Business Overview
Immunodiagnostic Systems Holdings Plc (LON: IDH) is a health care equipment & services company, providing the in-vitro diagnostic solution to the clinical laboratory market. The company is engaged in the business of developing, manufacturing and innovating automated immunoanalyser technologies and immunoassays. The services offered by the company provide patients with improved diagnostic outcomes. The company was incorporated in the year 1977 and trades on the London Stock Exchange under AIM segment. The company has an employee base of approximately 275 employees globally and is headquartered in the United Kingdom. The company’s products are manufactured and developed in the facilities located in the European region and cater to the needs of its customers from its regional offices located in Brazil, the USA and Europe. The company serves its global customers through a network of distributors. The company primarily engaged in the research of animals, Bone Turnover Markers and Other Research Areas. The clinical areas in which the company works include Bone Metabolism, Calcium Metabolism, Hypertension, Chronic Kidney Disease, Growth, Cartilage Markers, Fertility, Autoimmunity, Infectious Diseases and Allergy.

The current Chairman is Dr Burkhard Wittek. Jaap Stuut holds the responsibilities of the Chief Executive Officer and joined the group in 2013. Mr Paul Martin holds the responsibilities ofFinance Director and Company Secretary.

Key Statistics



Top Shareholders 

 
Segment Information


(Source: Interim Report, Company Website)

The company’s operations are divided into three reportable segments being Automated, Manual and Technology. In the first half of financial 2020, the revenue and gross profit from Automated and Technology business have increased, while the revenue and gross profit from Manual business have declined for the period. The operating costs have declined from Automated and Manual business in the H1 financial year 2020, while the operating costs from Technology business increased for the period. In the first half of financial 2020, the adjusted EBITDA and adjusted EBIT from Automated and Technology business have increased, while the adjusted EBITDA and adjusted EBIT from Manual business declined for the period.

Financial Highlights – H1 Financial Year 2020 (30^th September 2019, GBP, thousand)


(Source: Interim Report, Company Website)
 
In the first half of the financial year 2020, driven by an increase in revenue from Automated Business and Technology Business for the period, the company’s revenue stood at GBP 18,791 thousand versus GBP 18,495 thousand in the first half of the financial year 2019. Due to decline in cost of sales for the period, the company’s gross profit increased to GBP 8,411 thousand in the first half of the financial year 2020 versus a gross profit of GBP 7,892 thousand in the first half of the financial year 2019. The company’s adjusted EBITDA stood at GBP 2,857 thousand in the first half of the financial year 2020 versus an adjusted EBITDA of GBP 1,893 thousand in the first half of the financial year 2019, reflecting an increase of 49 per cent for the period. Due to lower operating expenses for the period, the company reported an operating profit of GBP 642 thousand in the first half of the financial year 2020 versus an operating loss of GBP 223 thousand in the first half of the financial year 2019. The company’s adjusted EBIT (earnings before interest and tax) stood at GBP 642 thousand in the first half of the financial year 2020 versus an adjusted LBIT (loss before interest and tax) of GBP 266 thousand in the first half of the financial year 2019. Due to higher finance cost incurred for the period, the company reported an LBT (loss before tax) of GBP 230 thousand in the first half of the financial year 2020 versus a reported (loss before tax) of GBP 523 thousand in the first half of the financial year 2019. In the H1 Financial Year 2020, the company received a tax rebate and reported a PAT (profit after tax) attributable to shareholders of GBP 16 thousand versus a reported LAT (loss after tax) attributable to shareholders of GBP 305 thousand in the first half of the financial year 2019. The company’s basic and diluted earnings per share stood at 0.1 pence in the first half of the financial year 2020 versus a basic and diluted loss per share of 1 pence in the first half of the financial year 2019. The cash balances (cash and cash equivalents) stood at GBP 28,148 thousand in the first half of the financial year 2020 versus GBP 27,752 thousand in the first half of the financial year 2019.

Key Performance Indicators


Revenue

Revenue is the income generated by the company from its normal day to day operations. The company’s revenue increased to GBP 38.5 million in the financial year 2019 versus GBP 37.9 million in the financial year 2018. The company’s revenue on like-for-like (LFL) basis increased to GBP 38.5 million in the financial year 2019 versus GBP 37.9 million in the financial year 2018.



Revenue Per Employee

The company’s revenue per employee has increased from GBP 134 thousand in the financial year 2018 to GBP 137 thousand in the financial year 2019. The revenue per employee in the H1 financial year 2020 stood at GBP 138 thousand versus GBP 130 thousand in the first half of the financial year 2019.



Total instrument sales

In the financial year 2019, the total instrumental sales stood at 127 versus 103 in the financial year 2018. The direct instrument placements increased to 13 in the financial year 2019 from 9 in the financial year 2018. The total instrumental sales (gross) stood at 32 in the first half of the financial year 2020 versus 28 in the H1 financial year 2019.

Financial Ratios

 

The reported gross margin in H1 Financial Year 2020 increased by 2.1 per cent to 44.8 per cent against 42.7 per cent reported last year for the same period, while remained lower than the industry median of 65.6 per cent. The reported EBITDA margin of 15.2 per cent for the H1 Financial Year 2020 stood lower than the industry median of 22.4 per cent. The reported operating margin in the first half of the Financial Year 2020 increased by 4.6 per cent to 3.4 per cent from a negative operating margin of 1.2 per cent reported last year for the same period. Net margin reported was 0.1 per cent for the H1 of the financial year 2020, reflecting an increase of 1.7 per cent when comparedwith last year data for the same period. Return on equity for the H1 of the Financial year 2020 remained Nil versus a negative return on equity of 0.5 per cent in the last year for the same period. On the liquidity front, Immunodiagnostic Systems Holdings Plc’scurrent ratio was significantly higher than the industry median of 1.64, reflecting sufficient current assets to pay its short-term obligations. On leverage front, the debt-equity ratio of the Immunodiagnostic Systems HoldingsPlc’swas 0.05x, which was lower as compared to the industry median of 0.25x, reflecting that the company is less leveraged as compared to its peers.
 
Share Price Performance
 

Daily Chart as of February 6^th, 2020, before the market close (Source: Thomson Reuters)

Immunodiagnostic Systems HoldingsPlc shares were trading at GBX 210 at the time of writing before the market close (at 8:00 AM GMT) on 6^th February 2020 and remained same versus the previous day closing price. Stock's 52 weeks High is GBX 290.00 and Low is GBX 160.00. At the time of writing, the share was trading 27.59 per cent lower than the 52w High and 31.25 per cent higher than the 52w low. Stock’s average traded volume for 5 days was 3,227.40; 30 days – 3,266.10 and 90 days – 8,056.06. The traded volume (average) for 5 days was down by 1.18 per cent versus 30 days average traded volume. The group’s stock is reflecting significantly lower volatility as against the benchmark index, based on the company’s beta of 0.38. The shares of the company have delivered a positive return of 21.74 per cent in the last nine months. The company’s stock has given investors 3.45 per cent of a positive return in the last six months.The outstanding market capitalisation was around £60.58 million, with a dividend yield of 0.33%.

Growth and Risk Assessments

The company keeps on launching new platforms and upgrade the old products and services to become one of the market leaders in the healthcare market. The company provides cost-effective services, accurate diagnostic testing and is a leading healthcare provider in every region and community it serves. The group is exposed to the effects of political and economic risks, including the impact of Brexit, as the market expects macro-economic uncertainty or downturn in the UK economy as a result of Brexit. Global political uncertainty regarding trade policy also poses a risk for the group, including protectionist measures and regulation or legislation in local markets. The company’s revenue is impacted by increased competition in the healthcare sector.

Conclusion

In the first half of the financial year 2020, the company’s Manual Business performance has declined because ofone-off order in FY2019, while the company expects its performance to improve in the second half of FY2020.The company has shownimprovement in financial performance in the first half of the financial year 2020. Both the top-line and the bottom-line performance have improved, with the improvement in the profitability of the company for the current period.

The company’srevenue on an LFL basis increased in the FY2019 for the first time since the financial year 2014. Therevenue from automated and Technology business have improved for the period.

The company has been able to manage the operating costs, which has resulted in improved financial performance for the period. In H1 FY2020, the company’s adjusted EBITDA improved by over 49 per cent, mainly driven by increased revenue, high supply margin and low expenditure on R&D.

The company is focusing on higher growth markets, through M&A and has achieved significant growth in the past. The company remained  cash generative in the current financial period due to focused investment prioritisation, and tight financial management approach opted by the company.

Over the course of 3 years (FY16 - FY19), the company’s Total revenue surged from GBP 38.31 million in FY16 to GBP 38.51 million in FY19. Compounded annual growth rate (CAGR) stood at 0.17 per cent.

Based on decent fundamental prospects, we have given a “Speculative Buy” recommendation at the closing price of GBX 210.00 (as on 5^th February 2020).
 
*The Speculative Buy recommendation is also valid for the current price as covered in the report (as on 6^th February 2020).

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