TIDMINS
RNS Number : 7249A
Instem plc
27 September 2022
Instem plc
("Instem", the "Company" or the "Group")
Half Year Report
Instem plc (AIM: INS.L), a leading provider of IT solutions to
the global life sciences market, announces its unaudited half year
results for the six months ended 30 June 2022.
Financial Highlights
-- Total Group revenues increased by 39 % to GBP 27.6m (H1 2021: GBP19.8m)
-- Recurring revenue (annual support and SaaS) increased 62 % to
GBP16.0m (H1 2021: GBP9.9m) with SaaS increasing 29% to GBP6.3m (H1
2021: GBP4.9m)
-- Constant currency revenue growth was 34%
-- Annual Recurring Revenue ("ARR") of GBP32.0m at 1 July 2022
-- Adjusted EBITDA* increased 8% to GBP4.5 m (H1 2021: GBP 4.2
m), representing 16.3% (H1 2021: 21.0%) of revenue
-- Profit before tax of GBP 1.9m (H1 2021: GBP1.2m)
-- Adjusted profit before tax** of GBP 3.2 m (H1 2021: GBP3.2m, as restated)
-- Basic and diluted earnings per share of 5.7p (H1 2021: 4.8p) and 5.5p (H1 2021: 4.6p)
-- Adjusted basic and diluted earnings per share** of 11.3p (H1
2021: 14.3p, as restated) and 10.8p (H1 2021: 13.6p, as
restated)
-- Net cash generated from operations of GBP1.8m (H1 2021 GBP4.1m)
-- Gross cash balance as at 30 June 2022 of GBP10.3m (H1 2021: GBP17.9m)
*Earnings before interest, tax, depreciation, amortisation and
non-recurring items (non recurring items are legal costs and
increased settlement provision relating to an historical contract
dispute plus acquisition costs, exceptional share based payment
charge and US government loan forgiveness)
** After adjusting for the effect of foreign currency exchange
and the unwinding of the finance liability included in finance
income/(costs), non-recurring items and amortisation of intangibles
on acquisitions
Operational Highlights
-- First reporting period with full contribution from The Edge
Software Consultancy Ltd ("The Edge"), d-Wise Technologies, Inc
("d-Wise") and PDS Pathology Data Systems Ltd ("PDS") (the
"Acquisitions"), with integration almost finalised
o Increasing recurring revenues and visibility
o Strengthening relationships with clients
o Increasing routes to market and cross selling
opportunities
-- Earn-outs met in full for d-Wise and The Edge (PDS has no earn out provision)
-- New banking facility finalised with HSBC of up to GBP20m,
GBP10m of which is committed and none currently utilised
Post-period end Highlights
-- Won largest ever contract
o $12m five-year agreement with global CRO, lead client for new
Aspire software solution
o Significant future SaaS revenues with long-term client
o Further expands the Group's global coverage and end-to-end
solutions
-- Full and final settlement of historical contractual licence dispute
o No impact on current operations; dispute arose in 2017
o Settled at EUR1.48m (GBP1.3m), offset by insurance
contribution of EUR450k (GBP400k), net GBP0.9m
o Settlement provision increased by GBP0.65m during H1 2022
toGBP0.9m as a non-recurring charge
o Cash payment of GBP0.9m due in October 2022
Outlook
-- Our ability to increase revenue per client, add new clients
as well as service larger contracts underpins management's growth
expectations in the current period and beyond
-- The market backdrop remains favourable, and we continue to
see high demand for our products and solutions
Phil Reason, CEO, commented: "The combination of continued
underlying growth and the contribution of the Acquisitions meant
that this was another strong period for the Company.
"Our ability to increase revenues per client, add new clients as
well as to increase recurring revenues underpins management's
growth expectations in the current period and beyond. The market
backdrop remains favourable and we continue to see high demand for
our products and solutions. While, as previously flagged, essential
salary inflation created a lag in H1 operating profit growth, this
will be less pronounced in H2 as the price rises we have
implemented take effect. Slower than expected consulting and
service revenue growth is expected to be offset by stronger growth
in higher margin software business, resulting in full year profit
performance in line with market expectations(1) .
The Acquisitions are now substantially integrated and we expect
to see further benefit to the enlarged Group as we convert our
order backlog. We will continue to focus on organic and acquisitive
growth opportunities with a view to further leveraging our business
model and strong industry standing."
1. The Board understands that consensus market expectation
adjusted profit before tax is GBP7.8m
Analyst Presentation: 11:30 today
Management will be hosting a presentation via web conference
today at 11:30. Analysts wishing to join should
register their interest by emailing instem@walbrookpr.com or by telephoning 020 7933 8780.
Investor Presentation: 16:30 today
Management will be providing a presentation and hosting an
Investor Q&A session on the results and future prospects today
at 16:30, through the digital platform Investor Meet Company.
Investors can sign up for free and add to attend the presentation
via the following link
https://www.investormeetcompany.com/instem-plc/register-investor .
Questions can be submitted pre-event and at any time during the
live presentation via the Investor Meet Company Platform.
For further information, please contact:
Instem plc Via Walbrook PR
Phil Reason, CEO
Nigel Goldsmith, CFO
Singer Capital Markets (Nominated
Adviser & Joint Broker) +44 (0) 20 7496 3000
Peter Steel
Alex Bond
Rachel Hayes
Stifel Nicolaus Europe Limited
(Joint Broker) +44 (0) 20 7710 7600
Richard Short
Ben Madison
Alex Price
Walbrook Financial PR +44 (0) 20 7933 8780
Nick Rome instem@walbrookpr.com
Tom Cooper
Joseph Walker
About Instem
Instem is a leading provider of IT solutions & services to
the life sciences market delivering compelling solutions for Study
Management and Data Collection; Regulatory Solutions for
Submissions and Compliance; and Informatics-based Insight
Generation.
Instem solutions are in use by over 700 customers worldwide,
including all the largest 25 pharmaceutical companies, enabling
clients to bring life enhancing products to market faster. Instem's
portfolio of software solutions increases client productivity by
automating study-related processes while offering the unique
ability to generate new knowledge through the extraction and
harmonisation of actionable scientific information.
Instem products and services address aspects of the entire drug
development value chain, from discovery through to market launch.
Management estimate that over 50% of all drugs on the market have
been through some part of Instem's platform at some stage of their
development.
To learn more about Instem solutions and its mission, please visit www.instem.com
Chairman's Statement
This period has been of considerable strategic importance for
the Company as we substantially completed the integration of the
three recent Acquisitions. This is the first set of results to
include their full contribution. The strong performance of the
significantly enlarged Group emphasises the benefits of our
acquisition strategy - with our increased scale and product range
strengthening our growth ambitions whilst helping to reduce
susceptibility to ongoing market fluctuations.
Having grown our reach, routes to market and ability to cross
sell, our combined operations are increasingly setting us apart
from our competitors.
Earn-Outs
I am delighted to confirm that the earn-out periods for d-wise
and The Edge have now completed, with both earn-out targets met in
full. PDS has no earn-out arrangement.
Financial Performance
While, as previously reported, there was minimal disruption to
revenue in the challenging macro-economic environment, there were
headwinds, mainly due to inflationary pressures, which led to
essential increases in remuneration for staff across the Company.
As stated earlier in the year, we successfully instigated a number
of price increases to mitigate the impact of these additional
costs.
We have seen a change in the revenue mix during the period with
greater increases in higher margin recurring SaaS and annual
support fees and lower growth in services. While service revenue is
picking up again in the second half, we anticipate that
software-related revenues will be the primary driver of growth in
the full year.
Our performance during the period was largely in line with the
Board's expectations, despite the above short-term issues, while
importantly we established foundations for continued growth and
margin improvement.
Performance in the Period for some of our key financial metrics
is summarised below:
-- Revenue increased 39%
-- SaaS Revenue increased 29%
-- Recurring Revenue increased 62%
-- Adjusted EBITDA increased 8%
Looking Forwards
As I noted earlier, our acquisition strategy is expected to
extend the reach of the Company, enabling us to take advantage of
additional growth opportunities as they arise. In this regard, we
are extremely encouraged by the recently announced post-period end,
$12m contract win - our largest ever contract. In this we will be
supporting a large contract research organisation ("CRO"), with
over 2,000 users worldwide, in its clinical trial analysis as it
adopts our new Aspire software solution. This is being supplied by
Company's Clinical Trial Acceleration business unit, formed
following the acquisition of d-Wise. We believe that over the next
3-5 years we can achieve compound annual organic growth of 10% and,
with further acquisitions, have the potential to more than double
our 2022 revenue (i.e. reaching total revenue of GBP120m+).
Our customers are continuing to experience increased demand for
their services and, as a result, we continue to see strong demand
for our solutions across the drug development lifecycle. We have a
healthy and growing order book, increased scale of operations and
increased levels of visibility resulting from our SaaS conversion
program. We remain confident about the future performance of the
business.
David Gare
Non-Executive Chairman
27 September 2022
Chief Executive's Report
Strategic Development
The Group has continued to pursue its mission to help our
clients radically reduce the cost and time of life sciences
research and development through data driven optimisation of
traditional non-clinical and clinical study processes, ultimately
replacing many of those studies with "in silico" alternatives such
as predictive analytics, simulation and modelling. The strategy is
based on leveraging trusted client and regulatory relationships and
our intimate understanding of complex scientific data, established
by providing a broad portfolio of market leading IT solutions that
optimise today's life sciences R&D processes, from early
discovery to late-stage clinical trials.
The increasing SaaS deployment of an expanded suite of solutions
ensures that we are in a stronger position to help our clients
aggregate and leverage a broader and deeper set of information
while increasing recurring revenue and visibility.
Group growth was supported by a robust underlying life sciences
research and development market as we experienced demand for our
solutions across the entire drug development life cycle. We further
embedded operations from the Acquisitions, positioning the enlarged
Group to take advantage of the positive prevailing market
conditions.
Our larger suite of solutions and broader market reach provides
further cross-selling opportunities to increase revenues from
existing and new clients. This is further enhanced by our capacity
to service larger contracts and provide a one-stop shop for clients
seeking to reduce and simplify their supplier network.
Having previously integrated areas such as Finance, People &
Culture, Information Systems and Marketing from the Acquisitions,
we have been able to complete the more comprehensive integration of
larger teams, such as those in Software Development, Out-Sourced
Services, SaaS Delivery and Customer Implementations / Support.
This is already starting to generate economies of scale, the
ability to standardise on best practice processes and opportunities
to target highly skilled resources at the most compelling business
opportunities.
A combined Governance, Risk and Compliance team is now in place,
overseeing global implementation and compliance with standards such
as ISO 9001 Quality Management, ISO 27001 Information Security
Management, industry regulation such as Good Laboratory / Clinical
Practice ("GLP" and "GCP") and the increasing importance of
Environmental, Social and Governance ("ESG") practices, standards
and regulation, which is increasingly important to all of our
stakeholders.
Most recently, we have been able to liberate senior management
bandwidth from the enlarged team to make three new US-based
appointments:
-- VP Investor Relations, to support increased investor
engagement following the appointment of Stifel as joint broker and
an active programme intended to broaden institutional shareholding
in North America and mainland Europe
-- VP Corporate Development, to support our ability to target a
growing landscape of acquisition targets, many of which are based
in North America
-- VP Strategic Partnerships, to ensure we maximise the benefits
to Instem and a growing list of existing partners while ensuring we
optimise our ability to evaluate, consummate and manage future
additions. These relationships help differentiate Instem in the
market and have previously led to acquisition opportunities.
Market Review
The market backdrop continues to be favourable for the Group
given global population growth and life expectancy underpinning
increased demand for successful innovation in life sciences.
Increasing amounts of money are being invested in the biotech
industry with the pharmaceuticals sector investing heavily in drug
development, underpinning a strong pipeline for Instem.
In the pharmaceutical industry, which represents the largest
proportion of Instem's revenue, we refer again to the Pharma
R&D Annual Review, the 2022 version of which was released by
Pharma Intelligence in March this year. This report shows that the
industry grew strongly in 2021 with an 8.2% increase (2020: 4.8%)
in the total number of drugs in the regulatory stages of global
R&D, continuing a multi-year growth trend that shows no sign of
abating. Most relevant to Instem are the increase in the number of
drugs at the preclinical (or non-clinical) phase of drug
development of 11.0% (2020: 6.0%) and clinical phases 1-3 where
there was an 8.3% increase (2020: 3.6%), as these areas account for
much of our business.
The Company works with most of the world's leading public and
private CROs and tracks their business performance as this provides
additional insight into the health of the underlying market and
almost all of those companies have recently reported strong
underlying growth and very limited impact of wider macro-economic
headwinds.
Business Performance
Study Management
Most of our study management solutions address areas where
technology adoption is mature and Instem enjoys significant market
penetration. However, with global R&D study volume steadily
increasing, existing clients have continued to expand numbers of
users for most of our study management solutions, while adding
further products from our solution portfolio. This is the area with
the greatest opportunity to transition existing clients from
on-premise to SaaS deployment. While this transition has slowed
over the last two years, as clients concentrated on advancing Covid
vaccines and therapies, we are now seeing clients refocussing on
SaaS conversion projects.
This area generates a significant proportion of our recurring
revenue, so client retention is critical and once again this has
been exceptionally strong. Clients have generally been
understanding of the inflationary pressures that are impacting
Instem, particularly salary costs, in what remains a very
competitive labour market, and have been accepting of material
price increases as recurring contracts renew. As such, the Board
remains confident that margins can be protected through this
phase.
Regulatory Solutions
The majority of our clients and revenue in this area are
associated with our software and out-sourced services to create,
visualise and share information using Food & Drug
Administration ("FDA") mandated format S (Standard for the Exchange
of Non-clinical Data). The acquisition of PDS in September 2021,
number two in the market behind Instem in S out-sourced services,
has led to Instem taking substantial market share of new and repeat
business, with good growth in new business bookings. However,
revenue conversion (particularly in Q1 2022) was at a slower rate
than in recent periods as client studies failed to deliver as many
data sets ready for S conversion as they had anticipated. We are
now seeing an improving flow of data for conversion and expect a
stronger revenue performance in Q4 2022 and beyond.
Our out-sourced services productivity was also negatively
impacted by a significant change in the commercial terms to use a
widely adopted third-party product that helps check S packages for
conformance against the standard. Along with many other
organisations, Instem stopped using the third-party product and has
performed the equivalent checks manually. In parallel we have been
developing our own automated checking software, which will be
implemented by our out-sourced services team in Q4 2022. This will
be timely as we work through a growing order book for S
conversions.
In Silico Solutions
Our Leadscope predictive analytics solutions which provide an in
silico assessment of the potential safety liabilities associated
with a specific chemical structure have continued to grow strongly
in the period. New predictive assays, developed in collaboration
with industry and regulatory partners, have been licensed and
deployed, and work continues to add new in silico models, some of
which will replace animal-based studies.
Our introduction of an out-sourced alternative to clients
licensing our software is starting to build revenue momentum, and
work is progressing well on a collaborative European Medicine
Agency funded research project to investigate the mutagenicity of
different classes of N-nitrosamines ("NAs"). Nitrosamines have
become a focus of significant concern for the global pharmaceutical
industry, and we are anticipating that a new NA-related in silico
model will be created as we contribute to this important research
project.
Our KnowledgeScan target safety assessment business, having
slowed through the height of the Covid crisis, has picked up well
in Q2 2022 and continues to grow strongly in Q3 as client
scientists have returned to their laboratories and have once again
outsourced this work.
Clinical Trial Acceleration
The highlight in this area is undoubtedly the post period end
award of Instem's largest ever contract, a $12 million multi-year
SaaS project for a large CRO. As detailed in the 2 September 2022
RNS, this project will create an early adopter and key reference
client for our new Aspire(TM) statistical computing environment
("SCE"). Our Clinical Trial Acceleration team are global leaders in
this market, providing many small to medium sized CROs and pharma
companies with a productised SCE and the largest companies with
custom SCE solutions. Aspire is expected to provide a
transformational product-based alternative for the larger clients
and to replace large, resource intensive consulting projects with a
standardised SaaS solution.
With several large consulting projects completing in the period
and other large opportunities taking longer through the sales
cycle, growth in consulting revenue will be modest in 2022; a
scenario that will diminish in frequency and impact as a
consequence of the growing annuity revenue stream arising from
Aspire.
Outlook
The combination of continued underlying growth and the
contribution of the Acquisitions meant that this was another strong
period for the Company.
Our ability to increase revenue per client, add new clients as
well as service larger contracts underpins the Board's growth
expectations in the current period and beyond. The market backdrop
remains favourable, and we continue to see high demand for our
products and solutions. While, as previously flagged, essential
salary inflation created a lag in H1 operating profit growth, this
will be less pronounced in H2 as the price rises we have
implemented take effect. Slower than expected consulting and
service revenue growth is expected to be offset by stronger growth
in higher margin software business resulting in full year profit
performance in line with market expectations(1) .
The Acquisitions are now substantially integrated, and we expect
to see further benefit to the enlarged Group as we convert our
order backlog. We will continue to focus on organic and acquisitive
growth opportunities with a view to further leveraging our business
model and strong industry standing.
Phil Reason
Chief Executive Officer
27 September 2022
1. The Board understands that consensus market expectation
adjusted profit before tax is GBP7.8m.
Financial Review
Key Performance Indicators (KPIs)
The directors review monthly revenue and operating costs to
ensure that sufficient cash resources are available for the working
capital requirements of the Group.
The primary KPIs at 30 June 2022 were:
6 months to 6 months to % Change 12 months to
30 June 2022 30 June 2021 (H1 2021 to H1 2022) 31 Dec
GBP000 GBP000 2021
GBP000
Total revenue 27,604 19,826 39% 46,017
Recurring revenue 15,973 9,889 62% 24,083
Recurring revenue as a percentage of total
revenue 58% 50% - 52%
Annual recurring revenue 32, 124 n/a - 28,741
Adjusted EBITDA 4,500 4,161 8% 8,250
Adjusted EBITDA margin % 16.3% 21% -470bps 17.9%
Cash and cash equivalents 10,280 17,850 -42% 15,021
Operating profit after non-recurring items 1,568 1,921 -18% 4,098
In addition, certain non-financial KPIs are periodically
reviewed and assessed, including customer and staff retention
rates.
Instem's revenue model consists of perpetual licence income with
annual support and maintenance contracts, professional fees,
technology enabled outsourced services fees, SaaS subscriptions and
consulting services fees.
Total revenues in the period increased by 39% to GBP27.6m (H1
2021: GBP19.8m) with constant currency revenue growth at 34%.
Recurring revenue, derived from support & maintenance contracts
and SaaS subscriptions, increased in the period by 62% to GBP16.0m
(H1 2021: GBP9.9m). Recurring revenue as a percentage of total
revenue was 58% (H1 2021: 50%). In absolute terms, recurring
revenue increased over the prior year by GBP6.1m. Revenue from
technology enabled outsourced services increased by 42% to GBP3.7m
(H1 2021: GBP2.6m).
Operating expenses increased by 47% in the period reflecting the
full year cost of the 2021 acquisitions, ongoing investment in
operational teams and the increase in the rate of inflation,
primarily in salaries.
Adjusted earnings before interest, tax, depreciation,
amortisation, and non-recurring items (Adjusted EBITDA) increased
by 4% to GBP4.5m (H1 2021: GBP4.2m). For this measure of earnings,
the margin as a percentage of revenue decreased in the period to
16.3% from 21% in H1 2021, due to the impact of the lower than
Instem average margins of d-Wise and PDS and abnormally high salary
cost inflation across the Group from January 2022. The average
number of employees (including non-executive directors) for the
period was 485 globally, an increase of 49 since December 2021.
Non-recurring costs in the period were GBP0.8m (H1 2021:
GBP1.6m), consisting of an GBP0.7m increase of the provision
associated with an historical contract dispute (see Subsequent
Events section below for more detail) and GBP0.1m for integration
costs relating to the 2021 acquisitions of The Edge, d-Wise and
PDS.
The reported profit before tax for the period was GBP1.9m (H1
2021: GBP1.2m). The calculation for the adjusted profit before tax
was changed in 2022 to include two additional components; the
effect of foreign currency exchange and the unwinding of the
financial liability included in finance income/(costs). Those two
components have been included to better reflect the normalised,
ongoing operations of the Group. Adjusted profit before tax (i.e.
after adjusting for the effect of foreign currency exchange and the
unwind of the finance liability included in finance income/(costs),
non-recurring items and amortisation of intangibles on
acquisitions) was GBP3.2m (H1 2021: GBP3.2m, restated).
The Group operates internationally and is exposed to foreign
currency risk on transactions denominated in a currency other than
the functional currency and on the translation of the statement of
financial position and statement of comprehensive income of foreign
operations into sterling. The currency that gave rise to this risk
in 2022 was primarily from realised US dollars transactions. In
2022, the revenue and Adjusted EBITDA growth on a constant currency
basis, excluding the foreign exchange exposure was 34-% and 3%
respectively. The foreign exchange gain recorded during H1 2022 was
GBP0.94m (H1 2021: GBP0.26m loss), which is composed of unrealised
gains/losses from translation of intercompany balances. The Group
seeks to settle those intercompany balances whenever possible.
The Group continues to invest in its product portfolio.
Development costs incurred in the period were GBP3.7m (H1 2021:
GBP2.3m), of which GBP1.4m (H1 2021: GBP1.0m) was capitalised. The
Group has a development process in place and is committed to ensure
its own technology continues to evolve to meet client needs.
Basic and diluted earnings per share calculated on an adjusted
basis were 11.3p and 10.8p respectively (H1 2021: 14.3p basic and
13.6p diluted, as restated). The reported basic and diluted
earnings per share were 5.7p and 5.5p respectively (H1 2021: 4.8p
basic and 4.6p diluted).
The Group cash generated from operations for the period was
GBP1.8m (H1 2021: GBP4.1m), a reduction from prior year primarily
due to more cash tied up in working capital. The deferred and
contingent consideration payments of GBP4.5m which related to the
2021 acquisitions were part of the net cash used in financing
activities. The net cash used in investing activities includes
GBP1.4m (H1 2021: GBP1.0m) from the capitalisation of software
development. As a result of the above the gross cash balance
decreased from GBP15.0m at 31 December 2021 to GBP10.3m at 30 June
2022.
The remaining financial obligations associated with The Edge,
d-Wise and PDS acquisitions for H2 2022 and 2023 are deferred and
contingent consideration payments of GBP4.2m and GBP2.2m
respectively in cash. The contingent consideration provision
reflected management's estimate that the entities would achieve
their profitability targets and that the full amount of contingent
consideration would be paid. This was confirmed in the period.
Intangible assets increased from the 30 June 2021 to the 30 June
2022 interim results due to the PDS acquisition completed on 1
September 2021 and an element of deferred consideration GBP3.2m
(US$ 4.3m) relating to the d-Wise acquisition, which was originally
recognised in H1 2021 as employee remuneration through the
Statement of Comprehensive Income. As part of the procedures
performed at the 31 December 2021 year end the accounting treatment
was reassessed and it was concluded that no substantive employment
link existed. Appropriate adjustments were made to the results in
the year ended 31 December 2021 to include the deferred
consideration as part of the cost of business combination. Any
employment remuneration expense recognised in the interim 2021
results was reversed in H2 2021. Additionally, in 2022 the Goodwill
in d-wise has increased by GBP0.05m (US$0.06m) due to a change in
the contingent consideration paid.
The deficit on the Group's legacy defined benefit pension scheme
was GBP1.3m at 30 June 2022 (H1 2021: GBP2.7m) having improved from
a deficit of GBP2.0m at 31 December 2021. Liabilities decreased
from GBP16.0m at 31 December 2021 to GBP12.5m at 30 June 2022 and
Plan Assets have decreased from GBP14.0m at 31 December 2021 to
GBP11.2m at 30 June 2022. The scheme liabilities fell in value due
to significantly higher discount rates, which reflect the rise in
the yields on corporate bonds over the period and contributions
paid by the Group during the period have caused the deficit to
reduce.
These reductions in the scheme deficit were offset by investment
returns that were materially lower than expected, as well as higher
inflation assumptions over the period that led to a decrease in the
value of the Scheme's assets.
Movements in share capital and the share premium, merger rand
share based payment reserves reflect the exercise of share options
during the period, the fair value of share options granted being
charged to the Statement of Comprehensive Income and the issue of
shares paid in lieu of cash as deferred consideration for d-Wise.
The share capital of Instem at 30 June 2022 was 22,676,808 ordinary
shares of 10p each (note 12).
In line with previous periods and given our policy of retaining
cash within the business to capitalise on available growth
opportunities, the Board has not recommended the payment of a
dividend.
Principal risks and uncertainties
The principal risk and uncertainties that management have made
for the six months ended 30 June 2022 remained unchanged with those
reported in the annual statutory financial statement for the year
ended 31 December 2021.
The current weak economic conditions, spiralling cost inflation,
the Ukrainian conflict and the threat of a global recession,
compounded by the UK's departure from the European Union ("EU"),
may disrupt or negatively impact the Group's operations and
associated revenues. The Group has no clients or operations located
in either Ukraine or Russia. The Board is actively monitoring the
developing situation and is mindful of the potential for
escalation. The impact of Covid-19 remains a challenge,
particularly in China where the zero-tolerance approach by the
Chinese government and consequent widespread lockdowns has impacted
the Group's ability to implement its solutions on site for some
clients in a timely way. However, it is not apparent that this has
caused any material revenue or client loss and the Group continues
to work closely with its clients to service their needs.
The Group operates internationally and is exposed to foreign
currency risks on transactions denominated in a currency other than
the functional currency. The main currency giving rise to this risk
is the US dollar. Whilst weak sterling against the US dollar is
beneficial to revenue , our substantial US cost base provides a
natural hedge so that a strengthening USD is only modestly
beneficial to profit.
Finally, any significant inflationary increases would quickly
impact the Group's cost base as experienced during the period with
salary increases across the Group. The Group has taken steps to
mitigate these increases with corresponding increases in sales
prices wherever possible but there will be a time lag before the
full impact of these increases is reflected in the Group's
results.
The Group seeks to mitigate exposure to all forms of risk
through a combination of regular performance review and a
comprehensive insurance programme. Additionally, t he Group has a
significant proportion of recurring revenue (circa 58% of total)
from annual support & maintenance and SaaS contracts from a
well-established global customer base. Consequently, the Group
ensures that it maintains a diversified portfolio in terms of
customers, revenue mix, geography and markets.
Subsequent events
No adjusting events have occurred between the 30 June 2022
reporting date and the date of approval of this Interim Report.
A full and final settlement has been negotiated and agreed with
a former customer regarding an historical contractual licence
dispute that arose in 2017. Instem has agreed to pay EUR1.48m
(approx. GBP1.3m), of which its insurer has agreed to contribute
EUR0.45m (approx. GBP0.4m) resulting in a net payment due of
approx. EUR1.0m (GBP0.9m). This will be made in October 2022.
As previously announced, the Company had created a provision of
GBP0.25m in respect of the dispute and this was increased in the
period by GBP0.64m, resulting in a provision at 30 June 2022 of
approx. GBP0.9m. The increase in the provision was treated as a
non-recurring, exceptional charge in the half year ended 30 June
2022.
The issue involved does not affect the ongoing operations of the
Group.
Alternative performance measures
This report contains certain financial alternative performance
measures ("APMs") that are not defined or recognised under IFRS but
are presented to provide readers with additional financial
information that is evaluated by management and investors in
assessing the performance of the Group. This additional information
presented is not uniformly defined by all companies and may not be
comparable with similarly titled measures and disclosures by other
companies.
The table below provides the data for certain performance
measures mentioned above:
30 Jun 2022 30 Jun 2021 31 Dec 2021
GBP000 GBP000 GBP000
Annual support fees 9,716 4,988 14,378
SaaS subscription and support fees 6,257 4,901 9,704
Recurring revenue 15,973 9,889 24,082
Licence fees 2,803 3,086 4,597
Professional services 1,486 1,509 3,651
Technology enabled outsourced services 3,738 2,594 6,378
Consultancy services 3,604 2,748 7,309
Total revenue 27,604 19,826 46,017
Recurring revenue is the revenue that repeats annually under contractual arrangements. It
highlights how much of the Group's total revenue is secured and anticipated to repeat in future
periods, providing a measure of the financial strength of the business.
30 Jun 2022 30 Jun 2021 31 Dec 2021
GBP000 GBP000 GBP000
Annual Recurring Revenue 32,124 - 28,741
Annual recurring revenue is revenue that annually repeats under contractual arrangements and
consists of Software as a Service (SaaS) revenue together with annual support and maintenance
fees.
30 Jun 2022 30 Jun 2021 31 Dec 2021
GBP000 GBP000 GBP000
EBITDA (before non recurring items) 3,731 3,344 7,769
Non recurring cost (see note 6) 769 1,622 1,286
Non recurring income (see note 6) - (805) (805)
Adjusted EBITDA 4,500 4,161 8,250
Adjusted EBITDA is EBITDA plus non-recurring items (as set out in note 6). The same adjustments
are also made in determining the adjusted EBITDA margin. Items are only classified as non-recurring
or exceptional due to their nature or size and the Board considers that this metric provides
the best measure of assessing underlying trading performance.
30 Jun 2022 30 Jun 2021 30 Jun 2021 31 Dec 2021 31 Dec 2021
(as restated) (as originally reported) (as restated) (as originally reported)
GBP000 GBP000
GBP000 GBP000 GBP000
Profit before
tax 1,918 1,177 1,177 2,984 2,984
Amortisation
of
intangibles
arising on
acquisition 977 599 599 1,563 1,563
Non recurring
cost (see
note 6) 769 1,622 1,622 1,286 1,286
Non recurring
income (see
note 6) - (805) (805) (805) (805)
Intercompany
foreign
exchange
(gain)/loss - - 268 - (18)
Foreign
currency
exchange
(gain)/ loss (944) 258 - 44 -
Unwinding
discount on
deferred
consideration 455 318 - 867 -
Adjusted
profit before
tax 3,175 3,169 2,861 5,939 5,010
The calculation for the adjusted profit before tax was changed in H1 2022 compared with prior
periods by including two additional components, the effect of the foreign currency exchange
and the unwinding of the finance liability included in finance income/(costs). Those two components
have been included as adjustments as they do not affect the ongoing operations of the Group.
Adjusted profit before tax is after adjusting for the effect of foreign currency exchange
and the unwinding of the finance liability included in finance income/(costs), non-recurring
items and amortisation of intangibles on acquisitions. The same adjustments are also made
in determining adjusted earnings per share ("EPS"). The Board considers this adjusted measure
of operating profit provides the best metric of assessing underlying performance.
30 Jun 2022 30 Jun 2021 30 Jun 2021 31 Dec 2021 31 Dec 2021
(as restated) (as originally reported) (as restated) (as originally reported)
GBP000 GBP000
GBP000 GBP000 GBP000
Weighted
average
number of
shares
(000's) 23,547 22,168 22,168 22,719 22,719
Adjusted
diluted
earnings per
share 10.8p 13.6p 12.2p 20.4p 16.3p
30 Jun 2022 30 Jun 2021 31 Dec 2021
GBP000 GBP000 GBP000
Cash at bank 10,280 26,848 24,019
Bank overdraft - (8,998) (8,998)
Cash balance 10,280 17,850 15,021
Nigel Goldsmith
Chief Financial Officer
27 September 2022
Instem plc
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the six months ended 30 June 2022
Unaudited Unaudited Audited
Six months ended Six months ended Year
30 June 30 June ended 31 December 2021
2022 2021 GBP000
GBP000 GBP000
Note
REVENUE 4 27,604 19,826 46,017
Employee benefits expense (14,676) (11,504) (26,918)
Other expenses (8,428) (4,161) (10,491)
Net impairment loss on financial assets - - (358)
EARNINGS BEFORE INTEREST, TAXATION,
DEPRECIATION, AMORTISATION AND
NON-RECURRING COSTS (ADJUSTED
EBITDA) 4,500 4,161 8,250
Depreciation (168) (123) (312)
Amortisation of intangibles arising on
acquisition (977) (599) (1,563)
Amortisation of internally generated
intangibles (469) (397) (851)
Amortisation of right of use assets (549) (304) (945)
OPERATING PROFIT BEFORE NON-RECURRING COSTS 2,337 2,738 4,579
Non-recurring income 6 - 805 805
Non-recurring costs 6 (769) (1,622) (1,286)
----------------- ------------------ ------------------------
OPERATING PROFIT AFTER NON-RECURRING COSTS 1,568 1,921 4,098
Finance income 7 1,030 22 30
Finance costs 8 (680) (766) (1,144)
----------------- ------------------ ------------------------
PROFIT BEFORE TAXATION 1,918 1,177 2,984
Taxation (631) (154) (1,306)
----------------- ------------------ ------------------------
PROFIT FOR THE PERIOD 1,287 -1,023 1,678
================= ================== ========================
OTHER COMPREHENSIVE INCOME
Items that will not be reclassified to
profit and loss account
Actuarial gain on retirement benefit
obligations 382 785 1,375
Deferred tax on actuarial gain & loss (96) (149) (140)
Deferred tax on share options - - -
----------------- ------------------ ------------------------
286 636 1,235
Items that may be reclassified to profit
and loss account:
Exchange differences on translating foreign
operations (1,216) 24 (294)
----------------- ------------------ ------------------------
OTHER COMPREHENSIVE (EXPENSE)/ INCOME FOR
THE PERIOD (930) 660 941
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD 354 1,683 2,619
================= ================== ========================
PROFIT ATTRIBUTABLE TO OWNERS OF THE PARENT
COMPANY 1,287 1,023 1,678
================= ================== ========================
TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE
TO OWNERS OF THE PARENT COMPANY 354 1,683 2,619
================= ================== ========================
Earnings per share from continuing
operations
- Basic 5 5.7p 4.8p 7.8p
- Diluted 5 5.5p 4.6p 7.4p
Instem plc
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 30 June 2022 Unaudited Unaudited Audited
30 June 30 June 31 December
2022 2021 2021
Note GBP000 GBP000 GBP000
ASSETS
NON-CURRENT ASSETS
Intangible assets 58,381 43,098 58,311
Property, plant and equipment 552 637 592
Right of use assets 1,542 2,110 2,077
Finance lease receivables 69 105 85
TOTAL NON-CURRENT ASSETS 60,544 45,950 61,065
---------- ---------- ------------
CURRENT ASSETS
Inventories 99 54 64
Trade and other receivables 15,224 12,250 14,852
Finance lease receivables 51 42 44
Tax receivable 15 648 130
Cash and cash equivalents 9 10,280 17,850 15,021
---------- ---------- ------------
TOTAL CURRENT ASSETS 25,669 30,844 30,111
---------- ---------- ------------
TOTAL ASSETS 86,213 76,794 91,176
========== ========== ============
LIABILITIES
CURRENT LIABILITIES
Trade and other payables 4,905 4,055 5,723
Deferred income 17,672 14,243 18,935
Provision for liabilities and
charges 10 885 - -
Financial liabilities 11 6,235 4,515 6,612
Lease liabilities 935 1,079 1,077
TOTAL CURRENT LIABILITIES 30,632 23,892 32,347
---------- ---------- ------------
NON-CURRENT LIABILITIES
Financial liabilities 11 - 3,244 4,728
Retirement benefit obligations 1,303 2,729 2,014
Provision for liabilities and
charges 10 43 250 291
Lease liabilities 858 1,312 1,248
Deferred tax liabilities 2,977 2,855 3,247
---------- ---------- ------------
TOTAL NON-CURRENT LIABILITIES 5,181 10,390 11,528
---------- ---------- ------------
TOTAL LIABILITIES 35,813 34,482 43,875
========== ========== ============
EQUITY
Share capital 2,268 2,178 2,219
Share premium 28,224 28,191 28,191
Merger reserve 14,013 9,359 12,104
Share based payment reserve 3,045 1,447 2,294
Translation reserve (1,418) 66 (202)
Retained earnings 4,268 1,221 2,695
---------- ---------- ------------
TOTAL EQUITY ATTRIBUTABLE TO
OWNERS OF THE PARENT 50,400 42,512 47,301
---------- ---------- ------------
TOTAL EQUITY AND LIABILITIES 86,213 76,794 91,176
========== ========== ============
Instem plc
CONSOLIDATED STATEMENT OF CASH FLOWS
For the six months ended 30
June 2022 Unaudited Unaudited Audited
Six months ended 30 June Six months ended 30 June Year ended 31 December
Note 2022 2021 2021
GBP000 GBP000 GBP000
CASH FLOWS FROM OPERATING
ACTIVITIES
Profit before taxation 1,918 1,177 2,984
Adjustments for:
Depreciation 168 123 312
Amortisation of intangibles 1,446 996 2,414
Amortisation of right of use
assets 549 304 945
Share based payment charge 751 517 1,061
Retirement benefit obligations (398) (380) (530)
Finance income 7 (1,030) (22) (30)
US government loans forgiven 6 - (805) (805)
Finance costs 8 680 766 1,144
d-Wise acquisition cost 6 - 809 -
Loss on disposal of fixed
assets - 6 3
------------------------- ------------------------- -----------------------
CASH FLOWS FROM OPERATIONS
BEFORE MOVEMENTS IN WORKING
CAPITAL 4,084 3,491 7,498
Movements in working capital:
(Increase) in inventories (35) (4) (14)
Decrease/ (Increase) in trade
and other receivables 140 (151) (1,573)
(Decrease)/ Increase in trade,
other payables and deferred
income (2,995) 746 4,432
Increase in provisions 637 - -
------------------------- ------------------------- -----------------------
NET CASH GENERATED FROM
OPERATIONS 1,831 4,082 10,343
Finance income 86 3 6
Finance costs (116) (482) (276)
Income taxes (936) (485) (873)
------------------------- ------------------------- -----------------------
NET CASH GENERATED FROM
OPERATING ACTIVITIES 865 3,118 9,200
CASH FLOWS FROM INVESTING
ACTIVITIES
Capitalisation of development
costs (1,465) (922) (2,238)
Purchase of property, plant and
equipment (122) (37) (144)
Purchase of subsidiary
undertaking (net of cash
acquired) - (10,567) (14,840)
------------------------- ------------------------- -----------------------
NET CASH USED IN INVESTING
ACTIVITIES (1,587) (11,526) (17,222)
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from issue of share
capital 35 22 22
Payment of deferred
consideration (3,061) - (277)
Payment of contingent (1,412) - -
consideration
Repayment of lease liabilities (587) (367) (963)
Receipts from sublease of asset 16 22 40
Repayment of former PDS
shareholder loan - - (2,387)
------------------------- ------------------------- -----------------------
NET CASH (USED)/GENERATED FROM
FINANCING ACTIVITIES (5,009) (323) (3,565)
NET (DECREASE) /INCREASE IN
CASH AND CASH EQUIVALENTS (5,731) (8,731) (11,587)
Cash and cash equivalents at
start of period 15,021 26,724 26,724
Effect of exchange rate changes
on the balance of cash held in
foreign currencies 990 (143) (116)
------------------------- ------------------------- -----------------------
CASH AND CASH EQUIVALENTS AT OF PERIOD 10,280 17,850 15,021
========================= ========================= =======================
Instem plc
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the six months ended 30 June 2022
Share
based
Share Share Merger payment Translation Retained Total
capital premium reserve reserve reserve earnings equity
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Balance as at 1
January 2021 -
(Audited) 2,048 28,172 2,432 930 92 (438) 33,236
Profit for the
period - - - - - 1,023 1,023
Other
comprehensive
income - - - - 24 636 660
----------- ----------- ---------- ----------- ------------- ---------- ---------
Total
comprehensive
income - - - - 24 1,659 1,683
Shares issued 130 19 6,927 - - - 7,076
Share based
payment - - - 517 - - 517
----------- ----------- ---------- ----------- ------------- ---------- ---------
Balance as at 30
June 2021
(Unaudited) 2,178 28,191 9,359 1,447 116 1,221 42,512
Profit for the
period - - - - - 655 655
Other
comprehensive
(expense)/income - - - - (318) 599 281
----------- ----------- ---------- ----------- ------------- ---------- ---------
Total
comprehensive
expense - - - - (318) 1,254 936
Shares issued 41 - 2,745 - - - 2,786
Share based
payment - - - 544 - - 544
Deferred tax on
share options - - - 528 - - 528
Nil cost option
charge - - - (5) - - (5)
Reserve transfer
on lapse of
share options - - - (25) - 25 -
Reserve transfer
on exercise of
share options - - - (195) - 195 -
----------- ----------- ---------- ----------- ------------- ---------- ---------
Balance as at 31
December 2021
(Audited) 2,219 28,191 12,104 2,294 (202) 2,695 47,301
Profit for the
period - - - - - 1,287 1,287
Other
comprehensive
income (1,216) 286 (930)
----------- ----------- ---------- ----------- ------------- ---------- ---------
Total
comprehensive
income - - - - (1,216) 1,573 357
Shares issued 49 33 1,909 - - - 1,991
Share based
payment - - - 751 - - 751
----------- ----------- ---------- ----------- ------------- ---------- ---------
Balance as at 30
June 2022
(Unaudited) 2,268 28,224 14,013 3,045 (1,418) 4,505 50,400
=========== =========== ========== =========== ============= ========== =========
NOTES TO THE FINANCIAL INFORMATION
For the six months ended 30 June 2022
1. General information
The principal activity and nature of operations of the Group is
the provision of world class IT solutions and services to the life
sciences research and development market. Instem's solutions for
data collection, management and analysis are used by customers
worldwide to meet the needs of life science organisations for
data-driven decision making leading to safer, more effective
products. Instem plc is a public limited company, listed on AIM,
incorporated in England and Wales under the Companies Act 2006 and
domiciled in England. The registered office is Diamond Way, Stone
Business Park, Stone, Staffordshire ST15 0SD, UK.
2. Basis of preparation and accounting policies
Basis of preparation
The Group's half-yearly financial information, which is
unaudited, consolidates the results of Instem plc and its
subsidiary undertakings made up to 30 June 2022. The Group's
accounting reference date is 31 December.
The consolidated financial information is presented in Pounds
Sterling (GBP) which is also the functional currency of the
parent.
The financial information contained in this half year financial
report does not constitute statutory accounts as defined in section
434 of the Companies Act 2006. It does not therefore include all of
the information and disclosures required in the annual financial
statements.
The financial information presented for the six months ended 30
June 2022 and 30 June 2021 is unaudited.
Instem plc's consolidated statutory accounts for the year ended
31 December 2021, prepared under IFRS, have been delivered to the
Registrar of Companies. The report of the auditors on these
accounts was unqualified and did not contain a statement under
Section 498 (2) or (3) of the Companies Act 2006.
Significant accounting policies
The accounting policies used in the preparation of the financial
information for the six months ended 30 June 2022 are in accordance
with the recognition and measurement criteria of international
accounting standards and are consistent with those that will be
adopted in the annual statutory financial statements for the year
ending 31 December 2022.
While the financial information included has been prepared in
accordance with the recognition and measurement criteria of
International Financial Reporting Standards (IFRS), these financial
statements do not contain sufficient information to comply with
IFRS's.
Instem plc and its subsidiaries have not applied IAS 34, Interim
Financial Reporting, which is not mandatory for UK AIM listed
groups, in the preparation of this half-yearly financial
report.
Significant judgement and estimates
The judgements and estimations that management have made for the
six months ended 30 June 2022 are consistent with those reported in
the annual statutory financial statements for the year ended 31
December 2021.
Going concern
The Directors continue to adopt the going concern basis of
accounting in preparing these financial statements, which the
Directors believe is appropriate given the Group's trading
performance and financial liquidity. At 30 June 2022, the Group had
cash balances of GBP10.3m together with a GBP10.0m committed
banking facility.
The Group signed a new financing arrangement on 8 April 2022,
which consists of a committed facility of GBP10.0m with HSBC UK
Bank plc to support the Group's working capital needs and its
acquisition strategy, which can be extended up to GBP20.0m if
needed, subject to further bank approval. The financial covenants
have been considered in the Group cash forecast to ensure
compliance. During 2022, the Group settled the bank overdraft
facility of GBP9.0m with NatWest Bank plc.
The Group has considered a downside scenario which is also
linked to the company's risks when modelling the forecast results
and cash flow. The downside scenario showed that there is
sufficient liquidity headroom for at least 12 months from the date
of approval of these financial statements.
In the period to 30 June 2022, we have not observed any material
detriment to our overall existing business or in the level of new
business opportunities that are being presented to us in the
markets in which we operate, and we do not anticipate any during
the next 12 months.
Cash and cash equivalents
Cash and cash equivalents for the purposes of the Statement of
Cash Flows comprise the net of cash and overdraft balances that are
shown in the Statement of Financial Position in Cash and Cash
Equivalents.
3. Segmental Reporting
The business is organised into four operating segments to better
manage and report revenues; Study Management, Regulatory Solutions,
In Silico Solutions and Clinical Trial Acceleration. During 2021
the fourth segment , Clinical Trial Acceleration (CTA), was
established following the acquisition of d-Wise.
The Group's Chief Operating Decision Maker (CODM) is its Chief
Executive who monitors the performance of these operating segments
as well as deciding on the allocation of resources to them
alongside the executive management team.
Historically the Group's finance systems have recorded costs
centrally and have managed costs in this way. Over recent years the
Group has expanded both organically and through acquisition,
increasing the number of products and services offered.
During 2021 the financial system enabled more centrally recorded
costs to be allocated to the individual segments and that process
was further developed during 2022. The operations of the Group are
managed centrally along with group-wide functions including sales,
marketing, software development, information technology, customer
support, human resources. The CTA and In Silico segments already
bear the majority of their costs directly and as such report a
lower direct contribution margin to central overheads than the
other two segments. However, for the Study Management and
Regulatory Solutions segments most of their operational costs are
centrally managed. Consequently, these bear a higher proportion of
allocated central costs resulting in a reduction in profit
contribution compared with prior periods.
The expectation in future periods is to be able to allocate a
higher proportion of centrally held operational costs to the
individual segments as internal reporting systems evolve, thereby
enabling the Board to use the segmental cost information for
meaningful decision making. A higher proportion of central costs
were allocated to the operating segments during H1 2022 (79% of
total costs) compared with H1 2021 (40%).
The analysis provided below reflects costs directly attributable
to the respective segments in H1 2022 and 2021, which are primarily
third-party costs of sale and costs of allocated employees. The
remaining indirect operational costs are accounted for centrally
and are not allocated to specific segments.
Unaudited six months Study Management Regulatory In Silico Clinical
ended Solutions Solutions Trial Total
30 June 2022 Acceleration
GBP000 GBP000 GBP000 GBP000 GBP000
Total revenue 11,908 5,594 1,651 8,451 27,604
Direct attributable
costs (6,072) (4,262) (907) (6,900) (18,141)
----------------- ----------- ------------ -------------- ---------
Contribution to indirect
overheads 5,836 1,332 744 1,551 9,463
Contribution to indirect
overheads % 49% 24% 45% 18% 34%
Central unallocated
indirect costs (4,963)
Adjusted EBITDA 4,500
Unaudited six months Study Management Regulatory In Silico Clinical
ended Solutions Solutions Trial Acceleration Total
30 June 2021
GBP000 GBP000 GBP000 GBP000 GBP000
Total revenue 9,798 4,686 1,487 3,855 19,826
Direct attributable
costs (2,024) (1,113) (771) (2,477) (6,385)
----------------- ----------- ----------- -------------------- --------
Contribution to indirect
overheads 7,774 3,573 716 1,378 13,441
Contribution to indirect
overheads % 79% 76% 48% 36% 68%
Central unallocated
indirect costs (9,280)
______
Adjusted EBITDA 4,161
Audited year ended Study Management Regulatory In Silico Clinical
31 December 2021 Solutions Solutions Trials Total
Acceleration
GBP000 GBP000 GBP000 GBP000 GBP000
Total revenue 20,259 10,010 3,042 12,706 46,017
Direct attributable
costs (10,388) (6,016) (1,681) (11,308) (29,393)
----------------- ----------- ----------- -------------- ---------
Contribution to indirect
overheads 9,871 3,994 1,361 1,398 16,624
Contribution to indirect
overheads % 49% 40% 45% 11% 36%
Central unallocated
indirect costs (8,374)
______
Adjusted EBITDA 8,250
4. Key performance measures
Unaudited Unaudited Audited
Six months ended Six months ended Year ended
30 June 2022 30 June 2021 31 December 2021
GBP000 GBP000 GBP000
a) Recurring revenue
Annual support fees 9,716 4,988 14,378
SaaS subscriptions and support fees 6,257 4,901 9,704
------------------- ------------------- -------------------
Recurring revenue 15,973 9,889 24,082
Licence fees 2,803 3,086 4,597
Professional services 1,486 1,509 3,651
Technology enabled outsourced services 3,738 2,594 6,378
Consulting services 3,604 2,748 7,309
------------------- ------------------- -------------------
Total revenue 27,604 19,826 46,017
b) Adjusted EBITDA
c)
d)
EBITDA 3,731 3,344 7,769
Non-recurring items (see note 6) 769 817 481
------------------- ------------------- -------------------
Adjusted EBITDA 4,500 4,161 8,250
Adjusted profit after tax and bank balance performance measures
are detailed in notes 5 and 9.
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 deferred and contingently issuable shares in relation to the
d-Wise acquisition, which could potentially dilute basic EPS in the
future, were not included in the calculation of diluted EPS as they
are antidilutive for the half year and the year ended in 2021.
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) minus the issue price. The number of ordinary
shares that could have been acquired at their average market price
during the period is ignored. However, the shares that would
generate no proceeds and would not have any effect on profit or
loss attributable to ordinary shares outstanding are included.
a) Basic earnings per share
Unaudited Unaudited Audited
Six months Six months Year ended
ended ended 31 December
30 June 30 June 2021
2022 2021
Profit after tax (GBP000) 1,287 1,023 1,678
------------ ------------ -------------
Weighted average number of
shares (000's) 22,464 21,145 21,591
------------ ------------ -------------
Basic earnings per share 5.7p 4.8p 7.8p
============ ============ =============
b) Diluted earnings per share
Unaudited Unaudited
Six months Six months Audited
ended ended Year ended
30 June 30 June 31 December
2022 2021 2021
Profit after tax (GBP000) 1,287 1,023 1,678
------------ ------------ -------------
Weighted average number of
shares (000's) 22,464 21,145 21,591
Potentially dilutive shares
(000's) 1,083 1,023 1,128
Adjusted weighted average number
of shares (000's) 23,547 22,168 22,719
------------ ------------ -------------
Diluted earnings per share 5.5p 4.6p 7.4p
============ ============ =============
c) Adjusted earnings per share
Adjusted earnings per share is calculated after adjusting for
the effect of foreign currency exchange and the unwinding of the
finance liability included in finance income/(costs), non-recurring
items and amortisation of intangibles on acquisitions.
The adjusted profit after tax has been amended in 2022 to ensure
that the foreign exchange movements and exceptional business
expenses do not impact and distort the earnings per share
calculation.
Diluted adjusted earnings per share is calculated by adjusting
the weighted number of ordinary shares outstanding to assume
conversion of all dilutive potential shares arising from the share
option scheme. The dilutive impact of the share options is
calculated by determining the number of shares that could have been
acquired at fair value (determined as the average market share
price of the Company's shares) based on the monetary value of the
subscription rights attached to the outstanding share options.
Unaudited Unaudited Audited
Unaudited Six months Six months Year ended Audited
Six ended ended 31 December Year ended
months 30 June 30 June 2021 31 December
ended 2021 2021 (as restated) 2021
30 June (as restated) (initially (initially
2022 reported) reported)
Profit after tax (GBP000) 1,287 1,023 1,023 1,678 1,678
Non-recurring costs 769 1,622 1,622 1,286 1,286
Non- recurring income - (805) (805) (805) (805)
Amortisation of acquired
intangibles (GBP000) 977 599 599 1,563 1,563
Foreign exchange loss/(gain)
on revaluation of intergroup
balances (GBP000) - - 268 - (18)
Foreign currency exchange
(gain)/loss (944) 258 - 44 -
Finance cost on deferred
and contingent consideration
(GBP000) 455 318 - 867 -
Adjusted profit after
tax (GBP000) 2,544 3,169 2,707 5,939 3,704
------- ------- ------- ------- -------
Weighted average number
of shares (000's) 22,464 21,145 21,145 21,591 21,591
Potentially dilutive
shares (000's) 1,083 1,023 1,023 1,128 1,128
------- ------- ------- ------- -------
Adjusted weighted average
number of shares (000's) 23,547 22,168 22,168 22,719 22,719
------- ------- ------- ------- -------
Adjusted basic earnings
per share 11.3p 14.3p 12.8p 21.5p 17.2p
======= ======= ======= ======= =======
Adjusted diluted earnings
per share 10.8p 13.6p 12.2p 20.4p 16.3p
======= ======= ======= ======= =======
6. Non-recurring items
Unaudited Unaudited
Six months Six months Audited
ended ended Year ended
30 June 30 June 31 December
2022 2021 2020
Non-recurring cost
GBP000 GBP000 GBP000
Legal cost relating to historical
contract dispute 698 62 95
Share based payment - 170 175
Acquisition costs 71 1,390 1,019
769 1,622 1,286
------------ ------------ -------------
Unaudited Unaudited
Six months Six months Audited
ended ended Year ended
30 June 30 June 31 December
2022 2021 2020
Non-recurring income
GBP000 GBP000 GBP000
US government loans forgiven - (805) (805)
- (805) (805)
-------------------------------------------- ------------ -------------
Non-recurring costs include a cost provision relating to an
historical contractual licence dispute, which does not affect the
ongoing operations of the Group. The provision was increased by
GBP0.64m in the period to 30 June 2022.
Non-recurring costs also include acquisition costs relating to
the 2021 acquisitions of The Edge, d-Wise and PDS.
The non-recurring income of GBP0.8m ($1.1m) included in 2021
relates to US federal government COVID-19 support loans which were
forgiven during 2021 and there are no remaining unfulfilled
conditions or contingencies related to this income
7. Finance income
Unaudited Unaudited
Six months Six months Audited
ended ended Year ended
30 June 30 June 31 December
2022 2021 2021
GBP000 GBP000 GBP000
Foreign exchange gains 945 - -
Right of use interest income 2 3 6
Other interest 83 19 24
------------ ------------ -------------
1,030 22 30
============ ============ =============
8. Finance costs
Unaudited Unaudited
Six months Six months Audited
ended ended Year ended
30 June 30 June 31 December
2022 2021 2021
GBP000 GBP000 GBP000
Bank loans and overdrafts 116 43 85
Unwinding discount on deferred
consideration 455 318 867
Net charge on pension scheme 69 26 51
Right of use asset interest
cost 40 121 97
Foreign exchange losses - 258 44
------------ ------------ -------------
680 766 1,144
============ ============ =============
9. Cash and cash equivalents
Unaudited Unaudited Audited
30 June 30 June 31 December
2022 2021 2021
GBP000 GBP000 GBP000
Cash at bank 10,280 26,848 24,019
Bank overdraft - (8,998) (8,998)
Bank balance 10,280 17,850 15,021
============ ============ =============
The Group signed a new financing arrangement with HSBC UK Bank
plc in April 2022, which consists of a committed facility of
GBP10.0m for general corporate purposes, which can be extended up
to GBP20.0m if needed, subject to further bank approval. The
financial covenants have been considered in the forecast to ensure
compliance. During 2022, the Group settled its bank overdraft of
GBP9.0m with former bankers NatWest Bank plc.
10. Provision for liabilities and charges
Unaudited Unaudited Audited
30 June 30 June 31 December
Current liability 2022 2021 2021
GBP000 GBP000 GBP000
Historical legal dispute provision 885 - -
At end of period Current liability 885 - -
============ ========== =============
Unaudited Unaudited Audited
30 June 30 June 31 December
2022 2021 2021
Non-current liability GBP000 GBP000 GBP000
Historical legal dispute provision - 250 250
PDS warranty provision 43 - 41
At end of period Non current
liability 43 250 291
============ ========== =============
At the period end the Group held a provision of GBP0.9m (2021:
GBP0.25m) in respect of an historical contract dispute against a
maximum exposure of approximately GBP3.8m. The maximum exposure
included an additional claim for consequential loss. Since the
period end a settlement has been agreed with the plaintiff (see
note 13).
11. Financial liabilities
An analysis of financial liabilities as presented in the
statement of financial position is as follows:
Unaudited Unaudited Audited
30 June 30 June 31 December
Current liability 2022 2021 2021
GBP000 GBP000 GBP000
Deferred consideration 4,271 2,435 4,276
Contingent consideration 1,964 2,080 2,336
At end of period Current liability 6,235 4,515 6,612
============ ========== =============
Unaudited Unaudited Audited
30 June 30 June 31 December
Non-current liability 2022 2021 2021
GBP000 GBP000 GBP000
Deferred consideration - 1,780 3,060
Contingent consideration - 1,464 1,668
At end of period Non current
liability - 3,244 4,728
============= ========== =============
The contingent consideration is in respect of The Edge and
d-Wise. The conditions to pay both sums have been met in full.
The deferred consideration above is in respect of the
acquisitions of d-Wise and PDS.
12. Share Capital
The share capital of Instem plc consists of fully paid ordinary
shares with a nominal value of 10p per share.
30 June 30 June 31 December
2022 2021 2021
No. of No. of No. of
shares shares shares
Shares issued:
Beginning of the period 22,189,856 20,481,909 20,481,909
Issued on exercise of employee share
options 190,000 38,667 88,667
Share issue on acquisition of The
Edge - 391,920 391,920
Share issue on acquisition of d-Wise 296,952 868,203 868,203
Share issue on acquisition of PDS - - 359,157
Total shares issued and fully paid
at end of period 22,676,808 21,780,699 22,189,856
=========== =========== ============
Share premium
Proceeds received in addition to the nominal value of the shares
issued during the year have been included in share premium, less
fees, commissions and disbursements. Costs of new shares charged to
equity amounted to GBPnil.
Share premium has also been recorded in respect of the issue of
share capital related to employee share-based payment.
Merger reserve
The merger reserve represents
-- the difference between the consideration payable at the date
of acquisition, net of merger relief, and the share capital and
share premium of Instem Life Science Systems Limited and
-- the difference between the nominal value and share issue
price of shares issued as consideration in the purchase of
Leadscope Inc, The Edge Software Consultancy Ltd, d-Wise
Technologies, Inc and PDS Pathology Data Systems
13. Subsequent Events
No adjusting events have occurred between the 30 June 2022
reporting date and the date of approval of this Interim Report.
A full and final settlement has been negotiated and agreed with
a former customer regarding an historical contractual licence
dispute that arose in 2017. Instem has agreed to pay EUR1.48m
(approx. GBP1.3m), of which its insurer has agreed to contribute
EUR0.45m (approx. GBP0.4m) resulting in a net payment due of
approx. EUR1.0m (GBP0.9m). This will be made in October 2022.
As previously announced, the Company had created a provision of
GBP0.25m in respect of the dispute and this was increased in the
period by GBP0.64m, resulting in a provision at 30 June 2022 of
approx. GBP0.9m. The increase in the provision was treated as a
non-recurring, exceptional charge in the half year ended 30 June
2022.
The issue involved does not affect the ongoing operations of the
Group.
14. Availability of this Interim Announcement
Copies of the 2022 Interim Report for Instem plc will be
available from the Group's website at www.instem.com.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
RNS may use your IP address to confirm compliance with the terms
and conditions, to analyse how you engage with the information
contained in this communication, and to share such analysis on an
anonymised basis with others as part of our commercial services.
For further information about how RNS and the London Stock Exchange
use the personal data you provide us, please see our Privacy
Policy.
END
IR DXGDCUGDDGDL
(END) Dow Jones Newswires
September 27, 2022 02:02 ET (06:02 GMT)
Instem (LSE:INS)
Historical Stock Chart
From May 2024 to Jun 2024
Instem (LSE:INS)
Historical Stock Chart
From Jun 2023 to Jun 2024
