Fighting global health challenges through innovation Omega Diagnostics Group PLC Annual Report and Group Financial Statements 2015 Find up-to-date information at www.omegadiagnostics.com Omega Diagnostics Group PLC Omega Diagnostics Group PLC @OmegaDiagnostic Front cover: Uzma Bari, Development Scientist. Operational Highlights Visitect® CD4 test manufacturing process fully in-house following further recruitment to the scientific team. Contents Overview 01 Operational and Financial Highlights 02 At a Glance 05 Our Strategy and Key Performance Indicators 06 Chairman’s Statement Engagement with experts in lateral flow diagnostics and completion of investigation phase for Visitect® CD4. Visitect® CD4 final product stability being evaluated prior to further field evaluation. Continuing progress with allergy development programme with 32 allergens now optimised. Finished kits for 27 allergens available on the shelf and external site evaluations started. Appointment of Colin King as Chief Operating Officer from 3 August 2015. Manufacturing facility in Pune, India, progressing with fit-out substantially completed. At a Glance Page 2 Our Business Model Page 8 Financial Highlights Strategic Report 08 Our Business Model 10 Our Core Markets 12 Chief Executive’s Review 14 Our Business Model in Action 16 Risks and Risk Management 18 Financial Review Governance 20 Board of Directors 22 Senior Management Team 23 Corporate Governance Report 25 Advisers 26 Directors’ Report 27 Directors’ Remuneration Report 29 Statement of Directors’ Responsibilities Financial Statements 30 Independent Auditor’s Report 31 Consolidated Statement of Comprehensive Income 31 Adjusted Profit Before Taxation 32 Consolidated Balance Sheet 33 Consolidated Statement of Changes in Equity 34 Consolidated Cash Flow Statement 35 Company Balance Sheet 36 Company Statement of Changes in Equity 37 Company Cash Flow Statement 38 Notes to the Financial Statements 59 Notice of Annual General Meeting 60 Notes to the Notice of Annual General Meeting Sales (£m) £12.1m 11.6 11.3 Gross profit (£m) Gross profit (%) Adjusted profit before tax (£m) 4% 12.1 £7.7m 7.1 7.4 4% 7.7 63.4% 0.2% £1.4m 62.6 63.6 63.4 25% 1.4 1.1 0.8 2013 2014 2015 2013 2014 2015 2013 2014 2015 2013 2014 2015 Annual Report and Group Financial Statements 2015 01 Omega Diagnostics Group PLC Overview At a Glance A leading company in the fast growing area of immunoassay, with a global presence in over 100 countries Our focus Allergy and Autoimmune Food Intolerance Infectious Diseases The Group develops, manufactures and sells allergy tests for over 600 allergens. It has more than 20 years’ experience in the development of products for the diagnosis of allergies and a substantial understanding and knowledge in the production and standardisation of allergen extracts. The autoimmune panel is a range of enzyme immunoassay (EIA) tests for the detection and quantification of multiple autoimmune diseases. The Group provides a range of tests and instrumentation associated with food intolerance and gut health. Based on quantifying total IgG reactions to over 220 different foods, these tests are designed to support both health practitioners and individuals who wish to make informed decisions when managing their health. 600+ Over 600 specific IgE allergens available. 220+ IgG reactions to over 220 different foods. The Group specialises in a range of diagnostic kits for infectious diseases, in particular syphilis, febrile antigens and dengue fever. Enzyme immunoassays are available for a variety of viral, bacterial and fungal infections, complemented by a diverse selection of agglutination, fluorescence and rapid tests. 26m 26 million people living with HIV in remote settings need improved access to CD4 testing. Our range of products Omega Diagnostics Group PLC’s subsidiaries provide high quality IVD (in-vitro diagnostics) products for use in hospitals, blood banks, clinics and laboratories in over 100 countries and specialise in the areas of allergy and autoimmune, food intolerance and infectious diseases. Allergy and Autoimmune Food Intolerance Infectious Diseases Main products: − Allergozyme − Allergodip − Genesis Elisa Revenue share £3.6m Main products: Main products: − Genarrayt®/Foodprint® − Immutrep Syphilis − Food Detective® − Micropath Bacterial tests − CNS laboratory service − Dengue Elisa 30% Revenue share £6m 50% Revenue share £2.5m 20% 02 Omega Diagnostics Group PLC Annual Report and Group Financial Statements 2015 Kayleigh Bruce, Quality Control Supervisor. Where we operate A global reach allows the Group to benefit from fast growing economies in emerging markets while simultaneously mitigating challenging economic and political instability in certain regions of the world. Countries where our products are distributed Countries where we have a direct presence Our Core Markets Page 10 Our progress Double-digit growth in Food Progress being made to deliver Intolerance sales the full value of Visitect® CD4 The Food Intolerance division has again outperformed expections with increased sales of Food Detective® kits and Genarrayt®/Foodprint® reagents as well as our CNS laboratory service increasing test numbers. A further 18 Genarrayt®/Foodprint® instruments have been placed during the year, taking total installations to 150 across 38 countries. By increasing the number of local sites available to us for testing and performing a number of internal investigations, we have identified and corrected the root cause issues that have previously led to test variability. The next steps are to complete the verification and validation of the in-house manufacturing processes. Read more on pages 12 and 13 Read more on page 14 Continuing progress on the IDS/Allersys® Strong financial performance automated analyser Progress with the allergy development programme has focused on validation and scale up of the manufacturing process. Commercial scale quantities of 27 allergens have been produced and all have passed internal quality control procedures. Beta evaluations across two European sites in Italy and Spain are now underway. Adjusted profit before tax for the year has increased by 25% on the prior year, helped by increased sales and ongoing close management of overheads. This result was achieved despite reported turnover being approximately £0.4 million lower than it would have been if euro and dollar-denominated turnover had been translated at prior year exchange rates. Read more on page 18 Read more on page 15 Chief Executive’s Review Page 12 Annual Report and Group Financial Statements 2015 03 Omega Diagnostics Group PLC Overview At a Glance continued About us Left: Rory Ironside, Development Scientist. Right: Chris McMurran, Rapid Test Systems Manager. We’re committed to addressing global health challenges Our mission is to improve human health and well-being through innovative diagnostic products and global partnerships. Omega is one of the UK’s leading companies in the fast growing area of food intolerance testing 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. 04 Omega Diagnostics Group PLC Annual Report and Group Financial Statements 2015 Our Strategy and Key Performance Indicators A clear strategy to further the Group’s progress A clear strategy to leverage the Group’s business model through focusing on its strengths and differentiating with its use of innovative technologies and global partners. To maintain leadership in Food Intolerance testing and expand to provide a wider portfolio of related health and well-being tests. To become a leader in Allergy IVD testing through automation and mid-tier market targeting. Identifying Global Health opportunities and commercialising novel POC diagnostics tests for resource-poor areas with high unmet clinical needs. Collaborating with NGO networks to gain mass distribution of products. The core business remains in good shape as evidenced by the increase in adjusted profit before tax and Food Intolerance sales. Sales (£m) £12.1m 11.6 11.3 4% 12.1 Gross profit (%) 63.4% 0.2% Adjusted profit before tax (£m) £1.4m 25% 62.6 63.6 63.4 1.4 1.1 0.8 2013 2014 2015 2013 2014 2015 2013 2014 2015 Food Detective® sales (£m) £2.1m 23% 2.1 1.7 1.3 Food Intolerance – Genarrayt®/Foodprint® (£m) £2.5m 2.1 1.8 19% 2.5 2013 2014 2015 2013 2014 2015 Annual Report and Group Financial Statements 2015 05 Omega Diagnostics Group PLC Overview Chairman’s Statement I am confident that we now have the right team to deliver the inherent value that exists within our two main strategic opportunities In summary – Confirmation that Visitect® CD4 completed its investigation phase but technical challenges remain. – External evaluations underway to support CE marking of the Allersys® reagents. – Adjusted profit before tax increased by 25% to £1.4 million. – Appointment of Colin King as Chief Operating Officer. The Group remains in a strong cash position with cash reserves of £2.0 million.” David Evans Non-executive Chairman Strategy Point-of-care (POC) testing The Group’s strategy remains undiminished in wanting to become a market leader in the provision of POC testing for infectious diseases in large parts of the world where resources remain constrained and where there are substantial unmet needs. Our strategic priority for the year was to establish that our Visitect® CD4 test was capable of achieving acceptable performance in a field setting. Following a three-batch validation in February 2014, the Visitect® CD4 test underwent pilot studies in India and Kenya in the first half of the year. The results from the Indian study showed acceptable performance whereas the results from Kenya were sub-optimal, as compared to our design goals. In order to determine the cause behind the Kenyan results, further batches were made which, when tested on samples in the UK, demonstrated unacceptable levels of batch-to-batch variability. We decided that we needed to make a number of changes to the programme to determine the root cause of variability. Firstly, we brought the previously outsourced manufacturing process in-house. Secondly, we engaged with experts in lateral flow device development and manufacture who were able to investigate the issues with co-inventors from the Burnet Institute. Thirdly, we shifted internal management responsibility to our Development team from Operations. Finally, we agreed access to a local hospital with a much higher throughput of patient samples. During the second half of the year, we sought to manufacture the test using the benchtop methods exactly as developed by the Burnet Institute and, in the process, we have been able to deconstruct and reconstruct the test and to characterise fully all the key components. We have been able to make thousands of devices, tested on hundreds of samples, which has resulted in the recent achievement of confirming that we now have a process of making test devices which is capable of meeting certain design goals. We have now moved into a period of verification and validation and we are concentrating our efforts on overcoming a stability issue that has become evident that manifests after a period of five weeks of storage at room temperature. This requires further investigation as to root cause, which is being undertaken now. Verification and validation is a necessary process undertaken to establish finished product performance and we will not put product back into field evaluation until we have addressed this issue and the product meets the needs of the target market. Once resolved, we will restart the earlier field trials. Allergy automation Our strategic aim in Allergy remains unaltered: to launch a panel of 40 allergens on the automated IDS/Allersys® system followed by a programme of menu extensions to achieve a number two market position. During the year, we transferred the optimisation work from our external contractor to a newly recruited in-house scientific team. Our external contractor remains a key contributor and retains responsibility for the claim support work. In total, we have six IDS/Allersys® instruments across two sites supporting the work programmes. Following a successful pilot study in June 2014, comparing the performance of eight Allersys® allergens with the predicate device, ThermoFisher’s ImmunoCAP® system, the results were presented in June this year at the European Academy of Allergy and Clinical Immunology (EAACI) annual meeting in Barcelona which has generated a lot of follow-on interest. We now have a fully validated in-house manufacturing system with finished kits for 27 allergens available on the shelf. All these kits have recently begun external evaluations at sites in Spain and Italy and will provide performance data for the technical file needed to support CE marking the product. Commercialisation discussions continue, both with IDS in markets where it has a direct presence, and with IDS’ partners, which have developed a complementary range of autoimmune tests on the IDS/Allersys® platform. Financial performance The Group has seen growth in revenue of 4%, achieving £12.1 million for the year (2014: £11.6 million). This is despite the weaker euro exchange rate against sterling throughout the year. Revenue would have been £0.4 million higher on a constant currency basis. Gross profit increased to £7.7 million (2014: £7.4 million) and adjusted profit before tax (our preferred measure of profit and as defined on page 31) increased by 25% to £1.4 million (2014: £1.1 million). Adjusted earnings per share was 1.3 pence (2014: 1.2 pence), the smaller rate of growth reflecting the higher average number of shares in issue throughout the current year. The Group’s cash position remains strong with cash reserves of £2.0 million (2014: £3.1 million) at the year end following another year of efficient working capital management in the conversion of operating profit into operating cash. Corporate governance The size and structure of the Board and its committees are kept under review to ensure an appropriate level of governance operates throughout the year. The Board comprises two Non-executive Directors and three Executive Directors, with one more Executive Director joining the Board on 3 August 2015 (see below), who meet frequently during the year to discuss strategy and to review progress and outcomes against objectives. Whilst, as an AIM-quoted company, the Group is not required to comply with the full requirements of the UK Corporate Governance Code, we believe the Board has a good mix of skills and experience and a culture that easily enables the Non-executive members of the Board to challenge and advise the Executive team as appropriate. The Audit Committee and the Remuneration Committee are comprised of the two Non-executive Directors and the Board believes the current make-up and the number of committees remain appropriate for a group of our size. Board and employees In transitioning through to our next phase of growth, I am very pleased that Colin King has agreed to join the Board as Chief Operating Officer, joining us from the Alere Group. Colin’s appointment will take effect from 3 August 2015 and a separate announcement with the relevant AIM disclosures will be made at that time. I have known Colin for many years and he has a wealth of experience in managing change, leading teams and delivering to targets. I am sure he will prove to be a valuable addition to our team at this exciting phase of our development. Andrew Shepherd, whilst retaining his overall CEO remit and focus on delivering CD4 to the market, has been given responsibility for identifying new product opportunities in global health with a focus on achieving new product launch targets. Last but not least, I would like to thank all our employees, who work very hard to deliver improving results year after year, and much of our progress is down to a team effort across the Group as a whole. Outlook Trading in our core business in the new financial year to date is in line with management expectations. We continue to foresee growth opportunities in Food Intolerance which will mitigate the ongoing pressures of reimbursement for our Allergy business in Germany. Since our last update on Visitect® CD4 confirming completion of the internal investigation phase, we moved into the process of verification and validation. This includes testing the longer-term stability of in-house manufactured finished devices, and as such, could not commence until the manufacturing process had been selected. We are now concentrating our efforts on overcoming the stability issue and we will put the product back into field evaluation only once we have addressed this issue. We have continued to demonstrate that the combination of an increasing number of Allersys® reagents on IDS’ automated analyser can achieve comparable performance with the market-leading predicate instrument and we have recently commenced the first of our external evaluations using product manufactured in-house with validated manufacturing methods. Our future prospects will be improved considerably by the successful outcomes to our two key strategic projects. Whilst we still face technical challenges, I am confident that we now have the right team to deliver the inherent value that exists within both these strategic opportunities. David Evans Non-executive Chairman 6 July 2015 Annual Report and Group Financial Statements 2015 07 Omega Diagnostics Group PLC Overview Our Business Model Our aim is to leverage core competencies to generate strategic opportunities to maximise shareholder value 1 Build on core competencies Omega’s foundation of extensive knowledge and know-how, R&D capability, manufacturing and marketing expertise and an existing cash-generative core business enables the Group to commercialise innovative diagnostics products through global partnerships. Our focus encompasses: Manufacturer of quality IVD products Omega has acquired more than 25 years’ experience in the development and manufacture of products within three segments: Allergy and Autoimmune, Food Intolerance and Infectious Disease, with each of its sites possessing ISO 9001 and ISO 13485 accreditation and being compliant with directive 98/79/EC on medical devices. Omega has a skilled and experienced global marketing team which is highly knowledgeable of the Group’s products and the markets that they are sold into. Generating cash from our core business The Group always aims to manage its working capital efficiently and has a track record of conversion of operating profit into operating cash. Investing in our R&D programme The majority of Omega’s products across all segments have been developed over many years through an investment in skilled teams of scientists. People and knowledge In recent years Omega has significantly expanded the senior management team, recruiting a number of key staff with years of experience within the medical diagnostics industry. Four additional development scientists have been recruited since the year end, further increasing in-house resource to accelerate the development projects. Bill Rhodes was also appointed in the year as a Non-executive Director and brings a wealth of global experience to Omega. Chief Executive’s Review Page 12 Our Business Model in Action Page 14 2 Accessing strategic opportunities 3 Commercialisation We achieve this through: This is accomplished via: Global network and distribution capability Omega has a strong distribution network in over 100 countries and a number of the distributors in place have had long-standing relationships with Omega and sell a wide range of the Company’s products. Direct market presence In Germany and India, where Omega has a direct presence, we have sales teams focused on the needs of end user customers. NGO/Aid agencies Collaborating with NGO networks to gain mass distribution of products. Innovation Omega’s global reputation stems from its beginnings as a manufacturer of tests for a range of infectious diseases. This reputation led to the opportunity to license the CD4 technology to develop a point-of-care (POC) test for an estimated 17 million HIV positive patients who cannot currently access testing. We also have access to a POC test for syphilis which can differentiate between active and past infections. WHO estimates there are 12 million new cases of syphilis each year, with currently no POC assays on the market for detecting specific IgG and IgM antibodies. Licensing The Group will license in its needs in areas where it does not have in-house expertise, with the IDS/Allersys® instrument being an example of this. The Group looks to collaborate with world-leading global health partners who are well placed to undertake the early research phase and who then look to license out those opportunities, the Burnet Institute being an example of this. Partnerships Partnership with the Burnet Institute in Australia resulted in Omega securing an exclusive global licence to a unique, simple, lateral flow POC device which confirms whether a patient’s CD4 count is above or below a clinical cut off. This has the opportunity to reduce significantly the number of patients lost to care as a result of the length of time between testing and treatment. Partnership with Immunodiagnostic Systems Group plc (IDS) enabling Omega to develop a range of allergy immunoassays on IDS’s automated system. Combined with Omega’s experience in assay development, this forms a strong platform for allergy testing. Annual Report and Group Financial Statements 2015 09 Omega Diagnostics Group PLC Financial statementsGovernanceStrategic ReportOverview Our Core Markets Well positioned to benefit from a truly global business Our combination of direct subsidiaries and a strong distribution network give Omega a worldwide presence. Our strategy is to leverage a truly global business platform and continue to grow our core business. Continued growth is planned through continued geographic expansion, distribution partner optimisation and expanding the menu to broaden our offering. Key Infectious Diseases Allergy and Autoimmune Food Intolerance Americas Market dynamics – Weakening economy in Brazil and US dollar currency exchange. – Strong growing economy in Mexico. – Huge regulatory requirement in the US (FDA). Performance highlights – Growth of 79% of Food Intolerance products in Brazil and Canada. Market outlook – Continued growth in Latin America. Focus on Mexico for growth opportunities. – Expand on a strong market position for Food Intolerance in Canada. – Explore longer-term options for US entry. North America North America North America 4% 31% South/ South/ South and Central America Central America Central America 8% 27% 10 Omega Diagnostics Group PLC Annual Report and Group Financial Statements 2015 UK UK Europe Europe Africa and Africa and Middle East Middle East Asia and Asia and Far East Far East North America North America Europe Market dynamics – Continued reimbursement pressure on domestic business in Germany. – Weaker euro versus sterling. – Depressed markets in Southern Europe. South/ South/ Central America Central America – New markets opening in Eastern Europe. Performance highlights – Slowly declining business in Germany. – Regional Allergodip panel development to support export sales. – Food Intolerance remains strong in Southern Europe despite economic conditions. – Food Intolerance continues to grow. Market outlook – Introduce large allergen panel on Allergodip and grow export business out of Germany to mitigate domestic decline. – Diversification of business in Germany to maximise resources. – Continued growth in Food Intolerance. North America North America UK UK South/ South/ Central America Central America Africa and Africa and Middle East Middle East Middle East and Africa 11% 12% Middle East and Africa Market dynamics – Political and economic instability. Europe Europe – Currency availability and devaluation. – Strong market in Africa for current infectious disease products but increased competition and price pressure. Performance highlights – Launch of Foodprint® Arabia in Gulf countries. – Registration of Foodprint® and Food Detective® in Saudi Arabia. – Strong growth in Nigeria and Iran. Market outlook – Continued growth of Food Intolerance in Gulf countries. – Reverse trend in Infectious Diseases through Visitect® CD4 sales. Asia and Far East Market dynamics – Fast growing economies and increased expenditure on healthcare. – Currency devaluation in India. Performance highlights – Continued growth in India despite currency devaluation combined with improved product mix. – Strong growth in China. – New Food Intolerance partners in Hong Kong and the Philippines. Market outlook – Diversification of portfolio in India and continued growth. – Focus on tier 2 and 3 cities in India. – Implement manufacturing facility in India to gain access to lower production costs. – Continued growth in Food Intolerance in India, China and SE Asia. Africa and Africa and Middle East Middle East Asia and Asia and Far East Far East UK UK UK 8% 16% Europe Europe Europe 53% 2% Asia and Asia and Asia and Far East Far East Far East 16% 24% Annual Report and Group Financial Statements 2015 11 Omega Diagnostics Group PLC Financial statementsGovernanceStrategic ReportOverview Chief Executive’s Review The core business remains in good shape as evidenced by the increase in Food Intolerance sales In summary – Group revenue increased by 4% to £12.1 million, despite currency headwinds. – Adjusted profit before tax increased by 25% to £1.4 million. – Important changes made to technical management of CD4 programme lead to completion of investigation phase. – Growing team focused on Global Health activities and opportunities. – Continued investment in in-house scientific resource. Dear fellow shareholder During the year we made progress with the core business, mostly driven by the Food Intolerance division, which delivered another good year of growth and profitability. Although we faced challenging issues with the production transfer of the CD4 product, it also gave us the opportunity to review our overall operation to make it more efficient. Operations and organisational change The CD4 opportunity remains the major factor in what we see as the potential for transformational growth in the near future but, in acknowledging the issues that we faced with the technology transfer and subsequent initial trial results in India and Kenya, we clearly had to make some internal changes to how we work. As David has mentioned in his Chairman’s Statement, additional important changes have been made to the technical management of the CD4 programme with all technical activity now falling under the control of our R&D Director, Dr Edward Valente. As reported elsewhere we have recently encountered a stability issue which still needs to be resolved and I am confident we have the right team in place to do that. We have also established a new division, Global Health, reporting directly to me, which encompasses all aspects of the CD4 product roll-out and promotion along with assessment and development of new product opportunities. This new division has a dedicated team of sales and product specialists who have built up extensive experience in the global health arena over the last few years. It also includes market development and promotional activities for the schistosomiasis and syphilis POC products. In January 2015 we appointed Dr Nigel Abraham as Group Scientific Director for Food Intolerance Products and Services. A fellow of the Institute of Biomedical Science for over 30 years, Nigel joins us from Genova Diagnostics Europe, where he was Scientific Director and Board Member. Nigel is a specialist in allergy and food intolerance and has been involved in extensive research in the field of chemical mediators of allergic disease. His extensive knowledge and expertise will bring support to new product development as we extend our range, ongoing assay improvement programmes and customer service. In appreciating the challenges ahead of us, we have expanded and broadened our Board Executive team with the appointment of Colin King as Chief Operating Officer (COO). We are all looking forward to Colin joining the Board in August 2015. His wealth of relevant industry experience and his depth and breadth of knowledge of the in-vitro diagnostics sector will greatly benefit the Company going forward. In addition to the strengthened Board change we have a high quality senior management team, consisting of site managers from our subsidiary operations and other key managers from Operations, Development and Sales. This group meets on a regular basis to discuss and troubleshoot and contribute to the overall strategic goals of the Group. Core business Segmental revenue performance Food Intolerance The Food Intolerance division has consistently performed well since we acquired the Genesis/CNS business in 2007 and has maintained a 17.5% compound annual growth rate in revenue over the last six years. For this year, total Food Intolerance sales increased by 15% to £5.95 million (2014: £5.18 million). Sales of Food Detective® grew by a further 23% in the year to £2.08 million (2014: £1.69 million) with impressive growth performances in Poland, Brazil and China. Total volumes achieved were just over 163,000 units (2014: 106,000 units). Excluding component sales to China, the average selling price per kit was £20.66 (2014: £22.55), the fall over the previous year reflecting targeted promotional activities in Poland. Sales of Genarrayt®/Foodprint® reagents grew by 19% to £2.52 million (2014: £2.12 million) with strong performances in Spain, France, Canada and Brazil. Spain and France both exceeded annual revenues of £0.5 million and the next five markets measured by revenue all exceeded £0.1 million each. The Group sold a further 18 instruments in the year, taking the cumulative number of installations to 150 instruments in 38 countries, and revenue per instrument (excluding Spain) increased by 4% to £14,354 (2014: £13,746). The lower percentage growth rate of revenue per instrument (as compared to the overall growth in reagent sales) reflects the investment being made into newer Far Eastern markets. Our CNS laboratory service achieved a modest increase of 3% in sales to £0.65 million (2014: £0.64 million), dominated by the markets in the UK and Ireland. We produced and sold 8,241 patient reports in the year (2014: 7,985), maintaining an average price of £79.33 per report (2014: £79.55). As our Food Intolerance business continues to be a key growth driver and contributor to the bottom line, it has become increasingly clear that we need the right resource to provide high level scientific and technical support for the CNS product range. The clear strategic intention is to continue on a growth trajectory with this core business supported by increasing the range of products in the health and well-being market, which now extends beyond 75 countries. Allergy and Autoimmune Sales for the Allergy and Autoimmune division are comprised of Allergy sales of £3.08 million (2014: £3.52 million) and sales of Autoimmune products of £0.53 million (2014: £0.45 million). The Allergy sales continue to be derived almost exclusively from our Omega GmbH business in Germany, which has experienced a reduction in sales due to continued reimbursement restrictions in all but five of the 17 regions we operate in. The overall reduction in Omega GmbH allergy sales was limited to 6% in euro terms. In reported sterling terms, the reduction was 13% due to the weakening of the euro against sterling rate throughout most of the year, the average rate being 1.275 (2014: 1.186). The strategy remains to focus on retaining customer relationships through training, service and education. The modest growth in Autoimmune sales reverses a recent downward trend due principally to growth in the Middle East. Significant efforts continue to be made with the Allersys® Allergy development programme with steady progress having been made towards commercial launch. With 32 allergens having been optimised and showing equivalent performance to the market leader and with external site evaluations still to be concluded there is still some work ahead of us but we have confidence that when we launch the test platform it will be well accepted. Infectious Diseases Infectious Diseases sales increased by 4% to £2.55 million (2014: £2.45 million). The increase is principally down to two factors. First, the recovery in business fortunes of a UK customer that, in the previous year, experienced financial difficulties but which has now secured a more stable footing. Second, a combination of improved market and product mix in Africa and Asia has more than mitigated for some reductions in the Middle East. Whilst remaining in a very competitive environment we foresee a future increase in sales coming from the introduction of new products such as CD4 and other products coming through the Global Health programme. Global Health Visitect® CD4 Over the last year, there has been a tremendous effort made by the technical team in resolving the production issues surrounding the test following the results of earlier trials in India and Kenya. With assistance from the inventor scientists from the Burnet Institute together with additional support from expert consultants in rapid diagnostic test (RDT) development, we have now reached the point where all of the potential variables have been analysed and investigated, effectively rebuilding the test from base raw materials to finished product. Whilst we have successfully made three pilot batches we have yet to complete verification and validation studies to confirm robustness and manufacturing at scale. A repeat of the earlier field trials in India and Kenya to demonstrate utility in field conditions will only commence once the stability issue is resolved. Several other evaluation sites are under discussion with other NGO partners as the interest in the test remains very high. In addition to full scale production in the UK, our production facility in Pune, India, is taking shape with a completion date expected within the next six months. This will eventually provide us with capacity of 2 million tests per annum in addition to the 2.5 million tests able to be produced in a single shift in the Alva, UK, facility. Commercialisation Efforts in priming the market for the test entry onto the market have continued unabated throughout the year and we are at a stage where all the major groups in this field recognise and appreciate that Visitect® CD4 is going to fulfil a vital role in initiating antiretroviral treatment for millions of people living with HIV. Visitect® CD4 is still the only instrument-free, disposable CD4 test available in the world. Visitect® CD4 is planned to be initially introduced and implemented in 13 countries in Sub-Saharan Africa through working with major NGO networks. As part of the commercialisation process there are certain regulatory hurdles to overcome in addition to gaining the CE mark approval for the test itself. WHO Prequalification (WHO PQ) for the test which aims to promote and facilitate access to safe, appropriate and affordable in-vitro diagnostics of good quality in an equitable manner. Focus is placed on in-vitro diagnostics for priority diseases such as HIV (including CD4) and their suitability for use in resource-limited settings. We are already engaged with WHO to gain PQ for Visitect® CD4 but the timescale for this is likely to be in excess of one year. In the absence of WHO PQ approval there is also Expert Review Panel for Diagnostics (ERPD), which aims to provide guidance to procurement agencies. ERPD has been designed to assess the risks associated with procurement of diagnostic products that have high public health impact, but that have not yet undergone assessment by WHO or a stringent national regulatory authority (SRA) such as the US FDA. It is not intended to replace WHO PQ or stringent regulatory assessment. Rather, it provides an interim assessment decision, valid for a time-limited period, in anticipation of completion of stringent regulatory review. The short-term goal is to obtain ERPD approval for Visitect® CD4 well in advance of WHO PQ, which will allow the earliest procurement of product. mHealth The field trials of the Android smartphone app to record and transmit Visitect® CD4 test results have also been delayed during the CD4 investigation phase but will be capable of being recommenced once the results from India and Kenya show that the test device itself works in the field. NGOs and global health organisations are very enthusiastic as the test/app combination offers a complete information solution from test site to management headquarters. Our activities and involvement with the GSMA (Groupe Speciale Mobile Association) consortium continue to attract attention from major players in Africa such as mining companies which operate across the continent and in areas which are remote and have poor healthcare facilities and a high HIV burden. Outlook This last year has been challenging for the Company and frustrating for staff and shareholders alike with the delays in the launch of the CD4 test. However, we have made good progress over the last few months to have a test which is capable of being made which meets certain design goals, but technical challenges remain. Once we resolve these issues we will repeat the earlier field trials in Kenya and India, and are confident that we will deliver a product which meets the demands of the Global Health community. Our core business has performed well again despite some headwinds in relation to foreign exchange issues which brought our turnover down by £0.4 million. However, once again, Food Intolerance kept up its good performance for both principal products, Food Detective® and Genarrayt®/ Foodprint®, which we expect to see continuing this coming year. However, we all appreciate that the focus is on Visitect® CD4 as this product has the ability to be truly transformational for the Group. I would like to thank all the Group employees who have made great efforts throughout the year. Andrew Shepherd Chief Executive 6 July 2015 Annual Report and Group Financial Statements 2015 13 Omega Diagnostics Group PLC Financial statementsGovernanceStrategic ReportOverview Our Business Model in Action Omega has proven to be an outstanding partner – I have been impressed with the technical capability of the Omega R&D team in Alva.” David Anderson, Co-Inventor of Visitect® CD4, and team Burnet Institute, Melbourne, Australia Visitect® prospects still key to value Technical transfer from Burnet to Omega. Three pilot batches successfully manufactured – May 2015. Visitect® CD4 summary to date: Phase 1 Phase 2 Phase 3 Phase 1 completion of full scale manufacturing validation and verification which will lead to devices being released for evaluation in India and Kenya. Successful field evaluation leading to CE marking and submission to ERPD. Positive opinion from ERPD process providing clearance for NGO procurement. 14 Omega Diagnostics Group PLC Annual Report and Group Financial Statements 2015 Addressing a growth market Addressing a growth market dominated by a single competitor with large barriers to entry, we have made significant progress towards our launch target of 40 allergens. Offering a true choice in the marketplace, recent feedback from the first evaluation sites endorses both the competitiveness and performance of our Allersys® reagent system for the IDS/Allersys® instrument. Further external evaluations are planned using reagents made in commercial quantities from a fully validated in-house manufacturing facility. Allersys® – A progressive year Significant efforts continue to be made with steady progress towards commercial launch. Allersys®: Optimised Claim Support CE Mark & Transfer Create assay and ensure equivalent performance to predicate device. 32 allergens. Verification phase – ensures design goals are met. 22 allergens. Final transfer to manufacturing. Beta site (customer lab) studies in Q2 2015. 27 allergens. Annual Report and Group Financial Statements 2015 15 Omega Diagnostics Group PLC Financial statementsGovernanceStrategic ReportOverview Risks and Risk Management Operating a system of internal control and risk management The long-term success of the Group depends on the continual review, assessment and control of the key business risks it faces. The Group’s principal risks and uncertainties are briefly outlined below. Risk and description Mitigating actions Change General economic conditions The Group may be faced with changes in the general economic climate in each territory in which it operates that may adversely affect the financial performance of the Group. Factors which may contribute include the level of direct and indirect competition against the Group, industrial disruption, rate of growth of the Group’s product segments and interest rates. The Group seeks to mitigate this risk by conducting operations on a broad geographic basis and by introducing new technologies to remain innovative. World economies in which the Group operates continue to steadily recover from the recent economic downturns. Regulatory risk The manufacturing, marketing and use of the Group’s products are subject to regulation by government and regulatory agencies in many countries. Of particular importance is the requirement to obtain and maintain approval for a product from the applicable regulatory agencies to enable the Group’s products to be marketed. Approvals can require clinical evaluation of data relating to safety, quality and efficacy of a product. The Group seeks to mitigate regulatory risk by increasing the resource in this area and by conducting its operations within recognised quality assurance systems and undergoes external assessment to ensure compliance with these systems. Increased risk recognises there are changes ahead around the new IVD regulations but already timelines are being deferred. Acquisition risk The success of the Group depends on the ability of the Directors to assimilate and integrate the operations, personnel, technologies and products of acquired companies. The Group seeks to mitigate this risk by selecting companies that meet certain criteria and by conducting a detailed due diligence review. No acquisitions in the year. 16 Omega Diagnostics Group PLC Annual Report and Group Financial Statements 2015 Key Increase in risk No change in risk Decrease in risk Risk and description Mitigating actions Change Eurozone risk The euro area combines 19 countries with multiple domestic policies all having to operate under common monetary conditions. The legacy of the financial crisis and differing policy choices will continue to weigh more heavily on some than others. The Group monitors those countries under pressure and mitigates the risk in those countries where it has trading relationships, with tighter credit control procedures and credit limits where necessary. The ability of certain countries to remain within the Eurozone has come under an increased threat which could lead to further weakening of the euro against major currencies. Development risk The Group continues to undertake an increased level of development activity than in the past with the aim of launching new products in the future. There is no guarantee that development activity will lead to the future launch of products. Such development activity can meet technical hurdles that are unable to be overcome and market and competition activity can render the output from development activities obsolete. The Group seeks to mitigate the risk around development activities by ensuring that development programmes are planned in accordance with recognised industry quality standards, managed by people with the requisite skills. Resolution of previously reported variability issues leads to increasing confidence regarding CD4. Competitor landscape less crowded. Continued increase in number of allergens optimised against main competitor predicate device. The Group also continues to monitor industry trends and customers’ needs to ensure its development targets remain relevant. Foreign currency risk A significant proportion of the Group’s sales are denominated in euros through Omega GmbH and in US dollars and the growing business through Omega Dx in India means that the Group is subject to risks associated with currency movements. Geopolitical tensions also exist in certain parts of the world which can lead to a tightening of monetary conditions. With Omega GmbH and Omega Dx there is increasing exposure to the investment in foreign subsidiaries. Natural hedging is adopted where possible whereby certain goods and services are sourced in euros and US dollars to match liabilities with trading income in these currencies. It is currently the Group’s policy to settle intercompany balances with Omega GmbH and Omega Dx within a short timescale. Annual Report and Group Financial Statements 2015 17 Omega Diagnostics Group PLC Financial statementsGovernanceStrategic ReportOverview Financial Review The Group’s performance and efficient managing of working capital resulted in £2 million of cash at the year end In summary – Group revenue increased by 4% to £12.1 million. – Food Intolerance sales increased by 15% to £5.95 million. – Gross margin maintained at 63.4%. – Adjusted profit before tax increased by 25% to £1.4 million. – Adjusted earnings per share of 1.3 pence. – Cash in hand at the end of the year of £2.0 million. Financial performance Our core business has continued to perform well against currency and reimbursement headwinds in Germany. Total revenue was up by 4.4% to £12.1 million (2014: £11.6 million), with our Food Intolerance division delivering another strong performance, maintaining its year-on-year growth. But for weaker exchange rates during the year, compared to the prior year, reported sales would have been £0.4 million higher. Gross profit increased by 4.1% to £7.7 million (2014: £7.4 million), with the gross margin being maintained at 63.4% (2014: 63.6%). Costs, net of other operating income, have risen slightly to £7.0 million (2014: £6.8 million), the principal reasons being an increase in costs related to Visitect® CD4, a near full-year charge for the manufacturing space in Pune, India, and investment in regulatory staff, offset by true savings in Omega GmbH coupled with a positive exchange effect in German overheads. Adjusted profit before tax increased significantly to £1.4 million compared to £1.1 million the year before. The lack of profitability in segmental performance as presented in the notes to the financial statements on page 42 will be addressed by the opportunities outlined throughout this Strategic Report. The UK companies continue to benefit from the enhanced R&D tax credit system and a net tax credit of £0.1 million (2014: £0.15 million) has been recognised in the year. Accordingly, adjusted profit after tax of £1.43 million (2014: £1.25 million), on a fully diluted 109.5 million shares in issue, resulted in adjusted earnings per share of 1.3 pence (2014: 1.2 pence). Other operating income of £173k through the income statement comprised a credit of £74k from the UNITAID grant received at the end of last year. Further income of £54k from a Scottish Enterprise Regional Selective Assistance grant awarded in 2012 was credited on the attainment of additional employment targets and capital expenditure incurred. The balance of £45k relates to compensation received from Lloyds Bank for previous hedging products that the Company was required to take out as part of borrowings entered into in 2007. Research and development Total investment in research and development was £1.81 million (2014: £1.61 million) representing 15% of Group turnover. Expenditure continues to be focused on our two key strategic opportunities. Expenditure on our Allersys® project increased to £0.98 million (2014: £0.93 million), the marginal increase reflecting additional staff costs in expanding our in-house scientific team. Expenditure on our Visitect® CD4 project increased to £0.48 million (2014: £0.43 million) as we progressed and completed our internal investigation phase. The total expenditure of £1.5 million has been capitalised on the balance sheet in accordance with IAS 38 – Development Costs. Earlier stage R&D expenditure amounted to £0.31 million (2014: £0.24 million), which has been expensed through the income statement. Foreign exchange The Group has investments in overseas operations and conducts trading transactions in currencies other than sterling. The principal currencies used and the average foreign exchange rates in the year are as follows: Sterling/US dollar Sterling/euro Sterling/Indian rupee 2014/15 2013/14 1.60 1.275 98.57 1.60 1.186 96.33 Profit and loss account The Group has foreign-denominated bank accounts to allow for the receipt and settlement of amounts in connection with its normal trading operations. These transactions are subject to timing differences between when they are transacted and when they are settled, which can give rise to foreign exchange differences. Foreign-denominated receivables, payables and bank balances are restated into sterling at closing balance sheet dates, which also gives rise to foreign exchange differences. During the year, the Group benefited from an exchange gain of £6,000 (2014: £74,000 exchange loss) on these transactions which has been credited through the income statement. Other comprehensive income The Group has net assets in Germany and India, held in fully owned subsidiaries. The original investments in these subsidiaries are held at historic exchange rates. The difference between these historic balances and their restated amounts at the most recent closing balance sheet rates gives rise to movements which are recorded through other comprehensive income and carried as a balance sheet reserve. During the year, there has been a charge of £524,000 (2014: £127,000) on the retranslation of foreign operations. Kieron Harbinson Group Finance Director 6 July 2015 Andrew Shepherd Chief Executive 6 July 2015 The Strategic Report was approved by the Board of Directors on 6 July 2015 and signed on its behalf by Kieron Harbinson, Group Finance Director, and Andrew Shepherd, Chief Executive. Intangible assets The Group’s intangible asset bank has grown to £12.1 million (2014: £11.3 million), comprising goodwill of £4.5 million, separately identifiable intangible assets of £3.4 million and capitalised development costs of £4.2 million. Goodwill There has been no impairment of goodwill on any of the acquisitions to date. A reduction of total goodwill to £4.5 million (2014: £4.7 million) in the year relates to a £0.2 million retranslation of goodwill to £1.1 million (2014: £1.3 million) in acquiring the Allergy IVD business in Germany in 2010. £0.4 million arose on acquiring Co-Tek in 2009 and £3.0 million arose on acquiring Genesis/CNS in 2007. Intangible assets Separately identifiable intangible assets have been recognised on acquisition: £2.0 million on Genesis/CNS, of which £0.7 million has been amortised to date; £0.1 million on Co-Tek, which has been fully amortised; and £1.7 million on Omega GmbH, of which £1.1 million has been amortised to date. A purchased licence of £1.5 million relates to the exclusive global access rights to the IDS–iSYS platform for allergy testing, which, to date, has not been amortised. Capitalised development costs £1.5 million of capitalised development costs have been incurred in the year (as outlined above), bringing the cumulative spend to date to £3.1 million on the Allergy iSYS project and £1.1 million on the Visitect® CD4 project, neither of which has been amortised to date. The amortisation of these capitalised development costs, along with the purchased licence referred to above, will only start after commercialisation of these assets. As stated last year, this particular subset of amortisation charges will not be added back in the computation of the Group’s routinely reported adjusted profit before tax. Property, plant and equipment The Group has invested £0.7 million (2014: £0.5 million) in the year across all its operations. This included a further £0.3 million in Alva on expanding its Visitect® CD4 manufacturing assembly facility following the decision to bring the entire process in-house, of which 90% has been funded through an asset finance facility. In India, £0.1 million has been paid on account to the contractor responsible for the fit-out of the new manufacturing facility in Pune. Approximately £0.2 million has been invested in Genesis/CNS to ensure it keeps pace with the growth experienced in our Food Intolerance business. The balance of expenditure covers normal replacement of smaller laboratory equipment items. Financing The Group continues to enjoy a good relationship with its principal bankers and, in May of this year, we renewed our £1 million overdraft facility for a further year; this remains undrawn and, accordingly, the Group remains in a strong position to fund its two key strategic objectives. Operating cash flow The Group always aims to manage its working capital efficiently and generated operating cash of £1.25 million (2014: £1.67 million) in the year. The Group has achieved a conversion rate of adjusted operating profit (operating profit plus amortisation of intangible assets plus share-based payments) to operating cash of 93% (2014: 122%). The reduction in percentage from the prior year is principally attributable to the intentional decision to lock in and hold key raw materials for our Visitect® CD4 test, worth £0.3 million (2014: £Nil) at the year end. Overall, we ended the year with cash reserves of £1.97 million (2014: £3.12 million). Annual Report and Group Financial Statements 2015 19 Omega Diagnostics Group PLC Financial statementsGovernanceStrategic ReportOverview Board of Directors In transitioning through to our next phase of growth, Colin King will join the Board as Chief Operating Officer on 3 August 2015 David Evans Non-executive Chairman Andrew Shepherd Chief Executive Kieron Harbinson Finance Director A R Appointed August 2000 Founder Appointed August 2002 David joined Omega in 2000 as Non-executive Chairman. He has considerable experience within the diagnostics industry. As Financial Director he was a key member of the team that floated Shield Diagnostics Limited in 1993. He became Chief Executive Officer responsible for the merger of Shield Diagnostics Group plc with Axis Biochemicals ASA of Norway in 1999 to create Axis-Shield plc. In addition to his role as Non-executive Chairman of Omega, he holds Non-executive Directorships in a number of other companies. Andrew is the Founder and Chief Executive of Omega. He has worked in the medical diagnostics industry for 41 years. In 1986 he moved to Scotland to join Bioscot Limited and, shortly afterwards, established Omega. He has used his technical experience and knowledge of exporting to oversee the significant growth of the export of Omega products. He is an active member of a number of relevant trade associations, and was a member of the Bill and Melinda Gates Foundation’s (BMGF) Global Health Diagnostics Forum, which provided guidance to BMGF in advising on technology and future investments in worldwide diagnostics programmes for developing countries. Kieron joined Omega in August 2002 as Finance Director. He has a broad experience in technology and related businesses. He started his career with Scotia Holdings PLC in 1984 and remained with the company for 14 years, occupying various senior finance roles. These roles enabled him to acquire experience in corporate acquisitions, disposals and intellectual property matters. In addition he gained experience in various debt and equity transactions, and was involved in raising over £100 million for the company. He then joined Kymata Limited, a start-up optoelectronics company, as Finance Director. Over a period of 18 months, he was involved in raising approximately US$85 million of venture capital funding. 20 Omega Diagnostics Group PLC Annual Report and Group Financial Statements 2015 Corporate Governance Report Page 23 Jag Grewal Sales and Marketing Director William Rhodes Non-executive Director A R Appointed June 2011 Appointed 1 May 2013 Jag joined Omega in June 2011 as Group Sales and Marketing Director. He has worked in the medical diagnostics industry for 21 years having started out as a Clinical Biochemist in the NHS. In 1995 he joined Beckman Instruments where he developed a career spanning 15 years in sales and marketing holding a variety of positions in sales, product management and marketing management. In 2009 he left as Northern Europe Marketing Manager to join Serco Health where he helped create the first joint venture within UK pathology between Serco and Guys and St Thomas’ Hospital. He is also past Chairman and current treasurer of the British In-Vitro Diagnostics Association (BIVDA). During his 14 year career with Becton, Dickinson and Co., one of the world’s leading suppliers of medical, diagnostic and life science research products, Bill held a number of senior leadership positions and, until the end of 2012, was BD’s Senior Vice President, Corporate Strategy and Development, being responsible for BD’s worldwide mergers and acquisitions and corporate strategies. Previously, he was Worldwide President of BD Biosciences, a business segment with turnover of over US$1.0 billion, including the provision of flow cytometry instruments and their associated reagents for CD4 testing used in a wide range of laboratory settings. Prior to working for BD, Bill held senior business development positions with Pfizer Inc. and Johnson and Johnson. Key A Audit Committee R Remuneration Committee Committee Chairman Annual Report and Group Financial Statements 2015 21 Omega Diagnostics Group PLC Financial statementsGovernanceStrategic ReportOverview Senior Management Team Dr Edward Valente Group Research and Development Director Edward joined Omega in March 2011 as Allergy Systems Director. He has worked in the medical diagnostics industry for 30 years. He started his career with Amersham International in 1983 where he held scientific and managerial positions in clinical diagnostics research and development. He then joined Shield Diagnostics in 1988 and held managerial positions in R&D and marketing. Latterly, he was responsible for market development of new markers, including clinical studies, and design and development of immunoassay products on automated platforms for industry majors. Mike Gordon Group Operations Director Iain Logan Group Financial Controller Mike joined Omega in October 2011 as Group Operations Director. He has worked in the medical diagnostics industry for 30 years. He started his career with Inveresk Research International as a Development Scientist. He then joined Bioscot Ltd working through its transition to Cogent Diagnostics Ltd and onwards to Hycor Biomedical Ltd. During this time he has held the positions of Quality Manager, Production Director and latterly as Production and Logistics Manager for its last corporate owners. During this period he was responsible for the implementation of ISO 9001 and for successfully navigating the company through the process of US FDA registration and inspection. Iain joined Omega in November 2010 as Group Financial Controller. He qualified as a Chartered Accountant in 2002 with PricewaterhouseCoopers in Edinburgh. He then worked at Murray International Holdings Limited in the head office finance team for three years performing a variety of financial accounting roles. He then moved on to Murray Capital Limited, the investment management company of Murray International Holdings Limited, gaining experience in all aspects of acquisitions, disposals and investment portfolio company analysis and management. His current role primarily covers responsibility for the financial reporting of the Group and management of the Group finance team. Prashant Maniar Managing Director – Omega Dx (Asia) Pvt Limited Jamie Yexley Site Manager – Genesis Diagnostics Limited, Cambridge Nutritional Sciences Limited Karsten Brenzke Site Manager – Omega Diagnostics GmbH Prashant joined Omega Dx (Asia) in October 2011 as Managing Director. He has worked in the diagnostics industry for 25 years. He started his career as Production Head in Cadila Laboratories. He then spent 15 years working for GlaxoSmithKline and ThermoFisher Scientific in various roles establishing their diagnostic business in India with 14 collaborations with national and multinational companies. In his most recent role he established the Microbial Control business for Lonza India. He has been responsible for the commercial set up of Omega Dx (Asia) Pvt Ltd and has transitioned the Group’s business in India from distributor to wholly owned subsidiary. Jamie joined Genesis and CNS in June 1999 as a Production Laboratory Assistant. He was promoted to Production Manager in 2005 and Operations Manager in 2009. He has been instrumental in seeing the Company through a sustained period of rapid growth and change. In 2012 he moved to the role of Site Manager. He has 21 years’ manufacturing experience with 14 years specifically in the medical diagnostics industry. Educated in Cambridge he has spent his professional career working in the manufacturing industry starting in an FMCG environment. Throughout his time with the Company he has been responsible for ICT where he is recognised as the Group’s foremost expert. Karsten joined Omega GmbH in November 2010 as a consultant to facilitate the acquisition of the IVD business from Allergopharma. He was then appointed on a permanent basis initially as Finance Manager before being appointed as Site Manager in May 2012. He has worked for different industry companies in the finance control function with his longest stay of seven years at Zeppelin Power Systems where he gained experience in mergers and post-merger integration. 22 Omega Diagnostics Group PLC Annual Report and Group Financial Statements 2015 Corporate Governance Report As an AIM-quoted company, the Group is not required to produce a corporate governance report nor comply with the requirements of the UK Corporate Governance Code. However, the Directors are committed to providing information on an open basis and present their Corporate Governance Report as follows: The Board of Directors The Board currently comprises one Non-executive Chairman; one Non-executive Director; and three Executive Directors, who are the Chief Executive, the Finance Director and the Sales and Marketing Director. David Evans, Non-executive Chairman, and William Rhodes, Non-executive Director, are considered by the Board to be independent in character and judgement. The Board meets at regular intervals and is responsible for setting corporate strategy, approving the annual budget, reviewing financial performance, agreeing the renewal of and any new banking/treasury facilities, approving major items of capital expenditure and reviewing and approving acquisitions. The Board is provided with appropriate information in advance of Board meetings to enable it to discharge its duties effectively. During the financial year, the Board met on eight occasions. Of the eight meetings David Evans, Kieron Harbinson and Jag Grewal attended all eight and Andrew Shepherd and William Rhodes attended seven out of the eight meetings they were entitled to attend. The Chairman has additional Non-executive Directorships of the following companies: – Scancell Holdings plc – EKF Diagnostics plc – Venn Life Sciences plc – Diagnostic Capital Limited – Lochglen Whisky Limited – Fine Art of Golf Limited – OptiBiotix Health plc – Premaitha plc – Integrated Magnetic Systems Limited – Collagen Solutions plc The Audit Committee The Audit Committee has met on two occasions during the year and once since the year end. The Committee is comprised of David Evans, as Chairman, and William Rhodes and has primary responsibility for monitoring the quality of internal controls, ensuring that the financial performance of the Group is properly measured and reported on, and for reviewing reports from the Group’s auditors relating to the Group’s accounting and financial reporting, in all cases having due regard to the interests of shareholders. The Committee shall also review preliminary results announcements, summary financial statements, significant financial returns to regulators and any financial information contained in certain other documents, such as announcements of a price-sensitive nature. The Committee considers and makes recommendations to the Board, to be put to shareholders for approval at the Annual General Meeting, in relation to the appointment, re-appointment and removal of the Group’s external auditors. The Committee also oversees the relationship with the external auditors including approval of remuneration levels, approval of terms of engagement and assessment of their independence and objectivity. In so doing, they take into account relevant UK professional and regulatory requirements and the relationship with the auditors as a whole, including the provision of any non-audit services. Ernst & Young LLP have been auditors to Omega Diagnostics Limited (ODL) since 2000 and were appointed as auditors to the Group following completion of the reverse takeover of ODL in September 2006. Responsibilities of the Board – Setting corporate strategy – Approving the annual budget – Reviewing financial performance – Agreeing the renewal of and any new banking/treasury facilities – Approving major items of capital expenditure – Reviewing and approving acquisitions The Board is provided with appropriate information in advance of Board meetings to enable it to discharge its duties effectively. Executive/Non-executive Board membership 1 1 3 Key Non-executive Chairman 1 Non-executive Director 1 Executive Director 3 Board attendance throughout the year Board Audit Committee Remuneration Committee David Evans Andrew Shepherd Kieron Harbinson Jag Grewal William Rhodes 8/8 7/8 8/8 8/8 7/8 3/3 — — — 3/3 3/3 — — — 3/3 Annual Report and Group Financial Statements 2015 23 Omega Diagnostics Group PLC Financial statementsGovernanceStrategic ReportOverview Corporate Governance Report continued The Audit Committee continued The Committee has reviewed the effectiveness of the Group’s system of internal controls and has considered the need for an internal audit function. At this stage of the Group’s size and development, the Committee has decided that an internal audit function is not required, as the Group’s internal controls system in place is appropriate for its size. The Committee will review this position on an annual basis. The Committee also reviews the Group’s arrangements for its employees raising concerns, in confidence, about possible wrongdoing in financial reporting or other matters. The Committee ensures that such arrangements allow for independent investigation and follow-up action. The Remuneration Committee The Remuneration Committee has met on three occasions during the year. The Committee is comprised of David Evans, as Chairman, and William Rhodes and has primary responsibility for determining and agreeing with the Board the remuneration of the Company’s Chief Executive, Chairman, Executive Directors, Company Secretary and such other members of the Executive management as it is designated to consider. The remuneration of the Non-executive Directors shall be a matter for the Chairman and the Executive Directors of the Board. No Director or manager shall be involved in any decisions regarding their own remuneration. Internal control The Board is responsible for the Group’s system of internal control and for reviewing its effectiveness throughout the year. Such a system can only provide reasonable assurance against misstatement or loss. The Board monitors financial controls through the setting and approval of an annual budget and the regular review of monthly management accounts. Management accounts contain a number of indicators that are designed to reduce the possibility of misstatement in financial statements. Where the management of operational risk requires outside advice, this is sought from expert consultants, and the Group receives this in the areas of employment law and health and safety management. The Group is compliant with industry standard quality assurance measures and undergoes regular external audits to ensure that accreditation is maintained. Communication with shareholders The Board recognises the importance of communication with its shareholders. The Group maintains informative websites for Omega Diagnostics Limited, Cambridge Nutritional Sciences Limited and Omega GmbH containing information likely to be of interest to existing and new investors. In addition, the Group retains the services of financial PR consultants, providing an additional contact point for investors. The Board encourages shareholder participation at its Annual General Meeting, where shareholders can be updated on the Group’s activities and plans. Going concern The Group’s business activities, together with the factors likely to affect its future development, performance and position are set out in the Strategic Report, which runs from page 8 to page 19. The financial position of the Group, its cash flows, liquidity position and borrowing facilities are described in the Financial Review on pages 18 and 19. In addition, Note 21 to the financial statements includes the Group’s objectives, policies and processes for its financial risk management objectives; details of its financial instruments and hedging activities; and its exposures to credit risk and liquidity risk. The Group has recently renewed a £1 million overdraft facility for a further year and this, together with a cash-generative core business and the application of working capital discipline, means that the Group maintains cash levels within its business to meet its short and longer-term objectives. As a consequence, the Directors believe that the Group is well placed to manage its business risks successfully and fully capitalise on the new product opportunities despite continued uncertainties with the macroeconomic outlook. The Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis of accounting in preparing the annual financial statements. By order of the Board Kieron Harbinson Company Secretary 6 July 2015 24 Omega Diagnostics Group PLC Annual Report and Group Financial Statements 2015 Advisers Nominated adviser and broker finnCap Limited 60 New Broad Street London EC2M 1JJ Auditors Ernst & Young LLP G1 5 George Square Glasgow G2 1DY Solicitors Brodies LLP 15 Atholl Crescent Edinburgh EH3 8HA Registrar Share Registrars Limited Suite E First Floor, 9 Lion and Lamb Yard Farnham Surrey GU9 7LL Public relations Walbrook PR Limited 4 Lombard Street London EC3V 9HD Country of incorporation England & Wales Omega Diagnostics Group PLC Registered number: 5017761 Annual Report and Group Financial Statements 2015 25 Omega Diagnostics Group PLC Financial statementsGovernanceStrategic ReportOverview Directors’ Report The Directors present their Annual Report and Group financial statements for the year ended 31 March 2015. Principal activities The principal activity of the Company is as a holding company. The principal activity of the Group is the manufacture, development and distribution of medical diagnostics products. Results and dividends The result for the year is a profit of £739,046 (2014: £692,851) which has been taken to reserves. The Directors do not propose to pay a dividend. The results are disclosed in more detail in the Strategic Report on pages 8 to 19. The Company has taken advantage of the exemption allowed under section 408 of the Companies Act 2006 and has not presented its own income statement in these financial statements. The Company loss for the year ended 31 March 2015 is £434,233 (2014: profit of £65,166). Business review and future development A review of business and future development is discussed in more detail in the Strategic Report. Key performance indicators are disclosed on page 5. Research and development Details of research and development activity are contained in the Financial Review on pages 18 and 19. Costs in the year amounted to £1,807,661 (2014: £1,615,240). Costs of £307,149 in relation to research activities (2014: £245,873) were expensed through the statement of comprehensive income and costs of £1,500,512 in relation to product development (2014: £1,369,367) were capitalised and included within intangible assets as detailed in Note 8. Directors The names of the Directors who have served the Group throughout the year are: – David Evans – Kieron Harbinson – Andrew Shepherd – Jag Grewal – William Rhodes Biographies of all Directors serving at the year end are on pages 20 and 21. Directors’ interests The beneficial interests of Directors who have served throughout the year are listed in the Directors’ Remuneration Report on pages 27 and 28. There are no non-beneficial interests held by Directors. There have been no changes to any Director’s interests in the shares of the Group between 31 March 2015 and the date of this report. Employees The Group encourages communication with its employees and favours an environment where staff can put forward their ideas, suggestions and concerns on any matter that involves them. The Group gives full and fair consideration to applications for employment made by disabled people, having regard to their particular aptitudes and abilities. Where an employee becomes disabled in the course of their employment, where possible, arrangements will be made for appropriate retraining to match their abilities with their duties. Principal risks and uncertainties The Board meets regularly to review operations and to discuss risk areas. The Strategic Report contains details of the Group’s system of internal control. Note 21 to the financial statements contains details of financial risks faced by the Group. Auditors The auditors, Ernst & Young LLP, have indicated their willingness to continue in office and a resolution for their re-appointment will be proposed at the forthcoming Annual General Meeting. Directors’ statement as to disclosure of information to auditors The Directors who were members of the Board at the time of approving the Directors’ Report are listed on pages 20 and 21. Having made enquiries of fellow Directors and of the Company’s auditors, each of these Directors confirms that: – to the best of each Director’s knowledge and belief, there is no information (that is, information needed by the Group’s auditors in connection with preparing their report) of which the Group’s auditors are unaware; and – each Director has taken all the steps a Director might reasonably be expected to have taken to be aware of relevant audit information and to establish that the Group’s auditors are aware of that information. By order of the Board Kieron Harbinson Company Secretary 6 July 2015 Major interests in shares As at 30 June 2015 the following shareholders held more than 3% of the Group’s issued ordinary share capital: Legal & General Investment Management Liontrust Asset Management Octopus Investments Limited Mobeus Equity Partners LLP Hargreaves Lansdown Stockbrokers Richard Sneller Unicorn Asset Management Charles Stanley Stockbrokers SG Private Banking 26 Omega Diagnostics Group PLC Annual Report and Group Financial Statements 2015 Number of 4 pence ordinary shares Percentage 19,476,471 8,711,494 6,676,930 6,541,600 5,005,199 4,400,000 4,266,750 3,918,600 3,350,265 17.91% 8.01% 6.14% 6.02% 4.60% 4.05% 3.92% 3.60% 3.08% Directors’ Remuneration Report As an AIM-quoted company, the Group is not required to produce a remuneration report that satisfies all the requirements of the Companies Act. However, the Directors are committed to providing information on an open basis and present their Remuneration Report as follows: Remuneration Committee The Remuneration Committee is comprised of David Evans and William Rhodes. The Committee meets as and when required to determine and agree with the Board the policy for the remuneration of the Group’s Chief Executive, Chairman and Executive Directors. The objective of this policy shall be to ensure that members of the Executive management of the Group are provided with appropriate incentives to encourage enhanced performance and are, in a fair and reasonable manner, rewarded for their individual contributions to the success of the Group. No Director or manager shall be involved in any decisions as to their own remuneration. Remuneration policy The Group’s policy is that the remuneration arrangements, including pensions, for subsequent financial years should be sufficiently competitive to attract, retain and motivate high quality Executives capable of achieving the Group’s objectives, thereby enhancing shareholder value. Incentive schemes/share option schemes During the prior year, Andrew Shepherd was issued with an option over 800,000 ordinary shares of the Group, Kieron Harbinson was issued with an option over 640,000 ordinary shares of the Group and Jag Grewal was issued with an option over 610,000 ordinary shares of the Group. All of the options were granted on 25 February 2014 and were under the Company’s EMI Option Scheme. William Rhodes was issued in the prior year with an option over 2,130,406 ordinary shares of the Group. The option was granted under the Company’s third Unapproved Option Scheme. Directors’ emoluments Executive Andrew Shepherd Kieron Harbinson Jag Grewal Non-executive David Evans William Rhodes Directors’ service contracts Andrew Shepherd entered into a service contract with the Group on 23 August 2006, under which he was appointed as Chief Executive on an annual salary of £85,000. His salary was increased to £131,250 per annum from 1 April 2009 and then further increased to £145,000 per annum from 1 April 2011. The agreement will continue until terminated by either party giving to the other not less than twelve months’ notice in writing. Kieron Harbinson entered into a service contract with the Group on 23 August 2006, under which he was appointed as Finance Director and Company Secretary on an annual salary of £72,500. His salary was increased to £94,500 per annum from 1 April 2009 and then further increased to £115,000 per annum from 1 April 2011. The agreement will continue until terminated by either party giving to the other not less than three months’ notice in writing. David Evans was appointed a Non-executive Director of the Group on 19 September 2006 and was entitled to an annual fee of £25,000 from 1 April 2008. The agreement will continue until terminated by either party giving to the other not less than one month’s notice in writing. Jag Grewal entered into a service contract with the Group on 30 June 2011, under which he was appointed as an Executive Director on an annual salary of £110,000. The agreement will continue until terminated by either party giving to the other not less than three months’ notice in writing. William Rhodes was appointed a Non-executive Director of the Group on 1 May 2013 and is entitled to an annual fee of £40,000. The agreement will continue until terminated by either party giving to the other not less than one month’s notice in writing. Fees/basic salary £ Bonuses £ Benefits in kind £ Total 2015 £ Total 2014 £ 145,000 115,000 110,000 25,000 40,000 — — — — — 1,789 — 145,000 116,789 — 110,000 145,000 116,561 110,000 — — 25,000 40,000 25,000 36,667 The amounts paid in the year towards Directors’ pension contributions were as follows: Directors’ pension contributions Andrew Shepherd Kieron Harbinson Jag Grewal Directors’ interests in the 4 pence ordinary shares of Omega Diagnostics Group PLC are as follows: David Evans Kieron Harbinson Andrew Shepherd Jag Grewal William Rhodes The Directors have no interests in the shares of subsidiary companies. 2015 £ 7,250 5,750 5,500 2014 £ 7,250 5,750 5,500 31 March 2015 31 March 2014 3,043,634 426,062 2,708,180 99,913 — 2,870,134 363,562 2,677,206 68,604 — Annual Report and Group Financial Statements 2015 27 Omega Diagnostics Group PLC Financial statementsGovernanceStrategic ReportOverview Directors’ Remuneration Report continued Directors’ share options David Evans William Rhodes Andrew Shepherd Kieron Harbinson Jag Grewal At 1 April 2014 Granted during the year Lapsed during the year Exercised during the year At 31 March 2015 Option price pence Date of grant Earliest exercise date Expiry date 390,822 2,130,406 703,480 600,000 800,000 468,987 300,000 640,000 100,000 200,000 610,000 — — — — — — — — — — — — — — — — — — — — — — — 390,822 19.0p 10/12/08 10/12/09 10/12/18 — 2,130,406 15.25p 04/07/13 04/07/16 04/07/23 — 703,480 — 600,000 — 800,000 — 468,987 — 300,000 — 640,000 — 100,000 — 200,000 — 610,000 19.0p 14.5p 30.5p 19.0p 14.5p 30.5p 13.25p 14.5p 30.5p 10/12/08 05/07/12 25/02/14 10/12/08 05/07/12 25/02/14 12/08/11 05/07/12 25/02/14 10/12/09 05/07/15 25/02/17 10/12/09 05/07/15 25/02/17 12/08/12 05/07/15 25/02/17 10/12/18 05/07/22 25/02/24 10/12/18 05/07/22 25/02/24 12/08/21 05/07/22 25/02/24 During the prior year Andrew Shepherd, Kieron Harbinson and Jag Grewal were issued with options under the Company’s EMI Option Scheme and William Rhodes was issued with options under the Company’s third Unapproved Option Scheme. The share price at 31 March 2015 was 13.75 pence. The highest and lowest share prices during the year were 30.50 pence and 13.63 pence respectively. Approved by the Board David Evans Non-executive Director 6 July 2015 28 Omega Diagnostics Group PLC Annual Report and Group Financial Statements 2015 Statement of Directors’ Responsibilities The Directors are responsible for preparing the Annual Report and the Group and Company financial statements in accordance with applicable United Kingdom law and those International Financial Reporting Standards (IFRSs) as adopted by the European Union. The Directors are required to prepare Group and Company financial statements for each financial year end. Under company law, the Directors must not approve the financial statements unless they are satisfied that they present fairly the financial position of the Group and Company, financial performance of the Group and cash flows of the Group and Company for that period. In preparing the Group and Company financial statements, the Directors are required to: – select suitable accounting policies in accordance with IAS 8 – Accounting Policies, Changes in Accounting Estimates and Errors and then apply them consistently; – present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information; – provide additional disclosures when compliance with the specific requirements in IFRSs is insufficient to enable users to understand the impact of particular transactions, other events and conditions on the Group’s financial position and financial performance; – state that the Group and Company has complied with IFRSs, subject to any material departures disclosed and explained in the financial statements; and – make judgements and estimates that are reasonable. The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group’s and Company’s transactions and disclose, with reasonable accuracy at any time, the financial position of the Group and Company and enable them to ensure that the Group and Company financial statements comply with the Companies Act 2006. They are also responsible for safeguarding assets of the Group and Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. Annual Report and Group Financial Statements 2015 29 Omega Diagnostics Group PLC Financial statementsGovernanceStrategic ReportOverview Independent Auditor’s Report to the members of Omega Diagnostics Group PLC We have audited the financial statements of Omega Diagnostics Group PLC for the year ended 31 March 2015 which comprise the consolidated statement of comprehensive income, consolidated balance sheet, consolidated statement of changes in equity, consolidated cash flow statement, Company balance sheet, Company statement of changes in equity, Company cash flow statement and the related Notes 1 to 22. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union and, as regards the parent Company financial statements, as applied in accordance with the provisions of the Companies Act 2006. This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditors’ report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members as a body, for our audit work, for this report, or for the opinions we have formed. Respective responsibilities of Directors and auditor As explained more fully in the Statement of Directors’ Responsibilities on page 29, the Directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors. Scope of the audit of the financial statements An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of whether the accounting policies are appropriate to the Group’s and the parent Company’s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the Directors; and the overall presentation of the financial statements. In addition we read all the financial and non‑financial information in the Annual Report and Group financial statements to identify material inconsistencies with the audited financial statements and to identify any information that is apparently material based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report. Opinion on financial statements In our opinion: – the financial statements give a true and fair view of the state of the Group’s and of the parent Company’s affairs as at 31 March 2015 and of the Group’s profit for the year then ended; – the Group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union; – the parent Company financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union and as applied in accordance with the provisions of the Companies Act 2006; and – the financial statements have been prepared in accordance with the requirements of the Companies Act 2006. Opinion on other matter prescribed by the Companies Act 2006 In our opinion the information given in the Strategic Report and the Directors’ Report for the financial year for which the financial statements are prepared is consistent with the financial statements. Matters on which we are required to report by exception We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion: – adequate accounting records have not been kept by the parent Company, or returns adequate for our audit have not been received from branches not visited by us; or – the parent Company financial statements are not in agreement with the accounting records and returns; or – certain disclosures of Directors’ remuneration specified by law are not made; or – we have not received all the information and explanations we require for our audit. Annie Graham (Senior Statutory Auditor) for and on behalf of Ernst & Young LLP, Statutory Auditor Glasgow 6 July 2015 30 Omega Diagnostics Group PLC Annual Report and Group Financial Statements 2015 Consolidated Statement of Comprehensive Income for the year ended 31 March 2015 Continuing operations Revenue Cost of sales Gross profit Administration costs Selling and marketing costs Other income Operating profit Finance costs Finance income – interest receivable Profit before taxation Tax credit Profit for the year Other comprehensive income to be reclassified to profit and loss in subsequent periods Exchange differences on translation of foreign operations Tax credit Other comprehensive income that will not be reclassified to profit and loss in subsequent periods Actuarial (loss)/gain on defined benefit pensions Tax credit/(charge) Other comprehensive income for the year Total comprehensive income for the year Earnings per share (EPS) Basic and diluted EPS on profit for the year Adjusted Profit Before Taxation for the year ended 31 March 2015 Profit before taxation IFRS‑related discount charges (included within Finance costs) Amortisation of intangible assets (included within Administration costs) Share‑based payment charges (included within Administration costs) Adjusted profit before taxation Earnings per share (EPS) Adjusted EPS on profit for the year Note 2015 £ 2014 £ 7 7 5 7 6 12,105,319 (4,431,671) 11,593,870 (4,223,000) 7,673,648 (5,278,903) (1,894,844) 173,069 7,370,870 (4,741,186) (2,102,359) — 672,970 (30,620) 41,908 684,258 54,788 527,325 (28,975) 44,691 543,041 149,810 739,046 692,851 (523,856) 56,068 (126,514) 13,488 (270,128) 58,228 51,941 (12,071) (679,688) (73,156) 59,358 619,695 20 0.7p 0.7p 2015 £ 684,258 14,941 378,680 295,223 2014 £ 543,041 12,575 414,308 125,987 1,373,102 1,095,911 1.3p 1.2p Adjusted profit before taxation is derived by taking statutory profit before taxation and adding back IFRS‑related discount charges, amortisation of intangible assets, share‑based payment charges, acquisition costs and fair value adjustments to financial derivatives. This is not a primary statement. Annual Report and Group Financial Statements 2015 31 Omega Diagnostics Group PLC Financial StatementsGovernanceStrategic ReportOverview Note 2015 £ 2014 £ 8 9 14 18 10 11 12 14 13 18 12 13 13 12,104,723 2,429,233 1,530,777 — 11,259,215 2,283,911 1,138,404 84,370 16,064,733 14,765,900 2,062,095 2,539,851 1,972,137 1,692,941 2,415,917 3,116,013 6,574,083 7,224,871 22,638,816 21,990,771 16,727,516 2,792,842 (707,208) 16,727,516 1,914,405 (183,352) 18,813,150 18,458,569 315,446 1,266,213 83,394 192,907 319,044 1,042,925 — — 1,857,960 1,361,969 237,772 1,542,059 187,875 427,823 1,386,358 356,052 1,967,706 2,170,233 3,825,666 3,532,202 22,638,816 21,990,771 Consolidated Balance Sheet as at 31 March 2015 ASSETS Non-current assets Intangibles Property, plant and equipment Deferred taxation Retirement benefit surplus Total non‑current assets Current assets Inventories Trade and other receivables Cash and cash equivalents Total current assets Total assets EQUITY AND LIABILITIES Equity Issued capital Retained earnings Other reserves Total equity Liabilities Non-current liabilities Long‑term borrowings Deferred taxation Deferred income Retirement benefit deficit Total non‑current liabilities Current liabilities Short‑term borrowings Trade and other payables Deferred income Total current liabilities Total liabilities Total equity and liabilities David Evans Non-executive Chairman 6 July 2015 Kieron Harbinson Finance Director 6 July 2015 Omega Diagnostics Group PLC Registered number: 5017761 32 Omega Diagnostics Group PLC Annual Report and Group Financial Statements 2015 Consolidated Statement of Changes in Equity for the year ended 31 March 2015 Share capital £ Share premium £ Retained earnings £ Translation reserve* £ Total £ Balance at 31 March 2013 4,145,580 8,831,527 1,042,209 (56,838) 13,962,478 Issue of share capital for cash consideration Expenses in connection with share issue Profit for the year ended 31 March 2014 Other comprehensive income – net exchange adjustments Other comprehensive income – actuarial gain on defined benefit pensions Other comprehensive income – tax credit Total comprehensive income for the year Share‑based payments 941,176 — — — — — — — 3,058,824 (249,591) — — — — — — — — 692,851 — 51,941 1,417 746,209 125,987 — — — (126,514) — — (126,514) — 4,000,000 (249,591) 692,851 (126,514) 51,941 1,417 619,695 125,987 Balance at 31 March 2014 5,086,756 11,640,760 1,914,405 (183,352) 18,458,569 Profit for the year ended 31 March 2015 Other comprehensive income – net exchange adjustments Other comprehensive income – actuarial loss on defined benefit pensions Other comprehensive income – tax credit Total comprehensive income for the year Share‑based payments — — — — — — — — — — — — 739,046 — (270,128) 114,296 583,214 295,223 — (523,856) — — (523,856) — 739,046 (523,856) (270,128) 114,296 59,358 295,223 Balance at 31 March 2015 5,086,756 11,640,760 2,792,842 (707,208) 18,813,150 * A translation reserve has been shown separately for the first time in the current year following significant exchange rate movements creating a material net exchange adjustment. Prior to this year, the impact of net exchange adjustments was shown cumulatively within the retained earnings reserves on the grounds of immateriality. Annual Report and Group Financial Statements 2015 33 Omega Diagnostics Group PLC Financial StatementsGovernanceStrategic ReportOverview Consolidated Cash Flow Statement for the year ended 31 March 2015 Cash flows generated from operations Profit for the year Adjustments for: Taxation Finance costs Finance income Operating profit before working capital movement (Increase)/decrease in trade and other receivables (Increase)/decrease in inventories Increase/(decrease) in trade and other payables Gain on sale of property, plant and equipment Depreciation Amortisation of intangible assets Movement in grants Share‑based payments Taxation received Cash flow from operating activities Investing activities Finance income Purchase of property, plant and equipment Purchase of intangible assets Sale of property, plant and equipment Net cash used in investing activities Financing activities Finance costs Proceeds from issue of share capital Expenses of share issue New finance leases Loan repayments Finance lease repayments Net cash (used in)/from financing activities Net (decrease)/increase in cash and cash equivalents Effects of exchange rate movements Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year Note 2015 £ 2014 £ 739,046 692,851 9 8 9 (54,788) 30,620 (41,908) 672,970 (123,934) (369,154) 155,701 (1,777) 324,967 378,680 (84,783) 295,223 — (149,810) 28,975 (44,691) 527,325 140,845 140,946 (297,791) (11,224) 265,553 414,308 356,052 125,987 7,106 1,247,893 1,669,107 41,908 (701,565) (1,394,146) 8,367 44,691 (478,968) (1,880,845) 32,500 (2,045,436) (2,282,622) (21,793) — — 247,500 (360,000) (89,976) (13,057) 4,000,000 (249,591) 282,365 (360,000) (43,538) (224,269) 3,616,179 (1,021,812) (122,064) 3,116,013 3,002,664 (47,344) 160,693 1,972,137 3,116,013 34 Omega Diagnostics Group PLC Annual Report and Group Financial Statements 2015 Company Balance Sheet as at 31 March 2015 ASSETS Non-current assets Investments Intangibles Deferred taxation Total non‑current assets Current assets Trade and other receivables Cash and cash equivalents Total current assets Total assets EQUITY AND LIABILITIES Equity Issued capital Retained earnings Total equity Liabilities Non-current liabilities Long‑term borrowings Total non‑current liabilities Current liabilities Short‑term borrowings Trade and other payables Total current liabilities Total liabilities Total equity and liabilities David Evans Non-executive Chairman 6 July 2015 Kieron Harbinson Finance Director 6 July 2015 Omega Diagnostics Group PLC Registered number: 5017761 Note 2015 £ 2014 £ 19 8 11 12 12 13 11,533,366 1,531,786 3,349 11,170,267 1,531,786 125,613 13,068,501 12,827,666 4,441,098 931,928 4,107,038 1,987,153 5,373,026 6,094,191 18,441,527 18,921,857 17,717,191 416,171 17,717,191 555,181 18,133,362 18,272,372 — — 111,526 111,526 120,353 187,812 360,000 177,959 308,165 537,959 308,165 649,485 18,441,527 18,921,857 Annual Report and Group Financial Statements 2015 35 Omega Diagnostics Group PLC Financial StatementsGovernanceStrategic ReportOverview Company Statement of Changes in Equity for the year ended 31 March 2015 Balance at 31 March 2013 Issue of share capital for cash consideration Expenses in connection with share issue Profit for the year ended 31 March 2014 Total comprehensive income for the year Share‑based payments Balance at 31 March 2014 Loss for the year ended 31 March 2015 Total comprehensive income for the year Share‑based payments Balance at 31 March 2015 Share capital £ Share premium £ Retained earnings £ Total £ 4,517,862 9,448,920 364,028 14,330,810 941,176 — 3,058,824 (249,591) — — 4,000,000 (249,591) — — — — — — 65,166 65,166 65,166 125,987 65,166 125,987 5,459,038 12,258,153 555,181 18,272,372 — — — — — — (434,233) (434,233) (434,233) 295,223 (434,233) 295,223 5,459,038 12,258,153 416,171 18,133,362 36 Omega Diagnostics Group PLC Annual Report and Group Financial Statements 2015 Company Cash Flow Statement for the year ended 31 March 2015 Cash flows generated from operations (Loss)/profit for the year Adjustments for: Taxation Finance costs Finance income Operating loss before working capital movement (Increase)/decrease in trade and other receivables Increase/(decrease) in trade and other payables Share‑based payments Net cash flow from operating activities Investing activities Finance income Purchase of intangible assets Investment in subsidiaries Net cash used in investing activities Financing activities Proceeds from issue of share capital Expenses of share issue Loan repayments Net cash flow (used in)/from financing activities Net (decrease)/increase in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year 2015 £ 2014 £ (434,233) 65,166 122,263 8,827 (102,911) (406,054) (334,060) 9,853 295,223 (125,613) 15,918 (113,984) (158,513) 20,873 (482,906) 125,987 (435,038) (494,559) 102,911 — (363,098) 113,983 (525,021) (241,339) (260,187) (652,377) — — (360,000) 4,000,000 (249,591) (360,000) (360,000) 3,390,409 (1,055,225) 1,987,153 2,243,473 (256,320) 931,928 1,987,153 Annual Report and Group Financial Statements 2015 37 Omega Diagnostics Group PLC Financial StatementsGovernanceStrategic ReportOverview Notes to the Financial Statements for the year ended 31 March 2015 1 Authorisation of financial statements The financial statements of Omega Diagnostics Group PLC for the year ended 31 March 2015 were authorised for issue by the Board of Directors on 6 July 2015, and the balance sheets were signed on the Board’s behalf by David Evans and Kieron Harbinson. Omega Diagnostics Group PLC is a public limited company incorporated in England. The Company’s ordinary shares are traded on AIM. 2 Accounting policies Basis of preparation The accounting policies which follow set out those policies which have been applied consistently to all periods presented in these financial statements. These financial statements are presented in sterling and have been prepared in accordance with IFRSs as adopted by the EU and applied in accordance with the provisions of the Companies Act 2006. In relation to IFRS 8 – Operating Segments, the Group has identified the Executive Board as the chief operating decision maker with responsibility for decisions over the allocation of resources to operating segments and for the monitoring of their performance. The Group reports performance of the following three segments: – Allergy and Autoimmune – Food Intolerance – Infectious Disease and Other Basis of consolidation The Group financial statements consolidate the financial statements of Omega Diagnostics Group PLC and the entities it controls (its subsidiaries). Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. 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. Intangible assets Goodwill Business combinations are accounted for under IFRS 3 using the acquisition method. Goodwill represents the excess of the cost of the business combination over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities. Goodwill is not amortised but is subject to an annual impairment review and whenever events or changes in circumstances indicate that the carrying value may be impaired a charge is made to the income statement. After initial recognition, goodwill is stated at cost less any accumulated impairment losses. For the purpose of impairment testing, goodwill is allocated to the related cash‑generating units monitored by management, usually at business segment level or statutory Company level as the case may be. Where the recoverable amount of the cash‑generating unit is less than its carrying amount, including goodwill, an impairment loss is recognised in the income statement. Other intangible assets Intangible assets acquired as part of a business combination are recognised outside goodwill if the asset is separable or arises from contractual or other legal rights and its fair value can be measured reliably. Following initial recognition at fair value at the acquisition date, the historic cost model is applied, with intangible assets being carried at cost less accumulated amortisation and accumulated impairment losses. Intangible assets with a finite life have no residual value and are amortised on a straight line basis over the expected useful lives, with charges included in administration costs, as follows: Technology assets – 5–20 years Customer relationships – 5–10 years Supply agreements – 5 years Licences/software – 5–20 years The carrying value of intangible assets is reviewed for impairment whenever events or changes in circumstances indicate the carrying value may not be recoverable. Research and development costs Expenditure on research and initial feasibility work is written off through the income statement as incurred. Thereafter, expenditure on product development which meets certain criteria is capitalised and amortised over its useful life. The stage at when it is probable that the product will generate future economic benefits is when the following criteria have been met: technical feasibility; intention and ability to sell the product; availability of resources to complete the development of the product; and the ability to measure the expenditure attributable to the product. The useful life of the intangible asset is determined on a product‑by‑product basis, taking into consideration a number of factors. Development costs previously recognised as an expense are not recognised as an asset in a subsequent period. Property, plant and equipment Property, plant and equipment are stated at cost less accumulated depreciation and any accumulated impairment losses. Depreciation is charged so as to write off the cost of assets to their estimated residual values over their estimated useful lives, on a straight line basis as follows: Land and property – 33 years, straight line with no residual value Leasehold improvements – 10 years, straight line with no residual value Plant and machinery – 3–10 years, straight line with no residual value Motor vehicles – 5 years, straight line with no residual value The carrying values of property, plant and equipment are reviewed for impairment if events or changes in circumstances indicate the carrying value may not be recoverable, and are written down immediately to their recoverable amount. Useful lives are reviewed annually and, where adjustments are required, these are made prospectively. 38 Omega Diagnostics Group PLC Annual Report and Group Financial Statements 2015 2 Accounting policies continued Impairment of assets The Group and Company assess at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, the Group and Company makes an estimate of the asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or cash‑generating unit’s fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered to be impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their net present value, using a pre‑tax discount rate that reflects current market assessments of the time value of money and the risks specific to that asset. Impairment losses on continuing operations are recognised in the income statement in those expense categories consistent with the function of the impaired asset. Inventories Inventories are stated at the lower of cost and net realisable value. Cost is defined as standard cost or purchase price and includes all direct costs incurred in bringing each product to its present location and condition. Net realisable value is based on estimated selling price less any further costs expected to be incurred prior to completion and disposal. Trade receivables Trade receivables are recognised initially at fair value and subsequently measured at the lower of original invoice amount and recoverable amount. A provision for doubtful amounts is made when there is objective evidence that collection of the full amount is no longer probable. Significant financial difficulty or significantly extended settlement periods are considered to be indicators of impairment. Normal average payment terms vary from payment in advance to 90 days. Balances are written off when the probability of recovery is assessed as remote. Cash and cash equivalents Cash and cash equivalents in the balance sheet comprise cash at banks and in hand and short‑term deposits with an original maturity of three months or less. Financial instruments Under IAS 39, financial assets, liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities. Financial assets are classified as either: – financial assets at fair value through profit or loss; or – loans and receivables. Financial assets at fair value through profit or loss The Group uses derivative financial instruments to reduce its exposure to fluctuations in interest rates, both in sterling and US dollars. The Group does not hold or issue derivatives for speculative or trading purposes. Derivative financial instruments with positive fair values are recognised as assets measured at their fair values at the balance sheet date. The fair value of interest rate contracts is determined by reference to market values for similar instruments that have similar maturities. Changes in fair value are recognised in the income statement included in finance costs, due to the fact that hedge accounting has not been applied. Loans and receivables Trade receivables that do not carry any interest and have fixed or determinable payment amounts that are not quoted in an active market are classified as loans and receivables. Loans and receivables with a maturity of less than twelve months are included in current assets and are measured at amortised cost using the effective interest method as reduced by appropriate allowances for estimated irrecoverable amounts. Financial liabilities are classified as either: – financial liabilities at fair value through profit or loss; or – other liabilities. Financial liabilities at fair value through profit or loss The Group uses derivative financial instruments to reduce its exposure to fluctuations in interest rates, both in sterling and US dollars. The Group does not hold or issue derivatives for speculative or trading purposes. Derivative financial instruments with negative fair values are recognised as liabilities measured at their fair values at the balance sheet date. The fair value of interest rate contracts is determined by reference to market values for similar instruments that have similar maturities. Changes in fair value are recognised in the income statement in finance costs, due to the fact that hedge accounting has not been applied. Other financial liabilities, whether used as part of the consideration for acquisitions which include deferred consideration or not, are designated by the Group as financial liabilities at fair value through profit and loss. They are measured at the present value of the consideration expected to be payable by discounting the expected future cash flows at prevailing interest rates. At initial recognition, the quantum of liability to be recognised will depend upon management’s expectation, at that date, of the amount that would ultimately be payable. Where there is a change in the expectation of future cash flows or interest rates, the change is reflected through the income statement. Annual Report and Group Financial Statements 2015 39 Omega Diagnostics Group PLC Financial StatementsGovernanceStrategic ReportOverview Notes to the Financial Statements continued for the year ended 31 March 2015 2 Accounting policies continued Financial instruments continued Other liabilities Trade payables are not interest bearing and are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method. Bank borrowings are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method. For long‑term bank borrowings stated at amortised cost, transaction costs that are directly attributable to the borrowing instrument are recognised as an interest expense over the life of the instrument. A financial asset or liability is generally derecognised when the contract that gives rise to it is settled, sold or cancelled or expires. Where an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and recognition of the new liability, such that the difference in the respective carrying amounts together with any costs or fees incurred are recognised. Financial assets and liabilities that are held for trading and other assets and liabilities designated as such on inception are included at fair value through profit and loss. Financial assets and liabilities are classified as held for trading if they are acquired for sale in the short term. Derivatives are also classified as held for trading unless they are designated as hedge instruments. Assets are carried in the balance sheet at fair value with gains or losses recognised in the income statement. Company’s investments in subsidiaries The Company recognises its investments in subsidiaries at cost. The carrying value of investments is reviewed for impairment whenever events or changes in circumstances indicate the carrying value may not be recoverable. Presentation currency The financial statements are presented in UK pounds sterling. Transactions in currencies other than sterling are recorded at the prevailing rate of exchange at the date of the transaction. At each balance sheet date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the balance sheet date. Foreign currencies Non‑monetary assets and liabilities that are denominated in foreign currencies are translated at the rates prevailing at the date of the transaction. Gains and losses arising on retranslation are included in the net profit or loss for the year. The trading results of the overseas subsidiaries are translated at the average exchange rate ruling during the year, with the exchange difference between the average rates and the rates ruling at the balance sheet date being taken to reserves. Any difference arising on the translation of the opening net investment, in the overseas subsidiaries, and of applicable foreign currency loans are dealt with as adjustments to reserves. Revenue recognition Revenue is measured at the fair value of the consideration received or receivable and net of discounts and sales‑related taxes. Sales of goods are recognised when the significant risks and rewards of ownership are transferred to the customer. This will be when goods have been dispatched and the collection of the related receivable is reasonably assured. Revenue relates to the sale of medical diagnostic kits. Grants Grants are recognised when it is reasonable to expect that the grants will be received and that all related conditions will be met, usually on submission of a valid claim for payment. Grants in respect of capital expenditure are credited to a deferred income account and are released to the income statement over the expected useful lives of the relevant assets by equal annual instalments. Revenue grants are credited to the income statement as and when the relevant expenditure is incurred. Leasing and hire purchase commitments Assets held under finance leases and hire purchase contracts are capitalised in the balance sheet and are depreciated over the shorter of their lease period and useful life. The corresponding lease or hire purchase obligation is capitalised in the balance sheet as a liability. The interest element of the rental obligation is charged to the income statement over the period of the lease and represents a constant proportion of the balance of capital repayments outstanding. Rentals applicable to operating leases, where substantially all the benefits and risks remain with the lessor, are charged against profits on a straight line basis over the period of the lease. Share-based payments Equity-settled transactions For equity‑settled transactions, the Group measures the award by reference to the fair value at the date at which they are granted and it is recognised as an expense over the vesting period, which ends on the date on which the relevant employees become fully entitled to the award. Fair value is determined using an appropriate pricing model. In valuing equity‑settled transactions, no account is taken of any service and performance (vesting conditions), other than conditions linked to the price of the shares of the Company (market conditions). Any other conditions which are required to be met in order for an employee to become fully entitled to an award are considered to be non‑vesting conditions. Like market performance conditions, non‑vesting conditions are taken into account in determining grant date fair value. No expense is recognised for awards that do not ultimately vest, except for awards where vesting is conditional upon a market or non‑vesting condition, which are treated as vesting irrespective of whether or not the market or non‑vesting condition is satisfied, provided that all other performance conditions are satisfied. At each balance sheet date before vesting, the cumulative expense is calculated, representing the extent to which the vesting period has expired and management’s best estimate of the achievement or otherwise of vesting conditions and of the number of equity instruments that will ultimately vest or, in the case of an instrument subject to a market or non‑vesting condition, be treated as vesting as described above. This includes any award where non‑vesting conditions within the control of the Group or the employee are not met. The movement in cumulative expense since the previous balance sheet date is recognised in the income statement, with a corresponding entry in equity. Where the terms of an equity‑settled award are modified or a new award is designated as replacing a cancelled or settled award, the cost based on the original award terms continues to be recognised over the original vesting period. In addition, an expense is recognised over the remainder of the new vesting period for the incremental fair value of any modification, based on the difference between the fair value of the original award and the fair value of the modified award, both as measured on the date of the modification. No reduction is recognised if this difference is negative. 40 Omega Diagnostics Group PLC Annual Report and Group Financial Statements 2015 2 Accounting policies continued Share-based payments continued Equity-settled transactions continued Where an equity‑settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any cost not yet recognised in the income statement for the award is expensed immediately. Any compensation paid up to the fair value of the award at the cancellation or settlement date is deducted from equity, with any excess over fair value being treated as an expense in the income statement. Pension contributions Contributions to personal pension plans of employees on a defined contribution basis are charged to the income statement in the year in which they are payable. The Group also operates two defined benefit plans in Germany, which are closed to new members. Obligations under defined benefit plans are measured at discounted present values by actuaries, while plan assets are recorded at fair value. The operating and financing costs of pensions are charged to the income statement in the period in which they arise and are recognised separately. The difference between actual and expected returns on assets during the year, including changes in actuarial assumptions, are recognised in the statement of comprehensive income. Income taxes Current tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities, based on tax rates and laws that are enacted or substantively enacted by the balance sheet date. Deferred income tax is recognised on all temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements, with the following exceptions: – where the temporary difference arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss; – in respect of taxable temporary differences associated with investments in subsidiaries, associates and joint ventures, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future; and – deferred income tax assets are recognised only to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, carried forward tax credits or tax losses can be utilised. Deferred income tax assets and liabilities are measured on an undiscounted basis at the tax rates that are expected to apply when the related asset is realised or the liability is settled, based on tax rates and laws enacted or substantively enacted at the balance sheet date. Income tax and deferred tax is charged or credited in other comprehensive income or directly to equity if it relates to items that are credited or charged in other comprehensive income or directly to equity. Otherwise, income tax and deferred tax are recognised in profit or loss. Use of estimates and judgements The preparation of these financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected. The significant areas of estimation and uncertainty and critical judgements in applying the accounting policies that have the most significant effect on the amounts recognised in the financial information are discussed overleaf. Further judgements, assumptions and estimates are set out in the Group financial statements. Valuation of intangible assets Management judgement is required to estimate the useful lives of intangible assets, having reference to future economic benefits expected to be derived from use of the asset. Economic benefits are based on the fair values of estimated future cash flows. Impairment of goodwill Goodwill is tested annually for impairment. The test considers future cash flow projections of cash‑generating units that give rise to the goodwill. Where the discounted cash flows are less than the carrying value of goodwill, an impairment charge is recognised for the difference. Further analysis of the estimates and judgements is disclosed in Note 8. Deferred tax assets Management judgement is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and level of future taxable profits together with an assessment of the effect of future tax planning strategies. The carrying value of the deferred tax asset at 31 March 2015 is £1,530,777 (2014: £1,138,404). Further details are contained in Note 14. New standards and interpretations not applied IASB and IFRIC have issued the following standards and interpretations, which are considered relevant to the Group, with an effective date after the date of these financial statements. International Accounting Standards (IAS/IFRSs) IAS 1 IAS 16 and IAS 38 AIP IAS 19 IFRS 9 IFRS 15 Disclosure Initiative – Amendments to IAS 1 Clarification of Accountable Methods of Depreciation and Amortisation Employee Benefits – Discount rate: regional market issue Financial Instruments Revenue from Contracts with Customers Effective date (annual periods beginning on or after) 1 January 2016 1 January 2016 1 January 2016 1 January 2018 1 January 2017 The above standards and interpretations will be adopted in accordance with their effective dates and have not been adopted in these financial statements. The Directors do not anticipate that the adoption of these standards and interpretations will have a material impact on the Group’s financial statements in the period of initial application. Annual Report and Group Financial Statements 2015 41 Omega Diagnostics Group PLC Financial StatementsGovernanceStrategic ReportOverview Notes to the Financial Statements continued for the year ended 31 March 2015 3 Adoption of new International Financial Reporting Standards The accounting policies adopted are consistent with those of the previous financial year. The following standards were adopted with no material impact – IFRS 10 and IAS 36 (Amendment). 4 Segment information For management purposes the Group is organised into three operating divisions: Allergy and Autoimmune, Food Intolerance, and Infectious Disease and Other. The Allergy and Autoimmune division specialises in the research, development, production and marketing of in‑vitro allergy and autoimmune tests used by doctors to diagnose patients with allergies and autoimmune diseases. The Food Intolerance division specialises in the research, development and production of kits to aid the detection of immune reactions to food. It also provides clinical analysis to the general public, clinics and health professionals as well as supplying the consumer Food Detective® test. The Infectious Disease division specialises in the research, development and production and marketing of kits to aid the diagnosis of infectious diseases. Corporate consists of centralised corporate costs which are not allocated across the three business divisions. Inter‑segment transfers or transactions are entered into under the normal commercial conditions that would be available to unrelated third parties. Business segment information 2015 Statutory presentation Revenue Inter‑segment revenue Total revenue Operating costs Operating (loss)/profit Net finance (costs)/income (Loss)/profit before taxation Adjusted profit before taxation (Loss)/profit before taxation IFRS‑related discount charges Amortisation of intangible assets Share‑based payment charges Allergy and Autoimmune £ Food Intolerance £ Infectious Disease/ Other £ Corporate £ Group £ 3,698,302 (84,478) 7,449,037 (1,502,610) 2,712,236 (167,168) — — 13,859,575 (1,754,256) 3,613,824 (3,851,938) 5,946,427 (3,873,796) 2,545,068 (2,812,507) — (894,108) 12,105,319 (11,432,349) (238,114) (61,172) 2,072,631 169 (267,439) (21,794) (894,108) 94,085 672,970 11,288 (299,286) 2,072,800 (289,233) (800,023) 684,258 (299,286) — 261,171 — 2,072,800 — 98,901 — (289,233) — 18,608 — (800,023) 14,941 — 295,223 684,258 14,941 378,680 295,223 Adjusted (loss)/profit before taxation (38,115) 2,171,701 (270,625) (489,859) 1,373,102 2014 Statutory presentation Revenue Inter‑segment revenue Total revenue Operating costs Operating (loss)/profit Net finance (costs)/income (Loss)/profit before taxation Adjusted profit before taxation (Loss)/profit before taxation IFRS‑related discount charges Amortisation of intangible assets Share‑based payment charges Allergy and Autoimmune £ Food Intolerance £ Infectious Disease/ Other £ Corporate £ Group £ 4,086,060 (119,442) 6,307,793 (1,130,298) 2,616,700 (166,943) — — 13,010,553 (1,416,683) 3,966,618 (4,033,421) 5,177,495 (3,618,695) 2,449,757 (2,558,105) — (856,324) 11,593,870 (11,066,545) (66,803) (69,812) 1,558,800 323 (108,348) (12,859) (856,324) 98,064 527,325 15,716 (136,615) 1,559,123 (121,207) (758,260) 543,041 (136,615) — 288,989 — 1,559,123 — 98,885 — (121,207) — 26,434 — (758,260) 12,575 — 125,987 543,041 12,575 414,308 125,987 Adjusted profit/(loss) before taxation 152,374 1,658,008 (94,773) (619,698) 1,095,911 42 Omega Diagnostics Group PLC Annual Report and Group Financial Statements 2015 4 Segment information continued Business segment information continued The segment assets and liabilities are as follows: 2015 Segment assets Unallocated assets Total assets Segment liabilities Unallocated liabilities Total liabilities 2014 Segment assets Unallocated assets Total assets Segment liabilities Unallocated liabilities Total liabilities Allergy and Autoimmune £ Food Intolerance £ 9,074,314 — 6,205,627 — Infectious Disease/ Other £ 3,840,498 — Corporate £ Group £ 15,463 — 19,135,902 3,502,914 9,074,314 6,205,627 3,840,498 15,463 22,638,816 433,446 — 558,426 — 862,075 — 152,288 — 2,006,235 1,819,431 433,446 558,426 862,075 152,288 3,825,666 Allergy and Autoimmune £ 8,942,934 — Food Intolerance £ 6,062,066 — Infectious Disease/ Other £ 2,730,161 — Corporate £ Group £ 1,193 — 17,736,354 4,254,417 8,942,934 6,062,066 2,730,161 1,193 21,990,771 195,440 — 396,536 — 994,550 — 155,884 — 1,742,410 1,789,792 195,440 396,536 994,550 155,884 3,532,202 Unallocated assets comprise cash, income tax receivable, deferred taxation and derivative financial instruments. Unallocated liabilities comprise interest‑bearing loans, borrowings, other financial liabilities, derivative financial instruments, deferred taxation and income tax payable. Information about major customers No single customer accounts for 10% or more of Group revenues. Geographical information The Group’s geographical information is based on the location of its markets and customers. Sales to external customers disclosed in the geographical information are based on the geographical location of its customers. The analysis of segment assets and capital expenditure is based on the geographical location of the assets. Revenues UK Germany Rest of Europe North America South/Central America India Asia and Far East Africa and Middle East 2015 Assets UK Germany India Unallocated assets Total assets 2015 £ 2014 £ 979,964 3,074,157 3,381,582 515,963 904,276 480,138 1,439,271 1,329,968 841,880 3,503,074 3,084,683 393,761 714,672 450,805 1,094,649 1,510,346 12,105,319 11,593,870 Intangibles £ Property, plant and equipment £ Retirement benefit surplus £ Inventories £ Trade and other receivables £ Total £ 9,965,739 2,135,073 3,911 — 1,539,531 792,576 97,126 — 12,104,723 2,429,233 — — — — — 1,373,913 614,069 74,113 — 2,058,699 328,075 153,077 — 14,937,882 3,869,793 328,227 3,502,914 2,062,095 2,539,851 22,638,816 Annual Report and Group Financial Statements 2015 43 Omega Diagnostics Group PLC Financial StatementsGovernanceStrategic ReportOverview Notes to the Financial Statements continued for the year ended 31 March 2015 Intangibles £ 8,608,729 2,646,298 4,188 — Property, plant and equipment £ Retirement benefit surplus £ 1,313,607 951,920 18,384 — — 84,370 — — Trade and other receivables £ 2,008,074 283,135 124,708 — Total £ 12,793,116 4,727,802 215,436 4,254,417 Inventories £ 862,706 762,079 68,156 — 11,259,215 2,283,911 84,370 1,692,941 2,415,917 21,990,771 4 Segment information continued Geographical information continued 2014 Assets UK Germany India Unallocated assets Total assets Liabilities UK Germany India Unallocated liabilities Total liabilities Capital expenditure UK Germany India Total capital expenditure 5 Finance costs Consolidated Interest payable on loans and bank overdrafts Unwinding of discounts Finance leases 6 Taxation Consolidated (a) Tax credited in the income statement Current tax – current year Current tax – prior year adjustment Deferred tax – current year Deferred tax – prior year adjustment (b) Tax relating to items charged or credited to other comprehensive income Deferred tax on actuarial loss/(gain) on retirement benefit obligations Deferred tax on net exchange adjustments Total tax credit 44 Omega Diagnostics Group PLC Annual Report and Group Financial Statements 2015 2015 £ 2014 £ 1,762,243 159,255 84,737 1,819,431 1,546,872 139,128 56,410 1,789,792 3,825,666 3,532,202 537,071 78,125 86,369 457,306 20,392 1,270 701,565 478,968 2015 £ 4,708 7,792 18,120 30,620 2014 £ 6,872 13,118 8,985 28,975 2015 £ 2014 £ — — 62,161 (7,373) — — 316,525 (166,715) 54,788 149,810 58,228 56,068 114,296 (12,071) 13,488 1,417 6 Taxation continued Consolidated (c) Reconciliation of total tax credit Factors affecting the tax charge for the year: Profit before tax Effective rate of taxation Profit before tax multiplied by the effective rate of tax Effects of: Expenses not deductible for tax purposes and permanent differences Other timing differences Research and development and deferred tax credits Movement on deferred tax arising from share‑based payments Tax under provided in prior years Adjustment due to different overseas tax rate Impact of UK rate change on deferred tax Tax credit for the year 2015 £ 2014 £ 684,258 543,041 21% 23% 143,694 124,899 65,054 — (362,447) 125,613 7,373 (29,449) (4,626) 4,191 28,977 (319,240) (125,613) 166,715 (9,512) (20,227) (54,788) (149,810) The rate of corporation tax reduced from 24% to 23%, effective from 1 April 2013, and to 21%, effective from 1 April 2014. A reduction to 20%, effective from 1 April 2015, was included in the Finance Act 2014 which was enacted on 17 July 2014. This rate will continue to apply per the Finance Act 2015 which was given Royal Assent on 26 March 2015. The deferred tax balances as at 31 March 2015 have been recognised at a rate of 20% as this is the rate at which deferred tax is expected to reverse. 7 Revenue and expenses Consolidated Revenue and other income Revenue – sales of goods Other income Finance income Total revenue and other income Other income is explained in the Financial Review. Consolidated Operating profit is stated after charging/(crediting): Material costs Depreciation Capitalised depreciation Amortisation of intangibles Net foreign exchange (gains)/losses Grant income Research costs Operating lease rentals Share‑based payments Auditors’ remuneration Fees payable to the Company’s auditors for the audit of the annual accounts: Local statutory audit of subsidiaries Local statutory audit of the parent Company Fees payable to the Company’s auditors for other services: Taxation compliance Taxation advisory All research costs noted above were charged directly to administration costs in the income statement. Staff costs The average monthly number of employees (including Directors) was: Consolidated Operations Management and administration Employee numbers 2015 £ 2014 £ 12,105,319 173,069 41,908 11,593,870 — 44,691 12,320,296 11,638,561 2015 £ 2014 £ 3,282,791 444,048 (119,081) 378,680 (5,803) 126,283 307,149 260,501 295,223 20,000 50,000 5,000 12,500 2,000 3,077,807 265,553 — 414,308 73,596 — 245,873 252,904 125,987 20,000 50,000 5,000 12,500 2,000 2015 number 2014 number 87 59 146 81 54 135 Annual Report and Group Financial Statements 2015 45 Omega Diagnostics Group PLC Financial StatementsGovernanceStrategic ReportOverview Notes to the Financial Statements continued for the year ended 31 March 2015 7 Revenue and expenses continued Staff costs continued Their aggregate remuneration comprised: Wages and salaries Social security costs Pension costs Share‑based payments Equity-settled share-based payments Consolidated and Company The share‑based payment plans are described below. 2015 £ 4,059,395 506,435 173,807 295,223 2014 £ 4,010,042 484,770 189,353 125,987 5,034,860 4,810,152 EMI Option Scheme and Unapproved Option Scheme The plans are equity‑settled plans and the fair value is measured at the grant date. Under the above plans, share options are granted to Directors and employees of the Company. The exercise price of the option is equal to the market price of the shares on the date of grant. The options vest one year after the date of grant and do not require to be the subject of any performance criteria. The scheme rules allow for performance criteria to be applied in appropriate cases. The fair value of the options is estimated at the grant date using the Black‑Scholes pricing model, taking into account the terms and conditions upon which the instruments were granted. The contractual life of each option granted is ten years and there is no cash settlement alternative. Second Unapproved Option Scheme (SUOS) The plan is an equity‑settled plan and the fair value is measured at the grant date. Under the above plan, share options may be granted to third parties for provision of services to the Company. The exercise price of the option is equal to the market price of the shares on the date of grant. The options vest three years after the date of grant and are not subject to any performance criteria. The fair value of the options is estimated at the grant date using the Black‑Scholes pricing model, taking into account the terms and conditions upon which the instruments were granted. The contractual life of each option granted is ten years and there is no cash settlement alternative. Third Unapproved Option Scheme (TUOS) The plan is an equity‑settled plan and the fair value is measured at the grant date. Under the above plan, share options may be granted to Directors of the Company. The exercise price of the option is equal to the market price of the shares on the date of grant. The options vest three years after the date of grant and are subject to performance criteria. The fair value of the options is estimated at the grant date using the Black‑Scholes pricing model, taking into account the terms and conditions upon which the instruments were granted. The contractual life of each option granted is ten years and there is no cash settlement alternative. Under the EMI Option Scheme no options lapsed during the year and a further 20,000 were granted. Under the third Unapproved Option Scheme (TUOS) during the year no options were granted. The following table illustrates the number and weighted average exercise prices (WAEP) of, and movements in, share options during the year: Outstanding 1 April Granted during the year under the EMI Option Scheme Granted during the year under the TUOS Exercised during the year Lapsed during the year under the EMI Option Scheme Outstanding at 31 March 2015 Exercisable at 31 March 2015 2015 number 8,978,695 20,000 — — — 8,998,695 2,633,289 2015 WAEP 20.96p 18.5p — — — — — 2014 number 3,598,289 3,320,000 2,130,406 — (70,000) 8,978,695 2,498,289 2014 WAEP 17.9p 29.26p 15.25p — — — — The following table lists the inputs to the model used for the years ended 31 March 2015 and 31 March 2014: Dividend yield Expected volatility Risk‑free interest rate Weighted average remaining contractual life Weighted average share price Exercise price Model used 46 Omega Diagnostics Group PLC Annual Report and Group Financial Statements 2015 EMI Option Scheme and Unapproved Option Schemes 2015 2014 0% 41% 5% 6.7 18.5p 18.5p Black-Scholes 0% 41% 5% 7.7 23.8p 23.8p Black‑Scholes 7 Revenue and expenses continued Equity-settled share-based payments continued The expected life of the options is based on management’s assumption of the options’ life due to the lack of any historical data on the exercise period of these options. The assumption takes into account the experience of employees and Directors and is not necessarily indicative of exercise patterns that may occur. The expected volatility reflects the assumption that historical volatility over a period similar to the life of the option is indicative of future trends, which may not necessarily be the actual outcome. Directors’ remuneration Consolidated Fees Emoluments Contributions to personal pension Members of a defined contribution pension scheme at the year end 2015 £ 65,000 371,789 2014 £ 71,667 371,561 436,789 443,228 18,500 18,500 455,289 461,728 3 3 Information in respect of individual Directors’ emoluments is provided in the Directors’ Remuneration Report on pages 27 and 28. 8 Intangibles Cost At 31 March 2013 Additions Additions internally generated Currency translation Goodwill £ Licences/ software £ Supply arrangements £ Technology assets £ Customer relationships £ Development costs £ Total £ 4,684,778 — — (27,256) 1,708,923 11,478 — (3,999) 526,583 — — (10,752) 2,148,343 — — (3,539) 1,229,958 — — (23,072) 1,329,750 — 1,369,367 (5,924) 11,628,335 11,478 1,369,367 (74,542) At 31 March 2014 4,657,522 1,716,402 515,831 2,144,804 1,206,886 2,693,193 12,934,638 Additions Additions internally generated Currency translation — — (150,470) 12,715 — (18,034) — — (59,356) — — (19,539) — — (127,369) — 1,500,512 (38,250) 12,715 1,500,512 (413,018) At 31 March 2015 4,507,052 1,711,083 456,475 2,125,265 1,079,517 4,155,455 14,034,847 Accumulated amortisation At 31 March 2013 Amortisation charge in the year Currency translation At 31 March 2014 Amortisation charge in the year Currency translation At 31 March 2015 Net book value 31 March 2015 31 March 2014 31 March 2013 — — — — — — — 92,719 44,243 (2,726) 236,963 105,283 (6,955) 625,792 131,823 (2,185) 324,985 132,959 (7,478) 134,236 335,291 755,430 450,466 35,999 (15,793) 98,001 (45,288) 129,535 (14,226) 115,145 (48,672) 154,442 388,004 870,739 516,939 — — — — — — — 1,280,459 414,308 (19,344) 1,675,423 378,680 (123,979) 1,930,124 4,507,052 1,556,641 68,471 1,254,526 562,578 4,155,455 12,104,723 4,657,522 1,582,166 180,540 1,389,374 756,420 2,693,193 11,259,215 4,684,778 1,616,204 289,620 1,522,551 904,973 1,329,750 10,347,876 Of the Development costs balance above of £4,155,455 (2014: £2,693,193), costs of £1,110,537 (2014: £629,021) relate to the Visitect® CD4 project, and costs of £3,044,918 (2014: £2,064,172) relate to the Allersys® project. Of the Licences/software balance above, £1,531,786 (2014: £1,531,786) is held on the balance sheet of the Company and relates to the IDS and CD4 licences. £119,081 of the additions in the year relate to capitalised depreciation on assets utilised for development activities. Impairment testing of goodwill and intangibles The Group tests goodwill annually for impairment or more frequently if there are indicators of impairment. The carrying amount of goodwill is indicated in the table above. The net book value of goodwill above for Genesis‑CNS amounts to £3,016,892 (2014: £3,016,892), Co‑Tek £332,986 (2014: £332,986) and Omega GmbH £1,157,174 (2014: £1,307,644). The recoverable amount of Genesis‑CNS, Co‑Tek and Omega GmbH has been determined based on a value in use calculation using cash flow projections based on the actual results for the year ended 31 March 2015 and the financial budget approved by the Board covering the period to 31 March 2016, with projected cash flows thereafter through to March 2019 based on a growth rate of 3% per annum. The key assumptions used in the budget for Genesis‑CNS are the sales projections which are predicated on the continued success of Genarrayt® and Food Detective®. The key assumption used in the budget for Co‑Tek is the growth in sales of the Company’s Micropath™ range of products. Annual Report and Group Financial Statements 2015 47 Omega Diagnostics Group PLC Financial StatementsGovernanceStrategic ReportOverview Notes to the Financial Statements continued for the year ended 31 March 2015 8 Intangibles continued Impairment testing of goodwill and intangibles continued The budget for Omega GmbH assumes continued sales in the German and export markets at the levels achieved in previous years. The Omega GmbH forecast previously included revenues in years two to five from the IDS/Allersys® platform – these revenues are no longer included as detailed below. Given the in‑year increase in the level of the development spend detailed in Note 8 a value in use calculation has been prepared to support both the Visitect® CD4 and Allersys® project costs. The recoverable amount for Visitect CD4 has been determined based on projections through to March 2020 assuming an increased number of unit sales each year as the product achieves market acceptance. The recoverable amount for the Allersys® project has been determined based on projections through to March 2020, again assuming an increasing number of tests sold each year as the product increases market acceptance and penetration. In all cases, the Company also makes assumptions in regard to having sufficient production personnel to cope with increased volumes. The discount rate applied to cash flows is 12.5% for the Group which takes account of other risks specific to each segment such as currency risk, geography and price risk. The discount rate is the weighted average cost of pre‑tax cost of debt financing and the pre‑tax cost of equity financing. As a result, there has been no impairment to the carrying value of goodwill or intangibles. Sensitivity analysis Base forecasts show headroom of £9.3 million above carrying value for Genesis‑CNS, headroom of £0.8 million for Co‑Tek, headroom of £0.9 million for Omega GmbH, headroom of £6.4 million for Visitect® CD4 and headroom of £2.0 million for Allersys®. Sensitivity analysis has been undertaken to assess the impact of any reasonably possible change in key assumptions. If the growth rate were to drop from 3% to 1% this would have the effect of reducing the headroom in Genesis‑CNS by £0.3 million over five years, in Co‑Tek by £41,000 over five years and in Omega GmbH by £33,000 over five years. If the growth in test sales forecast for Visitect® CD4 were to reduce by 10% each year this would have the effect of reducing the headroom by £1.0 million over five years. If the growth in test sales forecast for Allersys® was to reduce by 10% each year this would have the effect of reducing the headroom by £0.8 million over five years. For Genesis‑CNS, the discount rate would have to increase to 81% or the growth rate would have to be a decline of more than 181% for the headroom to reduce to £Nil. For Co‑Tek, the discount rate would have to increase to 86% or the growth rate would have to be a decline of 61% for the headroom to reduce to £Nil. For Omega GmbH, the discount rate would have to increase to 57% or the growth rate would have to be a decline of 105% for the headroom to reduce to £Nil. For Visitect CD4, the discount rate would have to increase to 83% or the forecast total test numbers would have to reduce by 64% for the headroom to reduce to £Nil. For Allersys®, the discount rate would have to increase to 21% or the forecast total test numbers would have to reduce by 26% for the headroom to reduce to £Nil. 9 Property, plant and equipment Consolidated Cost At 31 March 2013 Additions Disposals Currency translation At 31 March 2014 Additions Disposals Currency translation At 31 March 2015 Accumulated depreciation At 31 March 2013 Charge in the year Disposals Currency translation At 31 March 2014 Charge in the year Disposals Currency translation At 31 March 2015 Net book value 31 March 2015 31 March 2014 31 March 2013 Land and property £ Leasehold improvements £ Plant and machinery £ 693,965 — — (14,170) 241,925 17,077 — (1,430) 2,797,710 461,891 (108,635) (18,756) Motor vehicles £ 49,650 — — (1,014) Total £ 3,783,250 478,968 (108,635) (35,370) 679,795 257,572 3,132,210 48,636 4,118,213 — — (78,223) 144,651 — (234) 556,914 (4,480) (78,425) — (38,307) (2,693) 701,565 (42,787) (159,575) 601,572 401,989 3,606,219 7,636 4,617,416 42,651 18,984 — (1,253) 146,616 20,562 — (840) 1,451,445 215,733 (87,359) (8,020) 26,252 10,274 — (743) 1,666,964 265,553 (87,359) (10,856) 60,382 166,338 1,571,799 35,783 1,834,302 17,670 — (8,157) 17,431 — (223) 402,517 (1,558) (43,662) 6,431 (34,641) (1,926) 444,048 (36,199) (53,968) 69,895 183,546 1,929,096 5,647 2,188,183 531,677 218,443 1,677,123 1,989 2,429,233 619,413 651,314 91,234 1,560,411 12,853 2,283,911 95,309 1,346,265 23,398 2,116,286 £119,081 of the annual depreciation charge relates to assets utilised for development activities; therefore, this depreciation has been capitalised and included within intangible assets. The net book value of plant and machinery held under finance leases at 31 March 2015 is £519,977 (2014: £323,675). 48 Omega Diagnostics Group PLC Annual Report and Group Financial Statements 2015 10 Inventories Raw materials Work in progress Finished goods and goods for resale 11 Trade and other receivables Consolidated Trade receivables Less provision for impairment of receivables Trade receivables – net Prepayments and other receivables The Directors consider that the carrying amount of trade receivables and other receivables approximates their fair value. Company Prepayments and other receivables Due from subsidiary companies Analysis of trade receivables Consolidated Neither impaired nor past due Past due but not impaired Company Neither impaired nor past due Ageing of past due but not impaired trade receivables Up to three months Between three and six months More than six months 2015 £ 1,425,835 161,267 474,993 2014 £ 1,121,638 112,482 458,821 2,062,095 1,692,941 2015 £ 2014 £ 2,251,544 (14,117) 2,206,136 (14,117) 2,237,427 302,424 2,192,019 223,898 2,539,851 2,415,917 2015 £ 2014 £ 15,463 4,425,635 1,193 4,105,845 4,441,098 4,107,038 2015 £ 2014 £ 1,977,803 259,624 2,034,515 157,504 2015 £ 2014 £ 4,425,635 4,105,845 2015 £ 231,404 20,234 7,986 2014 £ 150,972 25 6,507 The Directors consider that the carrying amount of trade receivables and other receivables approximates their fair value. The credit quality of trade receivables that are neither past due nor impaired is assessed internally with reference to historical information relating to counterparty default rates. The maximum exposure to credit risk at the reporting date is the fair value of each class of receivable and no collateral is held as security. 12 Interest-bearing loans and borrowings and financial instruments Consolidated Current Other loans Obligations under finance leases Non-current Obligations under finance leases Other loans 2015 £ 2014 £ 120,353 117,419 360,000 67,823 237,772 427,823 315,446 — 207,518 111,526 315,446 319,044 The Directors consider that the carrying amount of other loans and finance obligations approximates their fair values. Annual Report and Group Financial Statements 2015 49 Omega Diagnostics Group PLC Financial StatementsGovernanceStrategic ReportOverview Notes to the Financial Statements continued for the year ended 31 March 2015 12 Interest-bearing loans and borrowings and financial instruments continued The Group uses finance leases and hire purchase contracts to acquire plant and machinery. These leases have terms of renewal but no purchase options and escalation clauses. Renewals are at the option of the lessee. Future minimum payments under finance leases and hire purchase contracts are as follows: Future minimum payments due: Not later than one year After one year but not more than five years Less finance charges allocated to future periods Present value of minimum lease payments The present value of minimum lease payments is analysed as follows: Not later than one year After one year but not more than five years Consolidated Other loans comprise the following: Vendor loan – 2015 (base rate) Company Current Other loans Non-current Other loans Company Other loans comprise the following: Vendor loan – 2015 (base rate) 13 Trade and other payables Consolidated Trade payables Social security costs Accruals and other payables 2015 £ 2014 £ 135,940 338,769 80,258 224,146 474,709 304,404 41,844 29,063 432,865 275,341 117,419 315,446 67,823 207,518 432,865 275,341 2015 £ 2014 £ 120,353 120,353 2015 £ 471,526 471,526 2014 £ 120,353 360,000 — 111,526 2015 £ 2014 £ 120,353 471,526 2015 £ 1,106,328 118,751 316,980 2014 £ 821,793 128,510 436,055 1,542,059 1,386,358 UNITAID and Scottish Enterprise grant funding as detailed in the Financial Review totalling £271,269 (2014: £356,052) is included as deferred income on the c onsolidated balance sheet. Trade payables and other payables comprise amounts outstanding for trade purchases and ongoing costs. The Directors consider that the carrying amount of trade payables approximates their fair value. Company Trade payables Accruals and other payables Due to subsidiary companies 2015 £ 40,090 112,199 35,523 2014 £ 1,920 153,963 22,076 187,812 177,959 Trade payables and other payables comprise amounts outstanding for trade purchases and ongoing costs. The Directors consider that the carrying amount of trade payables approximates their fair value. 50 Omega Diagnostics Group PLC Annual Report and Group Financial Statements 2015 14 Deferred taxation The deferred tax asset is made up as follows: Consolidated Decelerated capital allowances Temporary differences Tax losses carried forward 2015 £ 1,004 29,439 1,500,334 2014 £ 2,665 134,026 1,001,713 1,530,777 1,138,404 A deferred tax asset has been recognised for the carry forward of unused tax losses to the extent that it is probable that future taxable profits will be available against which the unused tax losses can be utilised. The deferred tax liability is made up as follows: Consolidated Fair value adjustments on acquisition Accelerated capital allowances Other timing differences 15 Share capital Company Authorised share capital Ordinary shares of 4.0 pence each Deferred shares of 0.9 pence each Issued and fully paid ordinary share capital At the beginning of the year Issued during the year At the end of the year 2015 £ 264,803 186,829 814,581 2014 £ 360,992 121,521 560,412 1,266,213 1,042,925 2015 number 2014 number 184,769,736 123,245,615 184,769,736 123,245,615 108,745,669 — 85,216,257 23,529,412 108,745,669 108,745,669 During the year ended 31 March 2015, the Company granted options over 20,000 ordinary shares at an average exercise price of 18.5 pence per share. The options will expire if not exercised within ten years of the date of grant. 16 Commitments and contingencies Operating lease commitments Future minimum rentals payable under non‑cancellable operating leases are as follows: Consolidated Land and buildings Within one year Within two to five years After five years Other Within one year Within two to five years After five years 2015 £ 2014 £ 369,409 1,046,883 125,997 59,194 136,478 — 221,636 693,137 250,689 33,702 98,700 1,480 Land and buildings leases in force for Omega Diagnostics Limited premises extend to 30 June 2021. The land and buildings leases in force for the premises of Genesis Diagnostics Limited and Cambridge Nutritional Sciences extend to March 2017. The land and buildings leases in force for the Omega Dx (Asia) facility in Pune extend to May 2019. Other leases are in force for office equipment items and extend to time periods ranging from April 2015 to June 2019. The leases may be extended at the expiry of their term. Performance bonds The Group has performance bonds and guarantees in place amounting to £208,116 at 31 March 2015 (2014: £35,372). Annual Report and Group Financial Statements 2015 51 Omega Diagnostics Group PLC Financial StatementsGovernanceStrategic ReportOverview Notes to the Financial Statements continued for the year ended 31 March 2015 17 Related party transactions Remuneration of key personnel The remuneration of the key management personnel of Omega Diagnostics Group PLC is set out below in aggregate for each of the categories specified in IAS 24 – Related Party Disclosures: Short‑term employee benefits Share‑based payments Post‑employment benefits 2015 £ 947,833 276,429 41,032 2014 £ 943,292 104,925 40,375 1,265,294 1,088,592 Included within short‑term employee benefits are amounts paid to MBA Consultancy of £25,000 (2014: £25,000), a company controlled by David Evans, and £40,000 (2014: £36,667) paid to Third Day Advisors, a company controlled by William Rhodes. Other related party transactions During the year there have been transactions between the parent Company, Omega Diagnostics Limited (ODL), Genesis Diagnostics Limited (Genesis), Cambridge Nutritional Sciences (CNS), Co‑Tek (South West) Limited (Co‑Tek), Omega GmbH (GmbH) and Omega Dx (Asia) largely relating to payment of management fees. The amounts outstanding at the year end are as follows: At 31 March 2015 ODG £ ODL £ Omega Diagnostics Group PLC Omega Diagnostics Limited Genesis Diagnostics Limited Cambridge Nutritional Sciences Limited Co‑Tek (South West) Limited Omega GmbH Omega Dx (Asia) — (2,203,460) — (889,585) (1,504,269) (2,415) (6,876) 75,098 2,203,460 332,792 (35,523) — 1,889,383 — At 31 March 2014 Omega Diagnostics Group PLC Omega Diagnostics Limited Genesis Diagnostics Limited Cambridge Nutritional Sciences Limited Co‑Tek (South West) Limited Omega GmbH Omega Dx (Asia) ODG £ — 1,578,718 33,634 (22,076) — 2,493,492 — ODL £ (1,578,718) — (742,615) (393,710) (7,121) — 48,183 Genesis £ (332,792) 889,585 — 346,640 71,810 — 49,409 Genesis £ (33,634) 742,615 — 161,729 41,608 — 48,193 CNS £ 35,523 1,504,269 (346,640) — 120,000 — 9,975 CNS £ 22,076 393,710 (161,729) — 20,000 — 6,837 Co-Tek £ — 2,415 (71,810) (120,000) — — — Co‑Tek £ — 7,121 (41,608) (20,000) — — — GmbH £ (1,889,383) 6,876 — — — — 5,563 GmbH £ (2,493,492) — — — — — — Dx (Asia) £ — (75,098) (49,409) (9,975) — (5,563) — Dx (Asia) £ — (48,183) (48,193) (6,837) — — — During the year there were transactions between the Company and its subsidiaries as follows: Balance at 1 April Charges to subsidiary companies Transfers of cash from subsidiary companies Balance at 31 March 2015 2015 £ 2014 £ 4,083,768 747,895 (441,549) 3,591,545 757,002 (264,779) 4,390,114 4,083,768 18 Retirement benefit obligations The Group operates pension schemes for the benefit of its UK and overseas employees. Details of the defined contribution schemes for the Group’s employees are given below in Note (a). Details of the defined benefit schemes for the Group’s German employees and details relating to these schemes are given below in Note (b). During the year the Group accounted for these pension schemes under IAS 19 – Employee Benefits. (a) Defined contribution schemes The Group makes contributions to personal plans of employees on a defined contribution basis. The Group does not have ownership of the schemes, with individual plans being arrangements between the employee and pension provider. For new hires in Germany, after 1 January 2011, the support fund (LV 1871 Unterstützungskasse e.V.) is the defined contribution scheme used. The total Group contributions for the year amounted to £66,733 (2014: £59,165). 52 Omega Diagnostics Group PLC Annual Report and Group Financial Statements 2015 18 Retirement benefit obligations continued (b) Defined benefit schemes The Deutscher Pensionsfonds AG and the LV 1871 Unterstützungskasse e.V. schemes give the rights to defined future benefits. Of these benefits the past service component is based on years of service and salary as of 1 January 2011 and are provided by the Deutscher Pensionsfonds AG. The remaining benefits based on years of service after 1 January 2011 as well as salary increases are provided by the LV 1871 Unterstützungskasse e.V. scheme. These are mainly dependent on the number of earning years and salary level at pension age. The commitments are covered through an insurance company and are compliant with the requirements of German insurance laws. Pension costs relating to each scheme operating in Germany are charged in accordance with IAS 19 – Employee Benefits. Formal valuations of each scheme have been carried out by Towers Watson (Reutlingen) GmbH, who are independent, professionally qualified actuaries, on 28 April 2015 using the following assumptions: Discount rate Future salary increases Future pension increases Price inflation (i) The amounts recognised in the balance sheet are as follows: Defined benefit obligation Fair value of plan assets Net (liability)/asset (ii) The amounts charged/(credited) to operating profit: Current service costs Interest cost on the defined benefit obligation Interest income on plan assets Total included in employee benefits expense The current service costs for the year, £102,933 (2014: £122,532), have been included in administration costs. (iii) The amounts recognised in the consolidated statement of comprehensive income: Actuarial (loss)/gain arising during the period Return on plan assets Total actuarial (loss)/gain on pensions (iv) Changes in the defined obligation during the year: Opening defined benefit obligation Current service cost Interest cost Actuarial loss/(gain) due to: Changes in demographic assumptions Changes in financial assumptions Exchange differences on foreign plans Benefits paid Closing defined benefit obligation The weighted average duration of the defined benefit obligation is 20.6 years. (v) Changes in plan assets during the year: Opening fair value of plan assets Interest income Return on plan assets Contributions by employer Exchange differences on foreign plans Benefits paid Closing fair value of plan assets 2015 1.50% 2.50% 1.75% 1.75% 2014 3.43% 2.50% 1.75% 1.75% 2015 £ 2014 £ 2,194,832 2,001,925 1,695,381 1,779,751 (192,907) 84,370 2015 £ 105,492 50,895 (53,454) 2014 £ 123,726 62,283 (63,477) 102,933 122,532 2015 £ (547,241) 277,113 2014 £ 101,447 (49,506) (270,128) 51,941 2015 £ 2014 £ 1,695,381 105,492 50,895 1,664,439 123,726 62,283 (111,691) 658,932 (195,088) (9,089) (193,434) 91,987 (33,985) (19,635) 2,194,832 1,695,381 2015 £ 2014 £ 1,779,751 53,454 277,113 105,492 (204,796) (9,089) 1,696,325 63,477 (49,506) 123,726 (34,636) (19,635) 2,001,925 1,779,751 Annual Report and Group Financial Statements 2015 53 Omega Diagnostics Group PLC Financial StatementsGovernanceStrategic ReportOverview Notes to the Financial Statements continued for the year ended 31 March 2015 18 Retirement benefit obligations continued (b) Defined benefit schemes continued Fair value of plan assets: Equities Bonds/debt instruments Cash/other 2015 Quoted £ Unquoted £ Total £ 400,385 820,070 340,327 — 441,143 — 400,385 1,261,213 340,327 Quoted £ 355,950 723,633 302,558 2014 Unquoted £ — 397,610 — Total £ 355,950 1,121,243 302,558 Total value of plan assets 1,560,782 441,143 2,001,925 1,382,141 397,610 1,779,751 (vi) The major categories of plan assets as a percentage of total plan assets: Equities Bonds/debt instruments Cash/other 2015 20% 63% 17% 2014 20% 63% 17% The asset figures above are now weighted with the underlying assets. The Group expects to contribute £110,000 to its defined benefit pension plans in the year ending 31 March 2016. (vii) Mortality assumptions Assumptions regarding future mortality experience are set based on advice in accordance with published statistics and experience in Germany. In the calculations, the mortality rate used is in accordance with Heubeck Richttafeln’s basis of calculation for group pension insurance, 2005G. Other assumptions have been set in accordance with Heubeck Richttafeln’s basis of calculation for group pension insurance, as set out in schedule 2005G. (viii) Sensitivity analysis Changes in assumptions compared with March 2015 actuarial assumptions: Effect on defined benefit obligation 2015 £ Effect on defined benefit obligation 2014 £ (388,725) 516,936 (264,585) 342,208 217,590 (249,916) 149,277 (132,930) 49,176 (108,435) 36,208 (79,634) Country of incorporation 2015 £ UK UK UK UK UK UK Germany India 1,752,884 1,845,066 4,034,110 480,978 1 1 2,542,321 878,005 2014 £ 1,752,884 1,845,066 4,034,110 480,978 1 1 2,542,321 514,906 11,533,366 11,170,267 Discount rate Increase by 1% Decrease by 1% Inflation rate Increase by 0.5% Decrease by 0.5% Salary increase Increase by 0.5% Decrease by 0.5% 19 Investments Company The Company’s investments in subsidiaries, which are all 100% owned, are comprised of the following: Investment in Omega Diagnostics Limited Investment in Genesis Diagnostics Limited Investment in Cambridge Nutritional Sciences Limited Investment in Co‑Tek (South West) Limited Investment in Bealaw (692) Limited Investment in Bealaw (693) Limited Investment in Omega GmbH Investment in Omega Dx (Asia) The further investment in the year relates to continued funding of Omega Dx (Asia). Bealaw (692) Limited and Bealaw (693) Limited are both dormant companies that have never traded. 54 Omega Diagnostics Group PLC Annual Report and Group Financial Statements 2015 20 Earnings per share Basic earnings per share is 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 is 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. Profit attributable to equity holders of the Group Basic average number of shares Share options Diluted weighted average number of shares 2015 £ 2014 £ 739,046 692,851 2015 number 2014 number 108,745,669 821,093 104,052,644 1,043,840 109,566,762 105,096,484 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 better assess trends in financial performance. Adjusted profit before taxation Tax credit Adjusted profit attributable to equity holders of the Group 2015 £ 2014 £ 1,373,102 54,788 1,095,911 149,810 1,427,890 1,245,721 21 Financial instruments The Group’s principal financial instruments comprise loans, finance leases, financial derivatives and cash. The main purpose of these financial instruments is to manage the Group’s funding and liquidity requirements. The Group has other financial instruments, such as trade receivables and trade payables, which arise directly from its operations. The categories of financial instruments are summarised in the following tables: Assets as per the consolidated balance sheet 2015 Trade receivables Cash and cash equivalents Assets as per the consolidated balance sheet 2014 Trade receivables Cash and cash equivalents Assets as per the Company balance sheet 2015 Due from subsidiary companies Cash and cash equivalents Assets as per the Company balance sheet 2014 Due from subsidiary companies Cash and cash equivalents Loans and receivables £ Total £ 2,237,427 1,972,137 2,237,427 1,972,137 4,209,564 4,209,564 Loans and receivables £ Total £ 2,192,019 3,116,013 2,192,019 3,116,013 5,308,032 5,308,032 Loans and receivables £ Total £ 4,425,635 931,928 4,425,635 931,928 5,357,563 5,357,563 Loans and receivables £ Total £ 4,105,845 1,987,153 4,105,845 1,987,153 6,092,998 6,092,998 Annual Report and Group Financial Statements 2015 55 Omega Diagnostics Group PLC Financial StatementsGovernanceStrategic ReportOverview Notes to the Financial Statements continued for the year ended 31 March 2015 21 Financial instruments continued Liabilities as per the consolidated balance sheet 2015 Trade payables Obligations under finance leases Other loans (designated on initial recognition) Liabilities as per the consolidated balance sheet 2014 Trade payables Obligations under finance leases Other loans (designated on initial recognition) Liabilities as per the Company balance sheet 2015 Trade payables and amounts due to subsidiary companies Other loans (designated upon initial recognition) Liabilities as per the Company balance sheet 2014 Trade payables and amounts due to subsidiary companies Other loans (designated upon initial recognition) Liabilities at fair value through profit and loss £ Amortised cost £ Total £ — — 120,353 1,106,328 432,865 — 1,106,328 432,865 120,353 120,353 1,539,193 1,659,546 Liabilities at fair value through profit and loss £ — — 471,526 Amortised cost £ 821,793 275,341 — Total £ 821,793 275,341 471,526 471,526 1,097,134 1,568,660 Liabilities at fair value through profit and loss £ Amortised cost £ Total £ — 120,353 75,613 — 75,613 120,353 120,353 75,613 195,966 Liabilities at fair value through profit and loss £ — 471,526 471,526 Amortised cost £ 23,996 — 23,996 Total £ 23,996 471,526 495,522 Within other loans designated at fair value through profit and loss is the vendor loan note of £1.1 million, which was issued in September 2007. It carries a coupon of base rate only and is repayable in three equal instalments of £360,000 in September 2012, 2013 and 2014 and a final capital payment of £20,000 in September 2015. The interest is rolled up and repayable with the final capital payment. The fair value is calculated as the future cash flows expected to result based on current estimates of interest rates. There has been no change in the year to the fair value of the loan due to changes in credit risk. The movement in the year of £351,173 (2014: £344,082) is due to the third instalment being paid in September 2014 (£360,000) offset by the effect of unwinding discount factors (£8,827), which is included within finance charges in the income statement. Financial risk management The principal financial risks to which the Group is exposed are those relating to foreign currency, credit, liquidity and interest rate. These risks are managed in accordance with Board‑approved policies. Foreign currency risk The Group operates in more than one currency jurisdiction and is therefore exposed to currency risk on the retranslation of the income statement and the balance sheet of its overseas subsidiaries from euros and rupees into its functional currency of pounds sterling. The Company funds its subsidiaries by a mixture of equity and intercompany loan financing and these balances are subject to exchange rate movements that can give rise to movements in equity. The Group also buys and sells goods and services in currencies other than the functional currency, principally in euros and US dollars. The Group has US dollar and euro‑denominated bank accounts and, where possible, the Group will offset currency exposure where purchases and sales of goods and services can be made in these currencies. The Group’s non‑sterling revenues, profits, assets, liabilities and cash flows can be affected by movements in exchange rates. It is currently Group policy not to engage in any speculative transaction of any kind but this will be monitored by the Board to determine whether it is appropriate to use additional currency management procedures to manage risk. At 31 March 2015 (and 31 March 2014) the Group has not entered into any hedge transactions. 56 Omega Diagnostics Group PLC Annual Report and Group Financial Statements 2015 21 Financial instruments continued Financial risk management continued Foreign currency risk continued The following table demonstrates the sensitivity to a possible change in currency rates on the Group’s profit before tax and equity through the impact of sterling weakening against the US dollar, the euro and the Canadian dollar. 2015 Trade and other receivables Trade and other payables Cash and cash equivalents Net investment in overseas subsidiary 2014 Trade and other receivables Trade and other payables Cash and cash equivalents Net investment in overseas subsidiary Decrease in currency rate Effect on profit before tax £ 5% 5% 5% 5% 5% 5% 5% 5% 72,642 (47,128) 27,801 — 56,671 (18,332) 31,295 — Effect on equity £ — — — (214,282) — — — 18,590 An increase in currency rate of 5% would have a similar but opposite effect. The sensitivity around bank loans above represents the entire impact on the Company’s profit before tax and equity. Credit risk The Group’s credit risk is primarily attributable to its trade receivables. The Group conducts its operations in many countries, so there is no concentration of risk in any one area. In most cases, the Group grants credit without security to its customers. Creditworthiness checks are undertaken before entering into contracts with new customers, and credit limits are set as appropriate. The Group conducts most of its operations through distributors and is therefore able to maintain a fairly close relationship with its immediate customers. As such, the Group monitors payment profiles of customers on a regular basis and is able to spot deteriorations in payment times. An allowance for impairment is made that represents the potential loss in respect of individual receivables where there is an identifiable loss event which, based on previous experience, is evidence of a reduction in the recoverability of cash flows. The amounts presented in the balance sheet are net of allowance for doubtful receivables. An analysis of trade receivables from various regions is analysed in the following table: UK/Europe North America South/Central America Asia and Far East Africa and Middle East 2015 Trade receivables £ 1,075,727 4,896 323,873 451,321 381,610 2014 Trade receivables £ 1,293,732 9,502 162,970 365,664 360,151 2,237,427 2,192,019 Capital management 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 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. Liquidity risk The Group’s objective is to maintain sufficient headroom to meet its foreseeable financing and working capital requirements. The Group has in place drawn loan facilities and, in the case of bank loans, regularly monitors performance to ensure compliance with all covenants. The Group also maintains a surplus balance of cash and cash equivalents to ensure flexible liquidity to meet financial liabilities as they fall due. The table below summarises the maturity profile of the Group’s financial liabilities at 31 March 2015 based on the undiscounted cash flows of liabilities which include both future interest and principal amounts outstanding based on the earliest date on which the Group can be required to pay. The amounts of future interest are not included in the carrying value of financial liabilities on the balance sheet. Consolidated 2015 Trade payables Obligations under finance leases Vendor loan 2014 Trade payables Obligations under finance leases Vendor loan Less than 3 months £ 1,106,328 19,883 — 3 to 12 months £ — 97,536 120,353 1 to 5 years £ Total £ — 315,446 — 1,106,328 432,865 120,353 1,126,211 217,889 315,446 1,659,546 821,793 9,734 — — 58,090 360,000 — 207,517 111,526 821,793 275,341 471,526 831,527 418,090 319,043 1,568,660 Annual Report and Group Financial Statements 2015 57 Omega Diagnostics Group PLC Financial StatementsGovernanceStrategic ReportOverview Notes to the Financial Statements continued for the year ended 31 March 2015 21 Financial instruments continued Financial risk management continued Liquidity risk continued The table below summarises the maturity profile of the Company’s financial liabilities at 31 March 2015 based on the undiscounted cash flows of liabilities based on the earliest date on which the Company can be required to pay. Company 2015 Trade payables and amounts due to subsidiary companies Vendor loan 2014 Trade payables and amounts due to subsidiary companies Vendor loan Interest rate risk All of the Group’s borrowings are at variable rates of interest. Less than 3 months £ 3 to 12 months £ 75,613 — — 120,353 75,613 120,353 1 to 5 years £ — — — Total £ 75,613 120,353 195,966 23,996 — 23,996 — 360,000 — 111,526 23,996 471,526 360,000 111,526 495,522 The following table demonstrates the sensitivity to a possible change in interest rates on the Group’s profit before tax through the impact on floating rate borrowings and cash balances. Consolidated 2015 Cash and cash equivalents Vendor loan 2014 Cash and cash equivalents Vendor loan Effect on profit before tax and equity £ Increase in basis points 25 25 25 25 6,360 (500) 4,096 (1,400) The following table demonstrates the sensitivity to a possible change in interest rates on the Company’s profit before tax through the impact on floating rate borrowings and cash balances. Company 2015 Cash and cash equivalents Vendor loan 2014 Cash and cash equivalents Vendor loan Effect on profit before tax and equity £ Increase in basis points 25 25 25 25 3,649 (500) 2,164 (1,400) Fair values The carrying amount for all categories of financial assets and liabilities disclosed on the balance sheet and in the related notes to the accounts is equal to the fair value of such assets and liabilities as at both 31 March 2015 and 31 March 2014. The monetary value attributable to these financial assets and liabilities is the same value that has been disclosed in the related notes to the accounts. The valuation methods used to fair value the financial assets and liabilities have been disclosed in Note 2 to the financial statements under the heading of Financial instruments. The carrying amount recorded in the balance sheet of each financial asset as at 31 March 2015 and 31 March 2014 represents the Group’s maximum exposure to credit risk. 22 Capital commitments At 31 March 2015 the Group had capital commitments contracted, but not provided for, of £0.2 million (2014: £Nil). 58 Omega Diagnostics Group PLC Annual Report and Group Financial Statements 2015 Notice of Annual General Meeting Notice is hereby given that the Annual General Meeting of the Company will be held at Omega House, Hillfoots Business Village, Alva, Clackmannanshire FK12 5DQ on 7 September 2015 at 12 noon for the following purposes: 1. To receive and adopt the reports of the Directors and the auditors and the audited accounts for the year ended 31 March 2015. 2. To re‑appoint Ernst & Young LLP as auditors of the Company to hold office until the conclusion of the next general meeting at which accounts are laid before the Company and that their remuneration be fixed by the Directors. 3. To re‑elect Mr David Evans as a Director of the Company. 4. To re‑elect Mr Colin King as a Director of the Company. 5. That, in accordance with section 551 of the Companies Act 2006, the Directors be generally and unconditionally authorised to allot shares in the Company or grant rights to subscribe for or convert any security into shares in the Company (“Rights”) up to an aggregate nominal amount of £1,449,942.24, provided that this authority shall, unless renewed, varied or revoked by the Company, expire on the conclusion of the next Annual General Meeting of the Company or, if earlier, on 31 October 2016 save that the Company may, before such expiry, make an offer or agreement which would or might require shares to be allotted or Rights to be granted and the Directors may allot shares or grant Rights in pursuance of any such offer or agreement notwithstanding that the authority conferred by this resolution has expired. This authority is in substitution for all previous authorities conferred on the Directors in accordance with section 551 of the Companies Act 2006, but without prejudice to any allotment already made or to be made pursuant to such authority. Resolution 6 is proposed as a special resolution. 6. That, conditional upon the passing of resolution 5 above, and in accordance with section 570 of the Companies Act, the Directors be generally empowered to allot equity securities (as defined in section 560 of the Companies Act 2006) pursuant to the authority conferred by resolution 5 as if section 561(1) of the Companies Act 2006 did not apply to any such allotment, provided that this power shall be limited to: 6.1 the allotment of equity securities in connection with an issue in favour of the holders of ordinary shares where the equity securities respectively attributable to the interests of all holders of ordinary shares are proportionate (as nearly as may be) to the respective number of ordinary shares held by them but subject to such exclusions or arrangements as the Directors may deem necessary or expedient to deal with fractional entitlements arising or any legal or practical problems under the laws of any overseas territory or the requirements of any regulatory body or stock exchange; and 6.2 the allotment of ordinary shares otherwise than pursuant to subparagraph 6.1 above up to an aggregate nominal amount of £217,491.32, and provided that this power shall, unless renewed, varied or revoked by the Company, expire on the conclusion of the next Annual General Meeting of the Company or, if earlier, 31 October 2016, save that the Company may, before such expiry, make an offer or agreement which would or might require equity securities to be allotted after such expiry and the Directors may allot equity securities in pursuance of any such offer or agreement notwithstanding that the power conferred by this resolution has expired. By order of the Board Kieron Harbinson Company Secretary 6 July 2015 Registered in England and Wales number 5017761 www.omegadiagnostics.com Omega Diagnostics Group PLC Omega House Hillfoots Business Village Alva FK12 5DQ Scotland United Kingdom Tel: +44 (0)1259 763030 Fax: +44 (0)1259 761853 Annual Report and Group Financial Statements 2015 59 Omega Diagnostics Group PLC Financial StatementsGovernanceStrategic ReportOverview Notes to the Notice of Annual General Meeting Re-election of Colin King as a Director 1. As previously announced, the Board intends to appoint Mr Colin King as an additional Director of the Company with effect from 3 August 2015. Article 77.4 of the Company’s Articles of Association provides that a Director so appointed shall hold office until the conclusion of the next AGM and shall be eligible for re‑election at that meeting. Accordingly, resolution 4 in the Notice proposes the re‑election of Mr King as a Director. Entitlement to attend and vote 2. Pursuant to Regulation 41 of the Uncertificated Securities Regulations 2001, the Company specifies that only those members registered on the Company’s register of members at 12 noon on 5 September 2015 shall be entitled to attend and vote at the Meeting. Appointment of proxies 3. If you are a member of the Company at the time set out in Note 2 above, you are entitled to appoint a proxy to exercise all or any of your rights to attend, speak and vote at the Meeting and you should have received a proxy form with this Notice of Meeting. You can only appoint a proxy using the procedures set out in these notes and the notes to the proxy form. 4. 5. 6. A proxy does not need to be a member of the Company but must attend the Meeting to represent you. Details of how to appoint the Chairman of the Meeting or another person as your proxy using the proxy form are set out in the notes to the proxy form. If you wish your proxy to speak on your behalf at the Meeting you will need to appoint your own choice of proxy (not the Chairman) and give your instructions directly to them. You may appoint more than one proxy provided each proxy is appointed to exercise rights attached to different shares. You may not appoint more than one proxy to exercise rights attached to any one share. To appoint more than one proxy, please contact the registrars of the Company, Share Registrars Limited, on 01252 821390. A vote withheld is not a vote in law, which means that the vote will not be counted in the calculation of votes for or against the resolution. If no voting indication is given, your proxy will vote or abstain from voting at his or her discretion. Your proxy will vote (or abstain from voting) as he or she thinks fit in relation to any other matter which is put before the Meeting. 7. The notes to the proxy form explain how to (a) direct your proxy to vote on each resolution or withhold their vote; (b) appoint proxies; (c) change proxy instructions; and (d) terminate proxy appointments. Corporate representing 8. Corporate members are referred to the guidance issued by the Institute of Chartered Secretaries and Administrators on proxies and corporate representatives – www.icsa.org.uk – for further details of this procedure. Issued shares and total voting rights 9. As at the date of this Annual Report the Company’s issued voting share capital comprised 108,745,669 ordinary shares of 4 pence each. Each ordinary share carries the right to one vote at a general meeting of the Company and, therefore, the total number of voting rights in the Company is as at the date of this Annual Report. Communications with the Company 10. Except as provided above, members who have general queries about the Meeting should telephone Kieron Harbinson on +44 (0)1259 763030 (no other methods of communication will be accepted). You may not use any electronic address provided either in this Notice of Annual General Meeting, or any related documents (including the proxy form), to communicate with the Company for any purposes other than those expressly stated. Voting through CREST CREST members who wish to appoint a proxy or proxies through the CREST electronic proxy appointment service may do so for the Annual General Meeting and any adjournment(s) thereof by using the procedures described in the CREST Manual. CREST Personal Members or other CREST sponsored members, and those CREST members who have appointed a voting service provider(s) should refer to their CREST sponsor or voting service provider(s), who will be able to take the appropriate action on their behalf. In order for a proxy appointment or instruction made using the CREST service to be valid, the appropriate CREST message (a “CREST Proxy Instruction”) must be properly authenticated in accordance with CRESTCo Limited’s specifications and must contain the information required for such instructions, as described in the CREST Manual. The message, regardless of whether it relates to the appointment of a proxy or to an amendment to the instruction given to a previously appointed proxy, must, in order to be valid, be transmitted so as to be received by the issuer’s agent (7RA36) by the latest time(s) for receipt of proxy appointments specified above. For this purpose, the time of receipt will be taken to be the time (as determined by the timestamp applied to the message by the CREST Applications Host) from which the issuer’s agent is able to retrieve the message by enquiry to CREST in the manner prescribed by CREST. After this time, any change of instructions to proxies appointed through CREST should be communicated to the appointee through other means. CREST members and, where applicable, their CREST sponsors or voting service providers should note that CRESTCo Limited does not make available special procedures in CREST for any particular messages. Normal system timings and limitations will therefore apply in relation to the input of CREST Proxy Instructions. It is the responsibility of the CREST member concerned to take (or, if the CREST member is a CREST personal member or sponsored member or has appointed a voting service provider(s), to procure that his or her CREST sponsor or voting service provider(s) take(s)) such action as shall be necessary to ensure that a message is transmitted by means of CREST by any particular time. In this connection, CREST members and, where applicable, their CREST sponsors or voting service providers are referred, in particular, to those sections of the CREST Manual concerning practical limitations of the CREST system and timings. The Company may treat as invalid a CREST Proxy Instruction in the circumstances set out in Regulation 35(5)(a) of the Uncertificated Securities Regulations 2001. 60 Omega Diagnostics Group PLC Annual Report and Group Financial Statements 2015 Printed by Ripping Image on FSC® certified paper. 100% of the inks used are vegetable oil based, 95% of press chemicals are recycled for further use and, on average, 99% of any waste associated with this production will be recycled. This document is printed on Heaven 42 and Edixion offset. Both papers are from FSC® certified forests. Omega Diagnostics Group PLC Omega House Hillfoots Business Village Alva FK12 5DQ Scotland United Kingdom www.omegadiagnostics.com Tel: +44 (0)1259 763030 Fax: +44 (0)1259 761853