REG - Immunodiagnostic Sys - Final Results <Origin Href="QuoteRef">IDH.L</Origin> <Origin Href="QuoteRef">RXP.L</Origin> - Part 1

Caspian SunriseAnnouncement

16/07/2015 12:07

RNS Number : 8877Q
Immunodiagnostic Systems Hldgs PLC
23 June 2015
23 June 2015
Immunodiagnostic Systems Holdings plc
Final Results
Immunodiagnostic Systems Holdings plc ("IDS", "the Company" or "the Group"), a leading producer of manual and automated specialist diagnostic testing kits and instrumentation for the clinical and research markets, today announces its final results for the year ended 31 March 2015.
Financial Summary 
 Revenue of 45.4m (2014: 52.3m), as previously announced in May 2015 trading update; a 13.2% decline based on actual exchange rates and 16.2% when excluding the acquisition of Diametra. On a constant currency basis the decline was 9.7%
 Automated revenues (IDS-iSYS), 45% of overall revenues, of 20.4m (2014: 22.4m) impacted, as previously flagged, by instrument returns and continued pricing pressure on 25OH Vitamin D assay
 Revenues from manual tests, 36% of overall revenues, of 16.4m (2014: 20.8m)
 Adjusted* EBIT of 4.9m (2014: 10.1m) before exceptional items. Statutory EBIT of 4.0m (2014: 8.3m)
 Adjusted* basic EPS of 11.1p (2014: 28.7p); statutory basic EPS of 8.1p (2014: 24.0p)
 Proposed dividend of 3.0p per share (2014: 8.5p) in line with revised dividend policy. Authority to buy back up to 2.25 million shares being sought at next Annual General Meeting
 Net cash flow from operations of 10.8m (2014: 15.6m)
 Closing cash and cash equivalents of 23.7m (31 March 2014: 26.7m) following acquisition of Diametra 
* before exceptional costs of 1.0m (2014: 1.9m)
Operational Summary
 Patricio Lacalle appointed CEO in April 2015
 Continued execution of the Group's strategic plan to expand endocrinology and related assay menu
 Cost control and management streamlining initiatives underway 
 European launch of IDS-iSYS 1,25 VitDXp assay - a fully automated assay for use with the IDS-iSYS Multi-Discipline Automated System
 European launch of IDS-iSYS2 instrument expected in H2 2015
 Acquisition of Diametra, an Italian company specialising in the development and manufacture of steroid hormone manual assays, a field of endocrinology. Development of fertility panel of automated assays ongoing
 Total gross direct instrument placements of 54 (2014: 60) with 14 net direct placements (2014: 35) and 49 OEM/distributor placements (2014: 57)
Patricio Lacalle, CEO of IDS, commented:
"We are committed to implementing our strategic priorities, namely; increased automated assay menu; increased net new placements; cost management and M&A. The current financial year will be one of transition for IDS as we look to build a solid sustainable platform for the future."
For further information:
Immunodiagnostic Systems Holdings plc
Tel : +44 (0)191 5190660
Burkhard Wittek, Non-executive Chairman
Patricio Lacalle, Chief Executive Officer





Peel Hunt LLP
Tel : +44 (0)207 418 8900
James Steel
Clare Terlouw

About Immunodiagnostic Systems Holdings PLC
The Group's vision is to be a speciality provider to the clinical laboratory diagnostic market. IDS's strategy is focused on developing, internally and through partnership, its automated assay menu for its proprietary automated immunoassay analyser, the IDS-iSYS system. Internally the Group is focused on developing an endocrinology excellence menu and externally IDS works with partners to develop assay panels in complementary indication fields. The Group sells its products primarily in the clinical laboratory market across a range of customers from reference laboratories to physician office laboratories. IDS has field sales forces in certain European countries, including France and Germany, the United States and Brazil and works with distributors in other markets including China, Italy and Spain. 


Chairmans Statement
"At Berkshire full reporting means giving you the information which we would wish you to give to us if our positions were reversed." Warren Buffett
 
1. Introduction
I am afraid that FY 2015 was not a successful year for the group as most key metrics did not develop positively:
a) In terms of financials revenues decreased by 13.2%. Excluding the contribution from Diametra which was acquired in the course of the fiscal year ended 31 March 2015 the decrease is 16.2% year on year. At the same time adjusted EBIT dropped to 4.9m from 10.1m, resulting in an operating margin of 10.3%.
b) The innovation process continued to underperform: in FY 2015 we introduced a total of 2 new automated assays. This is an improvement above the 0 introductions in FY 2014 - but the level of both numbers clearly indicates that our innovation and development process requires further improvement.
c) The sales process did not deliver, either: in FY 2015 we achieved a total of 54 gross new placements in our direct sales territories. After returns this yielded 14 net new placements, down from 35 in FY 2014 and 88 in FY 2013. This implies a rate of ca. 2 gross new placements per sales representative per year - far below the levels achieved by peers in our industry.
These developments led me to rejoin as Non-executive Chairman and a number of additional changes to the Board are detailed below. 
2. Board Changes
Non-executive Level
On November 25, 2014 the previous Chairman Dr. Anthony Martin resigned and the Board appointed two representatives of FORUM Family Office ("FORUM") to the Board: Till Campe and myself. FORUM has been a shareholder in IDS with a stake above 25% since 2009. In my position as the largest shareholder I felt that the position of the Company was deteriorating at a fast pace and change was required. On November 25, 2014 I was appointed Non-executive Chairman of the Board. Effective June 15, 2015, Peter Williamson was appointed as Non-executive Director. Eddie Blair will step down as Non-executive Director at the AGM on August 4, 2015.
Executive Level
On November 24, 2014 Patrik Dahlen resigned as CEO and left the Company on January 4, 2015. To bridge the time until a new CEO had been found I became Executive Chairman. This gave me the opportunity to get a first-hand experience about the workings of the Company and together with the Executive Team we were able to take the first steps of the required change process. 
On December 4, 2014 Chris Yates, our CFO, resigned as a Director and is currently working his notice.
Shortly after these events I was delighted to be able to hire Patricio Lacalle as the new CEO. Patricio had been working for four years as the CEO of Pulsion Medical Systems SE, a German medtech company and I had the luck to oversee his work in the Chairman role. During this period we were able to create significant value for shareholders, and I am confident that we will be able to create value again. Patricio started as CEO on April 1 and I reverted to Non-executive Chairman on that date.
Thus today the Board is comprised as follows:
a) Two Executives: Patricio Lacalle as the incoming CEO and Chris Yates as the outgoing CFO. We are looking for a replacement of Chris in the CFO role.
b) Two Non-executives from FORUM: Till Campe and myself. FORUM is a Family Office with the perspective of an active, long-term owner.
c) Three other Non-executives: Roland Sackers as Senior Independent Director and Financial/audit expert. He also brings in many years of experience in a best-in-class diagnostics company (Qiagen). Eddie Blair brings Diagnostics Experience. After nine years on the Board Eddie will step down at the AGM, thus we are presently seeking a successor with a scientific background and significant experience in IVD operations and innovation processes. I'd like to thank Eddie for his commitment to the Company and wish him well for the future. Peter Williamson joined the Board on June 15, 2015 and brings business acumen and a strong culture of active ownership.
Once these changes have been completed six of the seven Board members will be new. This gives us a chance to make a fresh start. 
3. The Way Forward for IDS
After close to 100 days in the role as Executive Chairman I feel confident that the Company will need changes in the following areas to become successful again:
a) Differentiated strategy: the new Board is starting to look at the Company as a combination of three business areas - and has to pursue a distinctive strategy in each area. They are the licensing/technology business, automated IVD and manual IVD.
b) Focus on few KPIs in the core automated IVD business: IDS has to implement the strategy which was largely defined several years ago. The key building blocks are:
- Larger menu - this refers to the innovation process
- Larger installed base - this refers to the sales process
- Cost discipline - a focus on effectiveness
- Acquisitions and other deals to accelerate the build-up of critical mass.
c) Culture: the Company needs to strengthen some aspects of its culture, in particular business sense, a bias to action and ambition. I will discuss below how we want to strengthen these aspects of the culture.
Below I would like to elaborate on these points.
4. Strategy
A lot has been written in previous Annual Reports about the strategic plans of IDS. As far as I can see these statements focus exclusively on the business of automated IVD. Going forwards, we are starting to view the Company operating in three business units:

Licensing & Technology
Automated IVD
Manual IVD
Total
Revenues 
c. 6m
c. 23m
c. 16m
c. 45.0m
Profitability
Very high
Negative
High
Low
4.1 Licensing and Technology
4.1.1 Business Description
The licensing and technology part of our business deals with supplying either our analyser technology or our assay technology to third parties. In FY 2015 the majority of revenues within this segment were accounted for by supplying assay technology. Going forward we hope to generate an increasing income from our technology partnership with Stago. 
4.1.2 Revenue Model
The revenue models in these segments are made up as follows:
a) In analyser technology: milestones at defined stages of development, (sometimes) royalties and a margin on hardware revenues; and
b) in assay technology: royalties. 
Thus gross margin in these activities is quite high. 
4.1.3 Key Success Factors
Key success factors going forward in this business are maintenance of the technological lead which induces our clients to license the respective technologies from us. This requires that we continue to spend on R&D at the rate we have in the past. 
4.1.4 Achievements in FY 2015
In FY 2015 we were able to increase revenues in this segment once more. Gross margins stayed at a high level. This segment continues to be an important contributor to IDS operating earnings. 
4.2 Automated IVD Business
4.2.1 Business Description
The automated IVD business is comprised of the sale and placement of our IDS-iSYS instrument as well as selling automated assays for use in these instruments. This is the business we have been developing in the last five years. 
4.2.2 Revenue Model
The typical revenue model in a country where we have a direct sales organisation is to place a machine for free with the customer against a contractual obligation to buy a certain amount of assays for us for a period of several years. This is industry standard. 
4.2.3 Key Success Factors
Key success factors in the automated IVD business vary depending on the part of the market a company is positioned in. IDS is a tiny niche player:
a) Size of the global IVD market US$ 9bn
b) Thereof automated US$ 7bn
c) IDS automated IVD revenues US$ 30m
d) IDS market share overall 0.4%
Therefore, in order to achieve a competitive advantage in the overall market, IDS has to specialise. A common approach to specialisation is indication areas. The core indication area of IDS is endocrinology. Market and market share data for this area - excluding vitamin 25OH which is addressing several indication areas - look as follows:
a) Size of global market for endocrinology markers  US$ 1,538m
b) Thereof automated US$ 332m
c) IDS automated endocrinology revenues  US$ 11.8m
d) IDS market share in endocrinology  3.6%
Thus in this field we are a player who is recognized by market participants as relevant and significant. This allows us to build up key opinion leaders who reinforce our position. Strategically we will have to make sure that this core competence - we refer to it internally as endocrinology excellence menu - is maintained and strengthened. 
4.2.4 Competition and Competitive Advantage
In this business our main competitors in the overall IVD business are:
a) the major suppliers of high-performance analyzers for central labs, e.g. Roche or Abbott; and
b) other suppliers of automated platforms for specialized assays, e.g. Phadia or DiaSorin.
In the field of endocrinology our main competitor is DiaSorin. 
4.2.5 Profitability
Gross margins in this business are high, slightly above the level of gross margins in the manual IVD business discussed below. At this stage of our business development operating costs are also very high as we are providing an infrastructure to grow this business further: nearly all of the R&D spend and the service organization are economically driven by this business. Thus operating earnings power in this part of the business is weak. 
To get it up to a satisfactory level we have to reach a critical size of circa 30-50m of revenues. This will require both an acceleration of our pace of internal innovation as well as acquisitions.
4.2.6 Highlights of FY 2015
In our core franchise of clinical automated endocrinology IVD IDS has achieved revenue growth of 10% in FY 2015. This is probably the most positive highlight of the year, and we will fight hard to keep up or even accelerate this growth rate going forward.
In December 2014 we were granted the CE mark for our fully-automated vitamin D 1,25 which will become a core assay within our endocrinology excellence menu. 
4.3 Manual IVD Business
4.3.1 Business Description
In this business segment we sell traditional manual assays - radio immunoassays ("RIA") and Elisa kits ("EIA") to labs which do not have the size to afford lab automation. Thus volumes per assay are smaller and revenues per customer lower. 
In the manual assay world there are two types of uses:
a) Research use (only): "RUO"; and
b) clinical use.
The present business of IDS is ca. 90% for clinical use. This will be the area where we will continue to focus on. The RUO segment of the market needs significant scientific documentation and support which IDS has not been specialised on, it is served by Abcam and its peers.
4.3.2 Revenue Model
The revenue in this business is straightforward: we sell assays and ancillaries to operate them efficiently. 
4.3.3 Key Success Factors
To effectively serve this customer group a company needs a combination of an informative and easy-to-use transactional B2B website, telesales and few sales reps calling on key accounts. 
At this point in time IDS has clear weaknesses in this way to market - this is one of the reasons why revenues in this segment have been shrinking at such a rate > 30% p.a. for the last few years. Patricio and his team are looking to find ways to strengthen our sales capabilities for this channel. 
A second success factor in the manual IVD business is a large menu: the ca. 30 manual assays offered by IDS is limited compared against specialists offering 100s of manual assays to the small labs. The acquisition of Diametra in late 2014 has added ca. another 100 manual assays to our portfolio. Thus a key project going forward will be to integrate both programs into a combined menu offering customers depth in some areas and breadth overall. 
4.3.4 Competition and Competitive Advantage
IDS is a small player when compared with competitors in this sector. In the clinical field of the manual assay business significant competitors include IBL, Biovendor or H. Schein. 
4.3.5 Profitability
Gross margins in this business are slightly lower than in the automated part of the IVD business. At this stage operating costs for this business are relatively moderate - in my opinion too low to keep the business sustainable. Thus current profitability is high, but we will have to invest more going forward into sales and marketing resources to stop the revenue erosion.
4.3.6 Key Highlights of FY 2015
In FY 2015 the manual IVD business at IDS shrank at a rate of 21% year on year. Since FY 2012 it has lost ca. 50% of its revenue base. When benchmarking IDS against peers who have also automated their manual assay menu it is clear that this rate of decay is rather poor performance. 
Thus we will address it in FY 2016, mainly by investing into our sales and marketing resources and processes.
5. Key Performance Indicators ("KPIs") in the Automated IVD Business
As mentioned above the core business of automated IVD is rather straightforward and requires concentration on a few KPIs. I would like to discuss these below.
5.1 New Assay Launches
The assay menu of IDS is sub-critical in size. At the end of FY 2015 it was comprised of 
a) Assays with the CE mark 14
b) Assays with FDA approval 6
It is hard to convince an efficiently run laboratory in our target group to install an additional device in order to run 6 or 14 assays. Critical mass in this business requires a menu of 25 - 30 automated assays to get new placements of analyzers.

Thus the rate of new assay introductions is one of the key KPIs to monitor in this business. Below please find the number of new assay introductions in the last five fiscal years. 

FY2011
FY2012
FY2013
FY2014
FY2015
Number of new assays developed (CE marked)
2
2
2
0
2
As you can see IDS has not performed well by this KPI. The main reasons are weaknesses in the development and upscaling process. This process is presently being completely overhauled. Thus we hope to be able to report a clear improvement in the FY 2016.
5.2 Net New Placements
Our revenue model in the automated IVD business is based on an installed base with each installed device generating recurring revenues. Thus in order to reach critical mass in the automated IVD business we have to increase the number of installations. The KPI used for this goal has been net new placements of IDS-iSYS machines in the territories we serve directly. Below is the number of net new placements in the last five Fiscal Years.

FY2011
FY2012
FY2013
FY2014
FY2015
Net new placements (direct)
88
87
88
35
14
As you can see we have not been performing well. Our diagnosis for this unsatisfactory development is weaknesses at all stages of the sales process. We will tackle them in FY 2016 one-by-one. Rather than promising an unrealistic number we can only state that we are expecting a clear improvement over FY 2015.
5.3 Cost Effectiveness
The IVD business is exposed to pricing pressure: annual price erosion in most assays is in the 1 - 3% p.a. range, in our main product automated vitamin D 25OH even higher. In order to cope with this pressure any competitor has to increase the cost effectiveness of his organization. 
The KPI most commonly used - and in fact most relevant - are revenue per employee. Current revenue per employee for IDS is 135k which is significantly below our peers, as shown in the table below: 

IDS(1)
DiaSorin(2)
Qiagen(3)
Pulsion(4)
Revenue per employee
135k
202k
202k
262k
(1) Revenue of 45,362k and average employees of 336 in year ending 31 March 2015 according to 2015 Annual Report and Accounts
(2) Revenue  443,770k and 1,620 employees in year ending December 31st, 2014, according to 2014 Annual Report, page 18. Based on exchange rate EUR/GBP of 0.737
(3) Revenue of USD 1,344,777k and 4,339 employees as of EOY 2014, according to 2014 Annual Report, pages 118 and 77. Based on exchange rate USD/GBP of 0.654
(4) Revenue of  31,669k and 89 average employees as of EOY 2014, according to 2014 Annual Report, pages 37 and 61. Based on exchange rate EUR/GBP of 0.737
For FY 2016 we will address this issue by requiring the organization to come up with productivity gains in all major areas. 
5.4 Acquisitions
In order to reach the critical size required in the automated IVD business we need acquisitions. They should give us:
a) A customer base in an indication area; and/or 
b) Assays with unique features.
In 2014 IDS acquired Diametra, a producer of manual assays located in Italy. Diametra has several assays in the fertility indication area which we will automate in the next two years. This will allow us to open a new panel within our core competence area of endocrinology.
Diametra brought with it a full infrastructure - administration, R&D, sales and production. In FY 2016 we will have to develop an integration plan eliminating duplications where possible while preserving the entrepreneurial spirit of the acquired company. 
6. Culture
To achieve the changes outlined above we need our employees to support them wholeheartedly. This will require evolving the culture the Company has developed in the past. IDS has started off as a scientific organization and its reputation has been built by scientific excellence. With the growth - which was driven mainly by the growth in the market for automated vitamin D assays - we have left our scientific niche and are now facing competition at the commercial level. This requires strengthening business sense as a part of our Company culture. 
Another part of the culture we want to strengthen is a bias for action. This starts with the role of the CEO - he has to immerse himself into the depths of operations to be able to gain conviction of what has to be done and to take the required decisions - even when they are unpopular. Thus we can report that by now we have taken final decisions on the assay development roadmaps for both FY 2016 and 2017.
A third aspect of corporate culture we would like to strengthen is ambition. This requires benchmarking ones achievements against peers, preferably best-in-class. Thus we have spent significant time with the Executive Management team in the last few months studying our competitors to build acceptance what constitutes good performance. And we will continue to report to you as our owners how we have been doing against our main peers. 
These three values have also been integrated into our recruiting process: we now start looking for people with these personality traits first - and technical/functional qualifications come second only. 
7. Dividend
In the last Annual Report we stated that our dividend policy will be to pay out 25 - 30% of eps as dividends. We would like to evolve this by also giving the Company the option to buy back shares if the opportunity arises and the Board believes it to be value generating to shareholders. In other words, we may buy back shares whenever we feel that the market price is below the intrinsic value of the Company. 
Therefore we propose a dividend of 3.0p (FY 2014: 8.5p). Based on adjusted basic eps of 11.1p per share this implies a payout ratio of ca. 27% i.e. within targeted range. Thus out of a net income attributable to parent of 2.4m we will pay a dividend amount of 0.9m.
At the AGM we will propose to give the Board authority to buy back up to 2,250,000 ordinary shares of the Company. At a share price of 280p this would imply an amount of 6.3m. Thus taken together the two uses of cash would add up to 7.2m.
8. HR
Whilst FY 2015 was not successful in financial terms it required a lot of work and adjustment from our staff - last but not least a massive change in the Board composition. After having been in the Executive Chairman role for three months whilst we undertook the search for a new CEO, I can wholeheartedly state that the quality and commitment of IDS staff is a key asset. This makes me confident that we will be able to succeed in the many changes which will have to take place going forward.
I would therefore 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 more successful company going forwards.
9. Outlook
FY 2016 will be a year of transition for the Company:
a) We are still suffering from the negative momentum which prevailed throughout FY 2015; and
b) any changes will take time to become effective.
In May 2015 we provided revenue guidance of 39m-42m for FY2016 and we hope that we will be able to show an improvement in momentum between H1 and H2 of the FY2016. 
Dr Burkhard Wittek
Chairman


Operational Review
During the financial year 2014/15, we fell short of a number of goals we set ourselves at the beginning of the fiscal year. The strategy set at the time is still broadly valid, however we have started to put increased focus on implementation and on managing cost. Our operational review will go along the lines of our main strategic pillars which we reiterated in the May 2015 trading update:
1) Increase automated assay panel via new launches
2) Increase net new placements through sales excellence
3) Focus on cost management
4) M&A to reach critical size in automated IVD
1. Increase automated assay panel via new launches
Since my arrival at IDS I have reviewed the innovation and development processes together with the managers in charge. My impression has been that we have to strengthen the role of project management vis--vis the managers of the functional areas. The current processes are too sequential in nature - a process passes through one functional area and is then "handed over" to the downstream functional area which picks up from there. My goal is to get all functions involved in a development project to be involved in the process from the beginning to get buy-in and to make sure their requirements are taken care of at the early stages.
A good case example is the role of regulatory affairs - i.e. the function ensuring that any products we are developing qualifies for regulatory approval in the main sales areas. Historically this perspective was added to the project at a later stage - when the development was in process. Today regulatory affairs are involved in the project from inception and have the chance to integrate their requirements into the overall process from the beginning. This should accelerate the total process significantly. 
2. Increase net new placements through sales excellence
We have realized that our sales approach has been different in each territory. We believe that sales excellence is a vital element of getting back to the number of net new placements achieved in the Fiscal Years 2012 and 2013. 
We will set our priorities by sales potential and follow a sales process which has proven successful, applying the principle of best practice. Finally, by means of putting all customer, prospect or opportunity interactions into one CRM system, we will drive a more effective and efficient sales approach.

3. Focus on cost management
This element has been recently added to the strategic objectives as we see ourselves confronted with declining sales and margins. Therefore we have to start to become even more cost conscious.
We have kicked off several projects in this area:
a) Review of site network with the goal of increased site specialisation;
b) Mapping of major processes in operations with the goal to identify inefficient process setups and idle capacity; and
c) Review of overhead structure and discretionary overhead spend.
It is too early to report expected results as these projects are partially still at an early stage. I hope to update shareholders at the time of the interims results in November 2015 to provide a progress report on progress and highlight results already achieved.
4. M&A to reach critical size in automated IVD
We have recently set our M&A priorities to identify potential partners for a deal or acquisition. In first priority we are looking for companies in the automated IVD field which offer: 
a) a market position in an indication area with the associated network and relationships; and/or 
b) unique assays which help us to "anchor" our panels with customers. 
Significantly increase our automated assay menu 
Our assay development strategy is two-fold:
a) Firstly we will internally develop a market-leading menu of endocrinology assays; and
b) secondly, through partnership or acquisitions, we will develop menu in complementary indication areas.
Endocrinology is a branch of biology and medicine dealing with the endocrine system, its diseases and its specific secretions called hormones. It also covers the integration of developmental events proliferation, growth and differentiation, and also the psychological or behavioural activities of metabolism, growth and development, tissue function, sleep, digestion, respiration, excretion, mood, stress, lactation, movement, reproduction and sensory perception as caused by hormones. 
The medical specialty of endocrinology involves the diagnostic evaluation of a wide variety of symptoms and variations and the long term management of disorders of deficiency or excess of one or more hormones. Most endocrine disorders are chronic diseases that need lifelong care. Some of the most common endocrine diseases include diabetes mellitus, hypothyroidism and the metabolic syndrome. 
Our IDS heritage is within certain endocrinology indications such as vitamin D deficiency and we believe this offers a solid platform from which we can develop a larger IDS endocrinology excellence menu. This approach will focus on continuing to build our assay panels in our current clinical areas: bone and calcium, growth and hypertension, as well as extending into other clinical areas such as fertility and diabetes. We believe there is a clear opportunity for IDS to become a leading provider of endocrinology immunoassays in the IVD market.
The core objective of our R&D leadership team is to significantly accelerate our assay development process to allow the group to rapidly build out its menu. In the current financial year, we are targeting the European (CE mark) launch of a range of endocrinology assays including ACTH and cortisol (both hypertension markers) and Bone TRAP and MGP (bone metabolism markers).
In our core market USA we still anticipate FDA clearance for our bone metabolism markers: osteocalcin, BAP and P1NP and we received FDA clearance for our hypertension marker, aldosterone, in April 2015.
Our assay menu strategy outside of endocrinology is market-driven and we will look to complement our endocrinology menu in related indication fields. The broader assay menu strategy will be executed through partnerships with other diagnostic companies as well as acquisitions. This partnership approach is already under way and we will continue to work closely with our existing partners to develop this menu. We will also pursue further collaborations with partners who we believe offer a leadership position in certain related indication fields. 
We continue to seek partners to provide "content" in certain indication fields that we believe offer synergy with our existing clinical areas. We are in active discussions with a number of parties who we believe may offer the appropriate level of expertise and capability in these areas.
Next generation instrument, the IDS-iSYS2 ("Mark II") analyser
One of IDS's key strengths is its proprietary immunoassay platform, the IDS-iSYS instrument. It is important to strengthen this technology advantage through continued development of the instrument platform. In the near term we will focus on launching our next generation instrument, the IDS-iSYS2 analyser.
The Mark II will be connectable to laboratory track systems, enabling improved access to large laboratory customers. We have successfully demonstrated the Mark II connecting to one of the major track systems and we continue to work with a number of track providers. The development remains on course and the expected timescale for registration within Europe is summer 2015.
We continue to work closely with our development partner, Diagnostica Stago ("Stago") on the development of the Mark II. Stago will have exclusive rights to sell the Mark II instrument in its core coagulation market. The technology transfer to Stago for the IDS-iSYS Mark II instrument was completed in May 2014 by both IDS and Stago.
Focus on developing our core Regional Markets 
We will focus on developing our core markets: the US, Europe and China. Overall, we estimate the global immunoassay market to be worth approximately 9bn and growing at circa 5-7% per annum. Our current core markets of the United States and Europe account for approximately 75% of this overall market with low single digit growth rates. Brazil and China account for a further 10% of the overall market and are growing at a blended rate of circa 14% per annum overall. 
Therefore, focusing our efforts on these four territories will cover 85% of the overall global IVD market. We believe that this investment in existing territories (US and Europe) and expansion into specific growth markets (Brazil and China) is a pragmatic and realistic strategy for the Group providing the best chance of succeeding in these growth markets. 
Business review
Overall automated and manual performance is set out in the table below.

2015
2015
2014
2014
%

000
%
000
%
change
Automated revenue (IDS-iSYS)
25OH vitamin D
7,752
10,860
(28.6)
Other specialty
7,994
7,285
9.7
Operating lease rental 
4,617
4,227
9.2
Total automated
20,363
44.9%
22,372
42.8%
(9.0)
Manual revenue
25OH vitamin D
5,419
8,468
(36.0)
Other specialty
10,971
12,310
(10.9)
Total manual
16,390
36.1%
20,778
39.8%
(21.1)
Instrument revenue
2,781
6.1%
3,043
5.8%
(8.6)
Other income
5,828
12.9%
6,070
11.6%
(4.0)
45,362
100%
52,263
100%
(13.2)
Group revenues decreased 13.2% to 45.4m (2014: 52.3m) mainly as a result of the 3.1m decline in 25OH automated and the 3.0m decline in 25OH manual revenues. 
Automated test revenue

2015
2015
2014
2014
%
000
%
000
%
change
Automated revenue (IDS-iSYS)
25OH vitamin D
7,752
38.1%
10,860
48.5%
(28.6)
Other specialty
7,994
39.2%
7,285
32.6%
9.7
Operating lease rental 
4,617
22.7%
4,227
18.9%
9.2
Total automated
20,363
100%
22,372
100%
(9.0)
During the financial year ended 31 March 2015, automated revenues declined to 20.4m (2014: 22.4m) to represent 44.9% of Group revenues (2014: 42.8%). Other automated specialty test kits grew by 9.7% driven by growth in sales of the Group's 1,25 dihydroxy vitamin D, growth and bone panels. Non-25OH vitamin D automated tests accounted for 39.2% of the Group's automated revenues (2014: 32.6%). The Group discloses the operating lease component associated with the placement of IDS-iSYS systems and as such the Group has adopted IAS 17 when determining the relevant proportions of automated assay revenues and operating lease rental payments. This has the effect of reducing automated 25OH vitamin D revenues from 10.0m to 7.8m and decreasing Other Specialty from 10.3m to 8.0m. Total operating lease income increased from 4.2m in 2013/14 to 4.6m in 2014/15 due to growth in the installed base.
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 direct instrument placements were 54 (2014: 60) with 40 instruments returned in the year (2014: 25), meaning net direct instrument placements were 14 (2014: 35). Germany continued to offer a solid placement performance in the year with net placements of 15 (2014: 21). However, France continued to see a high level of returns with an overall net return level of 6 instruments in the year due to increased competition and continued consolidation of the laboratory market. The United States sales organisation placed 18 instruments in 2014/15, similar to the 19 instruments placed in 2013/14. However, the United States saw a high level of returns compared to the prior year (2014: 4 returns; 2015: 15 returns).
The total number of instruments placed (directly or through distributors) and sold to OEM partners was 63 (2014: 92). 

2015
2014
%
Total
Total
Change
Direct - gross placements
54
60
(10.0)
Direct - returns
(40)
(25)
60.0
Direct - net placements
14
35
(60.0)
Direct - installed base to date
312
298
4.7
Distributor - gross placements
38
28
35.7
Distributor - placements to date
143
105
36.2
OEM sales and partners
11
29
(62.1)
Average revenue per direct instrument ("ARPI") was 55,000 per annum (calculated on a rolling 12-month basis) (2014: 71,000). The decline in ARPI was due to the continued significant number of higher throughput 25OH vitamin D only instruments being returned in the period and our new instrument placements being at a lower ARPI than historic levels. 
Manual test revenue
The majority of the decline in manual revenues to 16.4m (2014: 20.8m) was a result of the continued decline in manual 25OH vitamin D revenues to 5.4m (2014: 8.5m). Increased availability of 25OH vitamin D on automated platforms has led in Europe and the United States to customers switching away from manual kits. Other speciality manual revenues include the contribution from Diametra's manual assays from the acquisition date in September 2014. Overall, revenues from the Group's portfolio of other manual products declined by 10.9% to 11.0m (2014: 12.3m). Excluding Diametra this decline was more pronounced with revenues declining by 23.6% to 9.4m (2014: 12.3m). The vast majority of this was due to the decline of the Group's manual 1,25 assay revenues declining as customers switched either to the Group's automated 1,25 assay or to a competitor 1,25 assay.

2015
2015
2014
2014
%
000
%
000
%
change
Manual revenue
25OH vitamin D
5,419
33.1
8,468
40.8%
(36.0)
Other specialty
10,971
66.9
12,310
59.2%
(10.9)
Total manual
16,390
100.0
20,778
100.0%
(21.1)
Instrument revenue
The Group generated 2.8m of revenue (2014: 3.0m) from the sale of spare parts and the sale of instruments to OEM partners and distributors. 
Other income
Other income was 5.8m (2014: 6.1m), representing 12.9% of total revenue (2014: 11.6%), and was made up of a license fee of 0.8m (2014: 1.4m) and the royalties payable by significant OEM customers of 4.8m (2014: 4.0m). A related OEM customer also contributed 1.0m (2014: 1.0m) to manual revenues through the sale of antibodies. There is the risk over the medium-term that this income stream is eroded or removed if the Group's partners no longer require access to the licensed intellectual property. Other income in 2014 also included the 0.5m milestone payment from Omega in relation to their worldwide licence to develop and distribute allergy tests on the IDS-iSYS. 
Revenue by geography
Overall, Rest of World represented 17.9% of the Group's revenues in 2014/15 (2014: 14.0%).

% change
% change
2015
2014
actual 
constant

000
000
FX rates
FX rates
US
12,139
16,011
(24.2)
(22.2)
Europe 
19,272
22,851
(15.7)
(10.7)
Rest of World
8,132
7,331
10.9
15.7
Other income
5,819
6,070
(4.1)
(3.4)
Group revenue
45,362
52,263
(13.2)
(9.7)
The Group's US revenues declined by 22.2% at constant exchange rates in the year ended 31 March 2015. Manual revenues in the United States declined by 31.6%, primarily the result of lower manual 25OH revenues. Overall, automated revenues in the US declined by 15.3% driven by a 20.4% decline in 25OH automated revenues. Non-25OH vitamin D automated revenues increased by 4.3%. 2014/15 has seen continued senior management and sales team change in the United States and we were pleased to appoint a new General Manager in May 2015, Brendon Firestone, who should provide some much needed stability and sales focus to the operation. 
In Europe, we saw a decline in revenues at an actual exchange rate of 15.7% and at a constant exchange rate of 10.7%. Overall, in Europe we saw a 27.2% decline in manual revenues, driven by a 31.6% decline in manual 25OH vitamin D revenues. Automated revenues in Europe declined by 12.3% to 11.4m. Within Europe, the Group operates a German sales office, covering the Nordic regions, Germany and certain Eastern European territories, and a French sales office, covering UK, France and Belgium. The German office saw overall revenue decline of 10.2% to 9.9m. The French sales office saw a 27.9% decline in revenues to 5.3m with placement levels being depressed by continued consolidation of the French laboratory market leading to continued returns of instruments.
Patricio Lacalle
Chief Executive Officer


Financial Review
The Group achieved 4.9m of pre-exceptional earnings before interest and tax ("EBIT") (2014: 10.1m) in 2015. This disappointing performance was driven by revenue decline of 13% and a reduced gross margin. Cash generated from operations in 2015 was 10.8m (2014: 15.6m) with cash and cash equivalents decreasing from 26.7m as at 31 March 2014 to 23.7m as at 31 March 2015. 

2015
2014
% 

'000
000
Change
Revenue
45,362
52,263
(13.2)
Gross profit
28,331
35,574
(20.4)
Gross margin
62.5%
68.1%
(8.2)
 Sales & marketing
(9,922)
(10,185)
(2.6)
 R&D
(1,627)
(2,161)
(24.7)
 Administrative expenses
(8,548)
(9,606)
(11.0)

(20,097)
(21,952)
(8.5)
Depreciation and amortisation
(3,298)
(3,504)
(5.9)
Underlying EBIT 
4,936
10,118
(51.2)
Exceptional items
(983)
(1,860)
n/a
Statutory EBIT
3,953
8,258
(52.1)
Group revenue of 45.4m (2014: 52.3m) decreased by 13.2% with a 9.0% decline in automated revenues (2014: 21.0% growth) and a 21.1% decline in manual revenues (2014: 18.0% decline).
Gross profit of 28.3m (2014: 35.6m) was down 8.2% as a result of lower revenues and a lower gross margin.
Reclassification of costs
To ensure that the Group's financial performance can be more easily benchmarked with its peer group, a number of costs have been reclassified from administrative expenses to cost of sales. The Board believes this will bring the group's margin structure in line with what it believes to be the appropriate peer group and this subsequent benchmarking will allow the Group's efforts to be targeted more effectively at driving performance towards "best in class". Further, the Board believes that the depreciation of revenue generating IDS-iSYS instruments and the amortisation of development costs are more appropriately classified within cost of sales. 
The overall impact is to transfer 3.6m (2014: 3.3m) from depreciation and amortisation to cost of sales. 
The changes do not impact the overall EBIT performance of the Group. The following table highlights the changes made:

Before adjustments
Adjustments
After adjustments

2014
2015
2014
2015
2014
2015

'000
'000
'000
'000
'000
'000
Revenue
52,263
45,362


52,263
45,362
Cost of sales
(13,347)
(13,454)
(3,342)
(3,577)
(16,689)
(17,031)
Gross profit
38,916
31,908


35,574
28,331
 Sales & marketing
(10,185)
(9,922)


(10,185)
(9,922)
 R&D
(2,161)
(1,627)


(2,161)
(1,627)
 Other administrative costs
(9,606)
(8,458)


(9,606)
(8,548)

(21,952) 
(20,097)


(21,952)
(20,097)
Depreciation (i)
(2,682)
(2,465)
890
973
(1,792)
(1,492)
Amortisation (ii)
(4,164)
(4,410)
2,452
2,604
(1,712)
(1,806)
Underlying EBIT
10,118
4,936


10,118
4,936
(i) Comprising of depreciation on revenue earning IDS-iSYS instruments
(ii) Comprising of amortisation on development costs
Overheads
As restated, the Group's total overheads are comprised:

2015
2014
%

000
000
change
Sales and marketing
(9,922)
(10,185)
(2.6)
Research and development (i)
(1,627)
(2,161)
(24.7)
Other administration costs(i)
(8,548)
(9,606)
(11.0)
Operating costs (pre exceptional)
(20,097)
(21,952)
(8.5)
Depreciation
(1,492)
(1,792)
(16.7)
Amortisation
(1,806)
(1,712)
5.5
Underlying total overheads
(23,395)
(25,456)
(8.1)
Exceptional items
(983)
(1,860)
(47.2)
Total overheads
(24,378)
(27,316)
(10.8)
(i) Net of capitalisation
These overhead categories are now shown on the face of the statutory Profit & Loss account and the Board believe this revised presentation provides a clearer analysis to the reader of the accounts of where the Group's costs occur, rather than the previous categories shown in the Profit & Loss account, namely administrative expenses and distribution costs.
Operating costs decreased by 8.5% to 20.1m (2014: 22.0m). Payroll costs represent approximately 85% of underlying operating overheads (2014: 83%).  
The Group capitalised a number of development projects during the year including both instrument and new assay developments. Costs are capitalised once all the recognition criteria of IAS 38 Intangible Assets are met. The total amount of development cost overheads capitalised decreased from 3.2m in 2014 to 2.9m in 2015. Capitalised costs include the development of the Mark II instrument and the registration work in Brazil and China.We review these developments on a periodic basis throughout the financial year and the costs are impaired if a development no longer meets the required criteria.  
Goodwill impairment review
Under IAS36, we review annually the goodwill and indefinite-lived intangible assets for impairment. Additionally, impairment reviews may occur if there are any triggering events or changes in circumstances which may indicate that the carrying amount of goodwill is not recoverable.
For the purposes of this goodwill impairment review, the Board considers it currently has one single Cash Generating Unit ("CGU"), being the entirety of the IDS business.
Whilst the Group has seen a significant downturn in revenues during the past financial year the goodwill impairment review performed as at 31 January 2015 (the valuation date) highlighted the recoverable amount for the IDS CGU continued to exceed its carrying value and therefore we do not consider there to be goodwill impairment. The details of the review are contained within note 5 to this Final Results Statement. The Board will continue to monitor the situation going forwards to ensure if there are any triggering events or changes in circumstances that impact goodwill, then the impairment will be reassessed prior to the next annual impairment review on 31 January 2016.
Finance income
Net finance income was 0.1m (2014: 0.1m).
Exceptional items
The Group incurred a number of exceptional items during the current and previous financial year:

2015
2014

000
000
Impairment of assay development costs
-
(317)
Transaction costs
(561)
-
Restructuring costs
(422)
(1,160)
Strategic review costs
-
(244)
Nattopharma legal defence costs
-
(139)
Total exceptional costs
(983)
(1,860)
In the year-ended 31 March 2015 there were 0.6m of transaction costs incurred with 0.2m in relation to the acquisition of Diametra in September 2014 and 0.4m in relation to an aborted transaction process which ended in October 2014.
In 2014 the Group undertook a significant restructuring with a number of senior management changes as well as the relocation of the United States sales office. This led to a restructuring charge of 1.2m being incurred in 2014 and 0.4m in 2015.
Taxation
The tax charge of 1.7m (2014: 1.4m) gives a full year effective tax rate of 42.0% (2014: 16.6%). This comprises a current tax charge of 0.4m that arose in the year and a deferred tax charge of 1.3m. The deferred tax charge was materially affected by the write off of a previously recognised deferred tax asset relating to losses recoverable in subsidiary companies.
Earnings per share
Adjusted earnings per share is calculated using profit after tax adjusted to exclude the after tax effect of exceptional items. Adjusted basic earnings per share is 11.1p (2014: 28.7p).
Basic earnings per share has decreased to 8.1p (2014: 24.0p).
Balance sheet
The Group's shareholders' funds at 31 March 2015 were 80.4m (2014: 86.6m). 
The fixed assets of the Group consist primarily of property (2015: 1.9m, 2014: 0.6m), IDS-iSYS instruments (2015: 5.1m, 2014: 6.0m) and other tangible fixed assets (2015: 3.3m, 2014: 2.6m), goodwill (2015: 15.3m, 2014: 16.0m), capitalised development costs (2015: 15.1m, 2014: 15.9m) and other intangible fixed assets (2015: 15.5m, 2014: 16.8m). 
As at 31 March 2015, the Group had cash and cash equivalents of 23.7m (2014: 26.7m). 
Cash flow
IDS generated cash flows from operations of 10.8m (2014: 15.6m). The cash position in 2015 was affected by two notable items, namely the payment of a higher dividend (2015: 2.5m, 2014: 0.9m) and the acquisition of Diametra which led to a net outflow of 2.5m.
Foreign exchange
In the period, 40% of the Group's revenues were denominated in US Dollars, 47% Euros, 11% Sterling and 2% other currencies. The average exchange rates used to translate revenue in the year were:



Weakening/



(strengthening)
Average exchange rates
2015
2014
against Sterling %
Sterling : US Dollar
1.62
1.58
2.4
Sterling : Euro
1.27
1.19
7.0
The effect of these exchange rate changes on the results for the year was to decrease reported revenue by 1.9m.
Dividend
The Board is proposing a dividend for the year of 3.0p (2014: 8.5p) subject to the approval of shareholders at the Annual General Meeting on 4 August 2015. 
If approved, the dividend will be paid on 21 August 2015 to shareholders on the register at the close of business on 24 July 2015.
Chris Yates
Group Finance Director


Consolidated income statement for the year ended 31 March 2015
2015
2015
2014
2014
Notes
000
000
000
000
Revenue
1
 45,362
 52,263
Cost of sales
(17,031)
(16,689)
Gross profit
 28,331
 35,574
Sales and marketing
(9,922)
(10,185)
Research and development
(1,627)
(2,161)
Administrative expenses
(8,548)
(9,606)
Exceptional items
Transaction costs
(561)
-
Restructuring costs
(422)
(1,160)
Strategic review costs
-
(244)
Nattopharma legal defence costs
-
(139)
Impairment of development costs
-
(317)
Total exceptional items
(983)
(1,860)
(21,080)
(23,812)
Depreciation and amortisation
(3,298)
(3,504)
Profit from operations
2
 3,953
 8,258
Finance income
 158
 141
 4,111
 8,399
Finance costs
(58)
(64)
Profit before tax
 4,053
 8,335
Income tax expense
3
(1,701)
(1,382)
Profit for the year attributable to owners of the parent
 2,352
 6,953
Earnings per share
From continuing operations
Adjusted Basic
4
11.1p
28.7p
Basic
4
8.1p
24.0p
Diluted
4
8.0p
23.7p
Consolidated statement of comprehensive income for the year ended 31 March 2015
2015
2014
000
000
Profit for the year
 2,352
 6,953
Other comprehensive income to be reclassified to profit or loss in subsequent periods:
Currency translation differences
(5,905)
(1,411)
Other comprehensive income to be reclassified to profit or loss in subsequent periods, before tax:
(5,905)
(1,411)
Tax relating to other comprehensive income to be reclassified to profit or loss in subsequent periods
-
(66)
Other comprehensive income not to be reclassified to profit or loss in subsequent periods:
Remeasurement of defined benefit plan
(108)
-
Other comprehensive income not to be reclassified to profit or loss in subsequent periods, before tax:
(108)
-
Tax relating to other comprehensive income not to be reclassified to profit or loss in subsequent periods
36
-
Other comprehensive income, net of tax:
(5,977)
(1,477)
Total comprehensive income for the year attributable to owners of the parent
(3,625)
 5,476
Consolidated Balance Sheet as at 31 March 2015
2015
2014
Notes
000
000
Assets
Non-current assets
Property, plant and equipment
 10,264
 9,161
Goodwill
5
 15,326
 16,016
Other intangible assets
 30,574
 32,680
Investments
 -
 -
Deferred tax assets
115
 1,752
Other non-current assets
273
314
 56,552
 59,923
Current assets
Inventories
 6,805
 6,458
Trade and other receivables
 7,414
 7,239
Income tax assets
 2,600
 2,151
Cash and cash equivalents
 23,730
 26,690
 40,549
 42,538
Total assets
 97,101
 102,461
Liabilities
Current liabilities
Short-term borrowings
252
 -
Short-term portion of long-term borrowings
110
 -
Trade and other payables
 5,632
 7,096
Income tax liabilities
 971
267
Provisions
 82
292
Deferred income
147
105
 7,194
 7,760
Net current assets
 33,355
 34,778
Non-current liabilities
Long-term portion of long-term borrowings
 1,238
 -
Repayable grants
 1,357
 1,533
Provisions
 1,135
850
Deferred tax liabilities
 5,769
 5,732
 9,499
 8,115
Total liabilities
 16,693
 15,875
Net assets
 80,408
 86,586
Total equity
Called up share capital
584
583
Share premium account
 31,857
 31,809
Other reserves
(1,281)
 4,624
Retained earnings
 49,248
 49,570
Equity attributable to owners of the parent
 80,408
 86,586
Consolidated statement of cash flows for the year ended 31 March 2015
2015
2014
000
000
Operating activities
Cash generated from operations
 10,797
 15,631
Cash outflow related to exceptional costs
(1,168)
(1,807)
Income taxes paid
(161)
(1,535)
Net cash from operating activities
 9,468
 12,289
Investing activities
Acquisition of subsidiary (net of cash acquired)
(2,540)
 -
Purchases of other intangible assets
(3,587)
(3,698)
Disposals of other intangible assets
-
(50)
Purchases of property, plant and equipment
(2,872)
(2,226)
Disposals of property, plant and equipment
 229
 (82)
Interest received
 158
 141
Net cash used by investing activities
(8,612)
(5,915)
Financing activities
Proceeds from issue of shares for cash
 49
 1,784
Repayments of borrowings
(116)
 -
Interest paid
(58)
(64)
Dividends paid
(2,479)
(866)
Net cash used by financing activities
(2,604)
 854
Net (decrease) / increase in cash and cash equivalents
(1,748)
 7,228
Effect of exchange rate differences
(1,212)
(103)
Cash and cash equivalents at beginning of year
 26,690
 19,565
Cash and cash equivalents at end of year
 23,730
 26,690
Consolidated statement of changes in equity for the year ended 31 March 2015


Share
Share 
Other
Retained
Total

capital
premium
Reserves
earnings



account




000
000
000
000
000
At 1 April 2013

567
30,041
6,101
43,084
79,793
Profit for the year

-
-
-
6,953
6,953
Other comprehensive income






Foreign exchange translation differences on foreign currency net investment in subsidiaries

-
-
(1,411)
-
(1,411)
Tax effect of treatment of foreign currency translation differences

-
-
(66)
-
(66)
Total comprehensive income

-
-
(1,477)
6,953
5,476
Transactions with owners






Share based payments

-
-
-
41
41
Tax benefit on exercise of share options

-
-
-
358
358
Dividends paid

-
-
-
(866)
(866)
Shares issued in the year

16
1,768
-
-
1,784
At 31 March 2014

583
31,809
4,624
49,570
86,586







At 1 April 2014

583
31,809
4,624
49,570
86,586
Profit for the year

-
-
-
2,352
2,352
Other comprehensive income






Foreign exchange translation differences on foreign currency net investment in subsidiaries

-
-
(5,905)
-
(5,905)
Remeasurement of defined benefit plan

-
-
-
(108)
(108)
Tax effect on remeasurement of defined benefit plan

-
-
-
36
36
Total comprehensive income

-
-
(5,905)
2,280
(3,625)
Transactions with owners






Share based payments

-
-
-
(71)
(71)
Tax recognised on share based payments

-
-
-
(52)
(52)
Dividends paid

-
-
-
(2,479)
(2,479)
Shares issued in the year

1
48
-
-
49







At 31 March 2015

584
31,857
(1,281)
49,248
80,408
Notes to the consolidated financial statements for the year ended 31 March 2015
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.
Following a significant restructuring of the Group that began in 2013/14 the business was directed and monitored on a functional basis during 2014/15.
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. All earnings, balance sheet and cash flow information received and reviewed by the Board of Directors is prepared at a Group level. The Group determined that, consistently with 2013/14, during 2014/15 it had one operating segment as defined under IFRS 8, being the whole of the Group.
No further detailed segmental information is provided in this note, there being only one operating segment.
Revenues from customers located in individual countries are as follows:
2015
2014
'000
'000
UK (country of domicile)
1,677
2,705
US
12,166
16,011
Germany
6,241
7,086
France
4,138
5,782
Other
21,140
20,679
Total revenues
45,362
52,263
Non-current assets, excluding deferred tax and goodwill located in individual countries is as follows:
2015
2014
000
000
UK (country of domicile)
 11,182
10,363
France
 8,835
10,017
Belgium
 9,783
12,149
Other
 11,311
 9,626
Total
 41,111
 42,155
2. Profit from operations
Profit from operations is stated after charging / (crediting):
2015
2014
000
000
Amortisation of government grants re fixed assets
(16)
(17)
Amortisation of other intangible assets
4,439
 4,164
Impairment of other intangible assets
 -
 317
Loss on disposal of other intangible assets
 17
 -
Loss on disposal of owned plant, property and equipment
 219
 82
Depreciation of owned plant, property and equipment
 2,400
 2,682
Depreciation of assets held under finance leases
 65
 -
Operating lease costs
 892
 845
Share-based payments
 76
 41
Other staff costs
 16,950
 18,136
Cost of inventories recognised as an expense
 4,703
 3,205
Write downs of inventories recognised as an expense
 1,303
 1,638
Net (gain) / loss on foreign currency translation of trading items
(688)
 469
Auditor's remuneration (see below)
 183
 169
Amounts payable to Ernst & Young LLP and their associates in respect of both audit and non-audit services:
2015
`
2014
000
000
Audit services
- statutory audit of parent and consolidated accounts
 162
 139
Other services relating to taxation
- compliance services
 21
 30
 183
 169
3. Taxation on ordinary activities
a) Analysis of charge in the year
2015
2014
000
000
Current tax:
UK Corporation tax based on the results for the year at 21% (2014: 23%)
 859
 540
Over provision in prior year
(137)
(360)
Foreign tax on income
(449)
 547
Total current tax
 273
 727
Deferred tax:
Excess of taxation allowances over depreciation on fixed assets
 (548)
(19)
Other
(35)
(510)
Tax losses carried forward
 2,039
 1,019
Deferred tax on share-based payments charge
 22
(9)
(Over) / under provision in prior year
(50)
 174
Total deferred tax
 1,428
 655
Tax on profit on ordinary activities
 1,701
 1,382
In addition, total current and deferred tax of 16,000 has been charged to equity in respect of items credited/charged directly to equity (2014: 292,000 credited to equity).
b) Factors affecting tax charge
The tax assessed for the period is higher (2014: lower) than the standard rate of corporation tax in the UK, 21% (2014: 23%). The differences are explained below.
2015
2014
000
000
Profit on ordinary activities before taxation
 4,053
 8,335
Profit on ordinary activities by rate of tax in the UK of 21% (2014: 23%)
 851
 1,917
Expenses not deductible / (Income not taxable) for tax purposes
242
(173)
Additional relief for R & D expenditure
(1,285)
(523)
Foreign profits taxable at different rates
(51)
 255
Losses carried forward
 2,107
 809
Losses brought forward utilised
 -
(456)
Effect of change in tax rate on deferred tax balances
(17)
(264)
Exchange differences on deferred tax
 41
 3
Tax in respect of prior periods
(187)
(186)
Total tax charge at an effective rate of 42.0% (2014: 16.6%)
 1,701
 1,382
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 2015, 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.
2015
2014
000
000
Profit on ordinary activities after tax
 2,352
 6,953
Weighted average number of shares:
No.
No.
For basic earnings per share
 29,193,569
 28,955,485
Effect of dilutive potential Ordinary shares:
-Share options
 235,365
 335,092
For diluted earnings per share
29,428,934
29,290,577
Basic earnings per share
8.1p
24.0p
Diluted earnings per share
8.0p
23.7p
2015
2014
000
000
Profit on ordinary activities after tax as reported
 2,352
 6,953
Exceptional items after tax
 874
 1,351
Profit on ordinary activities after tax as adjusted
 3,226
 8,304
Adjusted basic earnings per share
11.1p
28.7p
Adjusted diluted earnings per share
11.0p
28.4p
5. Goodwill
000
Cost
At 1April2013
 17,313
Exchange differences
(330)
At 31March2014
 16,983
Arising on acquisition of subsidiary
 1,250
Exchange differences
(1,940)
At 31March2015
 16,293
Amortisation
At 1April2013
 967
Charge for the year
 -
At 31 March2014
 967
Charge for the year
 -
At 31March2015
 967
Net book value
At 31March2015
 15,326
At 31March2014
 16,016
At 1April2013
 16,346
Consistently with the year ended 31 March 2014, during the year ended 2015 at a Group level, the business was directed and monitored on a functional basis. The Board monitored the business at a Group level and IDS recognised only one operating segment. As a consequence of this, there were no smaller CGUs which were identifiable and for which goodwill was monitored for internal management purposes. Goodwill was only monitored at a whole Group level. Goodwill was allocated to a single CGU, being the entirety of the Group, and was tested for impairment at this overall Group level.
An impairment arises when the recoverable amount of the CGU is less than the carrying value of the CGU. The recoverable amount is the higher of the fair value less costs to dispose and the value in use.
At 31 January 2015, the Group performed its annual impairment test. At that date, the fair value less costs to sell was in excess of the value in use, and also in excess of the carrying value. Therefore there was no impairment. The fair value less costs to sell was determined using the share price at 31 January of 330p per share. Although considered appropriate, this calculation assumed no control premium, as this was not required to demonstrate no impairment. Using those same assumptions, a fall of 37p per share would result in the recoverable amount being equal to the carrying value. The addition of a control premium would materially increase the fall in share price required to demonstrate impairment.
As at 19 June 2015, the last working day before the signing of the Financial Statements for the Year ended 31 March 2015, the share price was 282.50p.
Using current forecasts (developed post year end) the value in use was calculated to be c. 5m below the carrying value. The key assumptions were:
 Specific forecasts for 2015/16 - 2019/20
 Three further extrapolated years based on declining growth, then a terminal value
 Long term EBIT margin of 15%
 Discount rate of 11%
6. Business combinations
On 9 September 2014, IDS completed the acquisition of the entire share capital of Dia.Metra S.r.l. ("Diametra"), an Italian company specialised in the development and commercialisation of manual immunoassays. The acquisition is in line with the Group's strategy of building its presence as a leading solution provider for speciality testing. In particular, the acquisition augments the Group's endocrinology pipeline. It is IDS's intention to convert a number of Diametra's manual assays in the area of steroid hormones onto the IDS-iSYS automated instrument. In addition, the acquisition of Diametra provides IDS with additional development and manufacturing capabilities.

000
Fair value of cash consideration 
 2,879 
Fair value of net assets acquired 


Non-current assets 


Property, plant & equipment 
 1,724 

Intangible assets
 1,301 

Other non-current assets
4

Current assets 


Inventory 
 327 

Receivables and accrued income 
 884 

Cash and cash equivalents 
 339 


 1,550 

Current liabilities 


Short term borrowings 
(452)

Trade and other payables 
(377)

Taxation
(61)

Accruals 
(89)


(979)

Non-current assets 


Long term borrowings 
(1,403)

Deferred taxation on intangibles
(408)

Provisions 
(160)


(1,971)

Net Assets 
 1,629 



Goodwill
 1,250 
The sale and purchase agreement allowed for a net assets adjustment on finalisation of the completion balance sheet. Additional consideration of 140,000 was paid subsequent to completion.
500,000 was paid into Escrow as at the completion date. 150,000 will be released upon the first anniversary of completion and the remaining 350,000 on the second anniversary, unless reduced by any warranty or other claim under the terms of the agreement.
Revenue of 1,561,000 and a loss after tax of 45,000 have been included in the consolidated results for the period from completion until the year end date.
Goodwill recognised includes the workforce and expected synergies from combining operations of IDS and Diametra, in particular in manufacturing and research and development.
At the acquisition date, there were no receivables not expected to be collected. The sale and purchase agreement contains a claim provision for any amounts not collected within one year.
The transaction costs associated with the acquisition amounted to 0.2m and are included within exceptional costs.
Had Diametra been acquired on 1 April 2014, the revenue and profit after tax of the Group for the year ended 31 March 2015 would have been 46.7m and 2.4m respectively.
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 2015 or 2014 but is derived from those financial statements. Statutory financial statements for 2014 have been delivered to the registrar of companies, and those for 2015 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 2015 will be posted to shareholders in July 2015. This final results announcement and results for the year ended 31 March 2015 were approved by the Board of Directors on 22 June 2015 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 2014, with the exception of the presentation item detailed in the following paragraph, and the accounting policies adopted in the audited financial statements of the Group for the year ended 31 March 2015.
The cost categories on the face of the Consolidated income statement have been increased and amended to give greater clarity. At the same time, certain elements of depreciation and amortisation have been recategorised from administrative expenses to cost of sales to allow benchmarking amongst peer companies. There is no change to profit from operations, earnings per share, net assets or cash flows of the Group. The 2014 comparatives have been restated to reflect the same basis. A full disclosure of the reasons for the change and the effects of the recategorisation is given in the Financial Review section of this Final Results Announcement.
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 & Wear NE35 9PD. It will be made available on the Company's website at: www.idsplc.com. 

This information is provided by RNS
The company news service from the London Stock Exchange
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