(ODX) Omega Diagnostics

25 November 2011

OMEGA DIAGNOSTICS GROUP PLC

("Omega" or the "Company")

INTERIM RESULTS

FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2011

Omega, the AIM listed medical diagnostics company, announces interim results for the six months ended 30 September 2011.

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

Financial Highlights:

·      Revenue up 67% to £5.53m (2010: £3.30m) with growth in all overseas regions

·      Gross profit up 85% to £3.52m (2010: £1.90m)

·      Gross profit percentage increased to 64% (2010: 57%)

·     Adjusted profit before tax ("PBT") up 6% to £427k (2010: £403k)

·      Adjusted EPS of 0.4p (2010: 1.7p)

·      Cash at the period end increased to £1.88m (2010: £0.91m)

Other highlights:

·      Good progress made with the IDS-iSYS development programme. We now have a functional IgE assay that is calibrated against the international standard, a necessary first step towards developing specific IgE assays

·      Official launch at the end of September of the full 600+ range of Allergozyme products through the Omega distribution network

·      Incorporation within the period of a wholly owned subsidiary in India; Omega Dx (Asia) Pvt Ltd

·      Ten year exclusive distribution agreement signed with Toyota Tsusho America Inc. (TAI), covering the future sale and distribution of its Food Detective™ product into the US market

·      Appointment of Mr Jag Grewal as Group Sales and Marketing Director

Regarding outlook, David Evans, Chairman, said:

"Overall our business continues to grow and current underlying trading is resilient with sales continuing the trend of being weighted towards the second half of the financial year.  As noted in the recent trading update the visibility of Allergozyme® export sales remains uncertain and customer evaluations in certain overseas markets are taking longer than first anticipated, but the Directors remain confident in this range of products.  Further good progress has been made with the allergy development programmes and I look forward to updating you further over the coming months."

Contacts: 

Chairman's Statement

Omega has made good progress in all its business segments with Allergy and Autoimmune becoming the largest segment by sales value following the acquisition last year of the German IVD business from Allergopharma.  Food Intolerance sales have grown in most regions and Infectious Disease sales have performed in line with expectations.

Financial

Revenue for the period increased by 67% to £5,528k (2010: £3,304k) with growth having taken place in all continental regions comprising the UK and Europe (+128%), Africa and Middle East (+10%), North America and South/Central America (+14%) and Asia and the Far East (+2%).  

Gross margin increased to 64% (2010: 57%) with the increase reflecting the positive segmental mix from Allergy testing which generates margins in excess of 70%.

Administration costs increased by £952k to £2,397k (2010: £1,445k) with 96% of the increase being attributable to costs within Omega Diagnostics GmbH ("Omega GmbH"), there being no costs attributable to Omega GmbH in the comparative period.  Within administration costs are development costs written off as incurred.  Excluding development costs within Omega GmbH itself (£106k), development costs have increased by £120k to £234k (2010: £114k) reflecting the increase in activity with the allergy development programme.  Remaining additional costs are accounted for by an increase in salaries, corporate advisory costs and depreciation charges.

Selling and marketing costs increased by £556k to £928k (2010: £372k) largely reflecting costs of £505k within Omega GmbH and any additional costs attributable to our strengthening the sales and marketing team part way through the period with the appointment of Jag Grewal as Group Sales and Marketing Director.

The Group achieved an adjusted PBT of £427k (2010: £403k) for the period representing an increase of 6% over the comparative half-year. This resulted in adjusted earnings per share of 0.4p (2010: 1.7p) reflecting the increase in the number of shares in issue following the fundraising in December 2010.  A reconciliation of profit before tax to adjusted profit before tax is shown underneath the income statement and earnings per share calculations are shown in note 5 to the interim results.

Allergy and Autoimmune

Divisional turnover was £2,279k (2010: £268k) given the full six-month contribution from Omega GmbH in the period.  Sales for Omega GmbH itself were £2,008k representing an increase of 5% over the previous period when the acquired IVD division was under the ownership of its previous parent company.  Following a relaunch of Allergodip, a point-of-care assay which had been discontinued before the acquisition last year, sales recommenced in July and the initial orders have been encouraging.

Food Intolerance

The Food Intolerance division continued to show growth with an increase in sales of 11% to £1,838k (2010: £1,653k).  A further eight Genarrayt® systems were placed in the period taking the installed base to 103 in total.  Reagent sales grew to £661k (2010: £632k). Sales in Spain were £227k (2010: £372k) but this reduction was more than offset by growth in newer sales to other countries to £434k (2010: £260k). 

Sales of Food Detective® (including bulk sales to China) grew to 34,370 kits in the period (2010: 19,225) generating revenues of £513k (2010: £369k).  Good growth has been seen in existing markets in Ireland Poland, UAE and China and a launch of the product in Brazil.

Infectious Disease/other

Divisional turnover grew by 2% to £1,411k (2010: £1,383k) helped by sales in Russia where business was regained as referred to at the year-end.  Sales of bacterial products manufactured by our Co-Tek business remained constant in the period at £180k as for the comparative half-year.

Research and Development

IDS-iSYS

As announced on 10 October 2011, we have made good progress with the IDS-iSYS development programme, demonstrating a functional total IgE assay that is calibrated against the international standard and feasibility for biotinylated liquid allergens to be used on the IDS-iSYS system for a representative sample of eight allergens (covering mites, animals, food, trees, grasses and weeds).  Since then, we have completed experiments to compare these eight allergens on the IDS-iSYS system with a leading commercial product and six out of the eight allergens are highly correlated and we are now moving into an assay optimisation phase.

Multiplex platforms

We have also demonstrated that it is feasible to coat panels of allergen extracts and to detect allergen-specific IgE in multiplex formats using Genarrayt® and other platforms which will be complementary to our IDS-iSYS platform.  The decision over the most suitable multiplex platform will ultimately be driven by market needs.

Outlook

Overall our business continues to grow and current underlying trading is resilient with sales continuing the trend of being weighted towards the second half of the financial year.  As noted in the recent trading update the visibility of Allergozyme® export sales remains uncertain and customer evaluations in certain overseas markets are taking longer than first anticipated, but the Directors remain confident in this range of products.  Further good progress has been made with the allergy development programmes and I look forward to updating you further over the coming months.

David Evans

Non-Executive Chairman

25 November 2011

INDEPENDENT REVIEW REPORT TO OMEGA DIAGNOSTICS GROUP PLC

Introduction

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 2011 which comprises the Consolidated  Statement of Comprehensive Income, Consolidated Balance Sheet, Consolidated Statement of Changes in Equity, Consolidated Cash Flow Statement and the related explanatory notes 1 to 5. 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 Interim Report in accordance with the AIM Rules issued by the London Stock Exchange which require that it is presented and prepared in a form consistent with that which will be adopted in the company's annual accounts having regard to the accounting standards applicable to such annual accounts.

 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 the AIM Rules issued by the London Stock Exchange.

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 (UK and Ireland) 2410, "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 2011 is not prepared, in all material respects, in accordance with the accounting policies outlined in Note 1, which comply with IFRS's as adopted by the European Union and in accordance with the AIM Rules issued by the London Stock Exchange.

Ernst & Young LLP

Glasgow

25 November 2011

Notes to the Interim Report

for the six months ended 30 September 2011

1. BASIS OF PREPARATION

For the purpose of preparing the March 2011 Annual financial statements the Directors used IFRS as adopted by the EU and in accordance with the AIM Rules issued by the London Stock Exchange. In preparing these interim financial statements, the same accounting policies have been used as set out in the Group's Annual Report for the year ended 31 March 2011. The Group has not applied IAS 34 Interim Financial Reporting, which is not mandatory for AIM companies, in the preparation of these interim financial statements.

The interim financial statements are unaudited but have been formally reviewed by the auditors and their report is unqualified. The information shown in the consolidated balance sheet as at 31 March 2011 does not constitute statutory accounts as defined in Section 435 of the Companies Act 2006 and has been extracted from the Group's 2011 Annual Report which has been filed with the Registrar of Companies. The report of the auditors on the financial statements contained within the Group's 2011 Annual Report was unqualified and did not contain a statement under sections 498 (2) and 498 (3) of Chapter 3, Part 16 of the Companies Act 2006.  These interim financial statements were approved by the Board of Directors on 24 November 2011.

2. SEGMENT INFORMATION

Following the completion of the acquisition of the In-Vitro diagnostics business of Allergopharma Joachim Ganzer KG and the incorporation of Omega GmbH the Group carried out a review of internal reporting and the information presented to the Board. For management purposes the Group is now organised into three operating divisions: Allergy and Autoimmune, Food Intolerance and Infectious Disease and Other.

The Allergy and Autoimmune division specialises in the research, development, production and marketing of in-vitro allergy and autoimmune tests used by doctors to diagnose patients with allergies and autoimmune diseases.

The Food Intolerance division specialises in the research, development and production of kits to aid the detection of immune reactions to food. It also provides clinical analysis to the general public, clinics and health professionals as well as supplying the consumer Food Detective test.

The Infectious Diseases division specialises in the research, development and production and marketing of kits to aid the diagnosis of infectious diseases.

Corporate consists of centralised corporate costs which are not allocated across the three business divisions. Inter segment transfers or transactions are entered into under the normal commercial conditions that would be available to unrelated third parties.

Comparatives have been adjusted to reflect the new reporting format. 

3. FINANCE COSTS