Half Year Report
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 £29.7m (H1 2022: £27.0m*)
- Recurring revenue (annual support and SaaS) increased 27.3% to £19.6m (H1 2022: £15.4m *) with SaaS revenues increasing 29.3% to £7.5m (H1 2022: £5.8m*), 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 £41.1m at 1 July 2023 (01 July 2022: £32.0m)
- Adjusted EBITDA** decreased 10.4% to £4.0m (H1 2022: £4.5m), 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 £4.7m
- Toxhub investment costs were less than expected at £0.7m offsetting some of the impact of delayed revenues associated with the opportunity
- Loss before tax of £0.07m (H1 2022: profit £2.0m*)
- Adjusted profit before tax*** of £2.9m (H1 2022: £3.2m*)
- 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 £2.1m (H1 2022: £1.8m)
- Gross cash balance as at 30 June 2023 of £8.4m (H1 2022: £10.3m) – after £5.8m 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
- Received the first SaaS subscription order for the Platform from Bayer AG, one of 13 international life science companies involved in the eTRANSAFE consortium
- Two further SaaS subscription orders were received post-period end
- 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 £41.1m 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 £11.1m*
*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 £203 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 SEND 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 £11.1m.
“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.”
Download the full report:
For further information, please contact:
| Instem plc | Via Walbrook |
| 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 |
| Richard Short | |
| Ben Maddison | |
| Rothschild & Co (Financial Adviser to Instem) | +44 (0) 161 827 3800 |
| Alistair Allen | |
| Julian Hudson | |
| Tom Palmer | |
| Wallbrook Financial PR | Tel: +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 £600m, a serviceable addressable market of c.£150m 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 £2.0bn.
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").