in new territories. We hope to maintain this momentum during the second half of the year.

Technology business

LFL growth in the Technology business of 51%, from a low revenue level, is driven by large volume orders for analysers by one OEM partner, as they prepare for the commercial launch of their automated menu. As communicated previously, short term revenues in this business unit will be dependent on the success of this OEM partner's product launch.

Financials

Gross margin during H1 FY19 will be lower than previous periods, due to the mix change in the IDS business. Within both our Automated and Manual business units, a greater proportion of our sales come via distribution channels, which have a lower margin than our direct sales channels. Similarly, we have seen a greater proportion of sales in our Technology business, which has lower gross margins than our assay businesses.

Closing cash and cash equivalents were GBP27.8m at 30 September 2018 (30 September 2017: 29.7m, 31 March 2018: GBP28.5m). Free cash flow, being cash flow before returns to shareholders, was GBP1.1m (FY18 H1: -GBP0.6m).

HR and Corporate Culture

At 30 September 2018 the Group employed 286 people on a full-time employment basis (30 September 2017: 287 persons, 31 March 2018: 281 persons).

We have continued our focus on improving the results delivered by our team. The corporate values which were introduced in the previous year are becoming part of our day to day lives, and further progress has been made in embedding our leadership principles into our global management team via a series of group workshops and one-on-one mentoring. We have put in place career development plans to motivate and retain our top team members.

Outlook

Our target for FY 2019 continues to be returning the business to revenue growth on a LFL basis, for the first time since FY14. We aim to achieve this primarily through growth of our Manual business, additional sales of automated products via distributors, and accelerated growth of our Autoimmune and Infectious Disease panels. However these gains will be offset by an anticipated decline in our US business. Nevertheless, with the significant effort being put in by the team at IDS, we maintain this revenue guidance.

For further information:

   Immunodiagnostic Systems Holdings plc                                 Tel : [phone] 

Jaap Stuut, Chief Executive Officer

Paul Martin, Group Finance Director

Peel Hunt LLP Tel : [phone]

James Steel

Oliver Jackson

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October 19, 2018 12:18 ET (16:18 GMT)