Final Results

RNS Number : 5824G

Omega Diagnostics Group PLC

02 July 2012

OMEGA DIAGNOSTICS GROUP PLC

("Omega" or the "Company" or the "Group")

FINAL RESULTS

FOR THE YEAR ENDED 31 MARCH 2012

Omega, the medical diagnostics company focused on allergy, food intolerance and infectious disease, announces final results for the year ended 31 March 2012.

Omega is one of the UK's leading companies in the fast growing area of food intolerance 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, a direct presence in Germany and India, and with a growing network of global partnerships.

Financial Highlights:

· Turnover up 41% to £11.1m (2011: £7.9m)

· Allergy and autoimmune revenue up 191% to £4.48m (2011: £1.54m)

· Food Intolerance revenue up 10% to £3.90m (2011: £3.56m)

· Infectious disease/other revenue down 2% to £2.75m (2011: £2.80m)

· Gross profit up 49% to £7.0m (2011: £4.7m)

· Adjusted profit before tax up 36% to £1.0m (2011: £0.74m)

· Adjusted EPS 1.2p (2011: 1.7p)

· Net cash generated from operations of £0.69m (2011: £0.35m)

· Cash at year end of £1.16m (2011: £2.05m) - reflecting iSYS development expenditure

· Net debt at the period end of £0.1m (2011: net cash of £0.45m)

Operational highlights:

· iSYS development programme; first batch of six allergens moving through optimisation with a further 18 allergens having commenced optimisation.

· Increase in average revenue per Genarrayt^®system (excluding Spain) by 25% to £10,783.

· Strengthening of the Board with key appointment of Jag Grewal as Sales and Marketing Director.

· Direct access to Indian market achieved with incorporation of fully owned subsidiary Omega Dx (Asia) Pvt Ltd.

· Signing of license agreements with the Burnet Institute, Melbourne ("the Burnet") for worldwide rights to Point-of-Care ("POC") tests for CD4 and Syphilis with post year end production of first prototype CD4 test passing preliminary evaluation at the Burnet.

Regarding outlook, David Evans, Chairman, said:

"As the Group looks to build on its progress to date, it is clear that to achieve significant year-on-year growth we either need to increase the level of automation for customers or to provide POC tests to provide solutions for unmet needs in developing markets. From a market perspective, a focus on the growing BRIC countries is expected to yield above average results. In particular, I believe the opportunity with CD4, which will commercially launch in July, offers the Group an ability to create significant strategic value based on the responses we have had to date from major global organisations."

Omega Diagnostics Group PLC		Tel: 01259 763 030
Andrew Shepherd, Chief Executive		www.omegadiagnostics.com
Kieron Harbinson, Group Finance Director
Jag Grewal, Group Sales and Marketing Director

Seymour Pierce Group		Tel: 020 7107 8000
Freddy Crossley / Mark Percy (Corporate Finance) David Banks / Katie Ratner (Corporate Broking)		www.seymourpierce.com

Walbrook PR Limited		Tel: 020 7933 8780
Paul McManus	Mob: 07980 541 893 or paul.mcmanus@walbrookpr.com
Paul Cornelius	Mob: 07557 285 676 or paul.cornelius@walbrookir.com

Chairman's Statement

Notable achievements

The Group has made progress on a number of fronts:

· Turnover in excess of £10 million for the first time.

· Adjusted profit before tax of £1 million.

· iSYS development programme; first batch of six allergens moving through optimisation with a further 18 allergens having commenced optimisation.

· Increase in average revenue per Genarrayt^® system by 25% to £10,783 (excluding Spain which, due its size, skews the numbers).

· Strengthening of the Board with Jag Grewal as Sales and Marketing Director.

· Conclusion of feasibility with two allergens on a rapid, low sample volume platform that could eventually run between 10-20 allergen tests on a Point-of-Care ("POC") device.

· Direct access to Indian market achieved with incorporation of fully owned subsidiary Omega Dx (Asia) Pvt Ltd.

· Signing of license agreements with Burnet Institute, Melbourne for exclusive worldwide rights to POC tests for CD4 and Syphilis.

Segmental turnover

· The Allergy and Autoimmune division achieved a growth in turnover of 191%, with sales of £4.48 million (2011: £1.54 million) following a full year contribution from our German business.

· The Food Intolerance division continued to perform well with growth in turnover of 10% to £3.90 million (2011: £3.56 million) with a strong performance from Food Detective^® and Genarrayt^®.

· Turnover in the Infectious Disease division fell back by 2% to £2.75 million (2011: £2.80 million) reflecting the competitive nature of this division but the opportunity with CD4 is expected to significantly enhance performance.

Financial performance

Turnover for the Group increased by 41% to £11.12 million (2011: £7.90 million), which includes a full year's contribution of trading from our German business. Gross profit increased to £7.0 million (2011: £4.71 million) and the gross margin improved from 60% to 63% reflecting a segmental mix towards higher margin business. Adjusted profit before tax increased by 36% to £1.0 million (2011: £0.74 million) with our Food Intolerance division performing particularly well. A reconciliation between profit before tax and adjusted profit before tax is shown at the foot of the income statement.

EPS

Net finance costs have remained stable at £38k (2011: £31k) and the Group achieved an adjusted profit after tax of £1,052k being adjusted profit before tax of £1,004k plus the tax credit of £48k. This resulted in adjusted earnings per share of 1.2p (2011: 1.7p) due to the increased average shares in issue of 85,238,746 (2011: 38,278,631). Statutory profit after tax amounted to £527k (2011: £31k) which resulted in earnings per share of 0.6p versus earnings per share of 0.1p in the previous year.

Balance sheet

Assets

· Intangible assets reduced to £9.1 million (2011: £9.4 million) reflect ongoing amortisation and final adjustments to goodwill on the acquisition of the German IVD business.

· Inventories of £1.7 million (2011: £1.5 million) reflect growing business volumes.

· Cash at year end of £1.2 million (2011: £2.1 million).

Liabilities

· Trade and other payables reduced slightly to £1.5 million (2011: £1.6 million).

· Total borrowings and other financial liabilities reduced to £1.4 million (2011: £2.1 million) reflecting repayment of bank debt of £0.3 million and settlement of IDS-iSYS licence fee instalment of £0.4 million.

Funding

After the year end, the Company successfully negotiated an overdraft facility of £700,000 on normal commercial terms which is subject to an annual review and is repayable on demand.

Strategic direction

As the Group looks to build on its progress to date, it is clear that to achieve significant year-on-year growth we either need to increase the level of automation for customers or to provide POC tests to provide solutions for unmet needs in developing markets. From a market perspective, a focus on the growing BRIC countries is expected to yield above average results.

Automation

The ongoing development work with the IDS-iSYS instrument is key to the future growth of the Allergy division. This programme, as planned, is rightly consuming a significant part of the Group's resources and is intended to achieve a significant market share in this growing market. Work has also continued in evaluating our range of Autoimmune products on a third party's instrument with 12 out of 17 products validated to date.

POC tests

The signing of agreements with the Burnet Institute in Melbourne has provided worldwide exclusive access to their developed POC test for CD4, a biomarker which, when measured accurately, can detect the point in time at which antiretroviral therapy should commence for patients with HIV infection. The current gold standard flow cytometry tests are performed in a laboratory that have the disadvantage of results only becoming available at a later date, by which time, many patients have been 'lost' to treatment. The availability of a CD4 POC test meets a current unmet need in developing countries. The Group and the Burnet Institute have successfully completed the initial stages of a technology transfer for manufacturing, with a small scale batch of prototype devices meeting preliminary evaluation at the Burnet. We expect this to be officially launched at the 19^th International AIDS Conference, AIDS 2012, in Washington DC on 22-27 July 2012.

In addition, a separate agreement has been signed with the Burnet Institute, granting the Group exclusive worldwide rights to its Syphilis IgM POC test. This is the only test in the world that can differentiate active infections from past infections.

BRIC focus

The setting up of Omega Dx in India allows us to take direct control over the marketing and supply of products into the Indian market. Historically the largest market for the Group's Infectious Disease products, India, has a growing middle class population which represents a significant opportunity for both the Food Intolerance and Allergy range of products. The validation of the Autoimmune tests on an automated platform has been driven, initially, by an opportunity in China but which also provides an opportunity for international expansion.

Board and employees

I am pleased that we have appointed Jag Grewal as Group Sales and Marketing Director who is providing additional strength to Andrew and his team. Simon Keller's appointment as International Business Development Director for Food Intolerance will, I am sure, lead to better performance for this division. Finally, none of the progress above happens automatically and I am grateful for the hard work of all employees who have contributed to the results announced today.

Outlook

Turnover in the first quarter is in line with management expectation.

The current trading environment remains challenging given the levels of economic uncertainty in Europe and the continuing budgetary constraints of the individual healthcare systems. As a consequence, it has recently emerged that the German healthcare system has begun a review of current reimbursement levels encompassing allergy testing in our market segment. At this stage, the timing and effect on the market is uncertain.

However, against that background, we have continued to build on our core strengths and diversify our business and there are a number of opportunities which I believe will mitigate any of the aforementioned risk over the medium term.

In particular, I believe the opportunity with CD4, which will commercially launch in July, offers the Group an ability to create significant strategic value based on the responses we have had to date from major global organisations.

The risks associated with our current allergy offering will be mitigated, not only through the launch of our allergy products on the IDS-iSYS at the end of the current financial year, but also with increased emphasis on export and alternative product offerings.

I look forward to updating you throughout the year.

David Evans

Non-Executive Chairman

29 June 2012

Chief Executive's Review

I am pleased to report that the Group has seen an increase in revenue for the year to £11.12 million, some 41% ahead of last year's figures (2011: £7.90 million) with like-for-like sales increasing by 5%.

We are very pleased with the progress the Group has made and the business is performing strongly. We are also looking forward to significant opportunities presented by direct access into the Indian market, the launch of a range of allergy tests on the automated IDS-iSYS platform and the new prospects that exist that could transform the performance within our Infectious Disease segment.

· New Team - In the year we have expanded our management team with some talented individuals. We now have a senior management team in place that can deliver further profitable growth.

· Focus - We have been careful to limit our strategic focus on our three core product segments so that our efforts have not been diluted.

· New products - Our search for new products in our strategic areas of activity has led to new opportunities that will fuel our growth in future years.

· Strategy - We continue to refine our strategy in order to take advantage of new opportunities.

Allergy/Autoimmune

The Allergy segment has benefited from a full year contribution following on from the acquisition of Allergopharma's IVD business in December 2010. Sales for Omega Diagnostics GmbH ("Omega GmbH"), our German subsidiary, grew by 305% to £3.87 million (2011: £0.96 million). On a full like-for-like basis, the growth in sales equates to 8%.

The delay in the export of allergy products from Omega GmbH, as previously highlighted, has been disappointing. This is being addressed through a combination of product improvements and amended software formats that are more suitable for export markets with the aim of validating these products to run on automated instruments that are widely available in international markets.

Sales of autoimmune tests increased by 5% to £615k (2011: £584k). We reported previously that the current range of autoimmune test kits were limited to small labs with manual test systems. Work has been undertaken during the year to revise the kit formats which will allow their use on a larger number of automation platforms similarly widely available in export markets. This strategy will allow our distributors to access larger parts of the market and extend the product life cycle.

Food Intolerance

This segment has seen an overall growth in sales of 10% to £3.90 million (2011: £3.56 million).

Sales of Genarrayt^® reagents have grown to £1.56 million (2011: £1.49 million). 13 Genarrayt^® systems (2011: 33 systems) were sold in the year bringing the total global placements to 108 systems. System sales revenue amounted to £88k (2011: £192k). However, this reduction in systems sold was an intentional decision to concentrate more on increasing sales traction across the installed instrument base. This is key to the future success of Genarrayt^® and with the market reputation gaining momentum we are seeing more high quality sales leads develop in key countries as they appreciate the power of this innovative technology.

The Food Detective^® test for food intolerance has seen a strong sales increase to £980k (2011: £772k). The number of countries where we have now sold product has continued to increase to 68 (2011: 54) with an increase in volumes to 60,782 kits (2011: 41,665). The top five markets account for 50% of sales with good growth in China and Brazil which fits with the Group's strategic focus on BRIC countries. Product registration in China is close to completion and we are hopeful for an early conclusion to this process.

Sales of Foodprint^® tests through the CNS testing laboratory have grown to £0.48 million (2011: £0.33 million). The testing services for food intolerance and other related tests have shown an increase in business to £621k (2011: £452k) which has mainly been due to increased sales to offshore accounts which send samples into the CNS laboratory for testing. Various sales initiatives are underway to access large retail accounts in the UK and overseas who are interested in offering our lab services in order to widen their own service portfolio.

With the appointment of Simon Keller there is now a more focused approach to targeting the key customer groups of nutritionists and associated healthcare professionals.

Progress has continued, albeit slowly, with registration of Food Detective^® in the United States by our partner Toyota Tsusho. The timeline to registration remains uncertain but ultimately we believe the potential market to be substantial.

Infectious Disease/Other

Sales of infectious disease tests reduced by 2% to £2.75 million (2011: £2.80 million). The market for the current range still remains highly competitive which goes to show that to increase sales in this sector in the future requires a step change in activity and focus.

Omega has been active in the IVD market, and specifically the infectious disease arena, for the last 25 years and has built up an enviable contact base which drives new opportunities. From discussions earlier in the year two new product opportunities came into focus which could lead to substantial future growth. The Group has exclusively in-licensed two test technologies from the Burnet Institute, a leading Australian medical research and public health organisation focused on improving the health of disadvantaged and marginalised groups.

The first in-licensed technology is a novel POC technology for CD4 testing at field level where current CD4 tests are unable to operate. Quantifying CD4 T-cells is a vital component to the management and care of HIV patients and is required to assess their candidacy for antiretroviral treatment (ART) as treatment begins once their count falls below 350 cells/μl, and to monitor their health during treatment every three to six months. This equates to a huge potential market as there is a growing demand for CD4 testing based on the number of individuals requiring to be placed on ART therapy but are as yet unidentified due to their rural location and/or lack of access to health facilities.

The second exclusive licence is for a POC test for detecting active Syphilis infection which is a major public health problem in developing countries. Although simple, reliable and affordable rapid tests for Syphilis are available, many of which are already produced by the Group, the Burnet test is the first POC test to make the important diagnostic distinction between active and past treated infections. Syphilis remains a major cause of stillbirth and neonatal death in many developing countries so this test is very important for screening pregnant women and identifying those patients requiring treatment of congenital Syphilis.

Subject to successful technology transfer processes, these tests have the potential to transform the Group's performance in this segment. The CD4 test, branded as VISITECT CD4, will be officially launched at the 19^th International AIDS Conference, AIDS 2012, in Washington DC, USA on 22-27 July 2012.

Distribution Network

Growth has been recorded in most geographic regions of the world with the exception of the UK which reduced by 3% to £933k (2011: £958k) and the Asia/Far East region which dropped by 3% to £1.32 million (2011: £1.35 million). These reductions were more than offset by good growth in Africa/Middle East with sales rising by 11% to £1.63 million (2011: £1.47 million) and in the European market by sales rising 86% to £6.5 million (2011: £3.5 million) as a result of a full year of revenue from our German subsidiary and strong performance with key users of the Genarrayt^® Food Intolerance products. Sales to South/Central America rose by 22% to £441k (2011: £361k).

BRIC strategy

In the year, we have further concentrated our efforts on expanding our business in the BRIC group of countries and we have met with some success in three out of the four target countries. In Brazil we increased sales by 18% overall across the Group achieving sales of £259k (2011: £220k), in Russia we increased sales by 76% to £150k (2011: £85k) and in China we increased sales by 22% to £118k (2011: £97k). India showed a decline of 19% with sales of £402k (2011: £499k) which was due to the fact that the then distributor started to promote the products through a catalogue selling operation as opposed to a representative-based sales model which we know to be proven and successful in the Indian market. This change only served to reinforce our decision to move to selling direct in India and we expect the decline to be reversed.

Following the establishment of our wholly owned Indian subsidiary in July 2011 a lot of effort has gone into making the plan become a reality. The inauguration ceremony of the new office in Mumbai took place at the end of January 2012 and since then, the core management team has been working hard to establish the office and internal procedures in readiness for the changeover from the current distributor. There has also been a lot of work involved with product registrations and employing the key members of staff required to run an India-wide sales operation. The result is that the Group will commence direct selling operations into the Indian market on 1 July 2012. Early pre-marketing activity has been successful in making the market aware of our change in distribution and early signs of future commercial success are encouraging.

Over the past few months, discussions have also been taking place with other IVD companies with a view to representing them in the Indian market. Early stage indications are that several new product ranges will be added to the Group's own product offerings. However, due to the lengthy registration process, the impact of third party sales will be minimal in the current financial year.

Research and development

Allergy/Autoimmune

Development of the allergy test panel on the IDS-iSYS automated system is progressing well. All key raw materials (allergen extracts, monoclonal antibodies and patient samples) made available as a result of our acquisition of the allergy IVD business have demonstrated proven value in the project. An initial tranche of eight allergens were used to demonstrate the overall technical feasibility of our intended approach and we are encouraged by the performance achieved to date. We compared our prototype with a leading commercial automated test and with other available manual tests. Our prototype correlated well with the automated test and it was found to be superior to all manual tests. Six of these eight allergens are moving through optimisation and there has been significant progress in understanding how raw materials and process factors impact the performance of others. A start has been made to a second group of 18 allergens and we remain confident that the program is on track for initial launch of between 40-50 allergy tests in Q4 of the current financial year. To this end we now have a suite of four IDS-iSYS instruments commissioned and committed to the project and the team has been augmented with a new project leader who brings 14 years of product development experience gained at Hycor, which is one of the major allergy IVD companies. We look forward to reporting continued progress over the remainder of the year.

With regard to a multiplex platform, we have continued to review and evaluate market requirements for allergen specific IgE testing in multiplex and Rapid Test formats. The attributes of conventional Rapid Test technology are well suited to this aim and further work on this development is expected to be carried out in the year ahead.

Outlook

The outlook for the new financial year is very encouraging with good growth potential across all segments of the business. The addition of the new test technologies licensed in from the Burnet Institute should allow us to make a major impact in Global Health markets as these tests satisfy a current unmet clinical demand.

While there continues to be difficulties in the Eurozone countries, we believe our robust and diversified business model, BRIC-focused strategy and focus on new products not affected by these issues hold us in good stead for continued and profitable growth.

Andrew Shepherd

Chief Executive

29 June 2012

Financial Review

Financial performance

Group turnover increased by 40.8% to £11.12 million (2011: £7.90 million) including a full 12 months' contribution from Omega GmbH following its acquisition of the Allergopharma IVD division in December 2010. Gross profit increased by 48.8% to £7.0 million (2011: £4.71 million) and the gross margin improved from 59.6% to 63.0% reflecting a segmental mix towards higher margin business overall. Historically, Omega's revenue business has been weighted towards the second half but the seasonality of allergy testing, where higher first half sales through Omega GmbH resulted from a higher pollen count occurring in May and September, has resulted in the Group achieving total sales of £5.52 million in the first half and £5.60 million in the second half. However, this has had an effect on gross margin such that first half margin was 63.6% and second half margin was 62.3%.

Administration costs have increased by a net £962k to £4,471k (2011: £3,509k). Excluding last year's acquisition-related costs of £412k, the gross increase can be viewed as £1,374k. Of this increase, £1,115k relates to the full-year effect of Omega GmbH versus only three months' worth of cost in the prior year, costs having risen from £521k to £1,636k. Increased activity in development/technical accounts for a further increase in expenditure of £196k, related to uncapitalised iSYS development costs (see cash flow section below) and increased headcount in Operations and a remaining increase of £63k relates mainly to increases in depreciation/amortisation charges.

Sales and marketing costs have increased by £946k to £2,015k (2011: £1,069k). Again, much of this impact is related to full-year activity through Omega GmbH, including the running of a direct sales force, which has added £700k of cost (£996k v £296k). UK-related costs have increased by £176k reflecting the headcount investment at Director level and below with additional product manager positions being filled and £70k reflects initial costs incurred in India.

Adjusted profit before tax increased by 36.5%, achieving £1.0 million (2011: £0.74 million) for the first time. The profit split between first half and second half exhibited a more traditional weighting with £427k achieved in the first half and £577k in the second half. A reconciliation between profit before tax and adjusted profit before tax is shown at the foot of the income statement.

Taxation

There is a tax credit of £48k (2011: tax charge £74k) in the year, comprising a debit for current tax of £18k (2011: £125k) and a deferred tax credit of £66k (2011: £51k). The tax credit in the year has arisen due to increased research and development tax credits resulting from the expenditure incurred on the iSYS development programme. Prior year adjustments to the tax charge arise when there are differences between estimated figures chargeable to tax and final tax computations.

Earnings per share

Net finance costs are mainly unchanged at £38k (2011: £31k) and adjusted profit after tax of £1,052k (2011: £662k) is arrived at by taking adjusted profit before tax of £1,004k (2011: £736k) plus the tax credit of £48k (2011: charge of £74k).

Adjusted earnings per share (EPS) amounted to 1.2p (2011: 1.7p) and is arrived at by taking the adjusted PAT of £1,052k and dividing by 85,238,746 (2011: 38,278,631) being the weighted average number of shares in issue for the year. Statutory profit for the year amounted to £527k (2011: £31k) which resulted in earnings per share of 0.6p versus earnings per share of 0.1p in the previous year.

Operational performance

Allergy and Autoimmune

The Allergy and Autoimmune division achieved a growth in turnover of 191%, with sales of £4.48 million (2011: £1.54 million), which includes the full 12 months trading contribution from Germany referred to above. Within these figures, sales of autoimmune products specifically rose by 5% to £615k (2011: £584k). The adjusted PBT for the division was £134k (2011: £37k), including iSYS development costs expensed to the income statement in the first half of the year before attainment of technical feasibility, after which, all iSYS-related development costs have been capitalised in accordance with current accounting standards.

Food Intolerance

The Food Intolerance division continued to perform well with growth in turnover of 10% to £3.90 million (2011: £3.56 million). The decision to concentrate on driving Genarrayt^® reagent sales across the installed instrument base has led to a 25% increase in average revenue per instrument to £10,783 (2011: £8,631) in all markets excluding Spain. A further 13 systems were installed in the year increasing total placements to 108. Total reagent sales grew to £1.56 million (2011: £1.49 million).

Sales of Food Detective^® recovered strongly this year with growth in turnover up by 27% to £0.98 million (2011: £0.77 million) with an exceptional performance in Poland where sales reached £0.2 million. Expectations are for continued growth in markets such as China and Brazil in line with the Group's focus on BRIC countries.

The Foodprint^® laboratory service also recorded commendable revenue growth of 45.0% with sales up to £481k (2011: £332k) with a particularly strong performance in Ireland.

The adjusted PBT for this division grew by 15.5% to £1,136k from £983k the year before.

Infectious Disease/Other

Our Infectious Disease division has continued as the most price competitive segment in which we operate. Overall, divisional turnover reduced slightly to £2.75 million (2011: £2.80 million) and yielded an adjusted profit before tax of £316k (2011: £406k). Much of the difference relates to the UK where an apparent reduction in volumes shipped from Co-Tek is merely a phasing effect and a catch up to meet minimum contracted volumes will be seen in the first half of the new financial year.

Corporate costs

Net centralised costs include costs not allocated to any specific segment and, where the Group makes internal arrangements to fund segments via intercompany loans, interest is charged to the specific segment and the corresponding interest income is netted off through Corporate costs. Net centralised corporate costs for the current year amounted to £582k (2011: £690k), after including such interest income of £72k (2011: £Nil).

Treasury operations

Currency management

The Group continues to transact operations in three main currencies being sterling, euros and US dollars. In the case of transactions in euros and US dollars, the Group may be exposed to fluctuations in the rates of exchange against sterling. Where possible, the Group operates a natural hedge by entering into transactions of both a buying and selling nature that limits the risk of adverse exchange rate losses. The Company holds
a reducing portion of its borrowings in US dollars where this loan can be serviced from a net surplus of US dollars generated from its trading activities. The exchange rate between sterling and the US dollar has been relatively stable throughout the year such that a translation loss of £1k (2011: gain £17k) has been recorded on these borrowings along with a loss on trading operations of £22k (2011: £22k) included within Administration costs.

The Group's net investment in and funding of Omega GmbH is in euros, which will give rise to foreign exchange variations from one period to another. In the year, a foreign exchange loss of £271k (2011: gain £189k), which has arisen due to a weaker euro, has been included within other comprehensive income.

Interest rate management

The Group operates certain derivative financial instruments for its sterling and US dollar borrowings. In the case of its sterling loan, the Group has an agreement with Bank of Scotland whereby the base rate element of the interest charge has been capped at 5.5% for the entire remaining term. In the case of the US dollar loan, the Group has two agreements with Bank of Scotland, one to cap the interest rate based on US Libor at 5% and one to operate a floor rate on US Libor of 2.25%. Under IFRS, these derivative financial instruments are required to be disclosed at their fair values as either assets or liabilities and there has been a fair value adjustment gain through the income statement of £3k (2011: £4k). Accordingly, at the balance sheet date, the Group had liabilities of derivative financial instruments of £Nil (2011: £3k).

Cash flow

Net cash flow generated from operations of £686k (2011: £348k) is ahead of last year due to the significant increase in the level of operating profits. Net cash used in investing activities of £1,199k (2011: £5,673k) includes the purchase of intangible assets of £769k (2011: £564k) of which, capitalised development expenditure in relation to the iSYS project amounted to £299k, incurred since 1 October 2011, the point in time at which all criteria in relation to IAS38 Intangible Assets were met. Net cash used in financing activities was £345k, all in the servicing and repayment of existing borrowings, leaving cash at the year-end of £1,159k (2011: £2,055k).

Net debt at the year-end amounted to £145k versus net cash at the prior year-end of £447k.

Financing

Following the end of the year, the Group has obtained additional resources with the granting from its principal banker, Bank of Scotland, of an overdraft facility of £700k. This facility was arranged on commercially acceptable terms and is annually renewable and repayable on demand.

Capital management

The financial performance of the Group is measured and monitored on a monthly basis through a combination of management reporting and KPIs. The Group manages its working capital requirements to ensure it continues to operate within the covenant limits applicable to any borrowing facilities whilst safeguarding the ability to continue to operate as a going concern. The Group funds its operations with a mixture of short and long-term borrowings or equity as appropriate with a view to maximising returns for shareholders and maintaining investor, creditor and market confidence. The use of funds for acquisitions is closely monitored by the Board so that existing funds are not adversely impacted by such activity and the Board reviews and approves an annual budget to help ensure it has adequate facilities to meet all its operational needs and to support future growth in the business.

Kieron Harbinson

Group Finance Director

29 June 2012

Consolidated Statement of Comprehensive Income

for the year ended 31 March 2012

	2012	2011
	£	£
Continuing operations
Revenue	11,124,053	7,902,036
Cost of sales	(4,120,259)	(3,195,742)

Gross profit	7,003,794	4,706,294
Administration costs	(4,471,381)	(3,508,810)
Selling and marketing costs	(2,015,300)	(1,069,027)
Other income - government grants and related assistance		7,769

Operating profit	517,113	136,226

Finance costs	(48,542)	(33,052)
Finance income - interest receivable	10,856	1,950

Profit before taxation	479,427	105,124

Tax credit / (charge)	47,556	(73,667)

Profit for the year	526,983	31,457

Other comprehensive income
Exchange differences on translation of foreign operations	(271,130)	189,009
Actuarial gain on defined benefit pensions	56,000	41,984
Tax credit	16,585	-
Other comprehensive income for the year	(198,545)	230,993

Total comprehensive income for the year	328,438	262,450

Earnings Per Share (EPS)
Basic and Diluted EPS on profit for the year	0.6p	0.1p

Adjusted Profit before Taxation
For the year ended 31 March 2012	2012	2011
	£	£
Profit before taxation	479,427	105,124
IFRS related discount charges (included within Finance costs)	45,225	21,968
Fair value adjustments to financial derivatives (included within Finance costs)	(2,981)	(4,086)
Amortisation of intangible assets (included within Administration costs)	415,419	192,907
Share based payment charges (included within Administration costs)	29,716	7,873
Acquisition costs (included within Administration costs)	37,461	412,045
Adjusted profit before taxation	1,004,267	735,831

Earnings Per Share (EPS)
Adjusted EPS on profit for the year	1.2p	1.7p

Consolidated Balance Sheet

as at 31 March 2012

		Restated*
	2012	2011
ASSETS	£	£
Non-current assets
Intangibles	9,136,072	9,376,571
Property, plant and equipment	2,068,509	1,954,485
Deferred taxation	150,332	84,913
Retirement benefit surplus	85,639	41,984

	11,440,552	11,457,953
Current assets
Inventories	1,689,549	1,502,659
Trade and other receivables	2,417,500	2,369,701
Income tax receivable	4,054	16,683
Cash and cash equivalents	1,159,132	2,054,877

	5,270,235	5,943,920

Total assets	16,710,787	17,401,873

EQUITY AND LIABILITIES
Equity
Issued capital	12,977,107	12,977,107
Retained earnings	347,403	(10,751)

Total equity	13,324,510	12,966,356

Liabilities
Non-current liabilities
Long-term borrowings	794,389	1,275,832
Other financial liabilities	-	549,663
Deferred taxation	503,728	520,607
Derivative financial instruments	454	3,435

Total non-current liabilities	1,298,571	2,349,537

Current liabilities
Short-term borrowings	509,811	332,499
Trade and other payables	1,453,018	1,615,705
Other financial liabilities	124,877	-
Income tax payable	-	137,776

Total current liabilities	2,087,706	2,085,980

Total liabilities	3,386,277	4,435,517

Total equity and liabilities	16,710,787	17,401,873

* The prior year balance sheet was restated to reflect an adjustment to the fair value of stock that was acquired as part of the allergy IVD business where the fair value in 2011 was determined provisionally.

Consolidated Statement of Changes in Equity

for the year ended 31 March 2012

	Share	Share	Retained
	capital	premium	earnings	Total
	£	£	£	£

Balance at 31 March 2010	1,562,246	4,368,716	(281,074)	5,649,888

Issue of share capital for cash consideration	2,583,334	5,166,668	-	7,750,002

Expenses in connection with share issue	-	(703,857)	-	(703,857)

Profit for the year ended 31 March 2011	-	-	31,457	31,457

Other comprehensive income - net exchange adjustments	-	-	189,009	189,009

Other comprehensive income - actuarial gain on defined benefit pensions	-	-	41,984	41,984

Total comprehensive income	-	-	262,450	12,958,483

Share-based payments	-	-	7,873	7,873

Balance at 31 March 2011	4,145,580	8,831,527	(10,751)	12,966,356

Profit for the year ended 31 March 2012	-	-	526,983	526,983

Other comprehensive income - net exchange adjustments	-	-	(271,130)	(271,130)

Other comprehensive income - actuarial gain on defined benefit pensions	-	-	56,000	56,000

Other comprehensive income - tax credit	-	-	16,585	16,585

Total comprehensive income	-	-	317,687	13,294,794

Share-based payments	-	-	29,716	29,716

Balance at 31 March 2012	4,145,580	8,831,527	347,403	13,324,510

Consolidated Cash Flow Statement

for the year ended 31 March 2012

	2012	2011
	£	£

Cash flows generated from operations
Profit for the year	526,983	31,457
Adjustments for:
Taxation	(47,556)	73,667
Finance costs	48,542	33,052
Finance income	(10,856)	(1,950)

Operating profit before working capital movement	517,113	136,226
Increase in trade and other receivables	(47,799)	(623,918)
(Increase)/decrease in inventories	(186,890)	95,707
(Decrease)/increase in trade and other payables	(37,697)	466,544
Gain on sale of property, plant and equipment	(283)	(3,949)
Depreciation	264,710	144,294
Amortisation of intangible assets	415,419	192,907
Share-based payments	29,716	7,873
Taxation paid	(143,306)	(67,501)

Cash flow from operating activities	810,983	348,183
Settlement of acquisition related liability	(125,000)	-
Net cash flow from operating activities	685,983	348,183


Investing activities
Finance income	10,856	1,950
Purchase of property, plant and equipment	(454,179)	(200,977)
Purchase of intangible assets	(768,968)	(563,653)
Sale of property, plant and equipment	13,681	5,499
Outflow on acquisition of subsidiaries	-	(4,916,049)

Net cash used in investing activities	(1,198,610)	(5,673,230)

Financing activities
Finance costs	(12,563)	(26,446)
Proceeds from issue of share capital	-	7,750,002
Expenses of Share Issue	-	(703,857)
Loan repayments	(272,832)	(276,744)
Finance lease repayments	(60,030)	(62,795)

Net cash (used in)/from financing activities	(345,425)	6,680,160

Net (Decrease)/increase in cash and cash equivalents	(858,052)	1,355,113
Effects of exchange rate movements	(37,693)	20,964
Cash and cash equivalents at beginning of year	2,054,877	678,800

Cash and cash equivalents at end of year	1,159,132	2,054,877

Notes to the Preliminary Announcement

for the year ended 31 March 2012

1. Basis of preparation

The financial information set out in this preliminary announcement does not constitute statutory accounts as defined in Section 434(3) of the Companies Act 2006.

The consolidated balance sheet at 31 March 2012 and the consolidated statement of comprehensive income, consolidated cash flow statement, consolidated statement of changes in equity and associated notes for the year then ended have been extracted from the Group's financial statements which were approved by the Board of Directors on 29 June 2012 and are audited.

The comparative consolidated financial information for the year ended 31 March 2011 is based on an abridged version of the Group's published financial statements for that year, which contained an unqualified audit report and which have been filed with the Registrar of Companies.

The statutory accounts for 2012 will be finalised on the basis of the financial information presented in this preliminary announcement and will be delivered to the registrar of companies following the company's annual general meeting.

The consolidated financial statements have been prepared in accordance with IFRS as adopted by the European Union as they apply to the financial statements of the Group for the year ended 31 March 2012.

Basis of consolidation

The Group financial statements consolidate the financial statements of Omega Diagnostics Group PLC and the entities it controls (its subsidiaries). Control comprises the power to govern the financial and operating policies of the investee so as to obtain benefit from its activities and is achieved through direct or indirect ownership of voting rights. Subsidiaries are consolidated from the date of acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date that such control ceases. The financial statements of the subsidiaries used in the preparation of the consolidated financial statements are based on consistent accounting policies. All intercompany balances and transactions, including unrealised profits arising from them, are eliminated.

2. Segment information

Business segment information
	Allergy and	Food	Infectious/
	Autoimmune	Intolerance	Other	Corporate	Group
2012	£	£	£	£	£

Statutory presentation
Revenue	4,488,210	4,456,689	2,762,572	-	11,707,471
Inter-segment revenue	(11,436)	(555,984)	(15,998)	-	(583,418)
Total revenue	4,476,774	3,900,705	2,746,574	-	11,124,053
Operating costs	(4,616,762)	(2,863,458)	(2,450,586)	(676,134)	(10,606,940)
Operating profit/(loss)	(139,988)	1,037,247	295,988	(676,134)	517,113
Other operating income	-	-	-	-	-
Net finance (costs)/income	(72,095)	(197)	-	34,606	(37,686)
Profit/(loss) before taxation	(212,083)	1,037,050	295,988	(641,528)	479,427

Adjusted profit before taxation
Profit/(loss) before taxation	(212,083)	1,037,050	295,988	(641,528)	479,427
IFRS-related discount charges	12,344	-	-	32,881	45,225
Fair value adjustments to financial derivatives	-	-	-	(2,981)	(2,981)
Amortisation of intangible assets	296,667	98,748	20,004	-	415,419
Acquisition costs	37,461	-	-	-	37,461
Share-based payment charges	-	-	-	29,716	29,716
Adjusted profit/(loss) before taxation	134,389	1,135,798	315,992	(581,912)	1,004,267


	Allergy and	Food	Infectious/
	Autoimmune	Intolerance	Other	Corporate	Group
2011	£	£	£	£	£

Statutory presentation
Revenue	1,539,206	3,997,989	2,862,036	-	8,399,231
Inter-segment revenue	-	(438,879)	(58,316)	-	(497,195)
Total revenue	1,539,206	3,559,110	2,803,720	-	7,902,036
Operating costs	(1,593,544)	(2,654,817)	(2,421,619)	(1,103,599)	(7,773,579)
Operating profit/(loss)	(54,338)	904,293	382,101	(1,103,599)	128,457
Other operating income	-	4,000	3,769	-	7,769
Net finance costs	-	(6,969)	-	(24,133)	(31,102)
Profit/(loss) before taxation	(54,338)	901,324	385,870	(1,127,732)	105,124

Adjusted profit before taxation
Profit/(loss) before taxation	(54,338)	901,324	385,870	(1,127,732)	105,124
IFRS-related discount charges	-	-	-	21,968	21,968
Fair value adjustments to financial derivatives	-	-	-	(4,086)	(4,086)
Amortisation of intangible assets	90,942	81,961	20,004	-	192,907
Acquisition costs	-	-	-	412,045	412,045
Share-based payment charges	-	-	-	7,873	7,873
Adjusted profit/(loss) before taxation	36,604	983,285	405,874	(689,932)	735,831

3. Finance costs

	2012	2011
	£	£

Interest payable on loans and bank overdrafts	14,862	24,624
Exchange difference on loans	577	(16,776)
Unwinding of discounts	32,880	21,968
Fair value adjustment to financial derivatives	(2,981)	(4,086)
Finance leases	3,204	7,322

	48,542	33,052

4. Earnings per share

Basic Earnings per share are calculated by dividing net profit for the year attributable to ordinary equity holders of the Group by the weighted average number of ordinary shares outstanding during the year.

Diluted earnings per share are calculated by dividing the net profit attributable to ordinary equity holders of the Group by the weighted average number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would be issued on the conversion of all the dilutive potential ordinary shares into ordinary shares. Diluting events are excluded from the calculation when the average market price of ordinary shares is lower than the exercise price.

	2012 £	2011 £

Profit attributable to equity holders of the Group	526,983	31,457

	2012 Number	2011 Number

Basic average number of shares	85,216,257	38,278,631

Share options	22,489	-

Diluted weighted average number of shares	85,238,746	38,278,631

Adjusted Earnings per share on profit for the year

The Group presents adjusted earnings per share which is calculated by taking adjusted profit before taxation and adding the tax credit or deducting the tax charge in order to allow shareholders to understand better the elements of financial performance in the year, so as to facilitate comparison with prior periods and to assess better trends and financial performance.