25 May 2012

Shares in IDS slump on warning

28/11/2011 Ben Jaglom

Diagnostic kits maker Immunodiagnostic Systems Holdings (IDH) has warned that it expects Vitamin D testing to grow 'at lower rates than experienced in recent years'.

The AIM 50 constituent issued the remark in its interim results for the six months to September. It declared that the lower growth is to be driven by 'competing automated products from some major manufacturers' (Siemens, Roche and Abbott are all expected to launch Vitamin D tests in the coming year) in addition to 'efforts to contain health budgets' that are being felt 'particularly in the USA'.

This is resulting in what it says are 'increasing price pressures' and a resultant 'disruption to equipment ordering patterns which we believe will persist in the short term'. Despite the foreboding warning of future trading Immunodiagnostic reported a 17 per cent rise in pre-tax profits to £7.7 million on sales of £27.3 million. Earnings per share grew by 8 per cent to 20.2p while net cash of £3.3 million (2010: net debt of £2.3 million) was declared.

In an interview with Growth Company Investor chief executive officer Ian Cookson remarked there is now 'a lot more competition in the (vitamin D testing) market' adding that a 'slowing' vitamin D market led the business to 'review its growth estimates'. Regarding competitors such as Abbott he argued that Immunodiagnostic 'can compete' insisting there 'remains a market segment where we can operate.'

Analysts at Brewin Dolphin downgraded their forecasts following the results from pre-tax profits of £20.6 million (EPS: 56.6p) to £18 million (EPS: 47.5p) for the year to March 2012. In 2013 profits were downgraded from £24.5 million (EPS: 67.2p) to £20 million (EPS: 51.2p)

Last recommended by Growth Company Investor this June at 969.5p the unexpected warning of lower growth has led to a 31.3 per cent slide in the share price following the announcement, with the shares currently trading at 540p. With the warning that increased competition and cuts in healthcare budgets will negatively impact its future prospects, we downgrade the shares from add to hold.

Tags: AIM 50, Competition from rivals, Diagnostics business, Kit manufacturer, Profit warning

Sector: Health Care Equipment & Services

Companies: Immunodiagnostic Systems

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