REG - Instem plc - Final Results

Wed Mar 28, 2012 2:01am EDT

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RNS Number : 2169A
Instem plc
28 March 2012
 



28 March 2012

Embargoed for 07:00

 

 

Instem plc

("Instem", the "Company" or the "Group")

 

Final Results

 

Instem plc (AIM: INS.L), a leading provider of IT applications to the global early development healthcare market, announces its preliminary unaudited results for the year ended 31 December 2011.

 

Financial Highlights

 

§ Revenues increased 7.9% to £10.8m (2010: £10.0m)

Recurring revenues accounted for 70% of total revenues (2010: 67%)

SaaS revenue for 2011 up 29% to £1.02m (2010: £0.79m)

§ Adjusted operating profit* £2.0m (2010: £2.3m)

§ Reported profit before tax £1.5m (2010: £1.4m)

§ Basic earnings per share 8.6p (2010 adjusted: 7.7p)

§ Cash generated from operations £1.4m (2010: £0.7m)

§ Closing cash balance as at 31 December 2011 of £3.4m (2010: £3.3m)

 

Operational Highlights

 

§  Strong level of Provantis customer wins, with nearly half being secured in the final quarter of the year. New customers included:

Battelle, the world's largest independent research and development organisation

National Center for Safety Evaluation of Drugs (NCSED), a subsidiary of the Chinese State Food & Drug Administration (SFDA)

Champions Oncology, the first deployment of Provantis in a drug efficacy rather than safety application

The Jackson Laboratory, one of the world's largest not-for-profit, biomedical research institutions

SRI International, a renowned independent, non-profit research institute

§ Provantis customer retention rate remained high at over 95%

§ Increased presence in emerging markets:

Further Asia Pacific market expansion with six new clients in China, Japan, Singapore and Australia

Instem India established post-period end to provide flexible software development capability

§ Strong performance from BioWisdom, which was acquired in March 2011 (now renamed Instem Scientific)

§ Centrus product fully compliant with the recently released US government sponsored Standard for the Exchange of Non-clinical Data (SEND)

 

* Operating profit before amortisation, share based payment and non-recurring items.

 

Phil Reason, CEO of Instem plc, commented:

 

"While revenues for the year were lower than originally anticipated, this was a strong performance in a difficult market and the outturn is marginally ahead of revised expectations. Our pre-clinical product, Provantis increased its market leading position, benefiting from our investments into SaaS deployment and increased geographic coverage. We saw signs, particularly towards the end of the year, that the Contract Research Organisation sector of our market is starting to recover from a difficult few years and we expect this to continue slowly in 2012. Two of the contracts which were delayed from the second half of 2011 have now been signed in the first quarter of 2012.

 

"The Group remains highly profitable, cash generative and has a strong pipeline of opportunities for the current year. While the Board is conscious of market conditions, our high level of renewals and a substantial contracted order book, combined with a full year's contribution from Instem Scientific underpin our confidence in the year ahead. We continue to pursue additional acquisition opportunities to extend our product offering, new customer relationships and market coverage."

 

For further information, please contact:

 

Instem plc

+44 (0) 1785 825 600

Phil Reason, CEO


Nigel Goldsmith, CFO




N+1 Brewin (Nominated Adviser & Broker)

+44 (0) 20 3201 3710             

Aubrey Powell


Luke Boyce




Newgate Threadneedle

+44 (0) 20 7653 9850

Caroline Evans-Jones


Fiona Conroy




 

About Instem plc

 

Instem (AIM:INS.L) is a leading supplier of IT solutions to the early development healthcare market. Instem's pre-clinical study management solutions accelerate drug and chemical development by increasing productivity, automating processes and enhancing practices that lead to safer and more effective drugs.

 

In March 2011 Instem acquired BioWisdom Limited, subsequently renamed Instem Scientific Limited ("Instem Scientific"), a leading provider of software solutions for extracting intelligence from R&D related healthcare data. The acquisition broadened and strengthened Instem's Centrus™ product suite, accelerating the product development roadmap.

 

Instem has over 130 customers in North America, Europe, China, India and Japan, including sixteen of the top twenty pharmaceutical and biotech companies such as GlaxoSmithKline and AstraZeneca. The Group employs over 110 people in six offices in the US, UK, and China; with additional resource locations in India and a full service distributor in Japan. It is estimated that approximately half of the world's pre-clinical drug safety data has been collected over the last 20 years via Instem software. 

 

To learn more about Instem please visit the Company's website, www.instem.com, or its investor centre http://investors.instem.com/.

 

 



 

Chairman's Statement

 

Against a difficult market backdrop, 2011 was a year of steady progress for Instem. Whilst we did not achieve the level of growth originally anticipated, we are pleased to report that the Group consolidated its leading position in its core market and saw a significant increase in its customer base. In addition, we were particularly encouraged by the strong contribution made by Instem Scientific (formerly BioWisdom Limited), which we acquired in March 2011. This acquisition was part of the next step in our long term strategy to consolidate the fragmented pharmaceutical software supplier base and we are therefore delighted that it is proving to be such a success. The Board continues to actively pursue similar opportunities.

 

The results for the year were impacted by the continued uncertainty and budgetary restraints within the broader pharmaceutical market and the Contract Research Organisation (CRO) sub-sector, with conditions in the EU being particularly challenging. Nonetheless, we won the overwhelming majority of new Early Development Safety Assessment (EDSA) business placed worldwide, securing a record level of new customers for Provantis, our core study management software. We believe this success is due to the quality of the suite of products, our ability to deliver this software as both an on-premise and SaaS solution, enabling a greater flexibility of pricing, and our global geographic presence.

 

We continued to invest in the capabilities of our product sets and will be launching a major new version of Provantis in 2012, for which we are already seeing a good level of interest from current and prospective customers. While sales of Centrus in 2011 were not as high as anticipated, the long-awaited formal adoption of the Standard for the Exchange of Non-clinical Data (SEND) by the FDA in June 2011 is expected to be a key driver for future business.

 

As anticipated at the time of the Interim Results, the final quarter of the year was particularly strong, suggesting a degree of confidence returning to the market. The timing of these contracts means the Group has entered 2012 with a strong opening order book.

 

We were saddened by the sudden death of our much respected and well-liked Chief Financial Officer, Jim McLauchlan, in August 2011. He provided invaluable services to the Company, particularly through the IPO process and he continues to be missed by us all. David Sherwin, a Non-executive Director of the Company, temporarily fulfilled the role while we sought a full-time replacement and we thank him for his efforts during that difficult time. We were pleased to secure the services of Nigel Goldsmith in November 2011, joining the Board as Chief Financial Officer. Nigel brings a high level of public company experience and pharmaceutical industry knowledge from his previous positions, including three years as Finance Director at IS Pharma plc (now Sinclair IS Pharma plc), during which he oversaw two equity fundraisings and completed two corporate acquisitions. Nigel is a welcome addition to the Board.  

 

We believe that the dynamics of the global R&D market provide Instem with good organic growth prospects, particularly in the US and emerging markets, with indications that study volumes in these regions are slowly starting to increase. Additionally, the strength of Instem's product portfolio and geographic reach provide a strong position in what is a fragmented software supplier marketplace and we continue to assess opportunities for further market consolidation. We therefore view the future with confidence.

 

I would like to take this opportunity to thank all our staff, customers and partners for their ongoing support.

 

 

David Gare

Chairman

27 March 2012

 

 

 

 



 

Operational Review

 

We are pleased to report that during the year, in spite of difficult global economic conditions which resulted in a lower outturn than originally anticipated, the Group has made significant progress in all areas of its business, reporting results marginally ahead of revised expectations.

 

During 2011, as in 2010, Instem won the majority of new business placed in the EDSA market worldwide, testament to both the competitive strengths of Provantis and the Group's ability to offer global services and support. The Group grew its client roster in its core markets, expanded further into international markets, most notably China, Singapore and Japan, and developed a strong pipeline of sales opportunities for Centrus.

 

In addition, in March 2011, the Company acquired BioWisdom Limited (now called Instem Scientific Limited). This acquisition is proving extremely beneficial to Instem, delivering strong results while adding functionality to our Centrus suite and increasing our addressable market.

 

Customer Wins and Renewals

 

Instem maintained its high level of Provantis renewals in the year, with the rate once again above 95%.As anticipated at the time of the Interim Results, the second half of the year saw a significant increase in the amount of new business secured, with the final quarter of 2011 being the strongest. We believe this is an indication that the workflow pattern experienced earlier in 2011 is now normalising and that the CRO sector is beginning to slowly recover from a difficult few years.

 

Traditional perpetual licensees for on-premise deployment signed during the year include: US-based Battelle, one of the world's largest independent research and development organisation; Japan-based ASKA Pharmaceutical, a pharmaceuticals manufacturing company; Beijing-based NCSED, a subsidiary of the Chinese State Food & Drug Administration (SFDA); and Genius Pharmaceutical Technology Ltd (Beijing Union), a CRO formed by the commercial offshoot of the Chinese Academy of Medical Sciences and Peking Union Medical College.

 

As well as securing customers for traditional licenses, Instem also saw a good uptake of its software deployed via the SaaS business model both within the smaller laboratory market, for which SaaS provides a lower cost of entry, and for the first time into larger organisations. One such example was Roche, a longstanding client of Instem, who signed a four-year SaaS agreement in October 2011 which extends their use of Provantis, by consolidating several key application areas, harmonising their sites worldwide and replacing several incumbent suppliers.

 

Total SaaS revenue for 2011 was up 29% to £1.02m (2010: £0.79m). Other new SaaS customers during the year include Chicago-based Experimur, a full-service toxicology testing and research laboratory; Australia-based TetraQ, a highly skilled preclinical contract research organisation; a US-based multinational biopharmaceutical company; Shanghai-based Medicilon Inc ("Medicilon"), a widely recognised drug discovery contract research organisation; and US-based Jackson Laboratory, one of the world's largest not-for-profit, biomedical research institutions.

 

Instem Scientific

 

There is a growing need for sophisticated, shared access to information to improve both the scientific and economic efficiency of R&D. The acquisition of BioWisdom significantly strengthened Instem's position in this data mining and data sharing market. We believe Instem Scientific's innovative intelligence solutions for the extraction, integration and analysis of medical knowledge is particularly well suited to our market and we have been pleased with the response from customers to this addition to our capabilities. 

 

Instem Scientific had a strong year, maintaining its significant customer relationships. It secured sales of its market leading SRS data integration product and powerful visual analytics platform Omniviz, as well as delivering solutions based on its newer technologies such as MetaWise.

 

In the twelve months since the acquisition, BioWisdom has been integrated successfully into the Group. Back office processes have been harmonised across the Group and the re-branding to "Instem Scientific" is largely complete. Instem's sales force has been trained on the full range of products now available and processes are in place to facilitate lead generation to the Instem Scientific team. Furthermore, we are now able to showcase new product capabilities to potential new customers, based on Instem Scientific's powerful core competencies.   

 

Increased Presence in Emerging Markets

 

In 2011 Instem continued to widen its presence beyond the more traditional markets of North America, Europe and Japan to the emerging economies, signing five orders in the emerging Asia Pacific markets. These economies have become strategically important due to their increasing number of early development facilities and the move towards a greater level of automation within established facilities. As the de facto standard in western facilities, Provantis offers compliance to national and western standards, dual language operation and proven protocol-driven automation that produces high quality study output in greatly reduced timescales.

 

We were pleased with our performance in this market and have made particular headway in the People's Republic of China, where our local presence has proven to be a significant differentiator, as well as in Singapore, Australia and India, where we have subsequently announced the establishment of a new technical support operation. 

 

In June 2011, Shanghai Medicilon purchased a SaaS subscription to the Provantis preclinical software solution suite. The purchase incorporates a range of Provantis modules across the areas of general toxicology, clinical pathology and pathology.

 

In December 2011, the influential NCSED, purchased the Integrated General Toxicology, Clinical Pathology and Pathology modules. NCSED is a subsidiary of the Chinese State Food & Drug Administration (SFDA), which manages and sponsors government and commercial contract research studies throughout China. Also in December, Genius Pharmaceutical Technology Ltd (Beijing Union), based in Beijing, purchased the Provantis preclinical software solution following a comprehensive competitive evaluation of domestic and western products.

 

Other new customers signed during the year in this region included TetraQ in Australia and a leading multi-national organisation with a research and development facility located in Singapore. Both signed contracts for the Provantis preclinical software solution suite. They are being supported by Instem from its operations based in Shanghai, China, underpinning the strategic investment into a localised version of Provantis and the establishment of a full-service offering, complete with local sales support, service implementation and customer support staff - with the ability to also provide support to the broader Asia-Pacific region.

 

Launch of Indian Office

 

The Company has for a number of years employed two full time contractors in India. However, based on its initial success in the region, the Board has now approved the launch of local operations, as announced on 26 March 2012. Instem India is expected to be launched in the first half of 2012 and will provide the Group with the ability to scale-up development resources flexibly in response to demand. In the longer term this operation will also enable the Group to provide sales and services locally in the region.

 

Product Development

 

Provantis®

 

Instem is the vendor of choice for solutions that support the identification and development of safer drugs through its market-leading Provantis software suite. This study management product continues to generate significant revenues and is the lead product, both in Instem's core North American and European markets, as well as the emerging international markets in the Asia-Pacific region.

 

Development of the suite continued in 2011 building towards the next major product release, Provantis 9, scheduled for the second half of 2012. An area of advancement will be the increased power and flexibility in reporting data (which will also be enhanced in the Centrus suite). The next evolution of the Protocol & Report Assembly module will maintain customers' efficiency and compliance, and can be supplemented by Instem's market-leading SEND solutions for electronic submissions and data exchange. Another area of advancement will be the extension of the capabilities of the Clinical Pathology module to work with Bioanalytical instruments.

 

Early demonstrations of the Clinical Pathology module to customers have been extremely positive and directly contributed to the winning of several of the new customers in 2011.

 

Centrus™

 

Development work during the year has focused on further functionalityfor creating, managing and using the Standard for the Exchange of Non-clinical Data (SEND), which was formally adopted by the FDA in June 2011 following several years of discussions. This is the first time that the FDA has formally defined a preferred standard. With the data that will form the basis of many future submissions already being collected, it will soon become imperative for pharmaceutical organisations and CROs to ensure this data can be submitted in the correct format. Our Centrus product is compliant with this standard and a strong pipeline of sales opportunities across the Instem customer base has been identified.

 

Instem Scientific™

 

Development work has been undertaken in 2011 to integrate BioWisdom's products with the Instem product suite.

 

Instem Scientific will continue to focus on translational informatics, harnessing the Group's expertise in developing solutions across pharmaceutical R&D, but with a particular focus in the Instem early development market.

 

Market Developments

 

We believe that the dynamics of the global R&D market continue to be favourable for Instem, particularly in the US and emerging markets, the latter of which accounted for over 40% of new customer wins in 2011. We are seeing indications amongst our customer base in these regions that study volumes are beginning to slowly increase. As anticipated, Europe has been particularly impacted by cuts to R&D expenditure, with significant reduction or closure of several large pharmaceutical R&D sites, and we anticipate little improvement in that trend in 2012. Where pharmaceutical R&D has continued, technology solutions are being sought to help reduce development time, cut costs and improve operating efficiency - particularly in emerging markets where little automation of processes has taken place to date.

 

We expect this to continue to drive demand for our Provantis suite and, in particular, we have seen growing interest in our Toxicology Resource Planning (TRP™) module. This module maximises resource utilisation and minimises study execution times through sophisticated graphical scheduling tools and powerful "what if" scenarios. TRP was a key component of both the Jackson and Battelle orders in H1 2011 and our largest ever TRP order for a US-based CRO in Q4 2011.

 

Combined with this need to increase efficiencies and reduce costs is a growing tendency in the pharmaceutical industry to partner with external service providers, such as CROs, in order to share risk. We expect this, combined with the release of the SEND standard by the FDA, to create demand for high integrity data sharing solutions. We address this need through our Centrus and broader Instem Scientific suite of products.

 

Acquisition Strategy

 

Instem operates within the highly fragmented pharmaceutical software supplier base. A significant part of Instem's growth strategy is to acquire businesses within this market, consolidating the number of software suppliers to the pharmaceutical industry and enhancing our competitive positioning. This is a strategy very much supported by Instem's customer base which has indicated its preference to purchase software from a smaller number of core suppliers. Such acquisitions would consolidate the Group's market position, complement its existing products, provide access to adjacent markets and increase clients' operating efficiency. 

 

Instem continues to pursue actively a number of acquisition opportunities.

 

Financial Review

 

The financial results demonstrate a solid performance in the year with total revenues steadily increasing by 7.9% to £10.8m, (2010: £10.0m) including the impact of the revenue acquired with Instem Scientific. While a record number of new customers was secured during the year, revenue from our core business was lower than in the prior year due, in large part, to a high number of these contracts being secured in the final quarter of the year. This resulted in only minimal 2011 revenue recognition for implementation services and annual support and maintenance contracts for these late orders, with the remainder of the implementation services to be recognised in 2012.

 

The business continued to expand in developing markets with revenue from outside North America and Europe increasing to £0.9m (2010: £0.6m), being 9% of Group revenue (2010: 6%) with notable wins in Japan, Singapore and China.

 

Instem's business model consists of fees for perpetual licenses, annual support, SaaS subscriptions and professional services. In 2011 approximately 70% of revenue was of a recurring nature (2010: 67%), principally from annual support fees and SaaS subscriptions, with a small contribution from professional fees.

 

The business continues to generate the majority of its revenue in US dollars and therefore we continue to hedge against its decline. In the period the average exchange rate was $1.6014/£1.00 compared with an average exchange rate in 2010 of $1.5474/£1.00.

 

The profit from operations before amortisation, share based payment and non-recurring costs for the year was £2.0m (2010: £2.3m).

 

In March 2011 Instem completed its first acquisition since IPO, acquiring BioWisdom Limited (now Instem Scientific Limited) for an initial consideration of £0.2m in cash, with a further £0.7m of unsecured debt assumed. A further contingent consideration of up to £0.6m will be payable in equal proportions of cash and shares dependent on achieving turnover targets in the two calendar years 2011 and 2012. As announced on 8 March 2012, post the end of the 2011 financial year, we issued 50,371 ordinary shares and paid contingent cash consideration of £0.084m in respect of the performance of Instem Scientific in 2011.

 

Cash generated from operations increased to £1.4m (2010: £0.7m). The Group had cash reserves of £3.4m as at 31 December 2011, compared with £3.3m as at 31 December 2010.

 

In line with previous periods, and our current policy of retaining cash within the business to capitalise on the available growth opportunities, the Board has not recommended the payment of a dividend.

 

 

Outlook

 

We saw signs, particularly towards the end of the year, that the Contract Research Organisation sector of our market is starting to recover from a difficult few years and we expect this to continue slowly in 2012. Two of the contracts which were delayed for the second half of 2011 have now been signed in the first quarter of 2012 and there is a strong pipeline of opportunities for the remainder of the year. The Group remains highly profitable and cash generative, and the new contracts secured in the final quarter provide a substantial level of contracted revenue expected to be recognised in 2012. Therefore, while the Board remains conscious of market conditions, these factors, combined with a full year's contribution from Instem Scientific and our high level of renewals, underpin our confidence in the year ahead.

 

 

Phil Reason

Chief Executive

27 March 2012

 

 



Consolidated Statement of Comprehensive Income

For the year ended 31 December 2011

 

 

 

Continuing Operations

 Note

Year ended

 31 December 2011

£000

Year ended

31 December 2010

£000




REVENUE

10,793

10,001

Operating expenses


(8,791)

(7,747)





PROFIT FROM OPERATIONS BEFORE AMORTISATION, SHARE BASED PAYMENT AND NON-RECURRING COSTS


 

2,002

 

2,254

Amortisation of intangibles


(347)

(34)

Share based payment


(88)

(21)





PROFIT BEFORE NON-RECURRING COSTS


1,567

2,199

Non-recurring costs


(21)

(388)





PROFIT FROM OPERATIONS


1,546

1,811

Non-recurring flotation costs


-

(295)

Finance income


422

263

Finance costs


(456)

(364)





PROFIT BEFORE TAXATION


1,512

1,415

Income tax expense

3

(506)

(514)





PROFIT FOR THE YEAR


1,006

901









OTHER COMPREHENSIVE INCOME/(EXPENSE)




Actuarial (loss) on retirement benefit obligations


(392)

(576)

Deferred tax on actuarial loss


68

147

Exchange differences on translating foreign operations


96

18





OTHER COMPREHENSIVE EXPENSE FOR THE YEAR


(228)

(411)









TOTAL COMPREHENSIVE INCOME FOR THE YEAR


778

490









PROFIT ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT COMPANY


 

1,006

 

901





TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO  EQUITY HOLDERS OF THE PARENT COMPANY


 

778

 

490





Earnings per share from continuing operations




Basic

5

8.6p

11.7p

Diluted

5

8.5p

11.7p

 



 

Consolidated Statement of Financial Position

As at 31 December 2011

 


Note

31 December 2011

31 December  2010

ASSETS


£000

£000

£000

£000

NON-CURRENT ASSETS






Intangible assets


8,103


6,417


Property, plant and equipment


188


166


Deferred tax assets


279


321








TOTAL NON-CURRENT ASSETS



8,570


6,904







CURRENT ASSETS






Inventories


93


137


Trade and other receivables


3,029


1,595


Current tax assets


64


-


Cash and cash equivalents


3,368


3,263








TOTAL CURRENT ASSETS



6,554


4,995







TOTAL ASSETS



15,124


11,899







LIABILITIES






CURRENT LIABILITIES






Trade and other payables


7,594


5,536


Current tax liabilities


-


85


Financial liabilities


250


253








TOTAL CURRENT LIABILITIES



7,844


5,874







NON-CURRENT LIABILITIES






Financial liabilities


250


-


Retirement benefit obligations


1,616


1,477








TOTAL NON-CURRENT LIABILITIES



1,866


1,477







TOTAL LIABILITIES



9,710


7,351







EQUITY






Share capital


1,171


1,171


Share premium


7,813


7,813


Merger reserve


(932)


(932)


Shares to be issued


88


-


Translation reserve


473


377


Retained earnings


(3,199)


(3,881)








TOTAL EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT



 

5,414


 

4,548







TOTAL EQUITY AND LIABILITIES



15,124


11,899







 

 



 

Consolidated Statement of Cashflows

For the year ended 31 December 2011

 

 

Note

Year ended

31 December 2011

Year ended

31 December 2010



£000

£000

£000

£000

CASH FLOWS FROM OPERATING ACTIVITIES






Result before taxation


1,512


1,415


Adjustments for:






Depreciation


116


75


Amortisation of intangibles


347


34


Profit on disposal of property, plant and equipment


(14)


-


Share based payments and shares to be issued


88


21


Adjustment to contingent consideration


(80)


-


Retirement benefit obligations


(245)


(206)


Net foreign exchange gains


88


-


Finance income


(422)


(263)


Finance costs


456


364


CASH FLOWS FROM OPERATIONS BEFORE MOVEMENTS IN WORKING CAPITAL


 

1,846


 

1,440

Movements in working capital:






Decrease/(increase) in inventories



47


(75)

(Increase)/decrease in trade and other receivables


(1,230)


266

Increase/(decrease) in trade and other payables


679


(915)

CASH GENERATED FROM OPERATIONS


1,342


716

Finance costs



(362)


(296)

Income taxes paid



(478)


(510)

NET CASH GENERATED FROM/(USED IN) OPERATING ACTIVITIES



 

502


 

(90)







CASH FLOWS FROM INVESTING ACTIVITIES






Finance income received


300


263


Income taxes paid


-


(95)


Purchase of intangible assets


(291)


(361)


Purchase of property, plant and equipment


(152)


(111)


Disposal of property, plant and equipment


30


-


Acquisition of subsidiary


(200)


-


Cash acquired with subsidiary


141


-


NET CASH USED IN INVESTING ACTIVITIES



(172)


(304)







CASH FLOWS FROM FINANCING ACTIVITIES






Proceeds from issue of ordinary shares


-


9,150


Share issue costs


-


(731)


Stamp duty


-


(83)


Series A Loan notes repaid


(253)


(4,897)


Payment of finance lease liabilities


-


(3)


Alchemy loan note repayment


-


(2,550)


NET CASH (USED IN)/GENERATED FROM

FINANCING ACTIVITIES


 

(253)


 

886

NET INCREASE IN CASH AND CASH EQUIVALENTS


77


492

Cash and cash equivalents at start of year



3,263


2,716

Effects of exchange rate changes on the balance of cash held in foreign currencies



 

28


 

55







CASH AND CASH EQUIVALENTS AT END OF YEAR



 

3,368


 

3,263







 

 

 

 



 

Consolidated Statement of Changes in Equity

 


Share capital

Share Premium

Merger

Reserve

Shares to be issued

Translation

reserve

Retained earnings

Total

 Equity


           £000

£000

£000

£000

£000

£000

£000









Balance as at 1

January 2010

649

-

4,218

 

-

359

(4,374)

852

New share capital

522

8,628

-

-

-

-

9,150

Costs of issue

-

(815)

-

-

-

-

(815)

Loan notes issued on acquisition

-

-

(5,150)

 

-

-

-

(5,150)

Total comprehensive income for the year

-

-

-

 

-

18

472

490

Share based payment

-

-

-

-

-

21

21









Balance as at 31 December 2010

1,171

7,813

(932)

 

-

377

(3,881)

4,548

Total comprehensive income for the year

-

-

-

-

96

682

778

Share based payment

-

-

-

88

-

-

88









Balance as at 31 December 2011

1,171

7,813

(932)

88

473

(3,199)

5,414









 



 

Notes to the Financial Statements

 

1. Basis of Preparation

 

FINANCIAL INFORMATION

The preliminary financial information does not constitute statutory accounts within the meaning of section 434 of the Companies Act 2006 but is derived from accounts for the years ended 31 December 2011 and 31 December 2010. The figures for the year ended 31 December 2010 were audited.  The preliminary financial information is prepared on the same basis as will be set out in the statutory accounts for the year ended 31 December 2011.  The figures for the year ended 31 December 2011 are unaudited.

 

The preliminary financial information was approved for issue by the Board of Directors on 27 March 2012.

 

The statutory accounts for the year ended 31 December 2011 will be delivered to the Registrar of Companies following the Company's Annual General Meeting.  Statutory accounts for the year ended 31 December 2010 have been filed with the Registrar of Companies.  The auditors' report on those accounts was unqualified and did not contain any statement under Section498 (2) or (3) of the Companies Act 2006.

 

GENERAL INFORMATION

 

The principal activity of the Group is the provision of world class information solutions for life sciences research and development. Instem Plc is a company incorporated in England and Wales under the Companies Act 2006 and domiciled in the UK. The registered office is Diamond Way, Stone Business Park, Stone, Staffordshire, ST15 0SD.

 

BASIS OF ACCOUNTING 

 

While the financial information included in this preliminary announcement has been prepared in accordance with the recognition and measurement criteria of International Financial Reporting Standards (IFRS), as adopted by the European Union (EU), this announcement does not in itself contain sufficient information to comply with IFRSs.

 

The Group's accounting reference date is 31 December. 

 

GOING CONCERN

 

Having made appropriate enquiries, the directors consider that the Group has adequate resources to enable it to continue in operation for the foreseeable future.  The Group has a significant proportion of recurring revenue from a well established global customer base, supported by a largely fixed cost base.

 

The financial position of the Group, its cash flows and liquidity position are set out in the primary statements of this financial information.  Detailed projections have been made for the 12 months following the approval of the financial statements and sensitivity analysis undertaken.  This work gives the directors confidence as to the future trading performance. Discussions have commenced in relation to the renewal of the Group's banking facilities and there are no indications at this stage that this renewal will not be forthcoming.

 

Accordingly the directors continue to adopt the going concern basis for the preparation of the financial statements.

 

 



 

2. Segmental Reporting

 

For management purposes, the Group is currently organised into one operating segment - Global Life Sciences.

 

Segment results, assets and liabilities include items directly attributable to a segment as well as those than can be allocated on a reasonable basis.

 




                     THIRD PARTY REVENUE





2011

£000

2010

£000


INFORMATION BY PRODUCT TYPE





Licence fees

      

2,336

1,953


Annual support fees


5,961

5,933


SaaS subscription fees


1,016

789


Professional services


1,338

1,203


Funded development initiatives


142

123




10,793

10,001

 


             THIRD PARTY REVENUE





2011

£000

2010

£000

INFORMATION BY GEOGRAPHICAL LOCATION




UK

 

1,342

1,339

Rest of Europe


2,518

2,231

USA and Canada


5,989

5,822

Rest of World


944

609



10,793

10,001

 


NON-CURRENT ASSETS EXCLUDING DEFERRED TAXATION





2011

£000

2010

£000

INFORMATION BY GEOGRAPHICAL LOCATION




UK


8,163

6,353

USA and Canada


48

205

Rest of World


80

25



8,291

6,583

 

MAJOR CUSTOMERS

In the prior year the Group generated external revenues of £1.456m from one customer which individually amounted to more than 10% of the Group revenue.  In the current year there were no individual customers accounting for 10% or more of total revenue. 

 


3. Income Taxes

 

 

Income taxes recognised in profit or loss


2011

£000

2010

£000

 

 

Current tax:




 

UK corporation tax on profits of the year


167

379

 

Double tax relief


-

(212)

 

Foreign tax


240

274

 

Adjustments in respect of previous years


(78)

(50)

 

Total current tax


329

391

 

Deferred tax:




 

Origination and reversal of temporary differences


150

73

 

Adjustments in respect of previous years


(36)

-

 

Retirement benefit obligation


63

50

 

Total deferred tax


177

123

 

Total income tax expense recognised in the current year


506

514

 



2011

£000

2010

£000

 

 





 

The income tax expense can be reconciled to the accounting profit as follows:




 





 

Profit before tax


1,512

1,415

 

Profit before tax multiplied by standard rate of corporation tax in the UK 26.5% (2010: 28%)


 

401

 

396

 





 

Effects of:




 

Expenses not deductible for tax purposes


67

84

 

Differences in overseas tax rates


152

84

 

Adjustments in respect of prior years


(114)

(50)

 

Total income tax expense recognised in profit or loss


506

514

 



 

 

4. Business Combinations

Subsidiary acquired

 

 

 

 

2011

Principal activity

Date of acquisition

Proportion of voting equity interests acquired

%

Consideration transferred

 

 

£000

 






 

Instem Scientific Limited (formerly BioWisdom Limited)

Leading provider of software solutions for extracting intelligence from R&D related healthcare data

3 March 2011

100

609

 

Instem Scientific Limited was acquired to continue the expansion and development of the Group's capabilities in the Global Life Sciences sector.

Consideration transferred




Instem Scientific Limited

£000

Cash



200

Contingent consideration - Payable in cash



244

Contingent consideration - To be settled in shares



245

Total consideration estimate at acquisition



689



Adjustment to estimate of contingent consideration recognised in Consolidated Statement of Comprehensive Income


Contingent consideration - Payable in cash



(40)

Contingent consideration - To be settled in shares



(40)

Total consideration estimate at 31 December 2011



609

 

The contingent consideration is based on certain cumulative performance related conditions over two years as follows:

·       Where FY2011 Revenue is equal to or greater than £1,304,000 the first deferred consideration shall be £100,000 plus £1,000 for every £1,000 of Revenue in excess of £1,304,000 subject to a maximum payment of £300,000.

 

·       Where FY2011 and FY2012 Revenue is equal to or greater than £2,815,000 the second deferred consideration shall be £100,000 plus £1,000 for every £1,000 of Revenue in excess of £2,815,000 subject to a maximum payment of £600,000.

 

Acquisition related costs amounting to £101,000 have been excluded from the consideration transferred and have been recognised as an expense in the current year, within the 'Non-recurring costs' line item in the consolidated statement of comprehensive income.

In addition to the consideration above, Instem plc has assumed £500,000 of debt on behalf of Instem Scientific Limited and provided £200,000 of working capital in the form of a long term loan.  This is included within trade and other receivables of the Company.

 

Assets acquired and liabilities recognised at the date of acquisition

 



Instem Scientific Limited

£000

Non-Current Assets



Intellectual property


819

Customer Related Assets


325

Software


79

Patents


21

Property, plant and equipment


1

Deferred Tax on losses brought forward


405




Current Assets



Trade and other receivables


131

Cash and cash equivalents


141




Current Liabilities



Trade and other payables


(851)

Financial liabilities


(544)




Non-Current Liabilities



Deferred Tax on acquisition


(336)



191

 

Goodwill arising on acquisition




Instem Scientific Limited

£000





Consideration transferred



689

Less: fair value of identifiable net assets acquired



(191)

Goodwill arising on acquisition



498

 

Goodwill arose on the acquisition of Instem Scientific Limited because the premium paid by the Company reflects the expected benefit of synergies, revenue growth and future market development.  Instem Scientific Limited was acquired to expand and enhance the Group's product and service offering within the Global Life Sciences operating segment.  These benefits have not been recognised separately from goodwill because they do not meet the recognition criteria for identifiable intangible assets. None of the goodwill is expected to be tax deductible.

Net cash outflow on acquisition



Instem Scientific Limited

£000




Consideration paid in cash


(200)

Less: cash and cash equivalent balances acquired


141

Net cash outflow


(59)

 

 



 

5. Earnings per share

Basic earnings per share is calculated by dividing the profit attributable to ordinary shareholders by the weighted average number of ordinary shares in issue during the year.  Diluted earnings per share is calculated by adjusting the weighted number of ordinary shares outstanding to assume conversion of all dilutive potential shares arising from the share option scheme and the acquisition of Instem Scientific Limited.  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.

 


2011

2010


Profit after  tax

 

 

 £000

Weighted average number of shares

 

'000

Earnings per share

 

 

Pence

Profit after  tax

 

 

 

£000

Weighted average number of shares

 

'000

Earnings per share

 

 

 

Pence








Earnings per share - Basic

1,006

11,714

8.6

901

7,698

11.7

Potentially dilutive shares

-

134

(0.1)

-

23

-

Earnings per share - Diluted

1,006

11,848

8.5

901

7,721

11.7

 

Adjusted earnings per share


2011

2010*


Profit after  tax

 

 

 £000

Weighted average number of shares

 

'000

Earnings per share

 

 

Pence

Profit after  tax

 

 

 

£000

Weighted average number of shares

 

'000

Earnings per share

 

 

 

Pence








Earnings per share - Basic

1,006

11,714

8.6

901

7,698

11.7

Effect of share based payments

 

88

 

-

 

0.7

 

21

 

-

 

0.3

Effect of non-recurring items

 

21

 

-

 

0.2

 

683

 

-

 

8.9

Effect of tax on non-recurring items

 

(6)

 

-

 

-

 

(191)

 

-

 

(2.5)

Adjusted earnings per share - Basic

 

1,109

 

11,714

 

9.5

 

1,414

 

7,698

 

18.4

Potentially dilutive shares

-

134

(0.1)

-

23

-

Adjusted earnings per share - Diluted

 

1,109

 

11,848

 

9.4

 

1,414

 

7,721

 

18.4

 

*Following the Initial Public Offering in October 2010 the Company had 11,714,286 shares in issue for the short period up to the end of the financial year.  On a comparable basis with 2011, if those shares had been in issue for the full 12 months during 2010, the weighted average number of shares in issue would have been 11,714,286 and the comparable basic earnings per share would have been 7.7p.


This information is provided by RNS
The company news service from the London Stock Exchange
 
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