Launch of Strategic Plan
- IDS's vision is to be a leading solution provider to the clinical laboratory diagnostic market
- Our 5 year target is to double revenues from current levels by increasing our installed base of IDS-iSYS instruments by over 1,000 and increasing the automated menu by over 80 assays
- Improving market penetration of our proprietary IDS-iSYS instrument platform through assay menu expansion: internally developed "endocrinology excellence" menu, and
a broader complementary menu developed through partnership
- Greater market penetration of core markets (US and
- Continued investment for growth: enhancing operational scalability
- M%7EA strategy to expand presence and market leadership in key identified niche segments
- Development of IDS-iSYS Mark II remains on track for H1 2015
- Chinese and Brazilian market entries are progressing well
- 35 net direct placements (2013: 88) and in total 92 instruments sold/placed (2013: 138)
- In 2013
- Return to top line growth with revenues up 5.0% to £52.3m (2013: £49.8m)
- Automated revenues (IDS-iSYS), 42.8% of overall revenues, increased by 21.0% to £22.4m (2013: £18.5m)
- Revenues from manual tests, 39.8% of overall revenues, decreased by 18.0% to £20.8m (2013: £25.3m)
- Gross margin increased to 74.5% (2013: 73.1%), reflecting changing product mix
- Adjusted EBIT increased to £10.1m (2013: £9.8m) before exceptional items; Statutory EBIT of £8.3m (2013: £10.0m)
- Adjusted basic EPS before exceptional items of 28.7p (2013: 27.2p); basic EPS of 24.0p (2013: 27.5p)
- Cash generated from operations of £13.8m during the financial year, closing net funds of £26.7m (2013: £19.6m)
- Proposed increased dividend of 8.5p (2013: 3.0p), reflecting revised dividend policy
"We are pleased with the progress made during the last financial year as well as trading in the first couple of months of the current period, both of which were in line with management's expectations. We believe the reported results highlight the continuing potential of our automated assays run on our proprietary instrument platform, the IDS-iSYS system, to be the core driver of growth.
"We are confident that the Strategic Plan for the Group outlined today will allow us to fully unlock the potential in the business and offers a real opportunity to deliver significant and sustainable shareholder value creation in the medium term and beyond. There remains a great deal of work to do to further improve our performance including enhancing the scalability of our operations and increasing our rate of internal assay development. We strongly believe that the key to success is to substantially improve the utilisation of the IDS-iSYS and that this can be achieved through a significant increase in assay menu, both through internal development and partnership".
"With the right team now in place we have begun to execute on this ambitious strategy and we look forward to keeping shareholders updated as to progress."
We are pleased to report a solid set of financial results for the year, which were in line with management's expectations. We are also pleased to outline below our revised five-year Strategic Plan ("Plan"). The Plan outlines our vision, to be a leading solution provider to the clinical laboratory diagnostic market. The strategy is built on our core strengths and we believe offers an opportunity to realise the full potential of the Group over the medium term and beyond.
The Group returned to growth with reported revenues for the year of £52.3m (2013: £49.8m) and adjusted earnings before interest and tax of £10.1m (2013: £9.8m). The Group's statutory earnings before interest and tax were £8.3m (2013: £10.0m). We continued to see a shift in the Group's sales mix, with automated revenues accounting for 42.8% of overall revenues (2013: 37.1%), manual revenues 39.8% (2013: 50.9%), instrument revenues 5.8% (2013: 5.8%) and other income (including royalties) 11.6% (2013: 6.2%). In particular, revenues from automated Other Specialty assays increased by 90.6% to £7.3m (2013: £3.8m). We remain focused on developing our automated assay menu and we anticipate automated revenues will continue to contribute an increasing proportion of our revenues in the future.
Adjusted profit before tax was £10.2m (2013: £9.8m) before exceptional costs of £1.9m (2013: exceptional net income of £0.2m). The Group's statutory earnings before tax were £8.3m (2013: £10.0m).
We have conducted a thorough review of the business over the past six months and we are pleased to set out our five-year strategy for the Group. The strategic review covered all aspects of the business, including an assessment of new and existing market opportunities, the relative strength of the Group's competitive offering and an appraisal of the Group's internal capabilities. A gap analysis also highlighted organisational or infrastructure changes required to meet our key objectives.
In overview, IDS's vision is to become a leading solution provider to the clinical laboratory diagnostic market. The central tenet of this strategy is to rapidly build out our automated assay menu through internal development and partnership. Internally we will build upon our IDS heritage within certain endocrinology indications, such as vitamin D deficiency, to develop an "endocrinology excellence" menu. We will also continue to actively pursue a partnership strategy to develop a broader range of assays available on the IDS-iSYS instrument platform ("IDS-iSYS").
The IDS-iSYS is core to the future success of IDS and we will focus on completing the development of the IDS-iSYS Mark II instrument and continue to look for opportunities to improve our technology platform to enhance our customers' experience.
Over time we will build our sales and marketing capabilities in our core markets,
We believe there is a great opportunity to accelerate the implementation of our Strategic Plan through the acquisition of bolt-on businesses that (i) provide immediate access to endocrinology manual assays, that can be converted to automated assays, and/or (ii) strengthen our operational capabilities.
We believe the Plan has the potential to deliver three clear goals over a five-year timeframe: increasing our automated assay menu by over 80 assays, increasing our installed base of IDS-iSYS instruments by over 1,000 and doubling revenues from current levels.
Board and management
The Executive Team has been strengthened during the year with the appointments of
The Board looks at a range of factors, including the macro environment, the current balance sheet and future investment plans when reviewing its capital allocation policy and, as part of this ongoing review, it has decided to revise its dividend policy. The Company's dividend policy aims to provide for a regular dividend flow, whilst allowing the Company to maintain the financial flexibility to take advantage of attractive investment opportunities in the future. Provided that our financial position allows for it, the Company will pay annual dividends on the basis of its results for the previous year and its revised dividend policy is for annual dividends to be 25-30% of the Group's net income. The amount and timing of a dividend may be changed at any time without notice. Therefore, the Board has recommended a dividend of 8.5p for the year ended
Trading for the first two months of the current financial year is in line with management expectations. Our revenue performance in 2014/15 will be dependent on a number of factors including the level of net placements compared to 2013/14, the timing of the launch of our new 1,25 vitamin D automated assay, the successful registration and launch of our products in
The Strategic Plan we set out builds on IDS's heritage in endocrinology, leverages significantly our IDS-iSYS instrument platform and has been developed in the context of market opportunities. This is a very exciting time for IDS and we are confident that successful execution of this Plan has the potential to deliver significant shareholder value over the medium term and beyond.
Our employees remain our strongest asset and their continued commitment to the business is essential to the success of the Company going forward. I would like to formally thank all IDS employees for all their hard work over the past 12 months.
During the financial year, we undertook a full review of the Group in order to build our vision and Strategic Plan ("Plan") for the Company. The review was an excellent opportunity for the relatively new Executive Team to work closely together to build this Plan. In overview, IDS's vision is to be a leading solution provider to the clinical laboratory diagnostic market and is centred on a number of key themes, which are detailed below.
Significantly increase our automated assay menu
Our target is to add 80 proprietary and partnered assays to our automated assay menu over the next five years. This will be achieved through a combination of internal development and partnership.
Our assay development strategy is two-fold. Firstly we will internally develop a market-leading menu of endocrinology assays. Secondly, through partnership, we will develop a broader, complementary, assay menu.
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%7ED 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 launch of a range of endocrinology assays including ACTH and cortisol (both hypertension markers) and Bone TRAP and MGP (bone metabolism markers). In addition, we still anticipate
Our broader assay menu strategy is market driven and we will look to complement our endocrinology menu in related indication fields to allow the Group to better meet the needs of certain market segments, for example the
Technogenetics has developed 29 automated assays for use on the IDS-iSYS in the areas of autoimmune and infectious disease. We continue to work closely with Technogentics to further expand these assay panels. IDS distributes these assays in its core European territories of
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.
Build on our key strengths
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-iSYS Mark II ("Mark II").
The development of the Mark II is proceeding according to plan. We remain confident that the base cost of the next generation of instrument will be materially lower than the current instrument, allowing the Group to remain competitive and also target lower throughput assays where current returns are not as attractive. The Mark II will also 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 completion of the European system is the first half of 2015.
We continue to work closely with our development partner,
Ownership of this technology platform leaves us uniquely placed to respond effectively and quickly to customers' requirements as it allows the opportunity for an integrated approach to assay and instrument development. One recent example of this capability in action is the development of the 1,25 Vit DXP automated assay. This accelerated assay development required the close co-operation of our instrument and assay development teams in order to deliver an assay which offers significantly improved workflow benefits to laboratory customers, as the sample pre-treatment is performed on board the IDS-iSYS. Longer term we will continue to invest in the IDS-iSYS instrument platform to improve its functionality and therefore attractiveness to our customer base.
Market and customer focus
We believe the development of an endocrinology excellence menu coupled with the Mark II instrument will allow us to continue to serve the needs of the large reference laboratories and specialist hospital laboratories. This menu will leverage the reputation for quality and scientific know-how that IDS has built within certain endocrinology indications, for example vitamin D, to date. This menu expansion will be supported by broadening our Key Opinion Leader network and developing a
In order to succeed in the general and retail laboratory market segment, we believe our endocrinology menu needs to be supported by a range of general assays. Once in place, we believe the relatively small footprint and cost-effectiveness of the Mark II instrument, coupled with this broader menu, will allow us to target this general and retail market opportunity in our core markets of
Focus on developing our core markets
We will focus on developing our core markets: the US,
Invest for growth
We are cognisant of the need to invest in our infrastructure and operational capability to enable our ambitious growth plans to be met. IDS currently operates three manufacturing sites: (primarily) manual reagents (Boldon,
To support our Strategic Plan we will continue to invest in the development of a Group-wide Enterprise Resource Planning System to enable the Group to work under one Information Systems ("IS") framework. We will also invest to upgrade our manufacturing and R%7ED facilities initially in both Boldon and LiÈge. This investment will be in facility upgrade, manufacturing automation and people. This upgrade is necessary to allow the R%7ED and operational teams to successfully manage a significant increase in the number of assays under development and the number of assays to be manufactured. Over time additional investment will also be necessary, for example, to increase our sales presence in our core geographies as well as investing in our online sales and marketing capabilities to enable us to manage a much larger actual and potential customer base, for example the POL market segment.
We strengthened our team in a number of functional areas of the Group during the year. At the Executive Team level we were very pleased to recruit
Our M%7EA strategy is an extension of the Group's growth strategy. We believe there is a good opportunity to accelerate the implementation of our Strategic Plan through bolt-on acquisitions. We will be pursuing acquisitions in two, related, areas:
i) Growing our endocrinology assay menu: we are targeting speciality laboratory diagnostics businesses with an endocrinology (immunoassay) or related speciality focus. These companies will have a level of clinical leadership in a complementary indication field that is supported by a strong intellectual property position.
ii) Building operational excellence: acquisition of clinical diagnostic businesses that offer complementary operational strengths to support the Group's growth plans. For example, these businesses may offer, inter alia, manufacturing know-how, an established route to market, geographically or in specific market segment, or a technology platform. These acquisitions may negate the need for some of the investment for growth set out above.
The Board has defined certain financial criteria that any acquisition should meet. In summary, acquisition targets should be revenue generating, profitable and cash generative businesses that will be earnings enhancing in the near term.
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