Omega Diagnostics
Written by
Omega Diagnostics |
Sales growth with Allersys menu development |
H1 trading update |
Healthcare equipment & services |
12 November 2015 |
Share price performance
Business description
Next events
Analyst
Omega Diagnostics is a research client of Edison Investment Research Limited |
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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* |
EPS* |
DPS |
P/E |
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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