TIDMINS
RNS Number : 1891D
Instem plc
26 March 2014
26 March 2014
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
2013.
Financial Highlights
-- Revenues increased 7% to GBP11.4m (2012: GBP10.7m)
o Recurring revenues increased 9% to GBP8.2m (2012: GBP7.5m),
representing 72% of total revenues
o Software as a Service (SaaS) revenues increased 35% to GBP1.5m
(2012 GBP1.1m)
-- Adjusted operating profit* increased 8% to GBP1.5m (2012:
GBP1.3m)
-- Reported profit before tax of GBP0.7m (2012: GBP1.3m)
-- Cash balance as at 31 December 2013 of GBP2.1m (2012:
GBP2.5m)
o GBP1.6m net investment in acquisitions during 2013
-- Adjusted** earnings per share of 8.6p (2012: 7.8p)
o Basic earnings per share of 4.5p (2012: 8.9p)
* before amortisation of intangibles on acquisitions, share
based payments and non-recurring costs
**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.
Strategic Developments
-- Logos Technologies (rebranded "Instem Clinical") and its
ALPHADAS(R) product suite acquired in May 2013. Fully integrated
and performing strongly
-- First entrance into the in vitro R&D market through the
acquisition of Perceptive Instruments Ltd. in November 2013
Operational Highlights
-- Customer retention rate remained strong at 95%
-- Signed 10-year US$6.2m revenue SaaS contract for Provantis
secured with the National Institute of Environmental Health
Sciences (NIEHS), a US Government body
-- SaaS deals with two top 10 pharmaceutical companies
-- Provantis licensed for 3 additional clients in North America,
Europe and India in Q4
-- First Instem Clinical contract won with Retroscreen Virology
Group plc (AIM:RVG), with additional sites licensed in December
2013
-- Signed SEND contracts with a major healthcare customer, a top
three pharmaceutical company and three further clients in H2
Phil Reason, CEO of Instem plc, commented: "The Group has
continued to increase its share of the preclinical market and made
important strategic progress including expansion of its product
sets and entry into the early phase clinical market. The increase
in new SaaS deals signed in the year is particularly pleasing. Our
SaaS offer is compelling for clients and provides the Group with
increasing long-term revenue visibility.
"Instem, like other pharmaceutical services companies, is
beginning to see an improvement in its end markets, with the global
pharmaceutical market re-focusing its efforts into early stage
development work. In addition, the industry's regulatory and fiscal
pressures continue to work in Instem's favour, driving demand for
all areas of our product portfolio.
"With the benefit of a full year's contribution from both the
Instem Clinical and more recent Perceptive Instruments
acquisitions, we look forward to 2014 with confidence."
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
Richard Lindley
Nick Owen
Newgate Threadneedle +44 (0) 20 7653 9850
Fiona Conroy
Caroline Forde
Jasper Randall
About Instem
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 established 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 400 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
During the year, Instem successfully continued its dual strategy
of both increasing its market share and extending its product
portfolio. In particular the two acquisitions successfully
completed in the year were important examples of the execution of
this strategy. Behind the scenes the Group has also invested in
strengthening its management resources to ensure that it has the
capacity to continue to implement its strategic plans.
Instem has again proven to be the leading supplier in the
preclinical market place, extending its footprint with existing
clients and across the industry as a whole. Of great importance,
and testimony to the quality of our people and our products, was
the decision of the NIEHS to use Provantis as the cornerstone IT
system for its National Toxicology Program in the USA. In addition,
several strategically important contracts were gained, including
both existing and new clients choosing Instem's preferred SaaS
deployment strategy. It was particularly pleasing to see uptake by
industry elites across the entirety of our product set.
The first of two acquisitions made in the year was Logos
Technologies (now rebranded Instem Clinical) which was acquired in
May. This acquisition has enabled Instem to make an important
strategic step into the adjacent early phase clinical market.
During the seven months as part of the Instem Group, the Board was
delighted that Instem Clinical was able to exceed its plans. Instem
Clinical is now fully integrated within the Group and we are
starting to see the market benefits of it being part of a larger
business.
In November the Group completed its second acquisition in the
period, purchasing Perceptive Instruments, a business that provides
world-leading software and hardware solutions supporting in vitro
research and development within the broad life sciences market. We
believe the acquisition will particularly enhance our offering in
the preclinical market. As the acquisition was late in the year, it
had little impact on our 2013 performance.
As outlined in the January Trading Update, although overall
order intake in 2013 was encouraging, particularly in the latter
half of the year, contractual discussions regarding a significant
contract remained ongoing at the year-end, consequently affecting
the overall 2013 revenue and profits performance. Whilst there is
clear potential for consolidation within the fragmented supplier
base, our priority during 2014 will be to maximise the synergistic
benefit created for Instem Clinical and Perceptive Instruments as a
result of being part of the Instem Group. Nevertheless, should
appropriate strategic opportunities arise during the year every
effort will be made to achieve further consolidation.
The pharmaceutical market continues to undergo structural
changes, and once again this created some uncertainty that impacted
client purchasing decisions during the year. There have, however,
been nascent signs of a recovery. Pharmaceutical companies are
prioritising investment in early stage drug development and the
sector outlook for 2014 is improving.
The Board believes that the significant progress achieved during
the year continues to provide the necessary platform for growth,
both organic and through further selective acquisitions.
David Gare
Non Executive Chairman
26 March 2014
Operational Review
The breadth of Instem's business has grown significantly over
the past year, as the portfolio of leading products for the early
development healthcare market has been expanded through organic and
acquisitive activity. Instem continues to service many of the
world's leading pharmaceutical organisations and laboratories,
providing the tools to streamline processes within the industry
whilst significantly reducing costs.
As well as securing customers for traditional licences, Instem
also saw further uptake of its software deployed via the SaaS
business model, which is proving to be an increasingly compelling
value proposition for organisations of all sizes. Total SaaS
revenue for 2013 was up 35% to GBP1.5m (2012: GBP1.1m). This, in
conjunction with annual licence renewals, continues to provide the
Group with strong forward visibility. Recurring revenues for the
year, including SaaS and support and maintenance revenues, amounted
to 72% of total revenues (2012: 70%).
Strategic acquisitions enhance product offering and expand
addressable market
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 providers, such as Instem. There is a
need to consolidate this disparate supplier landscape and enhance
data integration amongst and between the customer bases.
Instem has an impressive and longstanding customer list of
leading global pharmaceutical, chemical, academic and government
research organisations. Instem is ideally positioned with its
international sales model and geographical presence to sell
additional products to these customers, either through third-party
licensing agreements or acquired technology. In the year, Instem
has expanded its range of products through the acquisitions of two
complementary technology companies.
In May 2013, Instem acquired London-based Logos Technologies and
its ALPHADAS software suite. The initial consideration paid
amounted to GBP0.55 million with additional consideration of up to
GBP4.45 million payable through a mixture of cash and shares
dependent on profit related targets over the first four years. The
first earn-out payment of GBP0.45 million was made following the
period end, comprising GBP0.2 million in cash and GBP0.25 million
through the issue and allotment of new ordinary shares.
November 2013 marked Instem's entrance into the in vitro R&D
marketplace through the acquisition of Perceptive Instruments for
an initial cash amount of GBP1.0 million net of cash acquired, and
an additional GBP0.3 million earn-out, contingent on the
performance of the business. The integration of Perceptive
Instruments is progressing well.
Both acquisitions are complementary to Instem's product
portfolio and are expected to provide additional cross-selling
opportunities with existing and new clients.
Product Portfolio
Instem has continued to increase its reach with existing clients
and expand the number of clients it serves. Instem offers software
via perpetual licences and term-based subscriptions, and is seeing
strong growth in demand for its SaaS model.
Provantis
Provantis is the leading product for the management of study
data in the preclinical drug safety assessment market and it has
continued a strong performance throughout the year generating
further sales and maintaining a very high renewal rate for
recurring revenues.
In February 2013, Instem won a significant US Government
contract with the National Institute of Environmental Health
Sciences (NIEHS) to support National Toxicology Program studies.
During the year this contract was extended to enable two additional
contract laboratories to utilise Provantis. Other significant
client wins included a multi-site North American and European CRO
and further clients in India and China.
Provantis continued to generate a steady stream of additional
revenue from current clients who licensed additional modules from
the suite, increased their user licensing and upgraded to later
versions. The large Provantis client base also provides avenues for
cross-selling of complementary third party products such as Logbook
and ACIS.
Centrus
Centrus is Instem's software suite for the exchange,
aggregation, collation and reporting of early drug development
information. Modules associated with the US FDA sponsored Standard
for the Exchange of Non-Clinical Data (SEND) have proved
particularly successful. In May 2013, a world leading healthcare
company purchased the complete Centrus software suite, with four
further clients purchasing SEND related modules during 2013,
including a top three pharmaceutical company. Centrus submit(TM)
was also recognised for innovation and industry leadership at the
2013 SmartCEO VOLTAGE Awards.
A number of important new modules have been added to the Centrus
suite; these offer opportunities for additional sales with existing
customers and make the offer more compelling for new clients.
Instem is pleased to report that momentum for Centrus seen in the
final quarter of the year has continued into 2014.
ALPHADAS
Instem's solution for the early phase clinical market, ALPHADAS,
has performed well in the year and has generated strong order
intake. The first new contract for Instem Clinical,
post-acquisition, was a perpetual licence with Retroscreen Virology
Group plc (AIM: RVG), a virology healthcare business that recently
floated on AIM. The Retroscreen project progressed well during 2013
and in December Retroscreen exercised an option in the contract to
extend ALPHADAS licensing for additional sites. In December 2013,
Simbec Research selected ALPHADAS for deployment in its UK-based
Phase I unit.
ALPHADAS version 6 was released during the year, enabling
upgrades within the existing customer base and enhancing Instem's
competitive position for new product opportunities within the wider
early phase clinical market.
Instem Scientific
The re-use of scientific data is an increasing market within the
life sciences industry. Instem Scientific's products are designed
to enable clients to leverage large volumes of public and
proprietary historic data, to enable considerable value to be
unlocked from prior research investments. Instem routinely leads or
participates in industry groups focused on the challenges and
opportunities in this area and in September 2013 Gordon Baxter,
Instem's Chief Scientific Officer, was appointed to the Board of
one leading industry body, the Pistoia Alliance.
Instem completed the development and launch of the next version
of the SRS Data integration platform (version 8.4) in early July
2013, further enhancing our clients' abilities to identify patterns
and trends in their data and generate new knowledge and scientific
insight. Two new clients for SRS were added in the period.
New versions of Omniviz, an advanced visualisation and data
projection solution, were also released in the year. This
contributed to securing several additional licence purchases from
existing customers and a number of new clients.
Perceptive Instruments ("Perceptive")
Perceptive was acquired to enhance Instem's Study Workflow and
Automation Suites. The integration of Perceptive is underway and
progressing according to plans with Perceptive making a minimal,
five-week contribution to the 2013 fiscal year. Development focus
during 2013 was on a new product, Cyto Study Manager, which we plan
to launch in the first half of 2014. The majority of potential
clients for Cyto Study Manager are existing Perceptive or Instem
customers.
Market Overview
Over recent years the pharmaceutical industry has focused work
on drugs in late stage development in an attempt to fill the gap
from lost revenues on patent expired drugs. Recently, there have
been signs that the global pharmaceutical market is moving resource
towards early stage development work to refill the pipeline of
preclinical candidates. This is a key development given the Group's
position within the early stage development market.
As a consequence, Instem and its pharmaceutical services clients
that target the earlier stages of drug development, are beginning
to see an improvement in end markets. Citeline(R), which claims the
world's most comprehensive source of real-time R&D intelligence
for the pharmaceutical industry, recently reported a 7.9% increase
in the global drug pipeline.
Two key aspects are increasing demand for IT solutions. Firstly,
there is an increased preference for regulatory authorities to
receive data for new drug submissions electronically. Secondly,
there is a growing appetite from pharmaceutical organisations to
analyse and mine historic data in order to extract further value
and generate additional scientific insight from development work
already carried out.
PreClinical market
There is evidence of a more sustained recovery in the
preclinical market, including data from the two largest preclinical
CROs, Charles River and Covance, who have both reported greater
growth and optimism in recent results announcements.
While there were only modest additions of new commercial clients
in 2013, Instem's preclinical business benefitted from increased
demand from governmental customers. In February 2013, Instem won a
contract with the US government NIEHS with a cash value of
US$870,000 in the first year, with a potential to extend and expand
the agreement up to a further nine years, giving a possible total
contract value of between US$6.2 million - US$7.6 million.
Early Stage Clinical market
The early stage clinical market is immediately downstream of
preclinical and consequently has also witnessed reduced study
volumes in recent years. However, a growing prevalence of patient
studies in early phase clinical, to complement the widespread use
of healthy volunteers, is extending trial sites into hospital units
and increasing the importance of controlling data quality and
integrity through the deployment of IT solutions. These factors
together with the relatively low levels of automation in early
phase clinics have ensured that many opportunities remain for
software solutions to gain greater penetration.
Government
Governments in North America, China and Europe are expanding
investment in order to: prime advances in basic research, advance
therapies with important social needs (but limited return to
commercial organisations) and generally improve environmental
health. This is of particular importance as such organisations
frequently operate on a different economic cycle to the commercial
pharmaceutical industry.
Government agencies are indirectly supporting investment in
Instem technologies through funding a wide variety of commercial
organisations and research institutes as well as purchasing
solutions directly for their government research facilities.
Through this, Instem's products can also be mandated by authorities
for use by third parties involved in public sector programmes.
Growth Strategy
Instem will continue to focus on growing organically through
further penetration of existing product suites into pharmaceutical
organisations, CROs and research institutions. The Company's aim is
to increase recurring revenues and growth by maintaining market
leadership with established product suites and introducing new
solutions organically, acquisitively and through exclusive third
party arrangements, which satisfy an ever increasing proportion of
the early drug development market.
The approaching deadline for the requirement to submit SEND data
sets presents an important opportunity for Centrus. The growing
need for the management of 'Big Data' represents an opportunity for
Instem Scientific as companies look to mine large amounts of
historical data for the generation of scientific insight.
The trend, where large pharmaceutical organisations prefer to
select a smaller number of strategic providers for their research
software needs, continues to be the key focus of the Company's
acquisition strategy. The Company will continue to selectively
pursue additional bolt-on acquisitions that provide access to
adjacent markets and additional growth prospects.
Financial Review
The financial results demonstrate a solid performance in the
year with total revenues at GBP11.4m (2012: GBP10.7m). As described
in the Chairman's Statement, although market conditions were
challenging and resulted in the delay in one particularly
significant perpetual licence, there are nascent signs of a
recovery in end markets. Growth in revenues was principally driven
from the UK, with an increase from GBP1.3m in 2012 to GBP2.5m,
driven by new business orders for ALPHADAS received from
Retroscreen Virology,
Instem's business model consists of perpetual licence fees,
annual support, SaaS subscriptions and professional services.
Approximately 72% of revenue was recurring in nature (2012: 70%),
principally from annual support fees and SaaS subscriptions, with a
small contribution from professional fees.
The Company continues to generate the majority of its revenue in
US dollars and therefore we continued to hedge against currency
fluctuations. In the period the average exchange rate was
$1.5707/GBP1.00 compared with an average exchange rate in 2012 of
$1.5888/GBP1.00.
The profit from operations before amortisation on acquired
intangibles, share based payment and non-recurring costs for the
year was GBP1.5m (2012: GBP1.3m). Operating expenses, comprising
primarily salary costs, increased by GBP0.5m in the year reflecting
the two acquisitions during the year.
Amortisation increased due to the acquisitions to GBP0.6m (2012:
GBP0.4m)
Development costs incurred in the period were GBP1.8m (2012:
GBP1.7m), of which GBP0.3m was capitalised (2012: GBP0.3m).
Non-recurring costs of GBP0.2m include legal and professional
fees associated with the two completed acquisitions during the
year.
There was an increase in the funding deficit on the Company's
defined benefit pension scheme during the period calculated in
accordance with the provisions of IAS19 that amounted to GBP0.6m,
net of deferred tax (2012: GBP1.4m), which has been recognised in
Other Comprehensive Expense. This was a non-cash charge in the
period and arose primarily as a result of higher inflation 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. The defined benefit pension
scheme has remained closed to new members since 2000 and to future
accrual since 2008.
Cash generated from operations was GBP2.0m (2012: GBP0.4m). The
Group had cash reserves of GBP2.1m as at 31 December 2013, compared
with GBP2.5m as at 31 December 2012, after making initial payments
(net of cash acquired) for the two acquisitions during the year of
GBP1.6m.
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.
Outlook
The past year has seen the Group continue to increase its share
of the preclinical market and make important strategic progress
including expansion of its product sets and entry into the early
phase clinical market. The increase in new SaaS deals signed in the
year is particularly pleasing. Our SaaS offer is compelling for
clients and provides the Group with increasing long-term revenue
visibility.
Instem, like other pharmaceutical services companies, is
beginning to see an improvement in its end markets, with the global
pharmaceutical market re-focusing its efforts into early stage
development work. In addition, the industry's regulatory and fiscal
pressures continue to work in Instem's favour, driving demand for
all areas of our product portfolio.
With the benefit of a full year's contribution from both the
Instem Clinical and more recent Perceptive Instruments
acquisitions, we look forward to 2014 with confidence.
Phil Reason
Chief Executive
26 March 2014
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2013
Note Year ended Year ended
31 December 2013 31 December 2012
Continuing Operations GBP000 GBP000
REVENUE 2 11,361 10,661
Operating expenses (9,685) (9,157)
Amortisation of internally generated intangibles (226) (164)
PROFIT FROM OPERATIONS BEFORE AMORTISATION, SHARE BASED PAYMENT AND
NON-RECURRING COSTS 1,450 1,340
Amortisation of intangibles arising on acquisition (394) (233)
Share based payment (96) (86)
PROFIT BEFORE NON-RECURRING COSTS 960 1,021
Non-recurring (costs)/income (200) 137
PROFIT FROM OPERATIONS 760 1,158
Finance income 145 238
Finance costs (207) (144)
PROFIT BEFORE TAXATION 698 1,252
Income tax 3 (169) (208)
PROFIT FOR THE YEAR 529 1,044
OTHER COMPREHENSIVE EXPENSE
Actuarial loss on retirement benefit obligations (587) (1,833)
Deferred tax on actuarial loss 30 389
Exchange differences on translating foreign operations (90) (189)
OTHER COMPREHENSIVE EXPENSE FOR THE YEAR (647) (1,633)
TOTAL COMPREHENSIVE EXPENSE FOR THE YEAR (118) (589)
PROFIT ATTRIBUTABLE TO OWNERS OF THE PARENT COMPANY 529 1,044
TOTAL COMPREHENSIVE EXPENSE ATTRIBUTABLE TO OWNERS OF THE PARENT
COMPANY (118) (589)
Earnings per share from continuing operations
Basic 5 4.5p 8.9p
Diluted 5 4.5p 8.9p
Consolidated Statement of Financial Position
As at 31 December 2013
31 December 31 December
2013 2012
ASSETS GBP000 GBP000 GBP000 GBP000
NON-CURRENT ASSETS
Intangible assets 12,887 8,034
Property, plant and
equipment 265 187
Deferred tax assets 388 732
TOTAL NON-CURRENT ASSETS 13,540 8,953
CURRENT ASSETS
Inventories 307 90
Trade and other receivables 2,908 3,750
Current tax assets - 235
Cash and cash equivalents 2,053 2,450
TOTAL CURRENT ASSETS 5,268 6,525
TOTAL ASSETS 18,808 15,478
LIABILITIES
CURRENT LIABILITIES
Trade and other payables 7,236 7,037
Current tax payable 7 -
Financial liabilities 1,250 250
TOTAL CURRENT LIABILITIES 8,493 7,287
NON-CURRENT LIABILITIES
Financial liabilities 1,836 -
Retirement benefit obligations 3,506 3,196
TOTAL NON-CURRENT LIABILITIES 5,342 3,196
TOTAL LIABILITIES 13,835 10,483
EQUITY
Share capital 1,176 1,176
Share premium 7,892 7,892
Merger reserve (932) (932)
Shares to be issued 270 174
Translation reserve 194 284
Retained earnings (3,627) (3,599)
TOTAL EQUITY ATTRIBUTABLE
TO OWNERS OF THE PARENT 4,973 4,995
TOTAL EQUITY AND LIABILITIES 18,808 15,478
Consolidated Statement of Cashflows
For the year ended 31 December 2013
Year ended Year ended
31 December 31 December
2013 2012
GBP000 GBP000 GBP000 GBP000
CASH FLOWS FROM OPERATING
ACTIVITIES
Profit before taxation 698 1,252
Adjustments for:
Depreciation 187 158
Amortisation of intangibles 620 397
Share based payments
and shares to be issued 96 86
Adjustments to contingent
consideration - (241)
Retirement benefit
obligations (412) (337)
Net foreign exchange
gains 84 219
Finance income (145) (238)
Finance costs 207 144
1,335 1,440
CASH FLOWS FROM OPERATIONS
BEFORE MOVEMENTS IN WORKING
CAPITAL
Movements in working
capital:
Increase in inventories (210) -
Decrease/(Increase) in
trade and other receivables 823 (953)
Increase/(Decrease) in
trade and other payables 31 644 (63) (1,016)
CASH GENERATED FROM OPERATIONS 1,979 424
Finance costs (9) (60)
Income taxes 74 65 (442) (502)
NET CASH GENERATED
FROM/(USED) IN OPERATING
ACTIVITIES 2,044 (78)
CASH FLOWS FROM INVESTING
ACTIVITIES
Finance income received 61 19
Purchase of intangible
assets (407) (328)
Purchase of property,
plant and equipment (262) (158)
Disposal of property, - -
plant and equipment
Acquisition of subsidiaries (2,710) (86)
Cash acquired with 1,134 -
subsidiaries
NET CASH USED IN INVESTING
ACTIVITIES (2,184) (553)
CASH FLOWS FROM FINANCING
ACTIVITIES
Loan notes repaid (250) (250)
NET CASH USED IN FINANCING
ACTIVITIES (250) (250)
NET DECREASE IN CASH AND
CASH EQUIVALENTS (390) (881)
Cash and cash equivalents
at start of year 2,450 3,368
Effects of exchange
rate changes on the
balance of cash held
in foreign currencies (7) (37)
CASH AND CASH EQUIVALENTS
AT END OF YEAR 2,053 2,450
Consolidated Statement of Changes in Equity
Called Share Merger Shares Translation Retained Total
up Premium Reserve to be reserve earnings Equity
share issued
capital
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Balance
as at
1 January
2012 1,171 7,813 (932) 88 473 (3,199) 5,414
Profit
for the
year - - - - - 1,044 1,044
Other comprehensive
expense
for the
year - - - - (189) (1,444) (1,633)
Share based
payment - 86 - - 86
Shares
Issued 5 79 - - - 84
Balance
at 31 December
2012 1,176 7,892 (932) 174 284 (3,599) 4,995
Profit
for the
year
Other comprehensive - - - - - 529 529
expense
for the
year - - - - (90) (557) (647)
Total comprehensive
expense - - - - (90) (28) (118)
Share based
payment - - - 96 - - 96
Balance
as at 31
December
2013 1,176 7,892 (932) 270 194 (3,627) 4,973
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 2013 and 31 December 2012. The figures for the year
ended 31 December 2012 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 2013. The figures
for the year ended 31 December 2013 are unaudited.
The preliminary financial information was approved for issue by
the Board of Directors on 25 March 2014.
The statutory accounts for the year ended 31 December 2013 will
be delivered to the Registrar of Companies following the Company's
Annual General Meeting. Statutory accounts for the year ended 31
December 2012 have been filed with the Registrar of Companies. The
auditor's report on those 2012 accounts was unqualified and did not
contain any statement under Section498 (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 than can be allocated on
a reasonable basis.
THIRD PARTY REVENUE
2013 2012
GBP000 GBP000
INFORMATION BY PRODUCT TYPE
Licence fees 2,282 1,775
Annual support fees 6,307 6,188
SaaS subscription fees 1,543 1,141
Professional services 1,175 1,373
Funded development initiatives 54 184
-------------- -------------
11,361 10,661
============== =============
THIRD PARTY REVENUE
2013 2012
GBP000 GBP000
INFORMATION BY GEOGRAPHICAL LOCATION
UK 2,496 1,311
Rest of Europe 1,991 2,147
USA and Canada 5,871 6,135
Rest of World 1,003 1,068
---------------- ----------------
11,361 10,661
================ ================
NON-CURRENT ASSETS EXCLUDING DEFERRED TAXATION
2013 2012
GBP000 GBP000
INFORMATION BY GEOGRAPHICAL LOCATION
UK 13,120 8,183
USA and Canada 14 29
Rest of World 18 9
------------------------ -----------------------
13,152 8,221
======================== =======================
MAJOR CUSTOMERS
The Group generates external revenue from no customer which
individually amounts to more than 10% of the Group revenue (2012:
one such customer generated revenues of GBP1.1m)
3. Income Taxes
2013 2012
Income taxes recognised GBP000 GBP000
in profit or loss
Current tax:
UK corporation tax on profits
of the year 42 179
Double tax relief - (109)
Foreign tax 147 224
Foreign tax in respect (227) -
of previous years
Adjustments in respect
of previous years 121 27
Adjustments in respect
of R&D tax credit - (50)
------ --------
Total current tax 83 271
------ --------
Deferred tax:
Current year charge 11 -
Origination and reversal
of temporary differences - (38)
Adjustment in respect of
previous years 11 (83)
Retirement benefit obligation 64 58
------ --------
Total deferred tax 86 (63)
------ --------
Total income tax recognised
in the current year 169 208
====== ========
2013 2012
GBP000 GBP000
The income tax expense
can be reconciled to the
accounting profit as follows:
Profit before tax 698 1,252
-------- --------
Profit before tax multiplied
by standard rate of corporation
tax in the UK 23.25% (2012:
24.5%) 162 307
Effects of:
Expenses not deductible
for tax purposes 52 29
Fixed asset timing differences 1 -
Differences in overseas
tax rates 63 110
Adjustments in respect
of prior years (97) (106)
Tax losses utilised in
respect of subsidiaries (15) (73)
Tax losses carried forward 3 -
Non-taxable income - (59)
-------- --------
Total income tax expense
recognised in profit or
loss 169 208
======== ========
4. Acquisitions of Instem Clinical Holdings Limited (formerly
Logos Holdings Limited) and Perceptive Instruments Limited
Subsidiary acquired
Principal activity Date Proportion Consideration
of acquisition of voting transferred
equity
interests
2013 acquired GBP000
%
Instem Clinical
Holdings
Limited Holding of intellectual
(formerly property rights
Logos Holdings and investment 10 May
Limited) in group companies 2013 100 3,298
Instem Clinical Holdings Limited was acquired to continue the
expansion and development of the Group's capabilities in the Global
Life Sciences sector.
Consideration transferred
Instem
Clinical
Holdings
Limited
GBP000
Initial cash consideration
(including GBP25k stamp
duty) 575
Contingent consideration
- Payable in cash 200
Contingent consideration
- To be settled in shares 250
Contingent consideration
- To be settled in cash or
shares 2,273
Total consideration estimate 3,298
The contingent consideration is based on certain cumulative
performance related conditions over four years.
Acquisition related costs amounting to GBP98,000 have been
excluded from the consideration transferred and have been
recognised as an expense in the current year, within the
'Non-recurring costs' line item in the consolidated statement of
comprehensive income.
Fair value of assets acquired and liabilities recognised at the
date of acquisition
Instem
Clinical
Holdings
Limited
GBP000
Non-Current Assets
Goodwill -
Intellectual property 964
Customer related assets 105
Investment in subsidiaries 1
Property, plant and equipment 1
Deferred Tax on losses brought
forward 158
Current Assets
Trade and other receivables
Cash and cash equivalents 54
22
Current Liabilities
Trade and other payables
(243)
Non-Current Liabilities
Deferred Tax on acquisition (246)
Fair value of identifiable
net assets acquired 816
Goodwill arising on acquisition
Instem
Clinical
Holdings
Limited
GBP000
Consideration transferred 3,298
Less: fair value of identifiable
net assets acquired (816)
Goodwill arising on acquisition 2,482
Goodwill arose on the acquisition of Instem Clinical Holdings
Limited because the premium paid by the Company reflects the
expected benefit of synergies, revenue growth and future market
development. Instem Clinical Holdings Limited was acquired to
expand and enhance the Group's product and service offering within
the Global Life Sciences operating segment. These benefits have not
been recognised separately from goodwill because they do not meet
the recognition criteria for identifiable intangible assets.
Net cash outflow on acquisition
Instem
Clinical
Holdings
Limited
GBP000
Consideration paid in
cash (575)
Less: cash and cash equivalent
balances acquired 22
Net cash outflow (553)
Impact of acquisition on the results of the Group
Included in the profit for the year is GBP581,000 attributable
to the additional business generated by Instem Clinical Holdings
Limited. Revenue for the year includes GBP1,340,000 in respect of
Instem Clinical Holdings Limited.
Had this business combination been effected at 1 January 2013,
the revenue of the Group from continuing operations would have been
GBP1,418,000, and the profit for the year from continuing
operations would have been GBP297,000.
Subsidiary acquired
Principal Date of Proportion Consideration
activity acquisition of voting transferred
equity
interests
2013 acquired GBP000
%
Perceptive Holding of
Instruments intellectual 21 November
Limited property rights. 2013 100 2,435
Perceptive Instruments Limited was acquired to continue the
expansion and development of the Group's capabilities in the Global
Life Sciences sector.
Consideration transferred
Perceptive
Instruments
Limited
GBP000
Initial cash consideration 2,085
Contingent consideration
- Payable in cash 300
Deferred consideration -
Payable in cash 50
Total consideration estimate 2,435
The contingent consideration is based on performance related
conditions over one year.
Acquisition related costs amounting to GBP73,000 have been
excluded from the consideration transferred and have been
recognised as an expense in the current year, within the
'Non-recurring costs' line item in the consolidated statement of
comprehensive income.
Fair value of assets acquired and liabilities recognised at the
date of acquisition
Perceptive
Instruments
Limited
GBP000
Non-Current Assets
Goodwill -
Intellectual property 439
Customer related
assets 527
Property, plant
and equipment 4
Current Assets
Inventories 17
Trade and other
receivables 99
Cash and cash equivalents 1,112
Current Liabilities
Trade and other
payables (109)
Non-Current Liabilities
Deferred Tax on
acquisition (203)
Fair value of identifiable
net assets acquired 1,886
Goodwill arising on acquisition
Perceptive
Instruments
Limited
GBP000
Consideration transferred 2,435
Less: fair value of identifiable
net assets acquired (1,886)
Goodwill arising on acquisition 549
Goodwill arose on the acquisition of Perceptive Instruments
Limited because the premium paid by the Company reflects the
expected benefit of synergies, revenue growth and future market
development. Perceptive Instruments Limited was acquired to expand
and enhance the Group's product and service offering within the
Global Life Sciences operating segment. These benefits have not
been recognised separately from goodwill because they do not meet
the recognition criteria for identifiable intangible assets.
Net cash outflow on acquisition
Perceptive
Instruments
Limited
GBP000
Consideration paid in
cash 2,085
Less: cash and cash
equivalent balances
acquired (1,112)
Net cash outflow 973
Impact of acquisition on the results of the Group
Included in the profit for the year is a loss of GBP7,000
attributable to the additional business generated by Perceptive
Instruments Limited. Revenue for the year includes GBP36,000 in
respect of Perceptive Instruments Limited.
Had this business combination been effected at 1 January 2013,
the revenue of the Group from continuing operations would have been
GBP842,000, and the profit for the year from continuing operations
would have been GBP287,000.
5. Earnings per share
Basic earnings per share are 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.
2013 2012
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 529 11,765 4.5 1,044 11,755 8.9
Potentially - 15 - - - -
dilutive shares
--------------- --------------- --------------- --------------- --------------- ---------------
Earnings per
share -
Diluted 529 11,780 4.5 1,044 11,755 8.9
=============== =============== =============== =============== =============== ===============
Copies of the Annual Report and Accounts are to be posted to the
Company's shareholders and will be available on Instem's website at
http://investors.instem.com
This information is provided by RNS
The company news service from the London Stock Exchange
END
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