TIDMINS
RNS Number : 6345M
Instem plc
15 September 2023
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 2023 (or "the
Period").
Financial Summary
-- Overall performance for the Period broadly in line with the Board's expectations
-- Total Group revenues increased by 10.2% to GBP29.7m (H1 2022: GBP27.0m*)
-- Recurring revenue (annual support and SaaS) increased 27.3%
to GBP19.6m (H1 2022: GBP15.4m*) with SaaS revenues increasing
29.3% to GBP7.5m (H1 2022: GBP5.8m*), in total representing 66% (H1
2022: 57%*) of total revenues
-- Constant currency revenue growth was 6.0%
-- Annual Recurring Revenue ("ARR") increased 28.1%to GBP41.1m
at 1 July 2023 (01 July 2022: GBP32.0m)
-- Adjusted EBITDA** decreased 10.4% to GBP4.0m (H1 2022:
GBP4.5m), representing 13.6% of revenue (H1 2022: 16.7%) due to
inflationary pressures and investment
-- Constant currency Adjusted EBITDA decline of 13%
-- Excluding the impact of Toxhub, like-for-like underlying Adjusted EBITDA of GBP4.7m
-- Toxhub investment costs were less than expected at GBP0.7m
offsetting some of the impact of delayed revenues associated with
the opportunity
-- Loss before tax of GBP0.07m (H1 2022: profit GBP2.0m * )
-- Adjusted profit before tax*** of GBP 2.9 m (H1 2022: GBP3.2m*)
-- Basic and diluted loss/earnings per share of (0.1) p (H1
2022: 5.9p*) and (0.1)p (H1 2022: 5.7p*)
-- Adjusted basic and diluted earnings per share*** of 12.8p (H1
2022: 11.5p*) and 12.3p (H1 2022: 11.0p*)
-- Net cash generated from operations of GBP2.1m (H1 2022: GBP1.8m)
-- Gross cash balance as at 30 June 2023 of GBP8.4m (H1 2022:
GBP10.3m) - after GBP5.8m of deferred and contingent consideration
paid in H1 2023 in relation to certain of the Company's previous
acquisitions
*Restated for the disposal of Samarind Limited in March 2023
classified as a discontinued operation in these results
**Earnings before interest, tax, depreciation, amortisation and
non-recurring items (non recurring items are acquisition/disposal
costs, transitional services, legal costs, increased settlement
provision relating to an historical contract dispute plus
acquisition costs)
*** 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 summary
-- Increased focus on in silico and Artificial Intelligence
("AI") solutions as part of a blended growth strategy
-- Transfer of the Toxhub Platform (the "Platform") and rebranding of Centrus
o Received the first SaaS subscription order for the Platform
from Bayer AG, one of 13 international life science companies
involved in the eTRANSAFE consortium
o Two further SaaS subscription orders were received post-period
end
o Ongoing dialogue to bring other consortium partners onto the
Platform
-- Renewal of long-standing agreement with the National Toxicology Program ("NTP")
Post-period end summary
-- Signed a three-year subscription order with Altasciences worth $3.1m in total
-- Recommended cash offer by Ichor Management Limited at 833p
per Instem share, announced 30 August 2023
Current trading and outlook
-- Instem continues to perform well and is growing, with
constant currency revenue growth of 6% compared to the same period
in the prior year
-- ARR has grown strongly to GBP41.1m and continues to improve visibility over future revenues
-- Group transitioning to next phase of growth - with increased
focus and investment on AI opportunities which have an increased
cost and longer-term returns profile
-- Rate of revenue growth and underlying operating performance
expected to be impacted by wider softening market in the near
term
-- Early Toxhub progress, with three clients having been
converted onto the platform, but customer wins are taking longer
than initially expected
-- Adjusted EBITDA for the current year is now expected to be no greater than GBP11.1m*
*This statement constitutes a profit forecast for the purposes
of Rule 28 of the City Code on Takeovers and Mergers ("the Takeover
Code"). Please see further disclosures in note 16 to this
announcement.
Recommended Cash Offer by Ichor Management Limited
On 30 August 2023 the Company announced that it had reached an
agreement on the terms of a recommended cash offer for the entire
issued and to be issued ordinary share capital of Instem (the
"Acquisition"). It is intended that the Acquisition will be
implemented by way of a scheme of arrangement under Part 26 of the
Companies Act. Under the terms of the Acquisition, each Instem
Shareholder will be entitled to receive 833 pence in cash per
Instem Share. The Acquisition values the entire issued and to be
issued ordinary share capital of Instem at approximately GBP203
million.
Phil Reason, CEO, commented: " We have achieved further progress
during the Period, reinforcing our position within the sector,
growing our touchpoints and deepening relationships with existing
and new clients. However, revenue growth has not been as robust as
during previous periods due to a softening in market conditions in
the consulting as well as S and Target Safety Assessment outsourced
services segments of the business. With the added impact of
inflationary pressures, Adjusted EBITDA for the current year is now
expected to be no greater than GBP11.1m.
"While this market weakness has impacted the Company's
performance for the Period, and is expected to be reflected further
in the full-year performance, management believes that the
long-term prospects remain strong - with the Company's high levels
of recurring revenues underpinning confidence as well as the
relatively untapped upside from the growing AI opportunities yet to
be factored in - especially as Toxhub is derisked."
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
Oliver Platts
Stifel Nicolaus Europe Limited
(Joint Broker) +44 (0) 20 7710 7600
Ben Maddison
Richard Short
Rothschild & Co (Financial Adviser
to Instem) +44 (0) 161 827 3800
Alistair Allen
Julian Hudson
Tom Palmer
Walbrook Financial PR +44 (0) 20 7933 8780
Nick Rome instem@walbrookpr.com
Tom Cooper
Joseph Walker
About Instem
Instem is a leading IT solutions & services provider to the
life sciences market, radically reducing the cost and time taken
for drugs to come to market across the discovery and development
lifecycle. Its workflow software and data solutions are targeted at
increasing life science R&D efficiency, and are currently used
by over 700 customers worldwide, including the largest 25
pharmaceutical companies.
Instem provides a compelling set of solutions - with more than
50% of global preclinical drug safety data collected over the past
20 years using its software. The Company is focused on increasing
touchpoints across the drug development lifecycle - from discovery
and non-clinical testing through to launch and post-marketing and
is positioning itself at the forefront of broader market trends -
with the aim of monetising growing demand for data insight that
leverages artificial intelligence ("AI") and in silico-based
solutions.
Its AI solutions include predictive data analytics, simulation
and modelling, with a current total addressable market of over
GBP600m, a serviceable addressable market of c.GBP150m and multiple
opportunities to grow. The Group's broader portfolio helps clients
collect, analyse, report and submit data to regulatory agencies
with confidence and to reveal new insights from public and
proprietary data with a total addressable market worth close to
GBP2.0bn.
It has an established client based and is well positioned to
grow revenues from existing and new clients. Its blended growth
strategy will build on strong relationships and fundamentals with
growing levels of high margin SaaS revenues underpinning continued
profitable growth.
To learn more about Instem solutions and its mission, please visit www.instem.com
About eTRANSAFE
The "Enhancing TRANslational SAFEty Assessment through
Integrative Knowledge Management (eTRANSAFE)" project developed an
integrative data infrastructure and innovative computational
methods and tools that aimed to drastically improve the feasibility
and reliability of translational safety assessment during the drug
development process. This infrastructure was underpinned by
development of open standards and robust policies widely accepted
by stakeholders, including regulatory agencies and international
organisations.
The eTRANSAFE was a 5.5-year project that started on 1st
September of 2017, and was funded by the Innovative Medicines
Initiative 2 Joint Undertaking (IMI 2) together with the
pharmaceutical industry, that aimed to develop an advanced data
integration infrastructure together with innovative computational
methods to improve the security in drug development process.
This announcement contains inside information for the purposes
of the retained UK version of the EU Market Abuse Regulation (EU)
596/2014 ("UK MAR").
Chairman's Statement
As I stated in the 2022 Annual Report, we have recently
completed a strategic review of our operations and opportunities
with regard to positioning ourselves for the next phase of the
development of the business, focused on growing our capabilities in
modelling and simulation solutions. As a result we decided that,
building on our portfolio of 'world leading life science workflow
and data solutions', we would concentrate on the development of
three market focused groups, 'Study Management', In Silico &
Translational Science (ISTS) and Clinical Trial Analytics (CTA),
with our product range offering solutions across the drug discovery
and development spectrum.
Clearly each of these groups is at a different point in their
lifecycle, with Study Management being the most mature and ISTS,
which we believe provides the most long-term upside, being at an
early stage in its life cycle, development and investment profile.
We believe that this structure is the most appropriate to continue
the medium and long term development of our business.
During this last period this new and simplified structure has
been implemented by a number of organisational changes. Further we
successfully divested the Group of the Samarind, Regulatory
Information Management ("RIM") business, which no longer matched
our long term vision.
A brief review of the activities of our three market focused
groups during the Period is set out below:
-- Study Management, which provides a solid and dependable
platform, recorded 14% revenue growth (before adjusting for foreign
exchange gains) in the Period. We were pleased to announce the
renewal of our long standing agreement with the National Toxicology
Platform (NTP) in the USA and, overall, the business unit performed
in line with our plan over the Period. Nevertheless, the outlook
deteriorated as the Period progressed, with some softness in the
market for S services. Whilst this presents some challenges in the
shorter-term, we have significant market share in this area and
increasing SaaS content will improve both the quality and
visibility of future revenues.
-- CTA experienced a 4.3% revenue increase in the Period (before
adjusting for foreign exchange gains). The revenues associated with
this business tend to be sporadic and need to be viewed over the
longer term, and this revenue stream will continue to be
significant. The development of the new Aspire software solution is
progressing well and the lead client is expected to deploy the
solution on schedule in Q4 2023.
-- ISTS, which has grown by 1.2% in the period (before adjusting
for foreign exchange gains), is ideally placed to generate
longer-term growth, with the opportunity to take advantage of the
growing importance of AI developments in the pharma market. The
transfer of eTRANSAFE's Toxhub application during the period was a
particularly important development and enhances our in-silico
suite, now rebranded Centrus. However, ISTS currently represents
our smallest proportion of revenues and some aspects of our
activities in this area share the characteristics of start-up /
early stage businesses, being unpredictable as to timing and costs.
This is demonstrated in the slower than anticipated conversion of
clients onto the Toxhub platform to date, albeit we continue to
believe that this will provide the cornerstone for the significant
and sustainable longer-term future growth of this business
unit.
Financial Performance
All parts of the business continued to perform satisfactorily,
albeit some of our activities started to be impacted by a softening
in market conditions during the Period. We took steps to ensure
that we are strongly positioned to take advantage of growing demand
for AI solutions.
Performance in the Period (against H1 2022) for some of our key
financial metrics is summarised below:
-- Revenue increased 10% (6% on a constant currency basis)
-- SaaS Revenue increased 29%
-- Recurring Revenue increased 27%
-- Adjusted EBITDA decreased 10% (13% decrease on a constant currency basis)
We continued to invest in expanding our teams with average
employee numbers increasing by 6% during the Period. We were not
immune to inflationary pressure which continued during the Period,
with average salary costs increasing by 4.5%. This resulted in
Adjusted EBITDA reducing by GBP0.4m over the Period, slightly
behind our internal expectations. Adjusted EBITDA in these results
also includes the release during the Period of a GBP0.2m bad debt
provision made in the prior year.
The decision to focus on data science opportunities was looking
to the future, with higher growth opportunities that will provide
significant long term upside. While the speed of the move to data
sciences opportunities has been impeded by the slower than expected
transfer of Consortium members there is significant scope for
growth and to exploit the EUR40m investment made by the eTRANSAFE
consortium to date.
Looking Forward
We remain excited by the potential across our key markets and
are strongly positioned across Study Management, ISTS and Clinical
Trial Analytics. We continue to benefit from growing levels of
SaaS-driven business, providing a higher degree of visibility over
forward revenues. Whilst there is execution risk associated with
some of our more recent initiatives, the fact that we continue to
demonstrate our ability to help clients across the drug discovery
and development landscape has positioned the Company to take
advantage of organic and acquisitive growth opportunities,
underpinning management's longer-term confidence in the overall
business.
We recognise, however, the recent softening in market
conditions. We expect these tougher conditions to continue through
the remainder of 2023 and into 2024 and have modified expectations
for current year profitability accordingly, reflecting the risks in
transitioning the business for the next stage of development.
David Gare
Non-Executive Chairman
15 September 2023
Chief Executive's Report
Strategic Development
The Group continued to focus on helping clients to radically
reduce the cost and to increase the effectiveness of life sciences
research and development. Growing trends and demand for in silico
solutions form a solid backbone to our strategy. We continue to
transition from on-premise to SaaS contracts, which are ultimately
higher margin and provide increased levels of visibility.
Additionally, we have benefited from a proven acquisition strategy,
which has enabled us to scale and strengthen our portfolio of
solutions.
Importantly, we have strengthened our market position and
recurring revenue base and have the foundations in place and
ability to generate increasing revenues from higher growth segments
of the drug development cycle. With growing numbers of touchpoints
and cross selling opportunities, our data-centric solutions will
help a growing number of clients accelerate development and reduce
costs.
Toxhub
As announced in May 2023, Instem expanded its ISTS business unit
via the transfer of the Toxhub Platform from the eTRANSAFE
consortium, responding to a growing trend for early product safety
assessment and an increased demand for in silico solutions. The
Board believes that this will form a solid backbone to our strategy
and will provide a means of achieving further margin growth in the
longer term, following a period of start-up investment, leveraging
machine learning and AI technologies.
To date we have received the first three SaaS subscription
orders for the Platform from Bayer AG, a top 10 pharma company, and
a mid-tier pharma, three of 13 international life science companies
involved in the eTRANSAFE consortium. Although it has taken longer
than previously anticipated to bring potential clients onto the
platform, the Company has good ongoing dialogue with the other 10
companies within the consortium and hopes to secure additional
orders in the future in order to further demonstrate proof of
concept and de-risk execution of the longer-term opportunity.
We previously expected to incur GBP2.5 million of start-up costs
in the first 12 months of the project and now expect this to reduce
to GBP1.7m. To date, we have expensed GBP0.7 m. Following an
initial period of investment and incremental SaaS revenue growth,
the Company believes there is potential for meaningful momentum
from 2025 onwards.
Market Review
In the pharmaceutical industry, which represents the largest
proportion of Instem's revenue, we refer again to the Pharma
R&D Annual Review, the 2023 version of which was released by
Pharma Intelligence in April 2023. This report shows that the
industry grew in 2022 with a 5.9% increase (2021: 8.2%) 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.
Nevertheless, Instem has in recent months been impacted by a
short-term market slowdown that has affected demand for S and
Target Safety Assessment outsourced services, consistent with other
services providers, in the markets we serve. We expect the market
to recover in the medium term, underpinned by the strong
fundamental growth drivers that exist in the industry.
The longer-term market outlook continues to be favourable for
the Group, with 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, which creates an attractive opportunity
pipeline for Instem.
Business Performance
Study Management
In line with the internal reorganisation of our activities
announced in our FY2022 results, Study Management now includes our
S software and outsourced services business.
Overall, Study Management performed well, with revenue up 14.3%
in the Period. This was despite an anticipated reduction in
perpetual license sales, with most new software business secured as
SaaS subscriptions, increasing future revenue visibility.
Study Management has the majority of clients yet to make the
transition from on-premise to SaaS deployment. Whilst the programme
remains very active and is welcomed by clients, there were no
material transitions in the Period.
The Company renewed its long-standing agreement with the
National Toxicology Program ("NTP"), run by the US National
Institute of Environmental Health Sciences ("NIEHS") during the
Period for a further five years. While Provantis represents the
majority of this contract, the renewal includes some additional
study management solutions. The size of this extension helps to
underpin increased revenue visibility.
Post period-end, the Company grew its Provantis footprint
further, with Altasciences signing a three-year subscription order
worth $3.1m. This follows the acquisitions of Calvert Labs and
Sinclair Research by Altasciences and the subsequent decision to
standardise on Provantis and to transition from on-premises
deployment to Instem's cloud-based solutions, increasing its
Provantis user licences from 250 to more than 600.
While S outsourced services revenue grew strongly in the period,
compared to H1 2022, revenue was flat compared to H2 2022 as
overall market demand in this area has moderated. We are not
expecting growth in this area over the remainder of 2023.
In Silico and Translational Sciences
It was a busy and exciting period for our ISTS business as we
absorbed the clinical trial transparency software and outsourced
services business, previously in Clinical Trial Analytics, and
integrated the Toxhub software platform acquired from the eTRANSAFE
Consortium.
Our transparency software and outsourced services revenue was
stable in the Period compared with H1 2022, but we are already
seeing an increase in demand following the European Medicine Agency
decision to reinstate Policy 0070 regulation that requires pharma
companies to submit anonymised clinical trial data sets.
While there was slower demand for our Target Safety Assessment
Services, our computational toxicology business continues to
deliver double digit growth period after period. The team has been
highly active in regulatory supported initiatives to introduce
further in silico models designed to improve the science of drug
and chemical development, while significantly reducing cost and
elapsed time in our clients' R&D programmes.
We are actively bringing our portfolio of In Silico solutions
together under the Centrus brand and will be leveraging multiple
capabilities as we address the recently adopted International
Council for Harmonization, ICH S1B(R1) guidelines for the
replacement of two-year carcinogenicity studies in rats with a far
quicker and less expensive in silico "weight of evidence"
submission.
Clinical Trial Analytics
The development of our new SaaS-based statistical computing
environment product, Aspire, has progressed well and we expect that
the lead client will deploy the solution, as anticipated, during Q4
2023. The high-quality SaaS subscription revenue generated from
Aspire implementations is eagerly awaited as we continue to see
softness in the new project consultancy area of our Clinical Trial
Analytics business, while enjoying good retention and growth in our
recurring revenue business.
With the imminent Aspire release date, we are seeing
opportunities to upgrade some of the clients on our lower cost
Accel solution to the Aspire platform.
Recommended Cash Offer
On 30 August 2023 the Company announced that it had reached an
agreement on the terms of a recommended cash offer for the entire
issued and to be issued ordinary share capital of Instem (the
"Acquisition"). It is intended that the Acquisition will be
implemented by way of a scheme of arrangement under Part 26 of the
Companies Act. Under the terms of the Acquisition, each Instem
Shareholder will be entitled to receive 833 pence in cash per
Instem Share. The Acquisition values the entire issued and to be
issued ordinary share capital of Instem at approximately GBP203
million.
Further details on the Acquisition, including the background to
and reasons for the recommendation and Archimed's strategic plans
for Instem, are included in the Rule 2.7 announcement released on
30 August 2023.
The Company expects to publish a scheme document together with a
notice of general meeting shortly.
Summary & Outlook
We have achieved further progress during the Period, reinforcing
our position within the sector, growing our touchpoints and
deepening relationships with existing and new clients. However,
revenue growth has not been as robust as during previous periods
due to a softening in market conditions in the consulting as well
as S and Target Safety Assessment outsourced services segments of
the business. With the added impact of inflationary pressures,
Adjusted EBITDA for the current year is now expected to be no
greater than GBP11.1m.
While this market weakness has impacted the Company's
performance for the Period, and is expected to be reflected further
in the full-year performance, management believes that the
long-term prospects remain strong - with the Company's high levels
of recurring revenues underpinning confidence as well as the
relatively untapped upside from the growing AI opportunities yet to
be factored in - especially as Toxhub is derisked.
Phil Reason
Chief Executive Officer
15 September 2023
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 2023 were:
6 months to 6 months to % Change 12 months to
30 June 2023 30 June 2022 (H1 2022 to H1 2023) 31 Dec
GBP000 GBP000 2022
GBP000
Total revenue 29,742 26,994 10.2% 57,626
Recurring revenue 19,600 15,428 27.3% 33,407
Recurring revenue as a percentage of total
revenue 66% 57% - 58%
Annual recurring revenue 41,080 32,124 27.9% 34,967
Adjusted EBITDA 4,038 4,508 -10.4% 10,784
Adjusted EBITDA margin % 13.6% 16.7% -310bps 18.7%
Cash and cash equivalents (gross) 8,442* 10,280 -17.9% 13,964
Net cash balance 7,414 10,280 -27.9% 13,964
Operating profit before non-recurring items 2,153 2,372 -9.2% 6,497
Operating profit after non-recurring items 1,876 1,603 17% 5,690
Adjusted profit before tax 2,894 3,211 -9.9% 8,179
*Cash and cash equivalents stated after GBP5.8m of deferred and
contingent consideration paid in H1 2023 in relation to certain of
the Company's previous acquisitions
In addition, certain non-financial KPIs are periodically
reviewed and assessed, including customer and staff retention
rates.
Profit and loss account
Revenues
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 10.2% to GBP29.7m (H1
2022: GBP27.0m, as restated for the disposal of Samarind during the
Period classified as a discontinued operation). Constant currency
revenue growth was 6.0%. Recurring revenue, derived from support
& maintenance contracts and SaaS subscriptions, increased in
the period by 27.3% to GBP19.6m (H2 2022: GBP15.4m, as restated).
Recurring revenue as a percentage of total revenue was 66% (H1
2022: 57%, as restated). In absolute terms, recurring revenue
increased over the prior year by GBP4.2m. Revenue from technology
enabled outsourced services increased by 27% to GBP4.7m (H2 2022:
GBP3.7m , as restated ).
The Company now reports revenues on a segmental basis with
further commentary set out in the Chairman and Chief Executive
Officer statements. In summary, Study Management revenues increased
by 14.3% to GBP19.3m (H1 2022: GBP16.9m), ISTS revenues increased
by 1.2% to GBP3.1m (H1 2022: GBP3.1m) and CTA revenues increased by
4.3% to GBP7.3m (H1 2022: GBP7.0m). Further narrative on segmental
performance is also outlined in note 3 to this announcement.
Operating expenses
Operating expenses increased by 14.3% in the Period to GBP25.7m
(H1 2022: GBP22.5m). The increase was driven by two main
factors:
-- A 6% increase in the average number of employees, with the
Group continuing to invest in the expansion of its operational and
development teams; and
-- Continued inflationary pressure, with salaries increasing
during the Period on average by 4.75%.
Particularly notable was GBP0.7m of salary costs incurred during
the Period in relation to Toxhub. The Board previously notified its
expectation that the Group would incur GBP2.5m of start-up costs in
the first 12 months of the project, however, it is now reducing its
estimate to GBP1.7m.
Adjusted EBITDA
Primarily as a result of the Group's increased cost base during
the Period, adjusted earnings before interest, tax, depreciation,
amortisation, and non-recurring items (Adjusted EBITDA) decreased
by 10.4% to GBP4.0m (H1 2022: GBP4.5m , as restated ). For this
measure of earnings, the margin as a percentage of revenue
decreased in the Period to 13.6% from 16.7% in H1 2022. Adjusted
EBITDA for the Period also includes the release of a GBP0.2m
doubtful debt provision made in the prior year.
Other income and expenses and net profit
Non-recurring costs in the period were GBP1.0m (H1 2022:
GBP0.8m), comprising disposal costs and the associated cost that
Instem incurred for providing the transitional services relating to
the Samarind sale, and a provision for US Sales Tax pending the
outcome of a nexus study being conducted with the assistance of US
Tax advisors to determine where sales tax filing responsibilities
and potential exposures exist. Non-recurring costs also include
acquisition costs and administrative expenses in relation to the
final instalments of deferred consideration paid in H1 2023 for the
2021 corporate acquisitions. Non-recurring income of GBP0.1m during
the period relates to the charges for transitional services that
the Company has agreed to provide under the Share Purchase
Agreement to the acquirer of Samarind Limited.
The reported loss before tax for the period was GBP0.07m (H1
2022: GBP2.0m, as restated). Adjusted profit before tax (i.e. 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) was GBP2.9m (H1 2022: GBP3.2m, as 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 2023 was primarily from realised US dollars transactions. In
2023, the revenue growth and Adjusted EBITDA decline on a constant
currency basis, excluding the foreign exchange exposure was 6-% and
-13% respectively. The foreign exchange loss recorded during H1
2023 was GBP0.96m (H1 2022: GBP0.94m gain, as restated), which
comprises unrealised gains/losses from translation of intercompany
balances. Intercompany balances are settled between the Group's
entities whenever possible.
The Group continues to invest in its product portfolio.
Development costs incurred in the period were GBP4.4m (H1 2022:
GBP3.7m), of which GBP1.9m (H1 2022: GBP1.4m) was capitalised. No
development costs associated with Toxhub were capitalised in the
period. The Group has a development process in place and is
committed to ensuring that its own technology continues to evolve
to meet client needs.
Basic and diluted earnings per share calculated on an adjusted
basis were 12.8p and 12.3p respectively (H1 2022: 11.5p basic and
11.0p diluted, as restated). The reported basic and diluted
loss/earnings per share were (0.1)p and (0.1)p respectively (H1
2022: 5.9p basic and 5.7p diluted, as restated).
Cash flows
The Group generated cash from operations during the period of
GBP2.1m (H1 2022: GBP1.8m), an increase from the prior year
primarily due to working capital movements. Deferred and contingent
consideration payments of GBP5.8m (H1 2022: GBP4.5m) which related
to the 2021 corporate acquisitions accounted for the majority of
the net cash used in financing activities. To part-fund the final
deferred and contingent consideration payment for d-Wise of
GBP3.6m, the Company drew down GBP1.0m against its HSBC revolving
credit facility. GBP2.2m of contingent consideration was also paid
during the period in relation to the acquisition of The Edge. These
were the final deferred and contingent consideration payments due.
The net cash used in investing activities included GBP1.9m (H1
2022: GBP1.4m) of capitalised software development costs, mainly on
Aspire, Provantis and S. As a result of the above, the Group's
gross cash balance decreased from GBP14.0m at 31 December 2022 to
GBP8.4m at 30 June 2023.
Balance sheet
Goodwill, customer relationship and development costs included
in intangibles assets reduced by GBP0.9m from June 2022 to June
2023 due to the derecognition of Samarind intangible assets,
following the sale of the company. Intangible assets increased
following the Company being granted the exclusive rights for the
transition of the Toxhub platform from the eTRANSAFE consortium.
The carrying value of the Toxhub asset in intangible assets is the
inherent liability of EUR0.18m which the Group would be liable to
pay if it decided to cancel its 3 year contract with the platform
developer.
The deficit on the Group's legacy defined benefit pension scheme
was GBP1.4m at 30 June 2023 (H1 2022: GBP1.3m) having improved from
a deficit of GBP2.1m at 31 December 2022. Liabilities decreased
from GBP10.5m at 31 December 2022 to GBP10.0m at 30 June 2023 and
Plan Assets increased from GBP8.4m at 31 December 2022 to GBP8.6m
at 30 June 2023. 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, in addition to the
contributions paid by the Group.
The impact of the above has been offset to some extent by lower
than assumed investment returns, a small increase in long-term
inflation expectations and inflation experience since the valuation
date being higher than assumed.
Movements in share capital and the share premium, merger and
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 2023 was 22,889,433 ordinary
shares of 10p each (note 13).
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.
Current trading and outlook
Following a decline in H1 23 Adjusted EBITDA against the same
period in 2022 and against the Board's expectations, as in 2022, it
is expected that revenue growth will be second half weighted
benefitting from increased software recurring revenue,
predominantly from new business already secured and the reliable
renewal of contracts with current clients. As referred to elsewhere
we saw a softening in market conditions during the Period and this
has continued post period-end. The Board has therefore modified its
expectations for the Group's full year profitability accordingly ,
with FY23 Adjusted EBITDA now expected to be no greater than
GBP11.1m. The Board also notes that, excluding GBP1.7m of costs
associated with ToxHub now expected to be incurred in FY23, the
implied FY23 Adjusted EBITDA would be no greater than GBP12.8m,
materially below the Board's expectations at the beginning of the
year.*
*This statement constitutes a profit forecast for the purposes
of the Takeover Code. Please see further disclosures in note 16 to
this announcement.
Principal risks and uncertainties
The principal risk and uncertainties that management have made
for the six months ended 30 June 2023 remained unchanged with those
reported in the annual statutory financial statements for the year
ended 31 December 2022.
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.
Whilst the directors are confident as to the long term prospects
of Toxhub, it will require funding in the short to medium term with
no guarantees of material revenues generated.
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 is 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 66% 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 2023
reporting date and the date of approval of this Interim Report.
On 30 August 2023 the board of directors of Ichor Management
Limited ("Bidco") and the board of directors of Instem plc
("Instem") announced that they had reached agreement on the terms
of a recommended cash offer to be made by Bidco for the entire
issued and to be issued ordinary share capital of Instem plc (the
"Acquisition"). It is intended that the Acquisition will be
implemented by way of a scheme of arrangement under Part 26 of the
Companies Act.
Under the terms of the Acquisition, each Instem Shareholder will
be entitled to receive 833 pence in cash per Instem share. The
Acquisition values the entire issued and to be issued ordinary
share capital of Instem at approximately GBP203 million.
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 2023 30 Jun 2022 30 Jun 2022 31 Dec 2022 31 Dec 2022
GBP000 GBP000 GBP000 GBP000 GBP000
(as restated) (as initially reported) (as restated) (as initially reported)
Annual support fees 12,090 9,600 9,716 20,576 20,815
SaaS subscription and
support fees 7,510 5,828 6,257 12,831 13,658
Recurring revenue 19,600 15,428 15,973 33,407 34,473
Licence fees 1,640 2,789 2,803 6,012 6,049
Professional services 1,456 1,435 1,486 3,078 3,229
Technology enabled
outsourced services 4,681 3,738 3,738 8,496 8,496
Consultancy services 2,365 3,604 3,604 6,633 6,633
Total revenue 29,742 26,994 27,604 57,626 58,880
As Samarind Limited was sold on 31 March 2023 and was reported in the financial statements
for the half-year ended 30 June 2023 as a discontinued operation, the 2022 comparatives have
been restated in line with the requirements of IFRS 5 (note 5).
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 2023 30 Jun 2022 30 Jun 2022 31 Dec 2022 31 Dec 2022
GBP000 GBP000 GBP000 GBP000 GBP000
(as restated) (as initially reported) (as restated) (as initially reported)
Annual Recurring Revenue 41,080 - 32,124 - 34,967
Annual Recurring Revenue is the revenue that the Group is currently contracted to recognise,
for the next 12 months, for software Annual Support fees and SaaS Subscription fees. The revenue
is also adjusted with new or terminated contracts that have taken place in the period.
30 Jun 2023 30 Jun 2022 30 Jun 2022 31 Dec 2022 31 Dec 2022
GBP000 GBP000 GBP000 GBP000 GBP000
(as restated) (as initially reported) (as restated) (as initially reported)
EBITDA (before
non-recurring items) 3,106 3,739 3,731 9,977 10,056
Non-recurring cost
(see note 7) 1,042 769 769 1,208 1,208
Non-recurring income
(see note 7) (110) - - (401) (401)
Adjusted EBITDA 4,038 4,508 4,500 10,784 4,500
Adjusted EBITDA is EBITDA plus non-recurring items (as set out in note 7). 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 2023 30 Jun 2022 30 Jun 2022 31 Dec 2022 31 Dec 2022
GBP000 GBP000 GBP000 GBP000 GBP000
(as restated) (as initially reported) (as restated) (as initially reported)
(Loss)/Profit before
tax (66) 1,961 1,918 5,571 5,473
Amortisation of
intangibles arising on
acquisition 917 977 977 1,953 1,953
Non-recurring cost (see
note 7) 1,042 769 769 1,208 1,208
Non-recurring income
(see note 7) (110) - - (401) (401)
Impairment of goodwill - - - - 107
Foreign currency
exchange (gain)/ loss 962 (951) (944) (932) (932)
Unwinding discount on
deferred consideration 149 455 455 771 771
Adjusted profit before
tax 2,894 3,211 3,175 8,170 8,179
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 2023 30 Jun 2022 30 Jun 2022 31 Dec 2022 31 Dec 2022
GBP000 GBP000 GBP000 GBP000 GBP000
(as restated) (as initially reported) (as restated) (as initially reported)
Weighted average number
of shares (000's) 23,839 23,537 23,547 23,676 23,686
Adjusted diluted
earnings per share 12.3p 11.0p 10.8 31.0p 31.3p
30 Jun 2023 30 Jun 2022 31 Dec 2022
GBP000 GBP000 GBP000
Cash at bank 8,442 10,280 13,738
Banking facility (1,028) - -
Net cash balance 7,414 10,280 13,738
Nigel Goldsmith
Chief Financial Officer
15 September 2023
Instem plc
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the six months ended 30 June 2023
Unaudited Unaudited Audited
Six months ended Six months ended Year
30 June 30 June ended 31 December 2022
2023 2022 GBP000
GBP000 GBP000 (as restated)
Note (as restated)
REVENUE 4 29,742 26,994 57,626
Employee benefits expense (18,196) (14,414) (33,934)
Other expenses (7,716) (8,072) (13,104)
Net impairment gain on financial assets 208 - 196
EARNINGS BEFORE INTEREST, TAXATION,
DEPRECIATION, AMORTISATION AND
NON-RECURRING COSTS (ADJUSTED
EBITDA) 4,038 4,508 10,784
Depreciation (124) (167) (338)
Amortisation of intangibles arising on
acquisition (917) (977) (1,953)
Amortisation of internally generated
intangibles (464) (456) (1,055)
Amortisation of right of use assets (380) (536) (941)
OPERATING PROFIT BEFORE NON-RECURRING
COSTS 2,153 2,372 6,497
Non-recurring income 7 110 - 401
Non-recurring costs 7 (1,042) (769) (1,208)
------------------ ------------------- -------------------------
OPERATING PROFIT AFTER NON-RECURRING
ITEMS 1,221 1,603 5,690
Finance income 8 2 1,030 1,023
Finance costs 9 (1,289) (672) (1,142)
------------------ ------------------- -------------------------
(LOSS)/ PROFIT BEFORE TAXATION (66) 1,961 5,571
Taxation 35 (631) (821)
------------------ ------------------- -------------------------
(LOSS)/ PROFIT FOR THE PERIOD FROM
CONTINUING OPERATIONS (31) -1,330 4,750
================== =================== =========================
Profit / (Loss) from discontinued
operations 5 10 (43) (53)
------------------ ------------------- -------------------------
(LOSS)/ PROFIT FOR THE PERIOD (21) 1,287 4,697
================== =================== =========================
OTHER COMPREHENSIVE INCOME
Items that will not be reclassified to
profit and loss account
Actuarial gain on retirement benefit
obligations 234 382 (561)
Deferred tax on actuarial gain & loss (59) (96) 140
175 286 (421)
Items that may be reclassified to profit
and loss account:
Exchange differences on translating
foreign operations 573 (1,216) (1,596)
------------------ ------------------- -------------------------
OTHER COMPREHENSIVE INCOME/(EXPENSE) FOR
THE PERIOD 748 (930) (2,017)
TOTAL COMPREHENSIVE INCOME FOR THE
PERIOD 727 357 2,680
================== =================== =========================
(LOSS)/ PROFIT ATTRIBUTABLE TO OWNERS OF
THE PARENT COMPANY (21) 1,287 4,697
================== =================== =========================
TOTAL COMPREHENSIVE (LOSS)/ INCOME
ATTRIBUTABLE TO OWNERS OF THE PARENT
COMPANY 727 357 2,680
================== =================== =========================
Unaudited Unaudited Audited
Six months ended Six months ended Year
30 June 30 June ended 31 December 2022
2023 2022 GBP000
GBP000 GBP000
Note
EARNINGS PER SHARE FOR PROFIT FROM
CONTINUING OPERATIONS ATTRIBUTABLE TO
THE ORDINARY EQUITY
HOLDERS OF THE COMPANY
- Basic 6 (0.1)p 5.9p 21.0p
- Diluted 6 (0.1)p 5.7p 20.1p
EARNINGS PER SHARE FOR PROFIT ATTRIBUTABLE TO THE ORDINARY EQUITY HOLDERS OF THE
COMPANY
- Basic 6 (0.1)p 5.7p 20.8p
- Diluted 6 (0.1)p 5.5p 19.8p
Instem plc
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 30 June 2023 Unaudited Unaudited Audited
30 June 30 June 31 December
2023 2022 2022
Note GBP000 GBP000 GBP000
ASSETS
NON-CURRENT ASSETS
Intangible assets 58,017 58,381 58,341
Property, plant and equipment 702 552 768
Right of use assets 749 1,542 1,120
Finance lease receivables 14 69 42
TOTAL NON-CURRENT ASSETS 59,482 60,544 60,271
---------- ---------- ------------
CURRENT ASSETS
Inventories 91 99 76
Trade and other receivables 15,353 15,224 18,345
Finance lease receivables 53 51 53
Financial asset at fair value
through profit or loss 5 231 - -
Tax receivable - 15 -
Cash and cash equivalents 10 8,442 10,280 13,964
---------- ---------- ------------
TOTAL CURRENT ASSETS 24,170 25,669 32,438
---------- ---------- ------------
TOTAL ASSETS 83,652 86,213 92,709
========== ========== ============
LIABILITIES
CURRENT LIABILITIES
Trade and other payables 4,591 4,905 5,327
Deferred income 18,861 17,672 22,745
Current tax payable 474 - 251
Provision for liabilities and - 885 -
charges
Financial liabilities 12 - 6,235 5,765
Banking facility 11 1,028 - -
Lease liabilities 547 935 814
TOTAL CURRENT LIABILITIES 25,501 30,632 34,902
---------- ---------- ------------
NON-CURRENT LIABILITIES
Financial liabilities 12 155 - -
Retirement benefit obligations 1,375 1,303 2,013
Provision for liabilities and
charges 44 43 45
Lease liabilities 322 858 491
Deferred tax liabilities 1,614 2,977 1,901
---------- ---------- ------------
TOTAL NON-CURRENT LIABILITIES 3,510 5,181 4,450
---------- ---------- ------------
TOTAL LIABILITIES 29,011 35,813 39,352
========== ========== ============
EQUITY
Share capital 13 2,289 2,268 2,270
Share premium 28,273 28,224 28,224
Merger reserve 14,013 14,013 14,013
Share based payment reserve 3,430 3,045 3,570
Translation reserve (1,225) (1,418) (1,798)
Retained earnings 7,861 4,268 7,078
---------- ---------- ------------
TOTAL EQUITY ATTRIBUTABLE TO
OWNERS OF THE PARENT 54,641 50,400 53,357
---------- ---------- ------------
TOTAL EQUITY AND LIABILITIES 83,652 86,213 92,709
========== ========== ============
Instem plc
CONSOLIDATED STATEMENT OF CASH FLOWS
For the six months ended 30
June 2023 Unaudited Unaudited Audited
Six months ended 30 June Six months ended 30 June Year ended 31 December
Note 2023 2022 2022
CASH FLOWS FROM OPERATING
ACTIVITIES GBP000 GBP000 GBP000
(Loss)/Profit before taxation
on continuing operations (66) 1,961 5,571
Loss before tax on discontinued
operations (58) (43) (98)
Adjustments for:
Depreciation 124 168 340
Amortisation of intangibles 1,381 1,446 3,049
Amortisation of right of use
assets 380 549 967
Share based payment charge 725 751 1,377
Retirement benefit obligations (448) (398) (598)
Profit from discontinued
operations (10) - -
Finance income 8 (2) (1,030) (1,023)
Finance costs 9 1,289 680 1,143
Impairment on goodwill - - 107
Provision for US sales tax 7 655 - -
(Gain)/Loss on disposal 3 - (4)
------------------------- ------------------------- -----------------------
CASH FLOWS FROM OPERATIONS
BEFORE MOVEMENTS IN WORKING
CAPITAL 3,973 4,084 10,831
Movements in working capital:
(Increase) in inventories (15) (35) (12)
Decrease/ (Increase) in trade
and other receivables 1,445 140 (2,866)
(Decrease)/ Increase in trade,
other payables and deferred
income (3,260) (2,995) 2,185
Increase/ (decrease) in
provisions - 637 (281)
------------------------- ------------------------- -----------------------
NET CASH GENERATED FROM
OPERATIONS 2,143 1,831 9,857
Finance income 2 86 91
Finance costs (84) (116) (266)
Income taxes (643) (936) (1,810)
------------------------- ------------------------- -----------------------
NET CASH GENERATED FROM
OPERATING ACTIVITIES 1,418 865 7,872
CASH FLOWS FROM INVESTING
ACTIVITIES
Capitalisation of development
costs (1,888) (1,465) (3,036)
Purchase of property, plant and
equipment (59) (122) (478)
Net proceeds from Samarind 710 - -
disposal
------------------------- ------------------------- -----------------------
NET CASH USED IN INVESTING
ACTIVITIES (1,237) (1,587) (3,514)
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from issue of share
capital 56 35 36
Payment of deferred
consideration (3,596) (3,061) (3,891)
Payment of contingent
consideration (2,213) (1,412) (1,463)
Payment of lease liabilities (469) (587) (1,096)
Receipts from sublease of asset 27 16 53
Utilisation of banking facility 1,000 - -
------------------------- ------------------------- -----------------------
NET CASH (USED) FROM FINANCING
ACTIVITIES (5,195) (5,009) (6,361)
NET (DECREASE) /INCREASE IN
CASH AND CASH EQUIVALENTS (5,014) (5,731) (2,003)
Cash and cash equivalents at
start of period 13,964 15,021 15,021
Effect of exchange rate changes
on the balance of cash held in
foreign currencies (508) 990 946
------------------------- ------------------------- -----------------------
CASH AND CASH EQUIVALENTS AT OF PERIOD 8,442 10,280 13,964
========================= ========================= =======================
Instem plc
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the six months ended 30 June 2023
Share based
payment reserve
Share Share Merger Translation Retained Total
capital premium reserve reserve earnings equity
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
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) 4,268 50,400
Profit for the
period - - - - - 3,410 3,410
Other
comprehensive
(expense)/income - - - - (380) (707) (1,087)
----------- ----------- ---------- ----------------- ---------------- ---------- -----------
Total
comprehensive
expense - - - - (380) 2,703 2,323
Shares issued 2 - - - - - 2
Share based
payment - - - 626 - - 626
Deferred tax on
share options - - - 20 - - 20
Nil cost option
charge - - - (14) - - (14)
Reserve transfer
on lapse of share
options - - - - - - -
Reserve transfer
on exercise of
share options - - - (107) - 107 -
----------- ----------- ---------- ----------------- ---------------- ---------- -----------
Balance as at 31
December 2022
(Audited) 2,270 28,224 14,013 3,570 (1,798) 7,078 53,357
Loss for the
period - - - - - (21) (21)
Other
comprehensive
income 573 175 748
----------- ----------- ---------- ----------------- ---------------- ---------- -----------
Total
comprehensive
income - - - - 573 154 727
Shares issued 7 49 - - - - 56
Share based
payment - - - 725 - - 725
Deferred tax on
share options - - - (231) - - (231)
Deferred tax on
share options on
exercise - - - (5) - 5 -
Nil cost option
charge 12 - - (12) - - -
Reserve transfer
on lapse of share
options - - - - - - -
Reserve transfer
on exercise of
share options - - - (617) - 624 7
----------- ----------- ---------- ----------------- ---------------- ---------- -----------
Balance as at 30
June 2023
(Unaudited) 2,289 28,273 14,013 3,430 (1,225) 7,861 54,641
=========== =========== ========== ================= ================ ========== ===========
NOTES TO THE FINANCIAL INFORMATION
For the six months ended 30 June 2023
1. General information
The principal activity and nature of operations of the Group is
the provision of world class IT solutions to the life sciences
market. Instem's solutions for data collection, management and
analysis are used by customers worldwide to meet the needs of life
science and healthcare organisations for data-driven decision
making leading to safer, more effective products. Instem plc is a
public limited company, listed on AIM, and incorporated in England
and Wales under the Companies Act 2006 and domiciled in England and
Wales. The registered office is Diamond Way, Stone Business Park,
Stone, Staffordshire, ST15 0SD, 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 2023. 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 2023 and 30 June 2022 is unaudited.
Instem plc's consolidated statutory accounts for the year ended
31 December 2022, 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 2023 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 2023.
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 2023 are consistent with those reported in
the annual statutory financial statements for the year ended 31
December 2022.
-- Discontinued operation
On 31 March 2023, Instem completed the disposal of Samarind
Limited with consideration receivable up to GBP1.0m, of which
GBP0.8m was satisfied by cash receipt on completion, plus or minus
estimated net cash, and the remaining balance of GBP0.2m payable
contingent on Samarind's future performance that will be payable in
cash.
The Samarind Limited disposal was reported in the financial
statements for the half-year ended 30 June 2023 as a discontinued
operation. The comparatives have been restated in line with IFRS 5
requirements (note 5).
-- Potential indicator of impairment of goodwill
The carrying value of goodwill must be assessed for impairment
annually and whenever there is an indicator of impairment. The
Group did not achieve the Board's expected forecast cash flow for
the period ended 30 June 2023 which is an indicator of potential
impairment. However, the current cash offer, recommended by the
directors, supports a fair value of the Group that is a multiple of
the carrying amount of net assets, thus there is no impairment.
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 2023, the Group had
cash balances of GBP8.4m together with a GBP10.0m committed
revolving credit banking facility, of which GBP1.0m was drawn
during H1 2023.
The Group signed a new financing arrangement on 8 April 2022,
which consisted of a committed facility of GBP10.0m with HSBC UK
Bank plc to support the Group's working capital needs and its
acquisition strategy, that 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 the first half of 2023, the Group drew down
GBP1.0m to support the d-Wise final consideration pay out.
The Group has considered a downside scenario which is also
linked to the company's risks when modelling the forecast results
and cash flow. However, in considering the downside scenario there
is uncertainty how the Group's cash flow could be impacted from the
wage inflation in the sector and slowing collection of
receivables.
In the period to 30 June 2023, 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 as such the Group continues to
operate as a going concern.
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 Group has disaggregated revenue into various categories in
the following tables which are intended to depict how the nature,
amount, timing and uncertainty of revenue and cash flows are
affected by economic factors.
The Group's Chief Operating Decision Maker (CODM) has been
identified as the Board of Directors. The Board is responsible for
monitoring the performance of these operating segments as well as
deciding on the allocation of resources to them.
Over recent years the Group has expanded both organically and
through acquisition, increasing the number of products and services
offered and in 2020 the Group reported through three operating
segments, Study Management, Regulatory Solutions and In Silico
Solutions. During 2021 the fourth segment, Clinical Trial
Acceleration (CTA), was established following the acquisition of
d-Wise.
However, as part of integration process and our ongoing
development of the One Instem, the group announced further
organisational changes at the end of 2022 to integrate our enlarged
business.
In 2023, the CODM managed the Group by monitoring its revenue
streams and considered the cost base as a whole. After the
announcement of the organisational changes and the Samarind Limited
disposal on 31 March 2023, which was part of the Regulatory
Solutions segment, the Group is now operating and reporting as one
business segment but sharing revenue breakdown by our each of our
three business units; Study Management, In Silico and Translational
Services (ISTS) and Clinical Trial Analytics (CTA).
The Group's finance system records all costs centrally as the
CODM considers any allocation would be arbitrary and sensitive.
Therefore, the CODM concluded that the Group should report as one
operating segment.
Comparative figures will also be updated to conform with changes
in the presentation for the current year. This information is
provided to aid comparability and not as a restatement of prior
year disclosures therefore we do not need to comply with IAS8
criteria.
Samarind's RIM product is disclosed as a discontinued operation
as it was sold with effect from 31 March 2023. The comparative
figures have been restated in compliance with IFRS 5. Information
about this discontinued operation is provided in Note 5.
SEGMENTAL REPORTING Jun-23 Jun-22 Dec-22
Total Total Total
(as restated) (as restated)
GBP000 GBP000 GBP000
Study Management 19,296 16,888 36,426
ISTS 3,135 3,098 6,373
CTA 7,311 7,008 14,827
Total revenue 29,742 26,994 57,626
Central unallocated costs (25,704) (22,486) (46,842)
Adjusted EBITDA 4,038 4,508 10,784
Depreciation (124) (167) (338)
Amortisation of intangibles
arising on acquisitions (917) (977) (1,953)
Amortisation of internally
generated intangibles (464) (456) (1,055)
Depreciation of right of
use assets (380) (536) (941)
OPERATING PROFIT BEFORE
NON-RECURRING ITEMS ON CONTINUNG
OPERATIONS 2,153 2,372 6,497
Non-recurring costs (1,042) (769) (1,208)
Non-recurring income 110 - 401
OPERATING PROFIT AFTER
NON-RECURRING ITEMS FROM
CONTINUING OPERATIONS 1,221 1,603 5,690
Finance income 2 1,030 1,023
Finance costs (1,289) (672) (1,142)
(LOSS)/ PROFIT BEFORE TAXATION
FROM CONTINUING OPERATIONS (66) 1,961 5,571
Profit/(Loss) from discontinued
Operations 10 (43) (53)
Sales between business units and Group legal entities are
carried out at arm's length and eliminated on consolidation. The
business unit revenues reported to the Board of Directors are
measured in a manner consistent with that of the financial
statements.
4. Key performance measures
Unaudited Unaudited Audited
Six months ended Six months ended Year ended
30 June 2023 30 June 2022 31 December 2022
GBP000 GBP000 GBP000
(as restated) (as restated)
a) Recurring revenue
Annual support fees 12,090 9,600 20,576
SaaS subscriptions and support fees 7,510 5,828 12,831
Recurring revenue 19,600 15,428 33,407
Licence fees 1,640 2,789 6,012
Professional services 1,456 1,435 3,078
Technology enabled outsourced services 4,681 3,738 8,496
Consulting services 2,365 3,604 6,633
Total revenue from continuing operations 29,742 26,994 57,626
b) Adjusted EBITDA
c)
d)
EBITDA 3,106 3,739 9,977
Non-recurring items (see note 7) 932 769 807
Adjusted EBITDA 4,038 4,508 10,784
Adjusted profit after tax and bank balance performance measures
are detailed in notes 6 and 10.
5. Discontinued operations
On 31 March 2023, Instem plc completed the disposal of Samarind
limited which was the provider of Regulatory Information Management
software "RIM" and services to the Life Science sector. Samarind
Limited is an active business incorporated in England and Wales
under the Companies Act 2006 and domiciled in England and
Wales.
As of 31 December 2022, the Group did not classify Samarind
Limited as an Asset Held For Sale (AHFS) as management concluded
that completion of the disposal was not highly probable in
accordance with the requirements of IFRS 5 and based on the
available information as of 31 December 2022.
Samarind Limited was acquired in May 2016 without the view of
resale but the decision to sell this unit was concluded when the
Group reviewed and assessed their future strategic plans. As the
IFRS 5 criteria were not met as of 31 December 2022, Samarind's
Limited disposal is disclosed as a non-adjusting subsequent event
in 2023.
Samarind Limited was sold on 31 March 2023 and was reported in
the financial statements for the half-year ended 30 June 2023 as a
discontinued operation. The comparatives have been restated in line
with the IFRS 5 requirements.
Financial information relating to the discontinued operation for
the period to the date of disposal is set out below.
Financial performance and cash flow information
The financial performance and cash flow information presented
reflects the operations of Samarind Limited for the three months
ended 31 March 2023.
Three months ended Six months ended Year ended
31 March 2023 30 June 2022 31 December 2022
GBP000 GBP000 GBP000
REVENUE 243 610 1,254
Intercompany revenue 165 491 967
Expenses (304) (645) (1,244)
Intercompany cost (165) (491) (967)
Other gains/(losses) 3 (8) (1)
Impairment of goodwill - - (107)
Profit before tax (58) (43) (98)
Tax (4) - 45
Profit after tax on discontinued operation (62) (43) (53)
Gain on sale of subsidiary after tax 72 - -
Profit/(Loss) from discontinued operation 10 (43) (53)
===================== =================== ===================
Net cash inflow/ (outflow) from operating activities 199 (102) 75
Net cash (outflow) from investing activities (1) - (3)
Net cash (outflow) from financing activities (4) (7) (14)
Net increase in cash generated by subsidiary 194 (109) 58
===================== =================== ===================
Basic earnings per share from discontinued
operations 0.0p 0.2p 0.2p
Diluted earnings per share from discontinued
operations 0.0p 0.2p 0.3p
Details of the sale of the subsidiary
In the event the operations of the subsidiary achieve certain
performance criteria during the period ending 31 December 2023 as
specified in an 'earn out' clause in the sale agreement, additional
cash consideration of up to GBP0.20m will be receivable in addition
to the working capital adjustment. At the time of the sale the fair
value of the consideration was determined at GBP0.23m and it has
been recognised as a financial asset at fair value through profit
or loss.
GBP000
Consideration received or receivable
Cash 710
Fair value of contingent consideration 230
Total disposal consideration 940
Carrying amount of net assets sold (867)
Gain on sale before income tax and reclassification of foreign currency translation reserve 72
Income tax -
Gain on sale after income tax 72
=======
The carrying amounts of assets and liabilities as at the date of
sale (31 March 2023) were:
31 March
2023
GBP000
ASSETS
NON-CURRENT ASSETS
Intangible assets 919
Property, plant and equipment 4
Right of use assets 6
Deferred tax asset 4
TOTAL NON-CURRENT ASSETS 933
---------
CURRENT ASSETS
Trade and other receivables 132
Cash and cash equivalents 420
---------
TOTAL CURRENT ASSETS 552
---------
TOTAL ASSETS 1,485
=========
LIABILITIES
CURRENT LIABILITIES
Trade and other payables 48
Deferred income 570
---------
TOTAL CURRENT LIABILITIES 618
---------
TOTAL LIABILITIES 618
=========
EQUITY
Share capital -
Retained earnings 867
---------
TOTAL EQUITY 867
---------
TOTAL EQUITY AND LIABILITIES 1,485
=========
6. 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) 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.
The basic and diluted earnings per shares have been
calculated:
o for continued operations attributable to the ordinary equity
holder and
o for total earning per share attributable to the ordinary
equity holder
a) Basic earnings per share
FROM CONTINUED OPERATIONS Unaudited Unaudited Audited
ATTRIBUTABLE TO THE ORDINARY Six months Six months Year ended
EQUITY HOLDERS OF THE COMPANY ended ended 31 December
30 June 30 June 2022
2023 2022
(Loss)/Profit after tax (GBP000) (31) 1,330 4,750
------------ ------------ -------------
Weighted average number of
shares (000's) 22,795 22,464 22,577
------------ ------------ -------------
Basic earnings per share (0.1)p 5.9p 21.0p
============ ============ =============
TOTAL BASIC EARNINGS PER SHARE Unaudited Unaudited Audited
ATTRIBUTABLE TO THE ORDINARY Six months Six months Year ended
EQUITY HOLDERS OF THE COMPANY ended ended 31 December
30 June 30 June 2022
2023 2022
(Loss)/Profit after tax (GBP000) (21) 1,287 4,697
------------ ------------ -------------
Weighted average number of
shares (000's) 22,795 22,464 22,577
------------ ------------ -------------
Basic earnings per share (0.1)p 5.7p 20.8p
============ ============ =============
b) Diluted earnings per share
FROM CONTINUED OPERATIONS Unaudited Unaudited
ATTRIBUTABLE TO THE ORDINARY Six months Six months Audited
EQUITY HOLDERS OF THE COMPANY ended ended Year ended
30 June 30 June 31 December
2023 2022 2022
(Loss)/Profit after tax (GBP000) (31) 1,330 4,750
------------ ------------ -------------
Weighted average number of
shares (000's) 22,795 22,464 22,577
Potentially dilutive shares
(000's) 1,044 1,073 1,099
Adjusted weighted average number
of shares (000's) 23,839 23,537 23,676
------------ ------------ -------------
Diluted earnings per share (0.1)p 5.7p 20.1p
============ ============ =============
TOTAL BASIC EARNINGS PER SHARE Unaudited Unaudited
ATTRIBUTABLE TO THE ORDINARY Six months Six months Audited
EQUITY HOLDERS OF THE COMPANY ended ended Year ended
30 June 30 June 31 December
2023 2022 2022
(Loss)/Profit after tax (GBP000) (21) 1,287 4,697
------------ ------------ -------------
Weighted average number of
shares (000's) 22,795 22,464 22,577
Potentially dilutive shares
(000's) 1,044 1,083 1,109
Adjusted weighted average number
of shares (000's) 23,839 23,547 23,686
------------ ------------ -------------
Diluted earnings per share (0.1)p 5.5p 19.8p
============ ============ =============
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 2023 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.
The adjusted earnings per shares have been calculated:
o for continued operations attributable to the ordinary equity
holder and
o for total earning per share attributable to the ordinary
equity holder
FROM CONTINUED OPERATIONS
ATTRIBUTABLE TO THE ORDINARY Unaudited Unaudited Audited
EQUITY HOLDERS OF THE COMPANY Six months Six months Year ended
ended ended 31 December
30 June 30 June 2022 2022
2023
(Loss)/Profit after tax (GBP000) (31) 1,330 4,750
Non-recurring costs 1,042 769 1,208
Non- recurring income (110) - (401)
Amortisation of acquired intangibles 917 977 1,953
Foreign currency exchange
(gain)/loss 962 (951) (932)
Finance cost on deferred and
contingent consideration 149 455 771
Adjusted profit after tax
(GBP000) 2,929 2,580 7,349
------- ------- -------
Weighted average number of
shares (000's) 22,795 22,464 22,577
Potentially dilutive shares
(000's) 1,044 1,073 1,099
------- ------- -------
Adjusted weighted average
number of shares (000's) 23,839 23,537 23,676
------- ------- -------
Adjusted basic earnings per
share 12.8p 11.5p 32.6p
======= ======= =======
Adjusted diluted earnings
per share 12.3p 11.0p 31.0p
======= ======= =======
TOTAL BASIC EARNINGS PER
SHARE ATTRIBUTABLE TO THE Unaudited Unaudited Audited
ORDINARY EQUITY HOLDERS OF Six months Six months Year ended
THE COMPANY ended ended 31 December
30 June 30 June 2022 2022
2023
(Loss)/Profit after tax (GBP000) (21) 1,287 4,697
Non-recurring costs 1,042 769 1,208
Non- recurring income (110) - (401)
Amortisation of acquired intangibles 917 977 1,953
Foreign currency exchange
(gain)/loss 962 (944) (932)
Finance cost on deferred and
contingent consideration 149 455 771
Adjusted profit after tax
(GBP000) 2,939 2,544 7,403
------- ------- -------
Weighted average number of
shares (000's) 22,795 22,464 22,577
Potentially dilutive shares
(000's) 1,044 1,083 1,109
------- ------- -------
Adjusted weighted average
number of shares (000's) 23,839 23,547 23,686
------- ------- -------
Adjusted basic earnings per
share 12.9p 11.3p 32.8p
======= ======= =======
Adjusted diluted earnings
per share 12.3p 10.8p 31.3p
======= ======= =======
7. Non-recurring items
Unaudited Unaudited
Six months Six months Audited
ended ended Year ended
30 June 30 June 31 December
2023 2022 2022
Non-recurring cost
GBP000 GBP000 GBP000
Legal cost relating to historical
contract dispute - 698 1,129
Acquisition and disposal costs 310 71 79
Associated cost for the Samarind
transitional services 77 - -
Provision for US sales tax 655 - -
1,042 769 1,208
------------ ------------ -------------
Unaudited Unaudited
Six months Six months Audited
ended ended Year ended
30 June 30 June 31 December
2023 2022 2022
Non-recurring income
GBP000 GBP000 GBP000
Insurance proceeds relating
to historical contract dispute - - (401)
Transitional services related 110 - -
to the Samarind disposal
110 - (401)
------------ ------------ -------------
The non-recurring income of GBP0.1m included in 2023 relates to
the transitional services that Instem plc has agreed under the
Share Purchase Agreement to provide to the acquirer of Samarind
Limited.
The income receivable by Instem for providing those transitional
services is not arising in the course of the Group's ordinary
activities and therefore has been classified as non-recurring
income.
Non-recurring costs include disposal costs and the associated
cost that Instem incurred for providing the transitional services
relating to the Samarind sale and provision for US sales tax while
awaiting the outcome of the study to establish whether potential
exposure exists.
In 2022 non-recurring items includes the additional provision of
EUR1.2m (GBP1.02m) for the full and final settlement regarding a
historical contractual licence dispute that arose in 2017. As
previously announced Instem had already created provision of
GBP0.25m in respect of this dispute in the previous years. In
October 2022, Instem paid EUR1.48m (GBP1.3m), of which its insurer
agreed to contribute EUR0.45m (GBP0.4m) resulting in a net payment
due of approx. EUR1.0m (GBP0.9m). The insurance contribution of
EUR0.45m (GBP0.4m) was included in non-recurring income
8. Finance income
Unaudited Unaudited
Six months Six months Audited
ended ended Year ended
30 June 30 June 31 December
2023 2022 2022
GBP000 GBP000 GBP000
Foreign exchange gains - 945 932
Right of use interest income 2 2 5
Other interest - 83 86
------------ ------------ -------------
2 1,030 1,023
============ ============ =============
9. Finance costs
Unaudited Unaudited
Six months Six months Audited
ended ended Year ended
30 June 30 June 31 December
2023 2022 2022
GBP000 GBP000 GBP000
Bank loans and overdrafts 112 116 266
Unwinding discount on deferred
consideration 149 455 771
Net charge on pension scheme 44 69 36
Right of use asset interest
cost 22 40 69
Foreign exchange losses/(gains) 962 (8) -
------------ ------------ -------------
1,289 672 1,142
============ ============ =============
10. Cash and cash equivalents
Unaudited Unaudited Audited
30 June 30 June 31 December
2023 2022 2022
GBP000 GBP000 GBP000
Cash at bank 8,442 10,280 13,964
Bank balance 8,442 10,280 13,964
============ ============ =============
11. Banking facility
Unaudited Unaudited Audited
30 June 30 June 31 December
2023 2022 2022
GBP000 GBP000 GBP000
Bank overdraft 1,028 - -
============ ============ =============
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. During
2023, the Group drew GBP1.0m to support the d-Wise final
consideration pay out and the banking facility is not presented net
with cash and cash equivalents. The balance includes interest and
the relevant bank fees for the period ended 30 June 2023.
12. 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 2023 2022 2022
GBP000 GBP000 GBP000
Deferred consideration - 4,271 3,605
Contingent consideration - 1,964 2,160
At end of period Current liability - 6,235 5,765
============= ========== =============
Unaudited Unaudited Audited
30 June 30 June 31 December
Non-current liability 2023 2022 2022
GBP000 GBP000 GBP000
Toxhub deferred liability 155 - -
At end of period Non-current 155 - -
liability
============ ========== =============
On 15 May 2023, the Group launched Centrus, incorporating all of
our existing In Silico Solutions and the Toxhub assets acquired or
licensed from the eTRANSAFE consortium. The Group has taken
responsibility for the management of the Toxhub database and
software platform. The value of the Toxhub asset would be the
inherent liability of EUR0.18m which the Group would be liable to
pay if it decided to cancel its 3-year contract with the platform
developer.
13. 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 2022 31 December
2023 2022
No. of shares No. of shares No. of
shares
Shares issued:
Beginning of the period 22,704,308 22,189,856 22,189,856
Issued on exercise of employee
share options 87,884 190,000 217,500
Issued on exercise of employee 97,241 - -
share options through Employee
Benefit Trust
Share issue on acquisition
of d-Wise - 296,952 296,952
Total shares issued and fully
paid at end of period 22,889,433 22,676,808 22,704,308
============== ============== ============
Additional shares were issued during 2023 relating to
share-based payments.
On 24 February 2023, Instem Plc group established an Employee
Benefit Trust (EBT) for the employees' nil cost share options
awards.
All issued shares are fully paid. At 30 June 2023 the Instem plc
Group Employee Benefit Trust held nil shares in the Company. During
the year the Employee Benefit Trust acquired 97,241 shares,
representing 0.4% of the issued share capital of the Company, for
total consideration of GBPnil. During the year the Employee Benefit
Trust disposed of 71,892 shares, representing 0.3% of the issued
share capital of the Company, for total consideration of
GBP443,515. The maximum number of shares held by the Employee
Benefit Trust during the year was 97,241, representing 0.4% of the
issued share capital of the Company.
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 the 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.
14. Subsequent Events
No adjusting events have occurred between the 30 June 2023
reporting date and the date of approval of this Interim Report.
On 30 August 2023 the board of directors of Ichor Management
Limited ("Bidco") and the board of directors of Instem plc
("Instem") announced that they had reached agreement on the terms
of a recommended cash offer to be made by Bidco for the entire
issued and to be issued ordinary share capital of Instem (the
"Acquisition"). It is intended that the Acquisition will be
implemented by way of a scheme of arrangement under Part 26 of the
Companies Act.
Under the terms of the Acquisition, each Instem Shareholder will
be entitled to receive 833 pence in cash per Instem Share. The
Acquisition values the entire issued and to be issued ordinary
share capital of Instem at approximately GBP203 million.
15. Availability of this Interim Announcement
Copies of the 2023 Interim Report for Instem plc will be
available from the Group's website at www.instem.com .
16. Profit Forecasts
The following statements (together "the Profit Forecasts")
included in these unaudited half year results for the six months
ended 30 June 2023 constitute ordinary course profit forecasts for
the purposes of Rule 28 of the City Code on Takeovers and Mergers
("the Takeover Code"):
"Adjusted EBITDA for the current year is now expected to be no
greater than GBP11.1m."
"The Board also notes that, excluding GBP1.7m of costs
associated with Toxhub now expected to be incurred in FY23, the
implied FY23 Adjusted EBITDA would be no greater than GBP12.8m,
materially below the Board's expectations at the beginning of the
year."
As required by Rule 28 of the Takeover Code, the Board confirms
that, as at the date of this announcement, the Profit Forecasts
remain valid and that they have been properly compiled on the basis
of the assumptions stated below and that the basis of accounting
used is consistent with Instem's accounting policies which are in
accordance with International Financial Reporting Standards and
those that Instem applied in preparing its financial statements for
the year ended 31 December 2022.
Further information on the basis of preparation of the Profit
Forecasts, including the principal assumptions on which they are
based, is set out below.
Basis of preparation and principal assumptions
The Profit Forecasts are based on the assumptions listed
below.
Factors outside the influence or control of the Board
-- There will be no material changes to existing prevailing
macroeconomic or political conditions in the markets and regions in
which Instem operates.
-- There will be no material changes in market conditions in
relation to either customer demand or the overall competitive
environment.
-- The interest, inflation and tax rates in the markets and
regions in which Instem operates will remain materially unchanged
from the prevailing rates.
-- There will be no material adverse events that will have a
significant impact on Instem's financial performance.
-- There will be no business disruptions that materially affect
Instem or its key customers, including, but without limitation,
natural disasters, lockdowns, acts of terrorism, technological
issues or supply chain disruptions.
-- There will be no material changes to the prevailing foreign
exchange rates that will have a significant impact on Instem's
revenue or cost base.
-- There will be no material changes in legislation or
regulatory requirements impacting on Instem's operations or on its
accounting policies.
-- There will be no material litigation or contractual disputes
in relation to any of Instem's operations.
-- There will be no change in general sentiment towards the
Group and/or its operations which has an impact on its ability to
attract customers and to operate its business.
Factors within the influence or control of the Board
-- There will be no material change to the present executive management of Instem.
-- There will be no material change in the operational strategy of Instem.
-- There will be no material adverse change in Instem's ability
to maintain customer and partner relationships.
-- There will be no material acquisitions or disposals.
-- There will be no material strategic investments over and above those currently planned.
-- There will be no material change in the dividend or capital allocation policies of Instem.
-- There will be no material change in relation to Instem's
assumptions in the period covered by the Instem Profit Forecasts in
relation to Instem's ability to execute on new initiatives,
including, amongst others, Toxhub .
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END
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