TIDMINS
RNS Number : 9534A
Instem plc
27 March 2013
27 March 2013
Embargoed for 07:00
Instem plc
("Instem", the "Company" or the "Group")
Unaudited Preliminary Results
Instem plc (AIM: INS.L), a leading provider of IT applications
to the global early development healthcare market, announces its
unaudited preliminary results for the year ended 31 December
2012.
Financial Highlights
-- Revenues of GBP10.7m (2011: GBP10.8m)
o Recurring revenues accounted for 70% of total revenues (2011:
70%)
o SaaS (Software as a Service) revenue up 12% to GBP1.1m (2011:
GBP1.0m)
-- Adjusted operating profit* GBP1.5m (2011: GBP2.0m). in line
with revised market expectations
-- Reported profit before tax GBP1.3m (2011: GBP1.5m)
-- Basic earnings per share 8.9p (2011: 8.6p)
-- Closing cash balance as at 31 December 2012 of GBP2.5m (2011:
GBP3.4m)
Operational Highlights
-- Customer retention rate remained strong at over 95%
-- A number of prestigious contract wins including:
o The US National Institute of Allergy and Infectious Diseases
(NIAID)
o JOINN Laboratories, China's largest provider of pre-clinical
studies
o Advinus Therapeutics and Lupin Limited in India
o One of the world's largest Biopharmaceutical organisations
o A leading Japanese pharmaceutical company
-- Improvements to the product set through the release of
Provantis 9, the next generation of our leading pre-clinical drug
safety data collection software, Provantis Portal for remote data
access, Omniviz(R) 6.1, an upgraded version of our visual data
analytics platform, further modules in the Centrus(TM) suite and
Logbook(TM), our paperless solution for laboratory and other data
recording
-- A significant post year end US government contract win for
Provantis 9, announced in late February 2013, with the National
Institute of Environmental Health Sciences committing to an
agreement lasting up to ten years
* Operating profit before amortisation, share based payment and
non-recurring items.
Phil Reason, CEO of Instem plc, commented:
"The market inertia experienced earlier in 2012 now appears to
be largely resolved, with several new contracts secured in December
and in the first quarter of 2013. North America and the emerging
markets appear to be the most buoyant, offsetting continuing
difficult conditions in Europe. While Provantis sales are
anticipated to continue to deliver the majority of revenues to the
Group for some time, the growing interest in our Centrus and
translational science capabilities offers additional revenue
avenues for the future.
"Instem is a robust business, with net cash and a valuable
customer base delivering high levels of recurring revenue. The
business has been developed extensively in the last few years and
is continuing to increase its strong global market share. We
believe Instem continues to be well positioned to take advantage of
the structural changes in the processes of drug development that
are currently taking place. Both the regulatory and fiscal
environments continue to be favourable to Instem, driving demand
for all areas of our product suite."
For further information, please contact:
Instem plc +44 (0) 1785 825 600
Phil Reason, CEO
Nigel Goldsmith, CFO
N+1 Singer (Nominated Adviser &
Broker) +44 (0) 20 7496 3000
Aubrey Powell
Joe Stroud
Newgate Threadneedle +44 (0) 20 7653 9850
Caroline Evans-Jones
Fiona Conroy
About Instem plc
Instem is a leading supplier of IT applications to the early
development healthcare market delivering compelling solutions for
data collection, management and analysis across the R&D
continuum. Instem applications are used by customers worldwide,
meeting the rapidly expanding needs of life science and healthcare
organisations for data-driven decision making leading to safer,
more effective products.
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 its clients through full service offices in the
United States, United Kingdom and China with additional locations
in India and a full service distributor based in Japan.
To learn more about Instem solutions and its mission, please
visit www.instem.com or its investor centre
http://investors.instem.com/
Chairman's Statement
Against a challenging market environment, created by global
economic concerns on the one hand and the rapidly changing
structure of drug development processes on the other, Instem has
delivered a solid set of results for the year. The Group has
further consolidated its leading position in the early development
application market and extended its penetration across its customer
base, as well as establishing new relationships with some of the
most notable global leaders in the pharmaceutical market.
Delays, caused by customer uncertainties in the face of
strategic changes in the market, impacted the level of new licence
sales, particularly in the first half of 2012. However a strong
final quarter ensured revenues were broadly flat year-on-year at
GBP10.7m (2011: GBP10.8m) and several delayed contracts have been
signed post period end. A small increase in internal cost to
support the completion and release of Provantis 9, together with
increased third party costs due to the successful launch of
Logbook, led to a decrease in adjusted operating profit to GBP1.5m
(2011: GBP2.0m).This was in line with the revised market
expectation.
The Group continues to benefit from its substantial recurring
revenue base, of approximately GBP7.5m (on an annualised basis),
and enjoys a high and sustained customer renewal rate of over 95%.
Taken together with a healthy opening order book, this provides a
solid, profitable and cash-generative platform from which to
continue to develop the business.
Strong operational progress was made in the year. In particular
the Group extended its geographical footprint, establishing a
wholly owned subsidiary in Pune, India, providing additional
software development and support resource. Operations now span the
US, UK, India and China, and notable customer wins were secured in
each of these regions during the year. Over 87% of Instem's revenue
now comes from territories outside the UK (2011: 87%).
A core element of the Group's strategy is the extension of the
range of solutions it can offer its customer base. Instem continues
to execute against this strategy and in 2012 was pleased to launch
planned major new releases of Provantis, Omniviz, the Provantis
Portal, and further Centrus modules. In addition we were able to
add Logbook to our offering via a partnership with Trimetra.
Partnering and complementary product introductions such as this
have the ability to increase Instem's addressable marketplace and
will continue to be a focus for the Group going forward. The year
saw an encouraging level of sales across the enlarged product suite
to both existing and new customers.
Provantis 9, which delivers significant operational efficiencies
in Clinical Pathology laboratories, received very positive feedback
from its early adopter Roche and all of the other high profile beta
test clients. This product generated new licence and upgrade
revenue in 2012 and excellent opportunities for 2013.
Post year end, the Group announced that Provantis had been
selected as the IT platform for the National Toxicology Program
being managed by the US Government. This is a substantial
multi-year Software-as-a-Service contract and endorses Instem's
leading market position.
I would like to thank all our employees across the Group for
their continued enthusiasm and commitment, as it is their efforts
that provide Instem with its strong reputation and leading market
position.
While the structural changes in the market continue to impact
purchasing decisions at large pharma, there were signs towards the
end of the year of increasing confidence amongst pharma and
Contract Research Organisations ("CROs"), particularly within the
US and emerging markets. We believe that Instem is well positioned
to meet the needs of our customers in this changing environment and
look forward to a positive 2013.
David Gare
Chairman
26 March 2013
Operational Review
Whilst the major structural changes underway within the
pharmaceutical market are, we believe, to Instem's long term
advantage, they created uncertainty in 2012, delaying order
placement. This was particularly the case in Europe, where revenues
were down 13% on the prior year. The US and emerging markets were
less affected and, by the end of 2012, pharmaceutical customers in
these regions were making commitments - with Instem enjoying
favourable outcomes in the majority of bidding situations. After
they had endured a very challenging 2011, there was also a notable
increase in business in the year from our CRO clients. Some of the
largest CROs made significant purchases of additional products
whilst the smaller ones added more user licences - an encouraging
sign that study volumes are starting to increase.
It is pleasing to report that throughout the year, the Group
successfully increased its penetration in overseas markets and
secured several new clients. A number of new product introductions
and releases were made in 2012 and all of these generated new sales
in the year and contributed to a solid pipeline for 2013. As in
previous years, the majority of new contracts and contract renewals
were secured in the second half of 2012, consequently, the majority
of associated implementation services and product support revenue
will be recognised in 2013.
The Group's substantial recurring revenue base continues to
provide a solid and cash generative platform for the expansion of
an increasingly global business.
Customer Wins and Renewals
As the leader in its field, Instem continues to extend its
footprint within existing clients and across the industry as a
whole, outperforming its competitors in product and performance
evaluations. Instem has once again maintained its high level of
Provantis renewals in the year, with the rate remaining above 95%.
As anticipated at the time of the Interim Results, the second half
of the year saw a significant increase in the amount of new
business secured, in comparison with the first half, with the final
quarter once again being the strongest.
Traditional perpetual licences for on-premise deployment signed
during the year included the purchase of Provantis in November 2012
by the National Institute of Allergy and Infectious Diseases
(NIAID), part of the National Institutes of Health (NIH). This
purchase by a US government agency represents a good opportunity
for the Group, particularly as the NIH invests over $30 billion
annually in medical research. A prestigious contract was won in
December 2012 with a top 10 biopharmaceutical organisation, which
purchased multiple modules of the Centrus software suite, including
the Standard for Exchange of Nonclinical Data (SEND).This
represents the most comprehensive suite of Centrus modules
purchased to date. Additionally, in December 2012, Instem secured a
multi-year contract extension with its largest client, a leading
CRO, worth an annual seven-figure US Dollar amount. The CRO not
only extended the existing contract but also purchased additional
Instem products and services with a value in excess of $400,000,
underlining its confidence in Instem.
As well as securing customers for traditional licences, Instem
also saw further uptake of its software deployed via the Software
as a Service (SaaS) business model. SaaS and hybrid SaaS options
continue to prove to be an increasingly popular choice for
organisations of all sizes. Total SaaS revenue for 2012 was up 12%
to GBP1.1m (2011: GBP1.0m).
Several smaller US and European CROs extended their agreements
with Instem in the period by adding additional user and module
licenses; these included Champions, PSL, Jackson and Vivotecnia.
There was also a step-up in upgrade projects to Provantis 9 with
orders from Advinus and Lovelace.
Increased Global Presence
Instem's increased global reach has provided the Group with a
strong competitive advantage and we continue to tender and
successfully win projects with organisations located in all
territories where early development research facilities are based.
In late 2009, Instem embarked on a strategy to broaden its global
presence beyond the more traditional markets of North America,
Europe and Japan to the emerging economies. In 2010, our Chinese
operation was established, and during 2012 we were pleased to also
launch the Group's Indian operations out of Pune. Provantis offers
compliance to national and western standards, dual language
operation and proven protocol-driven automation that produces high
quality study output in greatly reduced timescales.
The Indian office provides the ability to scale-up development
and support resources flexibly in response to demand. In the longer
term, it is planned that this operation will also enable the Group
to provide sales and services locally in the region. During the
year we were pleased to increase our penetration in this region by
gaining a new client, Lupin Pharmaceuticals, and also by securing
an upgrade with an existing customer, Advinus Therapeutics.
In China, Instem continued to achieve new contracts including
the prestigious sale of Provantis to JOINN Laboratories, China's
largest provider of preclinical studies. The system will automate
processes within its China-based facilities located in Beijing and
Suzhou.
Through its highly successful Japanese distributor CTCLS, Instem
signed a contract in the first half of 2012 with one of Japan's
leading pharmaceutical companies for a comprehensive suite of
Provantis modules.
Instem Scientific
Instem Scientific has leveraged its strong client base,
technology and service offerings in omics research, data
integration and visual analytics to deliver information solutions
for translational science. This is a growing area of the life
sciences market as companies look to re-use of data in the
development of new drugs, chemicals and medical devices. Leveraging
large volumes of historic data collected by Instem's flagship
product Provantis, and extending this across the full reach of the
drug development process, from discovery through to clinical
development, is one of the opportunities for Instem Scientific
solutions.
Instem Scientific continues to enjoy a high rate of recurring
revenue renewal across all product lines reflecting the strong
long-term partnerships with its life science customers.
The Group continues to invest in this area of the business,
adding further expertise, marketing strength and new product
releases to improve performance and functionality.
Product Development
Instem's market leading study management product, Provantis,
continues to generate significant revenues for the Group. In July
2012, Instem successfully delivered Provantis 9, a major new
release of its core product suite. The release completed a
significant, phased multi-year product redevelopment, designed to
further enhance efficiencies and reduce study timelines while
supporting the changes in laboratory working practices brought
about by the structural changes in the pharma market. It takes
advantage of the latest capabilities of the underlying Microsoft(R)
and Oracle(R) platform technologies. Unique Provantis capabilities
that improve operational efficiency and reduce study timelines are
proving key competitive differentiators.
Initial Provantis 9 uptake and future interest has been
encouraging. Early adopter Roche and a wider group of high profile
beta test clients have shared very positive impressions of the new
release, helping stimulate both new client and existing client
upgrade orders.
In late 2010, Instem launched Centrus, a software suite that is
complementary to Provantis but focused on the areas of enterprise
information integration in early drug development, management and
reporting. The suite continues to build good momentum, particularly
the modules associated with the US Food and Drug Administration
sponsored Standard for the Exchange of Non-clinical Data
(SEND).
The Group's leading position in this developing area was
underlined in February 2012 when Instem was recognised for its
outstanding contribution to SEND at the Interchange North America
event organised by CDISC, the Clinical Data Interchange Standards
Consortium. Our release of Centrus Submit 3.1 immediately after the
formal release of the SEND 3.0 standard continues our leadership in
this area.
The Centrus pipeline continues to be healthy, and Instem was
pleased that in December 2012 it secured a significant order with
one of the world's largest biopharmaceutical organisations. This
order represents the most comprehensive suite of Centrus modules
purchased to date. Instem expects the SEND standard to be a
catalyst for the uptake of Centrus, as clients prioritise
investments, which satisfy new regulatory requirements and support
increased study outsourcing.
In June 2012, Instem launched Logbook, via a partnership with
Trimetra. It achieved notable success, by exceeding its anticipated
revenue targets for the year. Logbook replaces the last vestiges of
client paper data recording, improving operational efficiency and
facilitating electronic data access.
In October 2012, the Provantis Portal was launched, enabling
internal client staff or their external clients and collaborators
to access live study data securely. During the year it was taken
into use by a lead client, Jackson Laboratories, and generated good
opportunities for further follow-on business.
Instem Scientific continues to focus on translational
informatics, harnessing its expertise in developing solutions
across the whole spectrum of pharmaceutical R&D, but now with
an added focus in Instem's early development market. In November
2012, version 6.1 of OmviViz was released, bringing the full power
of 64-bit processing technology to a key component of their data
integration and bioinformatics suite. In particular this
facilitates the generation of new knowledge through the extraction
of actionable information across the research and development
continuum.
Market Overview
A typical drug can take 13-15 years from patent registration to
come to market, at an average cost of approximately $1.3 billion,
leaving a pharmaceutical company just 5-7 years of remaining patent
protection following product launch to recover its investment.
Therefore there is a recognised need to increase efficiencies and
reduce costs. Instem's established software solutions increase
efficiencies during drug development by automating study management
processes. The addition of products through internal development,
revenue-share partnerships, and acquisitions, serve to increase
Instem's addressable markets. Alongside this is an increased
tendency for pharmaceutical companies to partner with external
service providers such as CROs in order to share risk. We expect
this, combined with the release of the SEND standard by the FDA, to
create sustained demand for high integrity data sharing solutions.
We address this need through our Centrus and broader Instem
Scientific suite of products.
Instem is ideally positioned to take advantage of on-going
changes within the global R&D market, particularly in emerging
markets such as China where technology solutions are being sought
to help reduce development time, cut costs and improve operating
efficiency, and where little automation of processes has taken
place to date. There were also indications during the year from the
larger CROs that there is a modest but sustained increase in
activity levels as large pharma begin to increase spend on drug
development activities. Additionally in 2012, Instem saw an
increase in the number of licences required by smaller US and
European CROs, an encouraging sign of increasing confidence in
these markets.
The majority of the leaders in the industry continue to choose
our software, and indeed advocate consolidation in the disparate
supplier marketplace. Since the Group provides access to a blue
chip client base and a global network of support, sales and
development Instem is seeing an appetite, from other suppliers, to
partner with the Group in complementary areas. We remain alert to
opportunities for partnered product developments and, where
appropriate, selective acquisitions.
Future Plans
Instem plans to continue to develop its business by building on
the three elements of the Instem product set:
Instem Study Management:
-- Provantis; a suite of Study Management and Data Collection
modules that provide 75% of recurring revenues annually and
invariably captures a high proportion of all new business placed in
its market;
-- Centrus; a complementary Reporting, Analysis & Submission
product suite, that offers cross-selling capabilities within the
existing client base as well as to potential new customers;
Instem Scientific
-- Our translational science suite, provides the ability to
aggregate, analyse and extract knowledge from huge volumes of
disparate internal and external data, unlocking considerable
additional value from prior research investments; this positions us
within a valuable area of the pharmaceutical market.
Although Provantis sales are anticipated to continue to deliver
the majority of revenues to the Group for some time, the growing
interest in our Centrus and translational science capabilities
offers additional avenues for future growth.
The Group has an impressive and longstanding customer list of
leading global pharmaceutical, chemical, academic and government
research organisations. The IT supplier market is highly fragmented
and Instem's customer base has indicated its preference to purchase
software from a smaller number of core suppliers, of which Instem
is one. Instem continues to pursue relationships with other
suppliers that would advance this goal. An example is the
partnership with Trimetra which, for Instem, simultaneously
enhances the Group's market position, complements existing products
and provides access to adjacent markets and for Trimetra provides a
route to market for their Logbook product. Similar mutually
beneficial relationships that provide access to Instem's blue chip
client base and global network, for organisations with relevant
'market ready' products, offer attractive growth possibilities and
increase Instem's addressable market.
Financial Review
The financial results demonstrate a solid performance in the
year with total revenues steady at GBP10.7m (2010: GBP10.8m). As
described in the Chairman's Statement, new licence sales were lower
in the first half of the year than previously anticipated, but
increased in the final quarter. As a result only minimal revenue
has been recognised for implementation services and annual support
and maintenance from these contracts in 2012, with the remainder to
be recognised in 2013.
The business continued to expand in developing markets with
revenue from outside North America and Europe increasing to GBP1.1m
(2011: GBP0.9m), being 10% of Group revenue (2011: 9%) with notable
wins in India, China and Japan.
Instem's business model consists of fees for perpetual licences,
annual support, SaaS subscriptions and professional services. As in
the previous year, approximately 70% of revenue was recurring in
nature, principally from annual support fees and SaaS
subscriptions, with a small contribution from professional
fees.
The business continues to generate the majority of its revenue
in US dollars and therefore we continue to hedge against its
decline. In the period the average exchange rate was
$1.5888/GBP1.00 compared with an average exchange rate in 2011 of
$1.6014/GBP1.00.
The profit from operations before amortisation, share based
payment and non-recurring costs for the year was GBP1.5m (2011:
GBP2.0m). Operating expenses increased in line with expectations by
GBP0.4m over 2011 due to a small increase in internal costs as
Provantis 9 was completed, together with increased third party
costs due to the successful launch of Logbook.
Amortisation increased by GBP0.1m over the equivalent period in
2011 reflecting the increased investment in intangibles including
those assets acquired through the purchase of Instem
Scientific.
Development costs incurred in the period were GBP1.68m (2011:
GBP1.64m), of which GBP0.26m were capitalised (2011: GBP0.26m).
Non-recurring costs include a charge of GBP0.1m in respect of
legal and professional fees associated with pursuing acquisition
opportunities, offset by a GBP0.24m write-back of the provision for
deferred contingent consideration in respect of Instem
Scientific.
In common with many businesses with a defined benefit pension
scheme, there was an increase in the funding deficit during the
period calculated in accordance with the provisions of IAS19 that
amounted to GBP1.4m (net of deferred tax), which has been
recognised in Other Comprehensive Income/(Expense). This was a
non-cash charge in the period and arose primarily as a result of
lower discount rates used for calculation of the liabilities,
partially offset by higher expected returns on assets. As part of
the scheme's triennial actuarial valuation as at 5 April 2011, the
Company has agreed a schedule of payments to the scheme with the
trustees and the Pensions Regulator that is designed to eliminate
the funding deficit over an eight year period. This involves a
modest increase of GBP0.1m in the Company's current payments to the
scheme rising from GBP0.3m to GBP0.4m per annum from 2013. The
defined benefit pension scheme has remained closed to new members
since 2000 and to future accrual since 2008.
Cash generated from operations was GBP0.4m (2011: GBP1.3m). The
Group had cash reserves of GBP2.5m as at 31 December 2012, compared
with GBP3.4m as at 31 December 2011. Cash flows related to a number
of the larger contracts which were signed in the final quarter of
2012 have been received in the first quarter of 2013.
In line with previous periods, and our current policy of
retaining cash within the business to capitalise on the 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 2011 Annual Report.
Outlook
The market inertia experienced earlier in 2012 now appears to be
largely resolved, with several new contracts secured in December
and in the first quarter of 2013. North America and the emerging
markets appear to be the most buoyant, offsetting continuing
difficult conditions in Europe. While Provantis sales are
anticipated to continue to deliver the majority of revenues to the
Group for some time, the growing interest in our Centrus and
translational science capabilities offers additional revenue
avenues for the future.
Instem is a robust business, with net cash and a valuable
customer base delivering high levels of recurring revenue. The
business has been developed extensively in the last few years and
is continuing to increase its strong global market share. We
believe Instem continues to be well positioned to take advantage of
the structural changes in the processes of drug development that
are currently taking place. Both the regulatory and fiscal
environments continue to be favourable to Instem, driving demand
for all areas of our product suite.
Phil Reason
Chief Executive
26 March 2013
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2012
Note Year ended Year ended
31 December 2012 31 December 2011
Continuing Operations GBP000 GBP000
REVENUE 2 10,661 10,793
Operating expenses (9,157) (8,791)
------------------ ------------------
PROFIT FROM OPERATIONS BEFORE AMORTISATION, SHARE BASED PAYMENT AND
NON-RECURRING COSTS 1,504 2,002
Amortisation of intangibles (397) (347)
Share based payment (86) (88)
------------------ ------------------
PROFIT BEFORE NON-RECURRING COSTS 1,021 1,567
Non-recurring income/ (costs) 137 (21)
------------------ ------------------
PROFIT FROM OPERATIONS 1,158 1,546
Finance Income 238 422
Finance Costs (144) (456)
------------------ ------------------
PROFIT BEFORE TAXATION 1,252 1,512
Income tax expense 3 (208) (506)
------------------ ------------------
PROFIT FOR THE YEAR 1,044 1,006
------------------ ------------------
OTHER COMPREHENSIVE (EXPENSE)/INCOME
Actuarial loss on retirement benefit obligations 5 (1,833) (392)
Deferred tax on actuarial loss 389 68
Exchange differences on translating foreign operations (189) 96
------------------ ------------------
OTHER COMPREHENSIVE (EXPENSE) / INCOME FOR THE YEAR (1,633) (228)
------------------ ------------------
TOTAL COMPREHENSIVE (EXPENSE) / INCOME FOR THE YEAR (589) 778
================== ==================
PROFIT ATTRIBUTABLE TO OWNERS OF THE PARENT COMPANY 1,044 1,006
================== ==================
TOTAL COMPREHENSIVE (EXPENSE) / INCOME ATTRIBUTABLE TO OWNERS OF THE
PARENT COMPANY (589) 778
================== ==================
Earnings per share from continuing operations
Basic 4 8.9p 8.6p
Diluted 4 8.9p 8.5p
Consolidated Statement of Financial Position
As at 31 December 2012
Note 31 December 31 December
2012 2011
ASSETS GBP000 GBP000 GBP000 GBP000
NON-CURRENT ASSETS
Intangible assets 8,034 8,103
Property, plant and equipment 187 188
Deferred tax assets 732 279
-------- --------
TOTAL NON-CURRENT ASSETS 8,953 8,570
CURRENT ASSETS
Inventories 90 93
Trade and other receivables 3,750 3,029
Current tax assets 235 64
Cash and cash equivalents 2,450 3,368
-------- --------
TOTAL CURRENT ASSETS 6,525 6,554
-------- --------
TOTAL ASSETS 15,478 15,124
======== ========
LIABILITIES
CURRENT LIABILITIES
Trade and other payables 7,037 7,594
Financial liabilities 250 250
-------- --------
TOTAL CURRENT LIABILITIES 7,287 7,844
NON-CURRENT LIABILITIES
Financial liabilities - 250
Retirement benefit obligations 5 3,196 1,616
-------- --------
TOTAL NON-CURRENT LIABILITIES 3,196 1,866
-------- --------
TOTAL LIABILITIES 10,483 9,710
EQUITY
Share capital 1,176 1,171
Share premium 7,892 7,813
Merger reserve (932) (932)
Shares to be issued 174 88
Translation reserve 284 473
Retained earnings (3,599) (3,199)
-------- --------
TOTAL EQUITY ATTRIBUTABLE TO
OWNERS OF THE PARENT 4,995 5,414
-------- --------
TOTAL EQUITY AND LIABILITIES 15,478 15,124
======== ========
Consolidated Statement of Cashflows
For the year ended 31 December 2012
Note Year ended Year ended
31 December 2012 31 December
2011
GBP000 GBP000 GBP000 GBP000
CASH FLOWS FROM OPERATING ACTIVITIES
Profit before taxation 1,252 1,512
Adjustments for:
Depreciation 158 116
Amortisation of intangibles 397 347
Profit on disposal of property,
plant and equipment - (14)
Share based payments and shares
to be issued 86 88
Adjustments to contingent consideration (241) (80)
Retirement benefit obligations (337) (245)
Net foreign exchange gains 219 88
Finance income (238) (422)
Finance costs 144 456
--------- --------
CASH FLOWS FROM OPERATIONS BEFORE
MOVEMENTS IN WORKING CAPITAL 1,440 1,846
Movements in working capital:
Decrease in inventories - 47
Increase in trade and other receivables (953) (1,230)
(Decrease)/Increase in trade and
other payables (63) 679 (504)
--------- --------
CASH GENERATED FROM OPERATIONS 424 1,342
Finance costs (60) (362)
Income taxes paid (442) (478) (840)
--------- --------
NET CASH (USED)/GENERATED FROM
OPERATING ACTIVITIES (78) 502
CASH FLOWS FROM INVESTING ACTIVITIES
Finance income received 19 300
Purchase of intangible assets (328) (291)
Purchase of property, plant
and equipment (158) (152)
Disposal of property, plant
and equipment - 30
Acquisition of subsidiary (86) (200)
Cash acquired with subsidiary - 141
--------- --------
NET CASH GENERATED/(USED) IN
INVESTING ACTIVITIES (553) (172)
CASH FLOWS FROM FINANCING ACTIVITIES
Loan notes repaid (250) (253)
--------- --------
NET CASH USED IN FINANCING ACTIVITIES (250) (253)
--------- --------
NET (DECREASE)/INCREASE IN CASH
AND CASH EQUIVALENTS (881) 77
Cash and cash equivalents at
start of year 3,368 3,263
Effects of exchange rate changes
on the balance of cash held
in foreign currencies (37) 28
--------- --------
CASH AND CASH EQUIVALENTS AT
END OF YEAR 2,450 3,368
========= ========
Consolidated Statement of Changes in Equity
Called Share Merger Shares Translation Retained Total
up share Premium Reserve to be reserve earnings Equity
capital issued
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Balance as
at 1
January 2011 1,171 7,813 (932) - 377 (3,881) 4,548
Profit for
the year - - - - - 1,006 1,006
Other comprehensive
income/(expense)
for the year - - - - 96 (324) (228)
Share based
payment - - - 88 - - 88
---------- --------- --------- -------- ------------ ---------- --------
Balance at
31 December
2011 1,171 7,813 (932) 88 473 (3,199) 5,414
Profit for
the year - - - - - 1,044 1,044
Other comprehensive
income for
the year - - - - (189) (1,444) (1,633)
---------- --------- --------- -------- ------------ ---------- --------
Total comprehensive
income - - - - (189) (400) (589)
Share based
payment - - - 86 - - 86
Shares issued 5 79 - - - - 84
---------- --------- --------- -------- ------------ ---------- --------
Balance as
at 31 December
2012 1,176 7,892 (932) 174 284 (3,599) 4,995
========== ========= ========= ======== ============ ========== ========
Notes to the Financial Statements
1. Basis of Preparation
FINANCIAL INFORMATION
The preliminary financial information does not constitute
statutory accounts within the meaning of section 434 of the
Companies Act 2006 but is derived from accounts for the years ended
31 December 2012 and 31 December 2011. The figures for the year
ended 31 December 2011 were audited. The preliminary financial
information is prepared on the same basis as will be set out in the
statutory accounts for the year ended 31 December 2012. The figures
for the year ended 31 December 2012 are unaudited.
The preliminary financial information was approved for issue by
the Board of Directors on 26 March 2013.
The statutory accounts for the year ended 31 December 2012 will
be delivered to the Registrar of Companies following the Company's
Annual General Meeting. Statutory accounts for the year ended 31
December 2011 have been filed with the Registrar of Companies. The
auditors' report on those 2011 accounts was unqualified and did not
contain any statement under Section 498 (2) or (3) of the Companies
Act 2006.
GENERAL INFORMATION
The principal activity of the Group is the provision of world
class information solutions for Life Sciences research and
development. Instem plc is a company incorporated in England and
Wales under the Companies Act 2006 and domiciled in the UK. The
registered office is Diamond Way, Stone Business Park, Stone,
Staffordshire, ST15 0SD.
BASIS OF ACCOUNTING
While the financial information included in this preliminary
announcement has been prepared in accordance with the recognition
and measurement criteria of International Financial Reporting
Standards (IFRS), as adopted by the European Union (EU), this
announcement does not in itself contain sufficient information to
comply with IFRSs.
The Group's accounting reference date is 31 December.
GOING CONCERN
Having made appropriate enquiries, the directors consider that
the Group has adequate resources to enable it to continue in
operation for the foreseeable future. The Group has a significant
proportion of recurring revenue from a well-established global
customer base, supported by a largely fixed cost base.
The financial position of the Group, its cash flows and
liquidity position are set out in the primary statements of this
financial information. Detailed projections have been made for the
12 months following the approval of the financial statements and
sensitivity analysis undertaken. This work gives the directors
confidence as to the future trading performance.
Accordingly the directors continue to adopt the going concern
basis for the preparation of the financial statements.
2. Segmental Reporting
For management purposes, the Group is currently organised into
one operating segment - Global Life Sciences.
Segment results, assets and liabilities include items directly
attributable to a segment as well as those that can be allocated on
a reasonable basis.
THIRD PARTY REVENUE
2012 2011
GBP000 GBP000
INFORMATION BY PRODUCT TYPE
Licence fees 1,775 2,336
Annual support fees 6,188 5,961
SaaS subscription fees 1,141 1,016
Professional services 1,373 1,338
Funded development initiatives 184 142
--------- ---------
10,661 10,793
========= =========
THIRD PARTY REVENUE
2012 2011
GBP000 GBP000
INFORMATION BY GEOGRAPHICAL LOCATION
UK 1,311 1,342
Rest of Europe 2,147 2,518
USA and Canada 6,135 5,989
Rest of World 1,068 944
----------- ----------
10,661 10,793
=========== ==========
NON-CURRENT ASSETS EXCLUDING DEFERRED TAXATION
2012 2011
GBP000 GBP000
INFORMATION BY GEOGRAPHICAL LOCATION
UK 8,183 8,163
USA and Canada 29 48
Rest of World 9 80
---------------- ---------------
8,221 8,291
================ ===============
MAJOR CUSTOMERS
The group generates external revenue from one customer which
individually amounts to more than 10% of the Group revenue. Revenue
in respect of this customer for the year ended 31 December 2012
amounted to GBP1.1m (2011: GBP0.8m). In 2011 no customers exceeded
10% of revenue.
3. Income Taxes
2012 2011
Income taxes recognised in profit GBP000 GBP000
or loss
Current tax:
UK corporation tax on profits of
the year 179 167
Double tax relief (109) -
Foreign tax 224 240
Adjustments in respect of previous
years 27 (78)
Adjustments in respect 2010 R&D (50) -
tax credit
-------- --------
Total current tax 271 329
-------- --------
Deferred tax:
Origination and reversal of temporary
differences (38) 150
Adjustments in respect of previous
years (83) (36)
Retirement benefit obligation 58 63
-------- --------
Total deferred tax (63) 177
-------- --------
Total income tax expense recognised
in the current year 208 506
======== ========
2012 2011
GBP000 GBP000
The income tax expense can be reconciled
to the accounting profit as follows:
Profit before tax 1,252 1,512
-------- --------
Profit before tax multiplied by
standard rate of corporation tax
in the UK 24.5% (2011: 26.5%) 307 401
Effects of:
Expenses not deductible for tax
purposes 29 67
Differences in overseas tax rates 110 152
Adjustments in respect of prior
years (106) (114)
Tax losses utilised in respect (73) -
of subsidiaries
Non-taxable income (59) -
-------- --------
Total income tax expense recognised
in profit or loss 208 506
======== ========
4. Earnings per share
Basic earnings per share is calculated by dividing the 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.
2012 2011
Profit after Weighted Earnings per Profit after Weighted Earnings per
tax average number share tax average number share
of shares of shares
'000 Pence '000
GBP000 GBP000 Pence
Earnings per
share - Basic 1,044 11,755 8.9 1,006 11,714 8.6
Potentially
dilutive
shares - - - - 134 (0.1)
--------------- --------------- --------------- --------------- --------------- ---------------
Earnings per
share -
Diluted 1,044 11,755 8.9 1,006 11,848 8.5
=============== =============== =============== =============== =============== ===============
5. Retirement benefit obligations
The latest full triennial actuarial valuation of the defined
benefit scheme, the Instem LSS Pension Scheme, was carried out as
at 5 April 2011 and was finalised on 5 July 2012. The Scheme data
was used by a qualified independent actuary to determine the
valuation for accounts purposes as at 31 December 2012 in
accordance with the provisions of IAS19. The 2011 comparative
numbers were based on the prior triennial actuarial valuation at 5
April 2008 updated at 31 December 2011.
The expected return on plan assets was determined by considering
the expected returns available on the assets underlying the current
investment portfolio. Expected yields on bonds are based on gross
redemption yields at the reporting date whilst the expected returns
on the equity and property investments reflect the long-term real
rates of return experienced in the respective markets.
2012 2011
% %
Discount rate 4.5 5.4
Expected return on plan
assets 4.5 5.3
Inflation 2.9 3.1
Rate of increase in salaries N/A N/A
Rate of increase in pensions
in payment 2.9 3.1
Rate of increase in pensions
in deferment 2.9 3.1
Life Expectancy assumptions
Male currently aged 45 24.9 24.4
Female currently aged 45 26.2 26.8
Male currently aged 65 23.6 22.5
Female currently aged 65 24.7 24.9
ANALYSIS OF AMOUNT CHARGED TO 31 Dec 2012 31 Dec 2011
OTHER FINANCE COSTS GBP000 GBP000
Expected returns on pension scheme assets 288 334
Interest on pension scheme liabilities (372) (394)
------------ ------------
Net finance charge (84) (60)
============ ============
ANALYSIS OF AMOUNT RECOGNISED IN 31 Dec 2012 31 Dec 2011
OTHER COMPREHENSIVE INCOME GBP000 GBP000
Actual return less expected return on pension
scheme assets 172 (480)
Experience losses arising on scheme liabilities (763) -
Changes in assumptions underlying the present
value of the scheme liabilities (1,242) 88
------------ ------------
Actuarial loss recognised in other comprehensive
income (1,833) (392)
============ ============
CHANGES IN THE PRESENT VALUE OF THE DEFINED BENEFIT OBLIGATION 31 Dec 2012 31 Dec 2011
GBP000 GBP000
Opening defined benefit obligation 6,946 6,956
Interest cost 372 394
Actuarial loss/(gain) 2,005 (88)
Benefits paid (123) (316)
------------ ------------
Closing defined benefit obligation 9,200 6,946
============ ============
CHANGES IN THE FAIR VALUE OF PLAN ASSETS 31 Dec 2012 31 Dec 2011
GBP000 GBP000
Opening plan assets 5,330 5,479
Expected return 288 334
Actuarial loss/(gain) 172 (480)
Contributions by employer 337 313
Benefits paid (123) (316)
------------ ------------
Closing plan assets 6,004 5,330
============ ============
31 Dec 31 Dec
2012 2011
GBP000 GBP000
Present value of funded obligations (9,200) (6,946)
Fair value of plan assets 6,004 5,330
-------- --------
Deficit (3,196) (1,616)
Related deferred tax asset 735 404
-------- --------
Net pension liability (2,461) (1,212)
======== ========
ANALYSIS OF CUMULATIVE AMOUNT RECOGNISED IN OTHER COMPREHENSIVE INCOME Cumulative Cumulative
31 Dec 31 Dec
2012 2011
GBP000 GBP000
Actual return less expected return on pension scheme assets (359) (531)
Experience gains and losses arising on scheme liabilities (1,673) (910)
Changes in assumptions underlying the present value of the scheme liabilities (564) 678
----------- -----------
Cumulative actuarial loss recognised in other comprehensive income (2,596) (763)
=========== ===========
The Group expects to contribute GBP0.41m to its defined benefit
plan in 2013 (2012: GBP0.32m).
This information is provided by RNS
The company news service from the London Stock Exchange
END
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