INS Instem Plc

TIDMINS

RNS Number : 4398S

Instem plc

24 September 2014

24 September 2014

Instem plc

("Instem" or the "Group")

Unaudited Interim Results

Instem plc (AIM: INS.L), a leading provider of IT systems and services to the global life sciences community, announces its unaudited interim results for the six months ended 30 June 2014.

The Group has made good progress in the first half, concentrating on the integration of acquisitions, a corporate reorganisation to align management and staff with core lines of business and substantial investment in the initiation of the 10-year NIEHS contract. The first half results do not reflect the benefit of these major structural changes but the focus and momentum created is reflected in our expectations for the second half, which we anticipate will be a significant improvement on the second half of 2013.

In addition, whilst there are sufficient well-qualified new contract opportunities in Q4 to meet expectations for 2014, there is some uncertainty around the anticipated receipt of a small number of high value contracts in the period. If these contracts are not received by the year-end this could have a material impact on the results for the full year.

Financial Highlights

   --    Revenues increased 4% to GBP5.7m (H1 2013: GBP5.5m) 

o Recurring revenues remained constant at GBP4.2m representing 74% of total revenues (H1 2013: GBP4.2m representing 76% of total revenues)

o Software as a Service (SaaS) revenues increased 6% to GBP0.8m (H1 2013 GBP0.7m)

   --    Adjusted operating profit* of GBP0.05m (H1 2013: GBP0.7m) 
   --    Seasonal net operating cash outflow of GBP1.6m (H1 2013 GBP0.6m) 

-- Cash balance as at 30 June 2014 of GBP(0.2)m (30 June 2013: GBP0.9m), reflecting normal seasonality in cash collection, acquisition related payments of GBP0.2m and lower receipts from new business

   --    Adjusted** (loss)/earnings per share of (1.2)p (H1 2013: 3.2p) 
   --    Basic loss per share of (4.7)p (H1 2013: (0.7)p) 

*before amortisation of intangibles, share based payments and non-recurring costs

**After adjusting for the effect of foreign currency exchange on the revaluation of inter-Group balances included in finance income/(costs), non-recurring items and amortisation of intangibles on acquisitions.

Operational Highlights

-- Provantis pre-clinical study management suite continued to enhance its market leading position

o Initial contract from WIL Research - for Provantis, Centrus submit(TM) and Logbook

o Contract with NCDSER, former Shanghai government laboratory, enhancing position in China market

o Multi-year NIEHS contract extended with 2 additional sites and 100 additional users

   --    Further contract wins for the submit(TM) data management system 

-- Successful initial period for newly acquired Perceptive Instruments including signing of 20 new clients for traditional products and launch of new product Cyto Study Manager

   --    Contracts with Nuvisan and CRU Hungary for the Alphadas clinical study management product 
   --    Upgraded entire product portfolio during period under review, enhancing competitive position 

Phil Reason, CEO of Instem plc, commented: "Whilst the market held back on investment commitments during the first half, we continued to make good strategic progress during the period under review. All our business lines achieved important favourable contract decisions and key product software releases were made. Importantly, our two recent acquisitions are contributing to revenues and progressing well.

"We believe that we are well positioned to benefit from market dynamics whereby global pharmaceutical organisations are now reallocating investment from late to early stage development work. Furthermore, the market is increasingly recognising the benefit of IT solutions which enable efficiencies in R&D processes and satisfy growing regulatory requirements.

"Whilst there are sufficient well-qualified new contract opportunities in Q4 to meet expectations for 2014, there is some uncertainty around the anticipated receipt of a small number of high value contracts in the period. If these contracts are not received by the year-end this could have a material impact on the results for the full year."

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 
 
   Walbrook Financial PR              +44 (0) 20 7933 8000 
 Bob Huxford 
 Sam Allen 
 Paul McManus 
 

About Instem

Instem is a leading supplier of IT systems and services to the global life sciences community delivering compelling solutions for data collection, management and analysis across the R&D continuum. Instem applications are used by customers worldwide, meeting the 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 and also offer the 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

Operationally, much has been achieved in the six month period. As I said at the commencement of the year our priority for 2014 was to consolidate our market position and fully integrate our recent acquisitions. These two acquisitions have bedded down well:

- Perceptive Instruments, whose products extend our pre-clinical offering into the in vitro market, was fully integrated during the period. Further, as planned, the Cyto Study Manager product in June. This product is used for reporting genetic toxicology assays.

- Logos (now Instem Clinical), whose products bring us into the adjacent early phase clinical market, has successfully achieved all of its earn out targets to date.

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The level of new business placed in the six month period was lower than expected, possibly impacted by global pharma M&A activity during this time, affecting both profits and cash received. The weakness of the US dollar also had a small further negative impact on the results. However, we continued to strengthen our position in each of our product markets.

Recently, market activity has improved and we expect this to continue for the remainder of the year. Further, with a number of clients committed to multi- year partnerships, an excellent base has been established for future years.

Significant new releases were also made for our Provantis, Alphadas and Submit products. These were all important in maintaining and supplementing the reputation of the Group with its client base. We also implemented a number of changes to improve the efficiency of our operations. These included reducing our office space in Liverpool, doubling the size of our Indian based technology team and streamlining a number of internal functions.

Instem continues to be the leading supplier of IT solutions to the preclinical and early clinical market place, and with global pharmaceutical organisations now moving resources back into early stage development we are well placed to benefit from the market opportunities this development presents.

David Gare

Non Executive Chairman

24 September 2014

Operational Review

Instem continues to be a leading supplier to many of the world's largest life science organisations and laboratories, supplying the tools to streamline R&D processes, resulting in increased client efficiency, shorter product development timelines and reduced costs.

During the period under review the Group has improved its leading position within the markets in which it operates as the result of product upgrades, the extension of the product portfolio, the integration of recent acquisitions and the award of a number of strategically important contracts. The Group has also increased internal operational efficiencies through extending its offshore operations and streamlining a number of internal functions.

In line with its strategy, Instem experienced further growth in demand for the SaaS based delivery of its software, including additional products deployed for the first time in this fashion. Total SaaS revenue for the period was up 6% to GBP0.8m (H1 2013: GBP0.7m) and this, combined with annual licence renewals, continues to provide the Group with strong forward visibility. Recurring revenues for the period, including SaaS and support and maintenance revenues, accounted for 74% of total revenues (H1 2013: 76%).

Acquisitions

The IT supplier community within the early development biology market is highly fragmented and the Group's customer base has indicated a preference to purchase software from a smaller number of core providers, such as Instem. There is a need to consolidate the supplier landscape in order to enhance data integration amongst and between the customer bases and assisting in that consolidation is a core element of Instem's strategy.

In line with this strategy Instem expanded its range of products through the acquisitions of two complementary technology companies in 2013. In May 2013, Instem entered the early stage clinical market acquiring London-based Logos Technologies ("Logos") and its ALPHADAS software suite. In November 2013 the Group entered the in-vitro R&D marketplace through the acquisition of Perceptive Instruments.