TIDMINS
RNS Number : 7698R
Instem plc
26 September 2017
Instem plc
("Instem", the "Company" or the "Group")
Half Yearly 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 2017.
Financial Highlights
-- Total revenues increased 13% to GBP10.3m (H1 2016: GBP9.1m)
-- Recurring revenues increased 23% to GBP6.5m (H1 2016:
GBP5.3m), of which SaaS was GBP1.7m (H1 2016: GBP1.2m)
-- Proportion of recurring revenue to total revenue increased to 63% (H1 2016: 58%)
-- EBITDA* of GBP0.6m (H1 2016: GBP1.2m)
-- Adjusted** profit before tax of GBP0.1m (H1 2016: GBP1.0m)
-- Adjusted** basic earnings per share of 0.2p (H1 2016: 6.3p)
-- Reported loss before tax of GBP0.6m (H1 2016: profit of GBP0.1m)
-- Reported basic loss per share of 4.4p (H1 2016: earnings per share of 0.4p)
-- Seasonal net operating cash outflow of GBP1.4m (H1 2016: GBP1.5m)
-- After acquisition related payments of GBP0.5m in H1 2017 and
GBP1.7m in H2 2016, net cash balance as at 30 June 2017 of GBP1.2m
(H1 2016: GBP4.8m)
*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 the amortisation of
intangibles on acquisitions. Profit is adjusted in this way to
provide a clearer measure of underlying operating performance.
Operational Highlights
Significant Strategic progress:
-- Completion of a Group-wide re-organisation to improve efficiency and agility:
-- Non-recurring costs of GBP0.3m recognised during the period
-- Estimated operational cost savings of GBP1.5m per annum
-- Further investment in resources to help secure the opportunity in S
Underlying trading remains strong:
-- Regulatory Solutions Business saw increasing demand from the
recently mandated Standard for the Exchange of Nonclinical Data
("S") and continued to increase market share, winning the majority
of technology and outsourced services contracts
-- Major expansion of a Study Management contract with the US Government
-- Confirmation of the Target Safety Assessment opportunity addressed by our informatics-based KnowledgeScan service
Phil Reason, CEO of Instem plc, commented:
"Following a period of planned strategic progress, Instem is now
undoubtedly better positioned for profitable growth than ever
before. While our target markets are generally experiencing
stability or growth, our focus is moving toward annually recurring
revenue and higher margins, with less reliance on perpetual
software license sales.
We are particularly excited by the growth potential for our
technology-enabled outsourced services for S and Target Safety
Assessment where there are increasing regulatory drivers,
competitive differentiators and customer activity remains high.
The continued investment in our outsourced services team has
increased our monthly revenue generation and the full benefit of
the overhead reductions implemented at the end of the first half of
the year will also be realised in the second half of 2017 and
beyond. Consequently, we anticipate earnings for the full year to
be in line with market expectations."
For further information, please contact:
Instem plc +44 (0) 1785 825 600
Phil Reason, CEO www.instem.com
Nigel Goldsmith, CFO
N+1 Singer (Nominated Adviser
& Broker) +44 (0) 20 7496 3000
Richard Lindley
Nick Owen
Walbrook Financial PR +44 (0) 20 7933 8780
Paul Cornelius instem@walbrookpr.com
Sam Allen
Helen Cresswell
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 customers worldwide and enable
our 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 supports over 500 clients through offices in the United
States, United Kingdom, France, Japan, China and India.
To learn more about Instem solutions and its mission, please
visit instem.com.
CHAIRMAN'S STATEMENT
The first half of the current financial year has been a period
of strategic development and significant operational change
designed to both optimise the current operations and facilitate the
future direction of the business. These improvements were completed
during the first half of the year and are expected to improve
efficiency and profitability in the second half of the current year
and beyond.
Over recent years the Company has strengthened and expanded its
business through the addition of world leading products and
services for new and existing markets and has invested to ensure
that we can operate in all relevant global territories.
Since flotation at the end of 2010, we have acquired five
businesses, internally developed several additional product lines,
widened our operational footprint in Europe and established a sales
and customer service presence in China, Japan and India.
Furthermore, in addition to our original focus on Study Management,
we now address the Regulatory Solutions and Informatics markets.
Simultaneously, our revenue model is changing with an increasing
emphasis on recurring revenue through a combination of SaaS and
technology enabled services.
In the first half of the year, we carried out a review of our
operations to consolidate and centralise activities for synergies,
where appropriate and ensure they are aligned to capture future
growth opportunities. This is expected to result in annual cost
savings of approximately GBP1.5m. To effectively manage these
centralised activities we have strengthened our top management team
with the appointment, in January this year, of Chief Operating
Officer, MaryBeth Thompson. MaryBeth has extensive experience in
the life sciences industry.
Despite the amount of operational change during the period,
total revenues for the six months to June were some 13% higher than
the prior year at GBP10.3m (H1 2016: GBP9.1m). In particular, our
Regulatory Solutions business continued to develop and, we believe,
continued to win the majority of S-related business placed. Our
Informatics based KnowledgeScan business also continued to develop
with a significant increase in the number of Target Safety
Assessment reports being produced during the period. The
performance of Study Management was also positive, including the
award of a major contract extension for the US Government's
National Institute of Environmental Health Sciences and
substantially increasing the number of supported Provantis users at
our largest client.
The increase in overheads in the period under review over the
previous six months was the direct result of both a full six
months' cost of the two acquisitions made in 2016 and the continued
organic investment in our technology enabled outsourced services
business, which required additional resource to meet growing
demand. In addition, as a result of further management insight into
our Clinical business, following its restructuring at the end of
2016, we have made additional investment in our Alphadas product to
ensure that we maintain our strong market position. At the same
time, we have made a one-off provision against potential costs
arising from historical issues associated with this business.
Whilst EBITDA for the period at GBP0.6m was below earlier
expectations, the second half will benefit from approximately
GBP750k of cost savings. As a result of our operational
improvements and success in securing anticipated new business, we
expect a satisfactory outcome to the year as a whole.
David Gare, Non-Executive Chairman
25 September 2017
CHIEF EXECUTIVE'S REPORT
Strategic Development
The period under review was one of significant operational
change and strategic progress. The arrival of our new Chief
Operating Officer, MaryBeth Thompson at the start of the period,
provided the opportunity to trigger the next stage of business
reorganisation and integration. This saw the creation of
centralised areas of excellence for all key operational functions
under a new Operations leadership team, comprising new hires and
existing experienced managers. The increased senior management team
bandwidth has allowed us to analyse the opportunities, challenges
and threats facing the business and also provided valuable insights
into the Company's industry position and future opportunities. The
process identified areas of the business where there was capacity
that could be redeployed or reduced and enabled a number of
out-sourced activities to be more cost-effectively delivered
in-house, using UK and India based resources. This has all been
achieved whilst ensuring the business remained agile and responsive
to the dynamic markets in which it operates.
The Company has successfully reduced its annual overheads by
approximately GBP1.5m or 10%, which should significantly improve
the Group's profitability in the second half of the current year
and beyond.
Whilst this transition obviously created some disruption within
the business during the period, senior management continued to
focus on driving higher quality recurring revenues, which now
represent 63% of total revenues. Recurring revenues now cover
approximately 68% of total overheads providing much greater
visibility into the future financial performance of the business
and support for our longer term investment decisions.
As a result of these actions, we believe that Instem is now
'purpose built' to deliver software and scientific services which
address three distinct, but complementary, value propositions:
1. To efficiently capture, record and analyse scientific study data
2. To generate new insights from existing large data sets
through the application of sophisticated informatics
3. To ensure compliance with global regulators such as the FDA, EPA etc
Instem products and services now address the entire drug
development value chain, from discovery through to market launch,
and are currently deployed by over 500 companies, including all the
largest 25 pharmaceutical companies in the world.
Market Review
During the period Instem continued to win the majority of new
business placed in Non-clinical, our largest market. However, while
the order volume increased, the provision of client data for our
out-sourced S services contracts was slower than projected, with
much of the market leaving compliance with the December 2016
mandated regulatory standard until much later in the year than
anticipated.
Study Management and Data Collection
The global market for software to ensure the efficient capture,
recording and analysis of scientific study data remains robust as
the number of compounds in Research and Development continues to
increase. According to a recent report from Informa's Pharma
Intelligence, a leading industry and market analysis firm, the
number of compounds in the Global R&D Pipeline increased by
8.4% to 14,749 in 2017, its highest ever number. We believe that
this is due to a number of factors, but the overall trend is
largely underpinned by global population growth and from increasing
life expectancy, which is unlikely to change over the
near-term.
Importantly, the number of compounds in the R&D Pipeline
within Pre-Clinical and Phase I trials, where Instem specialises,
has increased year on year by 9.2% and 11.2% respectively,
indicating a growing potential for the Company's products and
services within these market segments.
The Company is particularly pleased to report that its contract
with the National Institute of Environmental Health Sciences
("NIEHS ") has progressed well since it was first announced in
2013. This 10-year contract for the capture, recording and analysis
of pre-clinical safety evaluation study data, as anticipated, has
expanded in scope since commencement, with the number of locations
and the number of authorised users both increasing over the period,
further demonstrating the increasing value of the Company's
software and services to the NIEHS.
Our largest customer also brought into operation over 700
additional Provantis user licenses during 2017 triggering enhanced
recurring revenue.
Our genetic toxicology solutions continue to dominate their
market and with a new release of our Cyto Study Manager solution we
anticipate further cross-selling opportunities across additional
Instem key accounts.
The Notocord business acquired in September 2016 has integrated
well and made a solid contribution during the period. A particular
highlight was a large order for the U.S. Army Medical Research
Institute of Infectious Diseases.
The new business pipeline remains promising, although during the
period the focus of our Study Management and Data Collection
business has been predominantly on completing implementation
projects for existing clients with some notable success. Following
the conclusions of our review and re-structure, significant
software development investment continues to be made in Alphadas to
ensure that we continue to secure a sizeable market share in a
competitive market.
Informatics
The KnowledgeScan(TM) informatics-based service was piloted in
2015 and formally launched by the Company in 2016. It offers the
pharmaceutical industry insightful new ways to create value from
huge volumes of public and proprietary scientific and
health-related data to reduce the risk and cost of bringing new
drugs to market.
The initial application of KnowledgeScan is for Target Safely
Assessment ("TSA"), a process routinely undertaken at the earlier
stages of drug discovery, but with continuing value throughout the
drug development process. Business volume has grown well in 2017,
having completed more TSAs in the first half of 2017 than in the
full year of 2016, with the pace of increase in activity being
sustained into the third quarter of 2017. We have added some
resource, but TSA capacity has generally been increased through
further process automation. Repeat business remains encouraging
with over 80% of customers having already placed further
orders.
Regulatory Solutions
Regulatory Solutions represent a growing market opportunity for
Instem with a broad target market in Regulatory Information
Management ("RIM") and growing demand for our regulatory submission
related products and services that implement the FDA mandated
Standard for Exchange of Non-clinical Data ("S").
Regulatory Information Management
The integration of Samarind, which we acquired in 2016, is now
largely complete and, having identified specific areas of the RIM
market where we have market leading capabilities, we are actively
pursuing related opportunities. We were pleased to secure an order
with one of the world's top 10 medical device businesses for the
entire Samarind RMS suite during the period. The industry and
regulatory initiative to implement an internationally harmonised
standard for the Identification of Medicinal Products ("IDMP") has
been delayed by several years, but it remains of keen interest to
our current customers and prospects given our leadership in
implementing the current European standard, which will ultimately
be replaced.
Standard for the Exchange of Nonclinical Data ("S")
Instem continues to dominate the S technology market with
software sales during the period predominantly focussed on our
modules for "viewing" or "exploring" S datasets. With the first
regulatory mandate coming into force in December 2016, those
companies who hadn't already equipped themselves with the
technology to "create" S datasets are now predominantly looking for
out-sourced services for S creation. While we have won the large
majority of out-sourced services contracts, many clients have then
been slow to provide data for conversion. This is expected to pick
up during the second half of 2017.
During 2017, enquiries for the Company's software solutions in
general and its outsourcing services in particular have continued
to increase as the next major milestone of the S mandate goes into
effect during December 2017. This covers shorter duration studies
that are undertaken in much greater volume and so is expected to
generate a significant increase in S conversion demand.
During the first seven months of 2017, the Group has received a
total of 54 orders from 38 organisations, of which 19 were
first-time Instem customers.
Instem now has a total of 71 customers that have procured the
Company's S technology and/or out-sourced services, which include
eight of the top 10 pre-clinical CROs and 17 of the world's top 25
global pharmaceutical companies. Established S-related client
relationships are expected to be a significant source of future
business as the volume of out-sourced services increases.
During 2017, the Group introduced a new software module,
STrial(TM), that will deliver significant efficiencies for its
clients (and our internal Services team) by reducing processing
time in one specific area by up to 80%. This product is the first
of its type on the market and offers a solution which can be
deployed alongside Instem's existing submit(TM) products or used
independently. STrial(TM) will create additional opportunities for
Instem with those companies that are currently running competing
systems that cannot efficiently meet these specific
requirements.
In addition, Instem has released an updated version of its
submit(TM) software that enables clients to satisfy an FDA request
for test data supporting the development of the next version of the
standard. No other vendor in the marketplace has introduced this
capability and this clearly gives Instem first mover advantage in
this rapidly growing market segment.
Outlook
Following a period of planned strategic progress, Instem is now
undoubtedly better positioned for profitable growth than ever
before. While our target markets are generally experiencing
stability or growth, our focus is moving toward annually recurring
revenue and higher margins, with less reliance on perpetual
software license sales.
We are particularly excited by the growth potential for our
technology-enabled outsourced services for S and Target Safety
Assessment where there are increasing regulatory drivers,
competitive differentiators and customer activity remains high.
The continued investment in our outsourced services team has
increased our monthly revenue generation and the full benefit of
the overhead reductions implemented at the end of the first half of
the year will also be realised in the second half of 2017 and
beyond. Consequently, we anticipate earnings for the full year to
be in line with market expectations.
Phil Reason, Chief Executive
25 September 2017
CHIEF FINANCIAL OFFICER'S REVIEW
Instem's revenue model consists of a blend of fees for perpetual
licences with annual support fees, SaaS subscriptions and
professional services income. As previously stated, significant
growth potential is seen for outsourced professional services for S
and KnowledgeScan with customers now starting to place increasing
levels of repeat business.
Total revenues increased 13% from GBP9.1m to GBP10.3m in the
period. Recurring revenue, derived from annual support fees, SaaS
subscriptions and outsourced managed services, increased 23% to
GBP6.5m (H1 2016: GBP5.3m) or 63% (H1 2016: 58%) of total
revenue.
Operating expenses were GBP1.9m higher in the period at GBP9.6m
compared with GBP7.7m in H1 2016. The increase primarily related to
the full 6 month cost impact of the recently acquired companies
together with the full cost of the investment in key staff
recruited in the second half of 2016.
The reorganisation exercise carried out at the end of the period
resulted in non-recurring costs of GBP0.3m and an estimated
operational cost saving of GBP0.75m in the second half of 2017,
which increases to GBP1.5m per annum in future years.
Development expenditure in the period was GBP1.7m (H1 2016:
GBP0.7m), of which GBP0.9m was capitalised (H1 2016: GBP0.1m).
Importantly, a significant proportion of the new development costs
related to the continued investment in our Study Management and
Data Collection software as well as reflecting integration of the
newly acquired products from the Notocord and Samarind
acquisitions.
Earnings from operations before interest, tax, depreciation,
amortisation and non-recurring items, ('EBITDA') for the period,
were GBP0.6m (H1 2016: GBP1.2m). Depreciation and amortisation
increased to GBP0.8m compared with GBP0.5m in the equivalent prior
period. The majority of the change relates to acquired intangibles
in 2016.
Non-recurring costs include GBP0.3m of reorganisation costs and
a GBP0.3m provision against potential costs arising from historical
issues relating to Instem Clinical. Non-recurring income of GBP0.1m
arose from an adjustment to the contingent consideration payable in
respect of the 2016 acquisitions.
The IAS19 funding deficit on Instem's defined benefit pension
scheme decreased by a net GBP0.5m to GBP4.2m during the period,
primarily due to lower expectations of future inflation, positive
asset returns and employer deficit contributions.
In the first half of 2016 the Company raised GBP5.0m to fund
acquisitions. The subsequent Samarind and Notocord acquisitions
consumed the majority of those funds through payment of initial,
deferred and contingent consideration during 2016 and a further
GBP0.5m in H1 2017.
Instem's operating cash flow continues to reflect normal
seasonality within the business, with cash inflow being more
weighted towards the second half of the year, when annual fee
renewals normally occur prior to the beginning of the new calendar
year. Net cash at the end of June 2017 totalled GBP1.2m (H1 2016
GBP4.8m).
Share capital, share premium and merger reserve increased by
GBP0.2m in the period due to shares issued to settle a proportion
of the consideration payable on the acquisitions.
In line with previous periods, and given our existing 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 within the business remain
unchanged from those described in our 2016 Annual Report.
Nigel Goldsmith, Chief Financial Officer
25 September 2017
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the six months ended 30 June 2017
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended 31
30 June 30 June December 2016
2017 2016 GBP000
Notes GBP000 GBP000
REVENUE 10,278 9,052 18,319
Operating expenses (9,644) (7,699) (16,843)
Share based payment (46) (154) (223)
EARNINGS BEFORE INTEREST, TAXATION, DEPRECIATION,
AMORTISATION AND NON-RECURRING ITEMS ("EBITDA") 588 1,199 1,253
Depreciation (97) (77) (156)
Amortisation of intangibles arising on acquisition (466) (268) (667)
Amortisation of internally generated intangibles (225) (157) (380)
--------------- ---------------- ---------------
(LOSS)/PROFIT BEFORE NON-RECURRING COSTS (200) 697 50
Non-recurring (costs)/income 4 (426) (126) 619
--------------- ---------------- ---------------
(LOSS)/PROFIT AFTER NON-RECURRING COSTS AND BEFORE
FINANCE COSTS (626) 571 669
Finance income 5 167 3 -
Finance costs 6 (168) (446) (646)
--------------- ---------------- ---------------
(LOSS)/PROFIT BEFORE TAXATION (627) 128 23
Taxation (73) (67) 1,035
--------------- ---------------- ---------------
(LOSS)/PROFIT FOR THE PERIOD (700) 61 1,058
--------------- ---------------- ---------------
OTHER COMPREHENSIVE INCOME/(EXPENSE)
Items that will not be reclassified to profit and loss
account
Actuarial gain/(loss) on retirement benefit obligations 333 (875) (1,192)
Deferred tax on actuarial (gain)/loss (57) 157 215
--------------- ---------------- ---------------
276 (718) (977)
Items that may be reclassified to profit and loss
account
Exchange differences on translating foreign operations (480) 454 844
--------------- ---------------- ---------------
OTHER COMPREHENSIVE EXPENSE FOR THE PERIOD (204) (264) (133)
--------------- ---------------- ---------------
TOTAL COMPREHENSIVE (EXPENSE)/INCOME FOR THE PERIOD (904) (203) 925
=============== ================ ===============
(LOSS)/PROFIT ATTRIBUTABLE TO OWNERS OF THE PARENT
COMPANY (700) 61 1,058
=============== ================ ===============
TOTAL COMPREHENSIVE (EXPENSE)/INCOME ATTRIBUTABLE TO
OWNERS OF THE PARENT COMPANY (904) (203) 925
=============== ================ ===============
Earnings per Share from continuing operations
attributable to owners of the parent
- Basic 3 (4.4p) 0.4p 6.9p
-
Diluted 3 (4.4p) 0.4p 6.8p
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 30 June 2017
Unaudited Unaudited Audited
30 June 30 June 31 December
2017 2016 2016
Notes GBP000 GBP000 GBP000
ASSETS
NON-CURRENT ASSETS
Intangible assets 17,996 14,390 17,607
Property, plant and
equipment 376 359 374
Deferred tax assets 506 534 947
---------- ---------- ------------
TOTAL NON-CURRENT ASSETS 18,878 15,283 18,928
---------- ---------- ------------
CURRENT ASSETS
Inventories 62 1,045 916
Trade and other receivables 6,698 6,371 6,899
Financial asset - - 10
Cash and cash equivalents 7 1,165 4,755 4,189
---------- ---------- ------------
TOTAL CURRENT ASSETS 7,925 12,171 12,014
---------- ---------- ------------
TOTAL ASSETS 26,803 27,454 30,942
========== ========== ============
LIABILITIES
CURRENT LIABILITIES
Trade and other payables 3,206 2,237 2,670
Deferred income 6,598 6,897 9,092
Current tax payable 19 599 429
Financial liabilities 389 1,118 979
---------- ---------- ------------
TOTAL CURRENT LIABILITIES 10,212 10,851 13,170
---------- ---------- ------------
NON-CURRENT LIABILITIES
Financial liabilities 69 600 242
Retirement benefit obligations 4,166 4,511 4,746
Provision for liabilities
and charges 8 250 - -
---------- ---------- ------------
TOTAL NON-CURRENT LIABILITIES 4,485 5,111 4,988
---------- ---------- ------------
TOTAL LIABILITIES 14,697 15,962 18,158
========== ========== ============
EQUITY
Share capital 1,587 1,571 1,577
Share premium 12,466 12,373 12,462
Merger reserve 1,598 1,432 1,432
Shares to be issued 910 686 864
Translation reserve 568 658 1,048
Retained earnings (5,023) (5,228) (4,599)
-------- -------- --------
TOTAL EQUITY ATTRIBUTABLE
TO OWNERS OF THE PARENT 12,106 1,492 12,784
-------- -------- --------
TOTAL EQUITY AND LIABILITIES 26,803 27,454 30,942
======== ======== ========
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
For the six months ended 30 June 2017
Unaudited Unaudited Audited
Six months ended 30 June Six months ended 30 June Year ended 31 December
2017 2016 2016
GBP000 GBP000 GBP000
CASH FLOWS FROM OPERATING
ACTIVITIES
Loss/(profit) before taxation (627) 128 23
Adjustments for:
Depreciation 97 77 156
Loss on disposal of property, plant
and equipment - - 2
Amortisation of intangibles 691 425 1,047
Share based payment 46 154 223
Retirement benefit obligations (312) (367) (518)
Finance income (167) (3) -
Finance costs 168 446 646
Decrease in deferred contingent
consideration (148) - (1,017)
------------------------- ------------------------- -----------------------
CASH FLOWS FROM OPERATIONS BEFORE
MOVEMENTS IN WORKING CAPITAL (252) 860 562
Movements in working capital:
Decrease/(increase) in inventories 678 (156) 12
Increase in trade and other
receivables (310) (599) (1,737)
(Decrease)/increase in trade, other
payables and deferred income (1,796) (1,663) 1,810
Increase in provisions 250 - -
------------------------- ------------------------- -----------------------
CASH (USED IN)/GENERATED FROM
OPERATIONS (1,430) (1,558) 647
Finance income 167 - -
Finance costs (44) (9) (379)
Income taxes (102) 42 (141)
------------------------- ------------------------- -----------------------
NET CASH (USED IN)/GENERATED FROM
OPERATING ACTIVITIES (1,409) (1,525) 127
------------------------- ------------------------- -----------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Finance income received - 3 -
Purchase of intangible assets (921) (138) (890)
Purchase of property, plant and equipment (103) (39) (113)
Payment of deferred contingent consideration (496) - -
Repayment of capital from finance leases (15) (18) (33)
Purchase of subsidiary undertakings (net of cash acquired) - (616) (2,347)
--------- ------- --------
NET CASH USED IN INVESTING ACTIVITIES (1,535) (808) (3,383)
--------- ------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issue of share capital 5 4,728 4,823
Finance lease interest (4) (5) (8)
--------- ------- --------
NET CASH GENERATED FROM FINANCING ACTIVITIES 1 4,723 4,815
--------- ------- --------
NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS (2,943) 2,390 1,559
Cash and cash equivalents at start of period 4,189 2,183 2,183
Effect of exchange rate changes on the balance of cash held in foreign currencies (81) 182 447
--------- ------- --------
CASH AND CASH EQUIVALENTS AT OF PERIOD 1,165 4,755 4,189
========= ======= ========
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the six months ended 30 June 2017
Attributable to owners of the parent
Called Share Merger Shares to be Translation Retained Total
up share premium reserve issued reserve earnings equity
capital
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Balance as at 31
January 2016
(audited) 1,304 7,903 1,241 641 204 (4,680) 6,613
Profit for the
period - - - - - 61 61
Other
comprehensive
income/(expense) - - - - 454 (718) (264)
--------- ---------- --------- -------------- ------------ ---------- --------
Total
comprehensive
income/(expense) - - - - 454 (657) (203)
Shares issued 267 4,470 191 (109) - 109 4,928
Share based
payment - - - 154 - - 154
--------- ---------- --------- -------------- ------------ ---------- --------
Balance as at 30
June 2016
(unaudited) 1,571 12,373 1,432 686 658 (5,228) 11,492
Profit for the
period - - - - - 997 997
Other
comprehensive
income/(expense) - - - - 390 (259) 131
--------- ---------- --------- -------------- ------------ ---------- --------
Total
comprehensive
income - - - - 390 738 1,128
Shares issued 6 89 - 109 - (109) 95
Share based
payment - - - 69 - - 69
--------- ---------- --------- -------------- ------------ ---------- --------
Balance as at 31
December 2016
(audited) 1,577 12,462 1,432 864 1,048 (4,599) 12,784
Loss for the
period - - - - - (700) (700)
Other
comprehensive
(expense)/income - - - - (480) 276 (204)
--------- ---------- --------- -------------- ------------ ---------- --------
Total
comprehensive
expense - - - - (480) (424) (904)
Shares issued 10 4 166 - - - 180
Share based
payment - - - 46 - - 46
--------- ---------- --------- -------------- ------------ ---------- --------
Balance as at 30
June 2017
(unaudited) 1,587 12,466 1,598 910 568 (5,023) 12,106
========= ========== ========= ============== ============ ========== ========
NOTES TO THE FINANCIAL INFORMATION
For the six months ended 30 June 2017
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,
and incorporated in England and Wales under the Companies Act 2006
and domiciled in England and Wales. The registered office is
Diamond Way, Stone Business Park, Stone, Staffordshire, ST15
0SD.
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 2017. 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-yearly
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 2016
and 30 June 2017 is unaudited.
Instem plc's consolidated statutory accounts for the year ended
31 December 2016, 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 2017 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 2017.
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.
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 Information
The Directors consider that the Group operates in one business
segment - Global Life Sciences, and therefore there are no
additional segmental disclosures to be made in these financial
statements.
3. 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
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2017 2016 2016
Unaudited Unaudited Audited
(Loss)/profit after
tax (GBP000) (700) 61 1,058
----------- ----------- -------------
Weighted average number
of shares (000's) 15,785 14,865 15,302
----------- ----------- -------------
Basic (loss)/earnings
per share (4.4p) 0.4p 6.9p
=========== =========== =============
(b) Diluted
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2017 2016 2016
Unaudited Unaudited Audited
(Loss)/profit after
tax (GBP000) (700) 61 1,058
----------- ----------- -------------
Weighted average number
of shares (000's) 15,785 14,865 15,302
Potentially dilutive
shares (000's) -* 384 324
Adjusted weighted average
number of shares (000's) 15,785 15,249 15,626
----------- ----------- -------------
Diluted (loss)/earnings
per share (4.4p) 0.4p 6.8p
=========== =========== =============
*Dilutive share options have been excluded from the calculations
in accordance with IAS33 - 'Earnings per share' as they are only
included where the impact is dilutive.
(c) Adjusted
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.
Year
Six months Six months ended
ended ended 31 December
30 June 2017 30 June 2016
Unaudited 2016 Unaudited Audited
(Loss)/profit after
tax (GBP000) (700) 61 1,058
Non-recurring costs/(income)
(GBP000) 426 126 (619)
Amortisation of acquired
intangibles (GBP000) 466 268 667
Foreign exchange differences
on revaluation of intergroup
balances (GBP000) (159) 476 646
-------- ------------- -------
Adjusted profit after
tax (GBP000) 33 931 1,752
-------- ------------- -------
Weighted average number
of shares (000's) 15,785 14,865 15,302
Potentially dilutive
shares (000's) 201 384 324
-------- ------------- -------
Adjusted weighted average
number of shares (000's) 15,986 15,249 15,626
-------- ------------- -------
Adjusted basic earnings
per share 0.2p 6.3p 11.5p
======== ============= =======
Adjusted diluted earnings
per share 0.2p 6.1p 11.2p
======== ============= =======
4. Non-recurring (costs)/income
Six months
ended Six months Year ended
30 June ended 31 December
2017 30 June 2016
Unaudited 2016 Unaudited Audited
GBP000 GBP000 GBP000
Professional fees in
respect of acquisitions - (126) (249)
Amendment to consideration
payable in respect
of Instem Clinical - - 690
Cost provision relating
to historical issues
associated with Instem
Clinical (250) - -
Restructuring costs (324) - (149)
Amendment to contingent
consideration post
acquisition in respect
of Notocord and Samarind 148 - 327
----------- ---------------- -------------
(426) (126) 619
----------- ---------------- -------------
5. Finance income
Six months Year
ended Six months ended
30 June ended 31 December
2017 30 June 2016
Unaudited 2016 Unaudited Audited
GBP000 GBP000 GBP000
Foreign exchange gains 167 3 -
=========== ================ =============
6. Finance costs
Six months Year
ended Six months ended
30 June ended 31 December
2017 30 June 2016
Unaudited 2016 Unaudited Audited
GBP000 GBP000 GBP000
Bank loans and overdrafts 44 9 32
Unwinding discount on
deferred consideration 56 11 120
Net interest on pension
scheme 64 70 139
Foreign exchange losses - 351 347
Finance lease interest 4 5 8
----------- ---------------- -------------
168 446 646
=========== ================ =============
7. Cash and cash equivalents
30 June 31 December
2017 30 June 2016
Unaudited 2016 Unaudited Audited
GBP000 GBP000 GBP000
Cash at bank 10,163 13,753 13,187
Bank overdraft (8,998) (8,998) (8,998)
1,165 4,755 4,189
=========== ================ ============
8. Provision for liabilities and charges
30 June 31 December
2017 30 June 2016
Unaudited 2016 Unaudited Audited
GBP000 GBP000 GBP000
At beginning of the - - -
period
Increase in provisions 250 - -
At end of period 250 - -
=========== ================ ============
The provision relates to potential costs arising from historical
issues associated with Instem Clinical (see note 4).
9. Availability of this Interim Announcement
Copies of the Interim Report will shortly be available to
download from the Group's website or available to order from the
registered office of the Group.
INDEPENDENT REVIEW REPORT TO INSTEM PLC
Introduction
We have been engaged by the Company to review the condensed set
of financial statements in the interim financial report for the six
months ended 30 June 2017 which comprises of the Condensed
Consolidated Statement of Comprehensive Income, Condensed
Consolidated Statement of Financial Position, Condensed
Consolidated Statement of Cash Flows, Condensed Consolidated
Statement of Changes in Equity and the related explanatory Notes
that have been reviewed. We have read the other information
contained in the interim financial report and considered whether it
contains any apparent misstatements or material inconsistencies
with the information in the condensed set of financial
statements.
This report is made solely to the Company in accordance with
International Standard on Review Engagements (UK and Ireland) 2410
"'Review of Interim Financial Information performed by the
Independent Auditor of the Entity" issued by the Auditing Practices
Board. Our review work has been undertaken so that we might state
to the Company those matters we are required to state to them in an
independent review 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, for our review work, for this
report, or for the conclusions we have formed.
Directors' Responsibilities
The interim financial report, is the responsibility of, and has
been approved by the directors. The directors are responsible for
preparing and presenting the interim financial report in accordance
with the AIM Rules of the London Stock Exchange.
As disclosed in note 1, the annual financial statements of the
Group are prepared in accordance with International Financial
Reporting Standards and International Financial Reporting
Interpretations Committee pronouncements as adopted by the European
Union. The condensed set of financial statements included in this
interim financial report has been prepared in accordance with the
presentation, recognition and measurement criteria of International
Financial Reporting Standards and International Financial Reporting
Interpretations Committee pronouncements, as adopted by the
European Union.
Our Responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the interim financial
report based on our review.
Scope of Review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity" issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK and Ireland) and consequently does not enable us to
obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do
not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the accompanying condensed set of
financial statements in the interim financial report for the six
months ended 30 June 2017 is not prepared, in all material
respects, in accordance with the presentation, recognition and
measurement criteria of International Financial Reporting Standards
and International Financial Reporting Interpretations Committee
pronouncements as adopted by the European Union, and the AIM Rules
of the London Stock Exchange.
RSM UK Audit LLP
Chartered Accountants
14th Floor
Chapel Street
Liverpool
L3 9AG
25 September 2017
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR DGGDCDDDBGRU
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