TIDMINS
RNS Number : 2155A
Instem plc
28 September 2020
Instem plc
("Instem", the "Company" or the "Group")
Half Year Report
Instem plc (AIM: INS.L), a leading provider of IT solutions to
the global life sciences market, announces its unaudited half year
results for the six months ended 30 June 2020.
Financial Highlights
-- Total revenues were up 20% to GBP14.0m (H1 2019: GBP11.7m)
-- Recurring revenue (annual support and SaaS) increased 19% to GBP8.4m (H1 2019: GBP7.0m)
-- Organic revenue growth (excluding Leadscope acquisition in
November 2019) of 12% to GBP13.1m (H1 2019: GBP11.7m)
-- Adjusted EBITDA* of GBP3.0 m (H1 2019: GBP1.7m)
-- Profit before tax of GBP1.9m (H1 2019: GBP0.4m)
-- Adjusted profit before tax** of GBP2.1m (H1 2019: GBP0.8m)
-- Basic and diluted earnings per share of 9.5p (H1 2019: 2.0p) and 9.0p (H1 2019: 1.9p)
-- Net operating cash inflow of GBP3.0m (H1 2019 inflow GBP3.2m)
-- Cash balance as at 30 June 2020 of GBP9.1m (H1 2019: GBP6.0m)
*Earnings before interest, tax, depreciation, amortisation and
non-recurring items.
**After adjusting for the effect of foreign currency exchange on
the revaluation of inter-company balances included in finance
income/(costs), non-recurring items and amortisation of intangibles
on acquisitions.
Profit is adjusted in this way to provide a clearer measure of
underlying operating performance.
Operational Highlights
-- All parts of the business performed well, highlighting the
resilience of the business model given the Covid-19 backdrop
-- Continued transition towards a SaaS based delivery and
revenue model, in line with the strategic objective to increase
earnings visibility
-- $1 million contract win with South Korea-based Biotoxtech
Post-period end Highlights
-- Oversubscribed GBP15.75m gross placing at 435p per share to
accelerate the Group's acquisition strategy
-- GBP0.7m contract from a top 30 pharmaceutical company for
conversion of historical studies to the S format
Phil Reason, CEO of Instem plc, commented:
"The performance in the first half of the year reflects the
strength of the Company's growing suite of solutions and services,
the underlying market fundamentals and the tremendous performance
of the entire Instem team, who have performed admirably in the
challenging Covid-19 environment.
"The organic growth achieved highlights the resilience of the
Company's model, especially given the Covid-19 backdrop, while the
positive impact from Leadscope provides a strong reference point
for the range of acquisitions that management is currently
progressing following the post-period end fundraise.
The Company continues to trade in line with the Board's
expectations, with the Board anticipating that the momentum
achieved during the first half and post period-end will continue
over the rest of the year."
For further information, please contact:
Instem plc Via Walbrook PR
Phil Reason, CEO
Nigel Goldsmith, CFO
N+1 Singer (Nominated Adviser
& Broker) +44 (0) 20 7496 3000
Peter Steel/Alex Bond (Corporate
Finance)
Rachel Hayes (Corporate Broking)
Walbrook Financial PR +44 (0) 20 7933 8780
Nick Rome instem@walbrookpr.com
Tom Cooper
Nicholas Johnson
About Instem
Instem is a leading provider of IT solutions & services to
the life sciences market delivering compelling solutions for Study
Management and Data Collection; Regulatory Solutions for
Submissions and Compliance; and Informatics-based Insight
Generation.
Instem solutions are in use by over 500 customers worldwide,
including all the largest 25 pharmaceutical companies, enabling
clients to bring life enhancing products to market faster. Instem's
portfolio of software solutions increases client productivity by
automating study-related processes while offering the unique
ability to generate new knowledge through the extraction and
harmonisation of actionable scientific information.
Instem products and services address aspects of the entire drug
development value chain, from discovery through to market launch.
Management estimate that over 50% of all drugs on the market have
been through some part of Instem's platform at some stage of their
development.
To learn more about Instem solutions and its mission, please visit www.instem.com
CHAIRMAN'S STATEMENT
The Company's business during the first half of 2020 was
conducted against the dramatic backdrop of the rapidly developing
Covid-19 global pandemic. I am delighted with our achievements
throughout this difficult and continuing period. Our performance
reflected the ongoing importance of our products and services and
the resilience of our business and staff. This was underpinned by
strong cash generation, organic growth and a strong performance
from our November 2019 acquisition of Leadscope.
All three areas of the business performed well with significant
revenue and profit growth over the equivalent period in the prior
year. The addition of new clients and the continued transition to
SaaS based contracts improves the scale of repeat business and
hence increases the visibility of future revenues.
The timing and success of our post period-end fundraise of
GBP15m net of expenses is of great strategic importance to the
Company. It both places Instem in a strong position to implement
its acquisitive growth strategy and has significantly strengthened
our institutional investor base.
Growth Strategy
As announced on completion of the fundraise in July 2020, the
Board's strategy is to pursue expansion through both organic growth
and targeted acquisitions. The market conditions created by the
global Covid-19 pandemic, in particular for the life sciences
sector, are generating opportunities in both areas. With a scalable
platform in place, the Board believes there are three distinct and
deliverable opportunities to enable continued development of the
business:
-- Organic revenue growth from additional market penetration,
cross-selling and the introduction of new products and
services;
-- Margin improvement through conversion to SaaS deployment and
extensively leveraging global infrastructure; and
-- Accretive M&A and strategic partnerships in existing
markets, as well as entry into related adjacent markets.
H1 Performance
All areas of the business performed well with a particularly
strong performance (albeit from a low base) from Informatics -
driven by growing demand for AI-based solutions.
The integration of Leadscope helped to significantly broaden
this offering and enhance our reputation in this area. Importantly,
this enables the Company to focus on growing the longevity of
relationships with existing and new clients by offering services
that span the drug development lifecycle. Our Regulatory Solutions
business, based on the US Food & Drug Administration mandated
Standard for the Exchange of Nonclinical Data ("S"), also continued
to provide strong growth as the Company took advantage of a record
number of new drug submissions. Additionally, the contract for
Biotoxtech, the largest contract research facility in South Korea,
demonstrated the global reputation of the Company. It was
particularly impressive that we were able to successfully install
this large system remotely.
I am pleased with the Company's performance - especially given
the Covid-19 backdrop. Not only was our response extremely well
handled with the transition to working from home but our ability to
grow and take advantage of the pipeline of opportunities highlights
the resilient nature of our operations. Added to this, the post
period end fundraise now provides us with the ability to drive a
step change in the size and scale of the business through
acquisitions.
We expect the momentum achieved during H1 and post period-end to
be maintained throughout the remainder of the financial year and we
continue to be excited by the significant potential of the
business.
David Gare
Non-Executive Chairman
28 September 2020
CHIEF EXECUTIVE'S REPORT
Strategic Developments
The Company continued to show its resilience during the period
with growth across all parts of the business despite the backdrop
of Covid-19. Importantly, cash balances grew whilst high levels of
recurring revenues provide enhanced visibility going forward.
The shift to SaaS continued, with SaaS revenues growing from
both new clients and established clients switching from on-premise
to SaaS deployments. The Company also benefited from the
integration of Leadscope enabling it to cross sell and upsell to
existing clients in addition to adding new customers.
Given the continued organic growth trajectory, the success of
the Leadscope acquisition and the potential to materially advance
its acquisition strategy, the Company took the opportunity to raise
GBP15.75m via an oversubscribed placing post-period end. The Board
is currently progressing a range of acquisition opportunities
having already identified a number of targets.
Market Review
The general market backdrop remained buoyant with the Company
benefiting from strong demand as the well-funded biotech industry
continued to focus on growing its development pipeline - as
highlighted by growing client demand for Covid-19 related R&D
activities during the period.
Research from Pharma Intelligence highlighted that the number of
drugs in the global pharmaceutical R&D pipeline grew almost 10%
year-on-year to an all-time high, providing a strong foundation for
the Company to build on the momentum it has already achieved.
The number of drugs in the preclinical (non-clinical) phase of
development, where much of Instem's business arises, grew
particularly strongly (over 13% through March 2020) creating strong
study demand for the non-clinical contract research organisations
("CROs"), who represent an important segment of the Instem
market.
There are also increasing regulatory-backed growth opportunities
that highlight the strength of the Group's product and services
suite. The volume of studies required to be submitted to the US
Food and Drug Administration using the Standard for the Exchange of
Non-clinical Data ("S") has continued to grow, underpinning demand
for Instem's S technology and outsourced services. In addition, the
Company's AI-based in-silico R&D business Leadscope remains
especially well-placed, having worked extensively through research
collaboration agreements ("RCAs") with the FDA, and in
collaboration with other agencies, to develop both predictive and
expert review solutions to satisfy regulatory guideline ICH M7
(R1), for the assessment and control of DNA reactive (mutagenic)
impurities in pharmaceuticals to limit potential carcinogenic
risk.
Business Performance
Study Management and Data Collection
Strong study demand for the non-clinical CROs has fuelled growth
in licensed users for Instem's Study Management and Data Collection
solutions and encouraged existing clients to take modules from our
portfolio that they had not yet licensed. Clients have also been
upgrading to later versions of our products to further increase
their productivity. We have continued to benefit from the
transition towards SaaS with steady progress again being made
towards our goal of moving all existing on-premise enterprise
software clients to SaaS deployment by the end of 2023. The largest
new study management contract in H1 2020 was for Biotoxtech, a
prominent South Korean non-clinical CRO. The contract is worth
approximately $1 million, the majority of which will be recognised
as revenue in H2 2020 and the balance in 2021.
Informatics
Informatics performed particularly well in the period with
strong organic growth in Target Safety Assessment ("TSA") services
and a first full half-year period contribution from Leadscope. Our
TSA work brings the Company into contact with customers at an early
stage in the therapeutic discovery process, providing a service
that aims to avoid very expensive later stage drug programme
failures.
TSA capacity has expanded through team growth (doubling since H1
2019, with staff now in Cambridge, UK and Pune, India), further
development of our underlying KnowledgeScan technology platform and
optimization of the workflow processes.
In addition to strong organic growth, the performance of the
Leadscope acquisition has been especially pleasing, helping the
Company grow existing customer revenues while also attracting new
clients.
We continue to see tremendous growth potential in our augmented
intelligence, machine learning and predictive analytics solutions
in informatics, with considerable appetite from clients to leverage
huge volumes of historic data to radically reduce the time and cost
to bring new drugs to market.
Regulatory Solutions
The Company's regulatory S solutions lead the FDA (Food and Drug
Administration) mandated market, with the industry continuing to
try to address a backlog of S conversion work, while keeping up
with the growing current study volumes. FDA driven demand remains
the cornerstone of growth, although pharma clients are increasingly
turning to S as their preferred approach to securing all study data
in a format that facilitates cross compound analysis and insight
generation. Instem aims to maintain approximately 70% share of the
accessible S outsourced services market.
With industry expertise in S expanding, many CROs, who had
previously outsourced S conversion work, are choosing to license
Instem's S conversion technology and to bring the conversion work
in-house.
The more S data sets that are created (by Instem or others) and
the more pharma companies that have access to them, the greater the
demand for our technology solutions that explore and exploit S
data, an area that is showing good software growth in 2020. We
continue to explore the potential to expand our technology into the
closely associated clinical submission standard SDTM.
Post-Period Fund Raise
The Company successfully completed an oversubscribed GBP15.75m
fundraise (pre-expenses) in July 2020, providing funds to advance
existing acquisition targets in line with its M&A strategy. A
number of bolt-on acquisitions and more substantial targets have
already been identified and are now being progressed - aided by the
impact of Covid-19 on certain business valuations.
Covid-19
The Company remains well placed and has seen minimal impact from
Covid-19, with working from home practices implemented and the
majority of business relatively unaffected. The transition to
remote operations was seamless, ensuring business continuity,
reflected by the Company's performance during the period. As
highlighted in the results announcement for the year ended 31
December 2019, while some new business opportunities have been
delayed, principally those in the early phase clinical and academic
sectors, most 2020 opportunities remain within the year and, to
date, no pipeline opportunities have been cancelled altogether by
clients. About 10% of Instem's professional services associated
with software deployment are performed on client premises, with
some consequential revenue slippage as travel and client site
access are not expected to materially improve until 2021.
Outlook
The performance in the first half of the year reflects the
strength of the Company's growing suite of solutions and services,
the underlying market fundamentals and the tremendous performance
of the entire Instem team, who have performed admirably in the
challenging Covid-19 environment. Furthermore, the Company is
reaping the benefits of the transition to SaaS at the same time as
strengthening its relationships with existing customers while also
growing its client base.
The organic growth achieved highlights the resilience of the
Company's model while the positive impact from Leadscope provides a
strong reference point for the range of acquisitions that
management is currently progressing following the post-period end
fundraise.
The Company continues to trade in line with the Board's
expectations, with the Board anticipating that the momentum
achieved during the first half and post-period end will continue
over the rest of the year.
Phil Reason
Chief Executive Officer
28 September 2020
Financial Review
Key Performance Indicators
The directors review monthly revenue and operating costs to
ensure that sufficient cash resources are available for the working
capital requirements of the Group. The primary KPIs at 30 June 2020
were:
6 months to 6 months to 12 months to
30 June 2020 30 June 2019 31 Dec
GBP000 GBP000 2019
GBP000
Total revenue 14,047 11,669 25,717
Recurring revenue 8,357 7,041 14,862
Recurring revenue as a percentage of total revenue 59% 60% 58%
*Adjusted EBITDA 2,995 1,662 4,864
Cash and cash equivalents 9,132 6,039 5,957
Instem's revenue model consists of perpetual licence income with
annual support and maintenance contracts, professional fees,
technology enabled outsourced services fees and SaaS
subscriptions.
Total revenues in the period increased by 20% to GBP14.0m (H1
2019: GBP11.7m). Like-for like revenues, excluding the impact of
Leadscope Inc, which was acquired in November 2019, increased by
12%. Recurring revenue, derived from support & maintenance
contracts and SaaS subscriptions, increased in the period by 19% to
GBP8.4m (H1 2019: GBP7.0m). Recurring revenue as a percentage of
total revenue was 59% (H1 2019: 60%). In absolute terms, recurring
revenue increased over the prior year by GBP1.4m but its percentage
of the total decreased due to the growth in technology enabled
outsourced services, which is currently all shown as non-recurring.
Revenue from technology enabled outsourced services increased to
GBP3.4m (H1 2019: GBP2.3m).
Total operating expenses increased by 10% in the period
reflecting the ongoing investment in operational teams and the
inclusion of Leadscope Inc costs. Lower travel and associated costs
due to Covid-19 were offset by a higher holiday pay accrual, as
employee holidays were deferred, again due to Covid-19.
Earnings before interest, tax, depreciation, amortisation,
impairment of goodwill and capitalised development and
non-recurring items (*Adjusted EBITDA) increased by 76% to GBP3.0m
(H1 2019: GBP1.7m). For this measure of earnings, the margin as a
percentage of revenue increased in the period to 21.3% from 14.2%
in H1 2019. Excluding Leadscope Inc, like-for like adjusted EBITDA
increased by 53% to GBP2.6m in the period.
Non-recurring costs in the period consist of GBP0.05m for legal
expenses associated with historical contract disputes (H1 2019:
GBP0.08m).
The reported profit before tax for the period was GBP1.9m (H1
2019: GBP0.4m). Adjusted profit before tax (i.e. adjusting for the
effect of foreign currency exchange on the revaluation of
inter-company balances included in finance income/(costs),
non-recurring items, impairment of goodwill and capitalised
development and amortisation of intangibles on acquisitions) was
GBP2.1m (H1 2019: GBP0.8m).
The Group continues to invest in its product portfolio.
Development costs incurred in the period were GBP1.6m (H1 2019:
GBP1.5m), of which GBP0.6m (H1 2019: GBP0.7m) was capitalised.
Basic and diluted earnings per share calculated on an adjusted
basis were 10.7p and 10.2p respectively (H1 2019: 4.6p basic and
4.4p diluted). The reported basic and diluted earnings per share
were 9.5p and 9.0p respectively (H1 2019: 2.0p basic and 1.9p
diluted).
The period saw strong net cash generated from operating
activities of GBP3.0m (H1 2019: GBP3.2m), largely due to cash
inflows from key contracts, outsourced services, working capital
management and a GBP0.6m R&D tax credit claimed in respect of
2018. H1 2019 cash benefitted from a number of customer payments
which were delayed from 2018 and paid in early 2019. Net cash
generated from financing activities includes the proceeds from
loans of GBP0.9m from the US government. The loans are part of the
US federal government support for businesses during the Covid-19
pandemic, having a maturity of two years and potentially being
partly or fully forgiven. Cash balances increased to GBP9.1m at 30
June 2020 (H1 2019: GBP6.0m).
The deficit on the Group's legacy defined benefit pension scheme
was GBP4.0m at 30 June 2020 (H1 2019: GBP2.2m) having worsened from
a deficit of GBP1.8m at 31 December 2019. Liabilities have
increased from GBP13.8m at 31 December 2019 to GBP15.5m at 30 June
2020 due to a significant fall in corporate bond yields over the
period. This was compounded by a combination of negative asset
returns and a modest increase in assumed life expectancy but offset
by deficit contributions paid over the period and a slight fall in
assumed price inflation.
Movements in share capital, share premium and share based
payment reserve reflect the exercise of share options during the
period and the fair value of share options granted being charged to
the statement of comprehensive income.
In line with previous periods and given our policy of retaining
cash within the business to capitalise on available growth
opportunities, the Board has not recommended the payment of a
dividend.
Principal risks and uncertainties
The principal risks and uncertainties remain unchanged from
those described in our 2019 Annual Report.
Post balance sheet events
On 26 June 2020, the Company announced that it had successfully
raised gross proceeds of GBP15.75 million (GBP15.0 million net of
expenses) through a placing of 3,620,690 new shares at a price of
435p per share.
At the same date, the Company also announced that following an
exercise of options, 187,427 shares were issued to Phil Reason, the
Company's Chief Executive Officer, of which 142,000 were sold.
Admission of the shares on AIM became effective on 17 July 2020.
The enlarged share capital of Instem is now 20,481,909 ordinary
shares.
Brexit
Trade negotiations with the European Union ("EU") are continuing
during 2020 with the transition period planned to end on 31
December 2020. Whilst the outcome remains uncertain, there is
always the associated risk of adverse implications for the
business, including the impact on exchange rate fluctuations.
However, the Group has to its knowledge experienced no negative
impact on its business to date and does not expect to do so in the
future. Instem operates in a global market with a multinational
customer base and its revenues and costs spread around the globe
without over reliance on Europe or exposure to it. The 2016
acquisition of Notocord in France provides the Group with a
presence in the EU that we expect to help mitigate any impact that
might arise from the Brexit outcome. The Group will continue to
monitor the progress of the UK/EU trade negotiations and any
potential implications for the business.
Nigel Goldsmith
Chief Financial Officer
28 September 2020
Instem plc
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the six months ended 30 June 2020
Unaudited Unaudited Audited
Six months ended Six months ended Year
30 June 30 June ended 31 December 2019
2020 2019 GBP000
GBP000 GBP000
Note
REVENUE 14,047 11,669 25,717
Employee benefits expense (8,009) (6,860) (13,609)
Other expenses (3,043) (3,147) (7,244)
EARNINGS BEFORE INTEREST, TAXATION,
DEPRECIATION, AMORTISATION AND
NON-RECURRING COSTS (ADJUSTED
EBITDA) 2,995 1,662 4,864
Depreciation (76) (77) (155)
Amortisation of intangibles arising on
acquisition (332) (262) (523)
Amortisation of internally generated
intangibles (310) (374) (755)
Amortisation of right of use assets (272) (272) (607)
Impairment of goodwill and capitalised
development - - (3,175)
PROFIT/(LOSS) BEFORE NON-RECURRING COSTS 2,005 677 (351)
Non-recurring costs 5 (49) (84) (302)
----------------- ------------------ ------------------------
PROFIT/LOSS) AFTER NON-RECURRING COSTS 1,956 593 (653)
Finance income 6 67 11 7
Finance costs 7 (124) (185) (255)
----------------- ------------------ ------------------------
PROFIT/(LOSS) BEFORE TAXATION 1,899 419 (901)
Taxation (308) (90) (22)
----------------- ------------------ ------------------------
PROFIT/(LOSS) FOR THE PERIOD 1,591 329 (923)
================= ================== ========================
OTHER COMPREHENSIVE (EXPENSE)/INCOME
Items that will not be reclassified to
profit and loss account
Actuarial (loss)/gain on retirement benefit
obligations (2,525) (275) 30
Deferred tax on actuarial gain & loss 480 47 (6)
----------------- ------------------ ------------------------
(2,045) (228) 24
Items that may be reclassified to profit
and loss account:
Exchange differences on translating foreign
operations 77 16 (208)
----------------- ------------------ ------------------------
OTHER COMPREHENSIVE EXPENSE FOR THE PERIOD (1,968) (212) (184)
TOTAL COMPREHENSIVE (EXPENSE)/INCOME FOR
THE PERIOD (377) 117 (1,107)
================= ================== ========================
PROFIT/(LOSS) ATTRIBUTABLE TO OWNERS OF THE
PARENT COMPANY 1,591 329 (923)
================= ================== ========================
TOTAL COMPREHENSIVE (EXPENSE)/INCOME
ATTRIBUTABLE TO OWNERS OF THE PARENT
COMPANY (377) 117 (1,107)
================= ================== ========================
Earnings per share from continuing
operations
- Basic 4 9.5p 2.0p (5.7p)
- Diluted 4 9.0p 1.9p (5.7p)
Instem plc
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 30 June 2020
Unaudited Unaudited Audited
30 June 30 June 31 December
2020 2019 2019
Note GBP000 GBP000 GBP000
ASSETS
NON-CURRENT ASSETS
Intangible assets 18,122 17,506 18,108
Property, plant and equipment 252 290 237
Right of use assets 1,982 2,848 2,165
Finance lease receivables 165 - 175
Deferred tax assets - 34 -
---------- ---------- ------------
TOTAL NON-CURRENT ASSETS 20,521 20,678 20,685
---------- ---------- ------------
CURRENT ASSETS
Inventories 39 39 36
Trade and other receivables 8,621 7,187 6,921
Finance lease receivables 19 - 39
Tax receivable 579 532 1,158
Cash and cash equivalents 8 9,132 6,039 5,972
---------- ---------- ------------
TOTAL CURRENT ASSETS 18,390 13,797 14,111
---------- ---------- ------------
TOTAL ASSETS 38,911 34,475 34,796
========== ========== ============
LIABILITIES
CURRENT LIABILITIES
Trade and other payables 2,315 2,566 2,662
Deferred income 11,048 9,323 8,942
Tax payable 425 176 404
Financial liabilities 749 35 301
Lease liabilities 461 682 565
Deferred tax liabilities 31 - 506
---------- ---------- ------------
TOTAL CURRENT LIABILITIES 15,029 12,782 13,380
---------- ---------- ------------
NON-CURRENT LIABILITIES
Financial liabilities 1,079 - 559
Retirement benefit obligations 3,985 2,231 1,804
Provision for liabilities and
charges 9 250 250 250
Lease liabilities 1,927 2,256 2,004
---------- ---------- ------------
TOTAL NON-CURRENT LIABILITIES 7,241 4,737 4,617
---------- ---------- ------------
TOTAL LIABILITIES 22,270 17,519 17,997
========== ========== ============
EQUITY
Share capital 1,667 1,630 1,662
Share premium 13,219 12,937 13,135
Merger reserve 2,432 1,598 2,432
Share based payment reserve 784 1,082 654
Translation reserve 159 306 82
Retained earnings (1,620) (621) (1,166)
---------- ---------- ------------
TOTAL EQUITY ATTRIBUTABLE TO
OWNERS OF THE PARENT 16,641 16,932 16,799
---------- ---------- ------------
TOTAL EQUITY AND LIABILITIES 38,911 34,475 34,746
========== ========== ============
Instem plc
CONSOLIDATED STATEMENT OF CASH FLOWS
For the six months ended 30 June 2020
Unaudited Unaudited Audited
Six months ended 30 June Six months ended 30 June Year ended 31 December
2020 2019 2019
GBP000 GBP000 GBP000
CASH FLOWS FROM OPERATING
ACTIVITIES
Profit before taxation 1,899 419 (901)
Adjustments for:
Depreciation 76 77 155
Amortisation of intangibles 642 636 1,278
Amortisation of right of use assets 272 272 607
Impairment of goodwill and
capitalised development - - 3,175
Share based payment charge 130 72 75
Retirement benefit obligations (362) (325) (475)
Finance income (67) (11) (7)
Finance costs 124 185 255
------------------------- ------------------------- -----------------------
CASH FLOWS FROM OPERATIONS BEFORE
MOVEMENTS IN WORKING CAPITAL 2,714 1,325 4,162
Movements in working capital:
(Increase)/Decrease in inventories (3) (2) 1
(Increase)/Decrease in trade and
other receivables (1,705) 590 790
Increase in trade, other payables
and deferred income 1,759 1,063 693
------------------------- ------------------------- -----------------------
NET CASH GENERATED FROM OPERATIONS 2,765 2,976 5,646
Finance income 67 11 7
Finance costs (124) (17) (255)
Income taxes 315 256 25
------------------------- ------------------------- -----------------------
NET CASH GENERATED FROM OPERATING
ACTIVITIES 3,023 3,226 5,423
------------------------- ------------------------- -----------------------
CASH FLOWS FROM INVESTING
ACTIVITIES
Capitalisation of development costs (600) (731) (1,344)
Purchase of property, plant and
equipment (85) (67) (91)
Purchase of subsidiary undertaking
(net of cash acquired) (73) - (1,268)
------------------------- ------------------------- -----------------------
NET CASH USED IN INVESTING
ACTIVITIES (758) (798) (2,703)
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from issue of share capital 89 440 648
Proceeds from US government loan 901 - -
Lease interest payment - (1) (2)
Repayment of lease liabilities (327) (306) (693)
Receipts from sublease of asset 25 - 7
Repayment of lease capital (15) (17) (34)
------------------------- ------------------------- -----------------------
NET CASH GENERATED FROM FINANCING
ACTIVITIES 673 116 (74)
NET INCREASE IN CASH AND CASH
EQUIVALENTS 2,938 2,544 2,646
Cash and cash equivalents at start
of period 5,957 3,572 3,572
Effect of exchange rate changes on
the balance of cash held in foreign
currencies 237 (77) (261)
------------------------- ------------------------- -----------------------
CASH AND CASH EQUIVALENTS AT OF
PERIOD 9,132 6,039 5,957
========================= ========================= =======================
Instem plc
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the six months ended 30 June 2020
Share based
payment
Share Share Merger reserve Translation Retained Total
capital premium reserve reserve earnings equity
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Balance as at 31
December 2018
(Audited) 1,592 12,535 1,598 1,010 290 (630) 16,395
Adjustment on
initial
application of
IFRS 16 - - - - - (68) (68)
---------- ---------- ---------- -------------- ------------- ---------- ---------
Adjusted balance
as at 1 January
2019 - Audited 1,592 12,535 1,598 1,010 290 (698) 16,327
Profit for the
period - - - - - 329 329
Other
comprehensive
income/(expense) - - - - 16 (228) (212)
---------- ---------- ---------- -------------- ------------- ---------- ---------
Total
comprehensive
income - - - - 16 101 117
Shares issued 38 402 - - - - 440
Share based
payment - - - 72 - - 72
---------- ---------- ---------- -------------- ------------- ---------- ---------
Balance as at 30
June 2019
(Unaudited) 1,630 12,937 1,598 1,082 306 (597) 16,956
Loss for the
period - - - - - (1,252) (1,252)
Other
comprehensive
(expense)/income - - - - (224) 252 28
---------- ---------- ---------- -------------- ------------- ---------- ---------
Total
comprehensive
expense - - - - (224) (1,000) (1,224)
Shares issued 32 198 834 - - - 1,064
Share based
payment - - - 3 - - 3
Reserve transfer
on lapse of
share options - - - (431) - 431 -
---------- ---------- ---------- -------------- ------------- ---------- ---------
Balance as at 31
December 2019
(Audited) 1,662 13,135 2,432 654 82 (1,166) 16,799
Profit for the
period - - - - - 1,591 1,591
Other
comprehensive
income/(expense) - - - - 77 (2,045) (1,968)
---------- ---------- ---------- -------------- ------------- ---------- ---------
Total
comprehensive
income/(expense) - - - - 77 (454) (377)
Shares issued 5 84 - - - - 89
Share based
payment - - - 130 - - 130
---------- ---------- ---------- -------------- ------------- ---------- ---------
Balance as at 30
June 2020
(Unaudited) 1,667 13,219 2,432 784 159 (1,620) 16,641
========== ========== ========== ============== ============= ========== =========
NOTES TO THE FINANCIAL INFORMATION
For the six months ended 30 June 2020
GENERAL INFORMATION
The principal activity and nature of operations of the Group is
the provision of world class IT solutions to the early development
healthcare market. Instem's solutions for data collection,
management and analysis are used by customers worldwide to meet the
needs of life science and healthcare organisations for data-driven
decision making leading to safer, more effective products. Instem
plc is a public limited company, listed on AIM, incorporated in
England and Wales under the Companies Act 2006 and domiciled in
England. The registered office is Diamond Way, Stone Business Park,
Stone, Staffordshire ST15 0SD, UK.
Notes to the accounts
1. Basis of preparation and accounting policies
Basis of preparation
The Group's half-yearly financial information, which is
unaudited, consolidates the results of Instem plc and its
subsidiary undertakings made up to 30 June 2020. The Group's
accounting reference date is 31 December.
The consolidated financial information is presented in Pounds
Sterling (GBP) which is also the functional currency of the
parent.
The financial information contained in this half year financial
report does not constitute statutory accounts as defined in section
434 of the Companies Act 2006. It does not therefore include all of
the information and disclosures required in the annual financial
statements.
The financial information for the six months ended 30 June 2020
and 30 June 2019 is unaudited.
Instem plc's consolidated statutory accounts for the year ended
31 December 2019, prepared under IFRS, have been delivered to the
Registrar of Companies. The report of the auditors on these
accounts was unqualified and did not contain a statement under
Section 498 (2) or (3) of the Companies Act 2006.
Significant accounting policies
The accounting policies used in the preparation of the financial
information for the six months ended 30 June 2020 are in accordance
with the recognition and measurement criteria of International
Financial Reporting Standards ('IFRS') as adopted by the European
Union and are consistent with those which will be adopted in the
annual statutory financial statements for the year ending 31
December 2020.
While the financial information included has been prepared in
accordance with the recognition and measurement criteria of
International Financial Reporting Standards (IFRS), as adopted by
the European Union (EU), these financial statements do not contain
sufficient information to comply with IFRS's.
Instem plc and its subsidiaries have not applied IAS 34, Interim
Financial Reporting, which is not mandatory for UK AIM listed
groups, in the preparation of this half-yearly financial
report.
Going concern
The Directors continue to adopt the going concern basis of
accounting in preparing these financial statements, which the
Directors believe is appropriate given the Group's financial
liquidity. In addition to the 30 June 2020 cash balances of GBP9.1m
plus GBP0.5m of unused banking facilities, the Group raised a
further GBP15.0m in equity funds in July 2020, which remains
unused.
The uncertainty regarding the impact on the Group of Covid-19
has been considered as part of the Group's adoption of the going
concern basis. In the period to 30 June 2020, we have not observed
any material detriment to our overall existing business or in the
level of new business opportunities that are being presented to us
in the markets in which we operate and we do not anticipate any
during the next 12 months.
Cash and cash equivalents
Cash and cash equivalents for the purposes of the Statement of
Cash Flows comprise the net of cash and overdraft balances that are
shown on the Statement of Financial Position in Cash and Cash
Equivalents.
2. Segmental Reporting
The business is organised in three operating segments to better
manage and report revenues; Study Management, Regulatory Solutions
and Informatics. Certain direct costs are allocated to the revenue
streams whilst the majority of costs are recorded and reported
centrally. Whilst the expectation in future years is to allocate
more centrally held operational costs to the individual segments,
it will take time for the allocations to be sufficiently accurate
for the Board to use segmental cost information for meaningful
decision making.
The operations of the Group are managed centrally with
group-wide functions including sales and marketing, development,
customer support, human resources and finance & administration
.
Unaudited six months ended Study Management Regulatory
30 June 2020 Solutions Informatics Total
GBP000 GBP000 GBP000 GBP000
Total revenue 7,057 5,278 1,712 14,047
Direct attributable costs (1,765) (980) (788) (3,533)
----------------- ----------- -------------- --------
Contribution to indirect
overheads 5,292 4,298 924 10,514
Central unallocated indirect
costs (7,519)
______
Adjusted EBITDA 2,995
Unaudited six months ended Study Management Regulatory
30 June 2019 Solutions Informatics Total
GBP000 GBP000 GBP000 GBP000
Total revenue 7,270 4,008 391 11,669
Direct attributable costs (2,047) (1,219) (221) (3,487)
----------------- ----------- -------------- --------
Contribution to indirect
overheads 5,223 2,789 170 8,182
Central unallocated indirect
costs (6,520)
______
Adjusted EBITDA 1,662
Audited year ended Study Management Regulatory
31 December 2019 Solutions Informatics Total
GBP000 GBP000 GBP000 GBP000
Total revenue 15,188 9,037 1,492 25,717
Direct attributable costs (4,370) (2,111) (660) (7,141)
----------------- ----------- -------------- ---------
Contribution to indirect
overheads 10,818 6,926 832 18,576
Central unallocated indirect
costs (13,712)
______
Adjusted EBITDA 4,864
3. Key performance measures
a) Recurring revenue Unaudited Unaudited Audited
Six months ended Six months ended Year ended
30 June 2020 30 June 2019 31 December 2019
GBP000 GBP000 GBP000
Annual support fees 4,588 4,107 8,418
SaaS subscription and support fees 3,796 2,934 6,444
------------------- ------------------- -------------------
Recurring revenue 8,357 7,041 14,862
Licence fees 1,510 1,385 3,501
Professional services 739 947 1,773
Technology enabled outsourced services 3,441 2,296 5,581
------------------- ------------------- -------------------
Total revenue 14,047 11,669 25,717
------------------- ------------------- -------------------
b) Adjusted EBITDA
EBITDA 2,946 1,578 4,562
Non-recurring costs (see note 5) 49 84 302
------------------- ------------------- -------------------
Adjusted EBITDA 2,995 1,662 4,864
------------------- ------------------- -------------------
Adjusted profit after tax and bank balance performance measures
are detailed in notes 4 and 8.
4. Earnings per share
Basic earnings per share are calculated by dividing the
(loss)/profit attributable to ordinary shareholders by the weighted
average number of ordinary shares in issue during the year. Diluted
earnings per share is calculated by adjusting the weighted number
of ordinary shares outstanding to assume conversion of all dilutive
potential shares arising from the share option scheme. The dilutive
impact of the share options is calculated by determining the number
of shares that could have been acquired at fair value (determined
as the average market share price of the Company's shares) based on
the monetary value of the subscription rights attached to the
outstanding share options.
a) Basic earnings per share
Unaudited Unaudited Audited
Six months Six months Year ended
ended ended 31 December
30 June 30 June 2019
2020 2019
Profit/(loss) after tax (GBP000) 1,591 329 (923)
------------ ------------ -------------
Weighted average number of
shares (000's) 16,662 16,163 16,254
------------ ------------ -------------
Basic earnings per share 9.5p 2.0p (5.7p)
============ ============ =============
b) Diluted earnings per share
Unaudited Unaudited
Six months Six months Audited
ended ended Year ended
30 June 30 June 31 December
2020 2019 2019
Profit/(loss) after tax (GBP000) 1,591 329 (923)
------------ ------------ -------------
Weighted average number of
shares (000's) 16,662 16,163 16,254
Potentially dilutive shares
(000's) 948 820 799
Adjusted weighted average
number of shares (000's) 17,610 16,983 17,053
------------ ------------ -------------
Diluted earnings per share 9.0p 1.9p (5.7p)
============ ============ =============
c) Adjusted earnings per share
Adjusted earnings per share is calculated after adjusting for
the effect of foreign currency exchange on the revaluation of
inter-company balances included in finance income/(costs),
non-recurring items and amortisation of intangibles on
acquisitions. Diluted adjusted earnings per share is calculated by
adjusting the weighted number of ordinary shares outstanding to
assume conversion of all dilutive potential shares arising from the
share option scheme. The dilutive impact of the share options is
calculated by determining the number of shares that could have been
acquired at fair value (determined as the average market share
price of the Company's shares) based on the monetary value of the
subscription rights attached to the outstanding share options.
Unaudited
Unaudited Six months Audited
Six months ended Year ended
ended 30 June 31 December
30 June 2020 2019 2019
Profit/(loss) after tax (GBP000) 1,591 329 (923)
Non-recurring costs 49 84 302
Amortisation of acquired intangibles 332 262 523
Impairment of goodwill and
capitalised development - - 3,175
Foreign exchange (gain)/loss
on revaluation of intergroup
balances (181) 69 61
------- ------- -------
Adjusted profit after tax (GBP000) 1,791 744 3,138
------- ------- -------
Weighted average number of
shares (000's) 16,662 16,163 16,254
Potentially dilutive shares
(000's) 948 820 799
------- ------- -------
Adjusted weighted average number
of shares (000's) 17,610 16,983 17,053
------- ------- -------
Adjusted basic earnings per
share 10.7p 4.6p 19.3p
======= ======= =======
Adjusted diluted earnings per
share 10.2p 4.4p 18.4p
======= ======= =======
5. Non-recurring costs
Unaudited Unaudited
Six months Six months Audited
ended ended Year ended
30 June 30 June 31 December
2020 2019 2019
GBP000 GBP000 GBP000
Legal cost relating to historical
contract disputes 49 49 106
Professional fees - 35 -
Acquisition costs - - 196
49 84 302
------------ ------------ -------------
6. Finance income
Unaudited Unaudited
Six months Six months Audited
ended ended Year ended
30 June 30 June 31 December
2020 2019 2019
GBP000 GBP000 GBP000
Foreign exchange gains 62 - -
Other interest 5 11 7
------------ ------------ -------------
67 11 7
============ ============ =============
7. Finance costs
Unaudited Unaudited
Six months Six months Audited
ended ended Year ended
30 June 30 June 31 December
2020 2019 2019
GBP000 GBP000 GBP000
Bank loans and overdrafts 19 17 34
Unwinding discount on deferred 40 - -
consideration
Net interest charge on pension
scheme 18 32 60
Lease interest cost - 1 2
Right of use asset interest
cost 47 53 118
Foreign exchange losses - 82 41
------------ ------------ -------------
124 129 255
============ ============ =============
8. Cash and cash equivalents
Unaudited Unaudited Audited
30 June 30 June 31 December
2020 2019 2019
GBP000 GBP000 GBP000
Cash at bank 18,130 15,037 14,955
Bank overdraft (8,998) (8,998) (8,998)
Bank balance 9,132 6,039 5,957
============ ============ =============
9. Provision for liabilities and charges
Unaudited Unaudited Audited
30 June 30 June 31 December
2020 2019 2019
GBP000 GBP000 GBP000
At beginning of the period 250 250 250
Movement in provision - - -
At end of period 250 250 250
============ ========== =============
The provision relates to potential costs arising from historical
contract disputes (see note 5).
10. Availability of this Interim Announcement
Copies of the 2020 Interim Report for Instem plc will be
available from the Group's website at www.instem.com.
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END
IR BDGDCDGDDGGR
(END) Dow Jones Newswires
September 28, 2020 02:00 ET (06:00 GMT)
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