Omega Diagnostics — Update 11 November 2015

Omega Diagnostics — Update 11 November 2015

Omega Diagnostics

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Omega Diagnostics

Sales growth with Allersys menu development

H1 trading update

Healthcare equipment & services

12 November 2015

Price

15.50p

Market cap

£17m

Net cash (£m) at 31 March 2015

1.2

Shares in issue

108.7m

Free float

80.8

Code

ODX

Primary exchange

AIM

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

9.7

(6.1)

6.9

Rel (local)

11.4

(1.1)

9.6

52-week high/low

25.75p

12.63p

Business description

Omega Diagnostics is a UK-German company with an Indian sales subsidiary. It develops and markets in vitro diagnostic products for allergy, infectious diseases and food intolerance. A point-of-care CD4 test for HIV monitoring (Visitect) and an automated allergy test system, Allersys are in development.

Next events

Interim report

30 November

FY16 trading update

April 2016

Analyst

Dr John Savin MBA

+44 (0)20 3077 5735

Omega Diagnostics is a research client of Edison Investment Research Limited

Development of the automated Allersys allergy test menu is progressing well, with 36 optimised assays, up from 32 in July, and with 40 targeted for launch. Omega’s Visitect CD4 test to monitor HIV patients is still resolving a stability issue with good progress being made but no timeline yet visible. H116 trading showed a 20% food intolerance gain but the German allergy market remains weak with a 13% fall. Infectious disease gained sales from a low base. Management expects adjusted EBIT will be level with H115 at c £0.56m after an 8% actual sales gain.

Year end

Revenue (£m)

PBT*
(£m)

EPS*
(p)

DPS
(p)

P/E
(x)

Yield
(%)

03/14

11.6

1.1

1.2

0.0

12.9

N/A

03/15

12.1

1.4

1.3

0.0

11.9

N/A

03/16e

12.6

1.4

1.2

0.0

12.9

N/A

03/17e

13.5

1.5

1.4

0.0

11.1

N/A

Note: *PBT and EPS are normalised, excluding intangible amortisation, exceptional items and share-based payments.

Allersys: Good initial customer evaluation

The Allersys range runs on the Immunodiagnostic Systems (IDS) iSYS system using modern chemistry and magnetic particles. The challenge is to adjust the accurate iSYS chemistry to be comparable with the older ImmunoCap chemistry. An initial customer evaluation in Spain on 10 allergens with 400 samples showed a linear relationship with ImmunoCap. An Italian study is expected to start soon. There are now 36 optimised allergens with 26 fully verified; 40 are being targeted for launch. IDS’s partners have developed autoimmune tests that run on iSYS and complement allergy tests. We assume sales starting in FY17.

Visitect: Problem being resolved but not clarified

Visitect is a point-of-care test to detect the threshold level of CD4+ immune white cells in HIV patients, both to establish if anti-retroviral therapy is required and to monitor existing therapy. Visitect encountered a stability issue in spring 2015. The general problem has been identified but the specific cause remains to be explained. In our view, it seems unlikely that any new filed trials would be underway before H217 with sale unlikely before the end of FY17.

Valuation: Core business mixed but steady

H1 sales were up 8% but H1 is normally weaker especially in allergy. In H1, food intolerance grew to £3.34m, up 20%, led by Food Detective and FoodPrint. This was offset by a fall of 13% in allergy to £1.59m, reflecting pricing pressures in the German allergy market and the weak euro. Infectious disease operates in a competitive market with direct Indian sales. It generated £1.22m, up 13% due to recovery in the UK and some African countries. Total sales were up 8% at £6.15m. Uncertainty about Visitect affects longer-term value but Allersys may have some sales in FY17. Management expects level H116 adjusted earnings before tax of c £0.56m. We have slightly lowered our revenue forecast for FY16.

Exhibit 1: Financial summary

Year end March (£000s)

2014

2015

2016e

2017e

Accounting basis

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

11,594

12,110

12,581

13,542

Cost of Sales

(4,223)

(4,432)

(4,606)

(5,000)

Gross Profit

7,371

7,678

7,975

8,543

EBITDA

1,346

1,687

1,681

1,850

Operating Profit (before GW and except)

1,080

1,362

1,356

1,525

Goodwill Amortisation

(414)

(379)

(379)

(379)

Exceptionals

0

0

0

0

Share payment charge

(139)

(310)

(250)

(250)

Operating Profit

527

673

727

896

Net cash finance charges

16

11

(10)

(25)

Profit Before Tax (norm)

1,083

1,373

1,346

1,500

Profit Before Tax (IFRS)

543

684

717

871

Tax

150

55

0

0

Profit After Tax (norm)

1,233

1,428

1,346

1,500

Profit After Tax (IFRS)

693

739

717

871

Average Number of Shares Outstanding (m)

105.3

108.7

108.7

108.7

EPS - normalised (p)

1.2

1.3

1.2

1.4

EPS - IFRS (p)

0.7

0.7

0.7

0.8

Dividend per share (p)

0.0

0.0

0.0

1.0

Gross margin

N/M

N/M

N/M

N/M

Fixed Assets

14,766

16,065

17,070

17,975

Intangible Assets

11,259

12,105

12,926

13,647

Tangible Assets

2,284

2,429

2,613

2,797

Deferred Tax

1,223

1,531

1,531

1,531

Current Assets

7,225

6,574

6,164

6,365

Stocks

1,693

2,062

2,143

2,307

Other current assets

2,416

2,540

2,640

2,841

Cash

3,116

1,972

1,381

1,217

Current Liabilities

(2,170)

(1,968)

(1,696)

(1,782)

Other current liabilities

(1,742)

(1,730)

(1,558)

(1,644)

Group borrowings

(428)

(238)

(138)

(138)

Long Term Liabilities

(1,362)

(1,858)

(1,482)

(1,382)

Long term borrowings

(319)

(315)

(215)

(115)

Other long term liabilities

(1,043)

(1,543)

(1,267)

(1,267)

Net Assets

18,458

18,813

20,056

21,177

CASH FLOW

Operating Cash Flow

1,662

1,248

1,328

1,545

Net Interest

32

20

(10)

0

Tax

7

0

0

0

Capex

(479)

(702)

(450)

(450)

Acquisitions/disposals

32

8

0

0

Purchase of intangibles and R&D capitalisation

(1,881)

(1,394)

(1,200)

(1,100)

Financing and loan movements

4,000

0

0

0

Other inc loan repayments and finance leases

(371)

(202)

(59)

(59)

Net Cash Flow

3,002

(1,022)

(391)

(64)

Opening net debt/(cash)

691

(2,369)

(1,419)

(1,028)

HP finance leases initiated

0

0

0

0

Other inc loan repayments and finance leases

58

72

0

0

Closing net debt/(cash)

(2,369)

(1,419)

(1,028)

(964)

Source: Omega Diagnostics reports, Edison Investment Research

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Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, Sydney

NSW 2000, Australia

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New Zealand

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