Half Yearly Report

RNS Number : 4965K

Cambridge Cognition Holdings PLC

22 September 2016

 

22 September 2016

Cambridge Cognition Holdings Plc

("Cambridge Cognition" or the "Company")

Half Yearly Report

Cambridge Cognition Holdings plc, (AIM: COG, 'the Company'), the neuroscience company which develops and markets near patient technologies for the assessment of brain health, announces its unaudited Interim Results for the six months ended 30 June 2016.

These results demonstrate revenue growth, a reduction in losses, a stronger balance sheet and significant advances in product and technology developments.

Financial Highlights

·        Total revenue increased by 11.3% to £3.26m (H1 2015: £2.93m)

·        EBITDA losses reduced to £0.11m (H1 2015: £0.26m loss)

·        Loss before tax reduced to £0.15m (H1 2015: £0.28m loss)

·        Loss per share reduced to 0.6p (H1 2015: 1.7p loss)

·        Completion of an oversubscribed £1.25m equity placing

·        Cash balance of £1.38m at period end (31 Dec 2015: £0.76m)

Operational Highlights

·        Pharmaceutical clinical trial revenues up 17.3% to £2.24m

·        Academic research revenues up 4.2% to £1.00m

·        Restructured and strengthened sales infrastructure in both the USA and Europe

·        Launched the Company's first online testing product and subsequently secured the first pharmaceutical collaboration for the product

·        Secured a joint venture agreement with Ctrl Group and developed a wearable prototype

·        Signed two distribution agreements for complementary products

·        Prepared and submitted an application to the US Food and Drug Administration (FDA) for regulatory clearance for CANTAB Mobile in the USA

·        Secured the Academic Research unit's largest ever order from an international biobank

Commenting on the results Steven Powell, Chief Executive Officer of Cambridge Cognition, said: "The results from the first half of the year reflect the significant advances that have been made in marketing of our core products and technology developments that have resulted in the launch of our online and wearable platforms. Our products and technologies are now aligned with all stages of our customers' drug development cycle and the commercial focus is now set to maximise the opportunities presented by existing sales channels."

Enquiries:

Cambridge Cognition Holdings plc	www.cambridgecognition.com
Steven Powell, Chief Executive Officer	Tel: [phone]
Nick Walters, Chief Financial Officer
finnCap Ltd (Nomad and Joint Broker)	Tel: [phone]
Geoff Nash/Simon Hicks	(Corporate Finance)
Alice Lane	(Corporate Broking)
Hybridan LLP (Joint Broker)	Tel: [phone]
Claire Noyce	(Corporate Broking)

CHIEF EXECUTIVE OFFICER'S REVIEW

We are pleased to report our results for the first half of 2016. During the period the financial results demonstrated year-on-year revenue growth and our R&D teams made considerable progress with the well-received launch of our CANTAB Recruit product and the commencement of our Cognition Kit joint venture. We expect these two initiatives to provide the foundation for revenue growth beyond that developing from our core Connect products.

In addition, we completed an oversubscribed equity placing in April raising gross proceeds of £1.25m (£1.14m net); the proceeds of which have been applied to the expansion of the sales infrastructure both in the USA and in Europe as well as funding other product programmes.

Financial Results 

Revenue in the period increased 11.3% to £3.26m (H1 2015: £2.93m). Within this, our core high-margin software and services grew by 12.3%. The hardware revenue increased year-on-year due to fulfillment of a single large contract in H1 2016. The underlying trend for hardware sales remains downwards, as growth in our Connect cloud based software reduces our reliance upon lower margin hardware.

Total revenues from the Pharmaceutical Clinical Trials unit increased by 17.3% to £2.24m (H1 2015: £1.91m). Within this total, the higher margin Software and Services revenues increased 15.8% to £1.98m (H1 2015: £1.71m).

	H1 2016	H1 2015	%
	£m	£m	Change
Software and Services	1.98	1.71	15.8%
Hardware	0.24	0.18	33.3%
Other	0.02	0.02	0%
Total	2.24	1.91	17.3%

Revenues from Academic Research increased by 4.2% to £1.00m (H1 2015: £0.96m) which included an 8.0% increase in Software and Services sales to £0.95m (H1 2015: £0.88m). Sales include £0.33m of revenue recognized from a £0.5m contract from an international biobank - the largest contract secured by the Academic Research business.

	H1 2016	H1 2015	%
	£m	£m	Change
Software and Services	0.95	0.88	8.0%
Hardware	0.04	0.06	(33.3)%
Other	0.01	0.02	(50.0%)
Total	1.00	0.96	4.2%

Sales from the Healthcare Technology business unit reduced to £28k (H1 2015: £56k) as market and product development continues in this area. The comparator H1 2015 result was bolstered by two significant sales for the division that have not been repeated in 2016. The level of R&D investment in the healthcare unit remains significant but short term commercialisation of near patient technologies has been re-directed towards collaborations with pharmaceutical partners to accelerate revenue growth for the Group and provide clinical validation of the products for longer term growth in the large healthcare market.

Gross profit grew by 4.7% to £2.70m (H1 2015: £2.58m). This gross profit growth does not match revenue growth due to the lower margin hardware sales figures noted previously.

The operating loss for the period of £0.15m (H1 2015: £0.28m) is a 46.4% reduction on the equivalent period last year.

	H1 2015	H1 2015
	£m	£m
Pharmaceutical Clinical Trials	0.27	0.28
Academic Research	0.30	0.30
Healthcare	(0.39)	(0.53)
Central Costs	(0.33)	(0.33)
Total	(0.15)	(0.28)

The Pharmaceutical Clinical Trials and Academic Research businesses produced operating profit consistent with last year in spite of increased revenues. This reflects an increased level of spend on sales infrastructure which was one of the purposes behind the financing round concluded in the reporting period. The increased headcount since the placing, and some of the associated recruitment cost, is included in the above figures. H2 costs will reflect the increased headcount but we expect to see the benefit of this investment in increased sales.

EBITDA reduced to £0.11m loss (H1 2015: £0.26m loss). Losses before tax were also reduced to £0.15m (H1 2015: £0.28m loss). As a result, loss per share improved to 0.6p (H1 2015: 1.7p loss). These results reflect the improved revenues (increase of 11.3%) and gross margin (increase of 4.7%) as well as a small reduction in administrative expenses of 3.4%.

Net cash outflow from operations during the period was £0.53m, an increase from an outflow of £0.27m for the first half of the prior year. Normally our cash flow closely follows our operational performance but due to two large sales made in June for which cash will be collected in Q3, cash generated from operations was £0.4m less than the result for the year. With the equity placing producing net proceeds of £1.14m, the net cash balance at 30 June 2016 was £1.38m (as at 31 December 2014: £0.76m).

Operational Review

Previously revenues and profits of our two core business streams, Academic Research and Pharmaceutical Clinical Trials, were secured with only modest levels of investment as most of our resources were channelled into the Healthcare business. During the first half of the year we refocused our commercial activities and began a period of significant investment in the commercial infrastructure for these two core market channels to accelerate revenue growth and bring forward sustainable profitability for the Group. As a result of successful development programmes we were also able to begin the commercialisation of near patient testing platforms via online and wearable technologies. We also began to provide consulting services for trial design and analytical services.

The net result of this is a significantly expanded product offer across all stages of the development cycle as summarised below:

Previous Offering	Current Offering
Standard device	Multiple devices
On site testing	On site and online testing
Data on the device	Data in the cloud
Limited	Scalable
Staff administered	User administered
In trial	Pre, during and post trial
	Trial design and analytical services
	Distributed products

As well as expanding the product portfolio, the sales organisation has been restructured to relax demarcations between the business units to encourage the sales team to sell a wider range of products to a wider range of customers. We expect the real benefit from this reorganisation to drive growth in 2017 as the timing of the changes is unlikely to have a significant impact on 2016 revenue.

Pharmaceutical Clinical Trials

Expansion of the product range in the period means that we now offer a range of products and services for use throughout the drug development cycle to:

- improve efficiency of trial recruitment,

- demonstrate efficacy and safety of new drugs and, significantly,

- provide quantitative outcome measures.

In April this year we launched CANTAB Recruit, an online patient recruitment portal for pharmaceutical and biotechnology companies to accelerate the identification of qualified clinical trial participants in high-need indications such as Alzheimer's disease. The web-based platform promises to enrich clinical research by sensitively pre-screening patients using innovative, interactive and proven cognitive measures to reduce screen failure rates and save study sponsors substantial time and cost. The first Recruit commercial contract was secured after the reporting period and further contracts are expected to close in the coming months.

The addition of CANTAB Recruit to our core Connect products sold to Pharmaceutical Clinical Trials customers now offers a multi platform solution for use throughout the drug development lifecycle. Furthermore, at the request of our customers, we have now commercialised our trial design and neuroanalytical capabilities and offer these as revenue generating services to complement the product platforms.

In March of this year we announced a joint venture with Ctrl Group to move our cognitive tests onto a wearable device platform - Cognition Kit. In August the results of a feasibility study were announced which confirmed for the first time that wearable consumer devices can be used clinically to measure cognitive performance accurately when programmed with the Cognition Kit software. This technology has application in both late stage clinical trials and also post approval marketing studies to support patient compliance. The technology has been well received and we expect the JV to secure its first collaborative deals before the end of 2016.

In order to maximize the opportunities presented by the new products the sales team has been expanded both in Europe and the USA. We now have a local presence in continental Europe for the first time as well as on the East and West coasts of the USA. The reporting structure has also been changed such that all members of the sales team are empowered to transact with any potential customer they encounter in their geographic territory rather than limiting themselves to the business unit they represent.

Academic Research

Academic research remains an important market for the Company as it is a source of third party published data and key opinion referrals for biotechnology and pharmaceutical R&D.

Sales to research customers have continued to grow at a steady rate and the Academic Research business remains cash flow positive despite making additional investments in sales and marketing. One of the highlights of the first half of the year for the Academic Research business was the award of a biobank contract of £0.5m. This success is indicative of the new areas which the sales team are being encouraged to explore. In particular the team has focused on working with small biotechnology companies, often academic spin outs, who are commencing clinical development programmes and may have limited neuroscience support in house.

We also entered into a distribution agreement with UK healthcare technology company MANUS Neurodynamica Limited. This agreement provides us with sole rights to market the MANUS Parkinson's Pen, a sensor pen for diagnosis and monitoring of neuromotor impairments which, initially, will be launched into the academic research market. The CE marked medical device uses non-invasive, patented technology to record and analyse limb and hand motion to assess underlying neuromotor processes, particularly for patients with Parkinson's disease and it is a small but significant step towards combining, for the first time, measures of cognitive function with phenotypic or 'physical' symptoms to give greater insight into changes in a patients symptoms. We expect to commence the first field trials with the product late in 2016.

Healthcare Technology

To date our investment in healthcare technologies has seen the development of CANTAB Mobile, CANTAB Insight and latterly CANTAB Recruit and Cognition Kit. These products provide the means to assess changes in cognitive function near to the patient, not just in the controlled environment of a clinical trial, and can help create value in clinical trials and support clinical decisions in important patient treatment pathways.

At the start of the year, having invested significantly in technology development over the last three years, we made a key strategic decision to deploy these technologies across all three business sectors - research, pharmaceutical and healthcare, supported by our enlarged sales and marketing groups. The outcome of this decision is becoming apparent with increased customer engagement and increased sales in our primary markets.

Both CANTAB Mobile and its sister product, CANTAB Insight, are fully commercialised. CANTAB Mobile continues to be used routinely in the NHS and while the revenues remain small, we have now assessed over 30,000 patients providing an excellent reference in support of the efficacy of the product. We have now appointed our first distributors for the product outside of the UK and CANTAB Mobile is the core product in our 70% owned subsidiary CANTAB Corporate Health (www.cantabcorp.com), which is marketing cognitive assessment for corporate health and private health. To date this activity has been restricted to the UK but in the course of this year we have begun to extend this activity into the EU. Also, in May of this year, we filed for 510K clearance with the FDA to enable us to market Mobile in the USA and early stage discussions have begun with potential US marketing partners.

Our corporate health initiative will also benefit from the second of the reseller/distribution agreements signed in the reporting period. In June we announced that we had secured the rights to distribute DANA in both Europe and the USA, a product from AnthroTronix Inc, a Maryland headquartered company. DANA is a handheld computerized test system which measures and monitors subtle and acute changes in cognitive efficiency to support medical rehabilitation. Initially funded by the United States Department of Defense to evaluate performance degradation in military personnel, DANA was granted FDA clearance in 2014 for use by medical providers to aid in the assessment of an individual's medical or psychological state. We will focus our marketing efforts on promoting the product in military and corporate health applications in both the EU and the USA and the DANA agreement demonstrates how we can utilise our growing sales channel to distribute synergistic products as well as those that are developed in house.

Outlook

The first half of 2016 has been significant for the investment in sales and marketing and maturation of the technology pipeline. This was made possible by the support of existing and new shareholders at the April equity placing. In the second half of the year we expect continued revenue growth through sale of core products and the establishment of multiple technology partnerships which have the potential to accelerate our growth in new product areas. This will position us well for continued growth into 2017 and beyond.

Steven Powell

Chief Executive Officer

22 September 2016

CONDENSED CONSOLIDATED COMPREHENSIVE INCOME STATEMENT

For the six months ended 30 June 2016

		6 months to 30 June 2016	6 months to 30 June 2015	Year to 31 December 2015
		Unaudited	Unaudited	Audited
	Note	£'000	£'000	£'000
Revenue	5	3,264	2,927	5,042
Cost of sales		(566)	(348)	(590)
Gross Profit		2,698	2,579	4,452
Administrative expenses		(2,925)	(3,028)	(5,620)
Other income		82	165	509
Operating (loss) before exceptional item	5	(145)	(284)	(659)
Exceptional item		-	-	(208)
Operating (loss) after exceptional item and (loss) before tax		(145)	(284)	(867)
Income tax		-	(2)	85
(Loss) for the period		(145)	(286)	(782)
Attributable to:
Equity holders in the parent		(118)	(286)	(782)
Non-controlling interest		(27)	-	-
		(145)	(286)	(782)
Earnings per share (pence)	6
Basic and diluted		(0.6)	(1.7)	(4.6)
Basic and diluted excluding exceptional item		(0.6)	(1.7)	(3.4)

(Loss) for the period	(145)	(286)	(782)
Other comprehensive income - items that may be reclassified subsequently to profit or loss
Exchange differences on translation of foreign operations	(12)	-	-
Total comprehensive income for the period	(157)	(286)	(782)

Consolidated statement of financial position

At 30 June 2016

		At 30 June 2016	At 30 June 2015	At 31 December 2015
		Unaudited	Unaudited	Audited
	Note	£'000	£'000	£'000
Assets
Non-current assets
Goodwill		352	352	352
Property, plant and equipment		112	110	141
Total non-current assets		464	462	493
Current assets
Inventories		62	77	58
Trade and other receivables		2,706	1,711	1,641
Cash and cash equivalents		1,375	1,260	756
Total current assets		4,143	3,048	2,455
Total assets		4,607	3,510	2,948
Liabilities
Current liabilities
Trade and other payables		2,180	1,637	1,535
Total liabilities		2,180	1,637	1,535
Equity
Share capital		204	170	170
Share premium account		7,517	6,412	6,412
Other reserves		5,969	5,981	5,981
Own shares		(49)	(51)	(51)
Retained earnings		(11,187)	(10,639)	(11,099)
Equity attributable to parent		2,454	1,873	1,413
Non-controlling interest		(27)	-	-
Total equity		2,427	1,873	1,413
Total liabilities and equity		4,607	3,510	2,948

Consolidated statement of changes in equity

For the 6 months ended 30 June 2016

	Share capital	Share premium	Other reserve	Own shares	Retained earnings	Non-controlling Interest	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 1 January 2015	169	6,335	5,981	(174)	(10,262)	-	2,049
Total comprehensive income for the period	-	-	-	-	(286)	-	(286)
Issue of new share capital	1	77	-	-	-	-	78
Transfer on allocation of shares in trust	-	-	-	123	(123)	-	-
Credit to equity for share based payments	-	-	-	-	32	-	32
Transactions with owners	1	77	-	123	(91)	-	110
Balance at 30 June 2015	170	6,412	5,981	(51)	(10,639)	-	1,873
Balance at 1 July 2015	170	6,412	5,981	(51)	(10,639)	-	1,873
Total comprehensive income for the period	-	-	-	-	(496)	-	(496)
Credit to equity for share based payments	-	-	-	-	36	-	36
Transactions with owners	-	-	-	-	36	-	36
Balance at 31 December 2015	170	6,412	5,981	(51)	(11,099)	-	1,413
Balance at 1 January 2016	170	6,412	5,981	(51)	(11,099)	-	1,413
Total comprehensive income for the period	-	-	(12)	-	(118)	-	(130)
Issue of new share capital	34	1,219	-	-	-	-	1,253
Share issue costs	-	(114)	-	-	-	-	(114)
Transfer on allocation of shares in trust	-	-	-	2	(2)	-	-
Credit to equity for share based payments	-	-	-	-	32	-	32
Transactions with owners	34	1,105	-	2	30	-	1,171
Equity attributable to parent	204	7,517	5,969	(49)	(11,187)	-	2,454
Non-controlling interest	-	-	-	-	-	(27)	(27)
Balance at 30 June 2016	204	7,517	5,969	(49)	(11,187)	(27)	2,427

Consolidated statement of cash flows

 For the 6 months ended 30 June 2016

		6 months to 30 June 2016	6 months to 30 June 2015	Year to 31 December  2015
		Unaudited	Unaudited	Audited
	Note	£'000	£'000	£'000
Net cash flows from operating activities	7	(527)	(271)	(708)
Investing activities
Purchase of property, plant and equipment		(3)	(66)	(133)
Net cash flow used in investing activities		(3)	(66)	(133)
Financing activities	-
Proceeds from the issue of share capital net of costs		1,139	78	78
Net cash flows from financing activities		1,139	78	78
Net increase in cash and cash equivalents		609	(259)	(763)
Cash and cash equivalents at start of period		756	1,519	1,519
Exchange differences on cash and cash equivalents		10	-	-
Cash and cash equivalents at end of period		1,375	1,260	756

NOTES TO THE INTERIM FINANCIAL STATEMENT

1. General information

Cambridge Cognition Holdings plc ('the Company') and its subsidiaries (together, 'the Group') develops and markets near patient technologies for the assessment of brain health for sale worldwide, principally in the UK, the US and Europe.

The Company is a public limited company listed on the Alternative Investment Market ('AIM') of the London Stock Exchange (symbol COG) and is incorporated and domiciled in the UK. The address of its registered office is Tunbridge Court, Tunbridge Lane, Bottisham, Cambridge, CB25 9TU.

The condensed consolidated interim financial statements were approved by the Board of Directors for issue on 22 September 2016.

The condensed consolidated interim financial statements do not comprise statutory accounts within the meaning of section 434 of the Companies Act 2006.

Statutory accounts of the Group for the year ended 31 December 2015 were approved by the Board of Directors on 10 May 2016 and delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under section 498 of the Companies Act 2006.

The condensed consolidated interim financial statements together with the comparative information for the six months ended 30 June 2016 have been reviewed, not audited. 

2. Basis of preparation

Going concern basis

The Group's forecasts and projections, taking account of reasonably possible changes in trading performance, support the conclusion that there is a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future, a period of not less than twelve months from the date of this report. The Group therefore continues to adopt the going concern basis in preparing its condensed consolidated interim financial statements.

3. Accounting policies

The accounting policies adopted in the preparation of the condensed consolidated interim financial statements are consistent with those followed in the preparation of the Group's consolidated financial statements for the year ended 31 December 2015.

CANTAB Corporate Health Limited, a company of which the Group owns 70% of the issued equity, commenced trading on 1 January 2016. The results of CANTAB Corporate Health Limited have been consolidated into the Group's results, with a non-controlling interest accounted for and disclosed.

4. Critical accounting judgements and key sources of estimation uncertainty

In the application of the Group's accounting policies the directors are required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis.

The following are the critical judgements that the directors have made in the process of applying the Group's accounting policies.

Revenue recognition

Trading operations within the Group recognise revenue with regard to amounts chargeable to customers under service contracts. In making its judgement, management consider the detailed criteria for the recognition of revenue from the provision of continuous services set out in IAS 18 Revenue. The directors are satisfied that the significant risks and rewards are transferred and that recognition of the revenue over the duration of the contractual period is appropriate.

Goodwill

The Group reviews the carrying value of its goodwill balances by carrying out impairment tests at least on an annual basis. These tests require estimates to be made of the value in use of its CGUs which are dependent on estimates of future cash flows and long term growth rates of the CGUs.

Capitalisation of development costs

The point at which development costs meet the criteria for capitalisation is critically dependent on management judgment of the probability of future economic benefits.

Recovery of deferred tax assets

Deferred tax assets have not been recognised for deductible temporary differences, share options and tax losses as management considers that there is not sufficient certainty that future taxable profits will be available to utilise those temporary differences and tax losses.

Share-based payment transactions

The Group measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined using either a Black-Scholes model or a Binomial Option model. The accounting estimates and assumptions relating to equity settled share-based payments would have no impact on the carrying amounts of assets and liabilities within the next annual reporting period but may impact profit and loss and equity.

5. Segmental information

The analysis of revenue by business unit is as follows:

	6 months to 30 June 2016	6 months to 30 June 2015	Year to 31 December 2015
	£'000	£'000	£'000
Pharmaceutical Clinical Trials	2,238	1,913	3,395
Academic Research	998	958	1,544
Healthcare Technology	28	56	103
	3,264	2,927	5,042

The analysis of revenue by product type is as follows:

	6 months to 30 June 2016	6 months to 30 June 2015	Year to 31 December 2015
	£'000	£'000	£'000
Software and services	2,954	2,631	4,592
Hardware	277	259	329
Other	33	37	121
	3,264	2,927	5,042

The analysis of operating (loss) before exceptional item by business unit is as follows:

	6 months to 30 June 2016	6 months to 30 June 2015	Year to 31 December 2015
	£'000	£'000	£'000
Pharmaceutical Clinical Trials	274	280	197
Academic Research	293	299	303
Healthcare Technology	(385)	(531)	(1,102)
Central costs	(327)	(332)	(57)
	(145)	(284)	(659)

The analysis of operating (loss) allocates costs to the business unit to which they relate, including an allocation of support function costs. Central costs represent the Company's corporate costs less other income.

6. Earnings per share

Calculation of loss per share is based on the following loss and numbers of shares:

	6 months to 30 June 2016	6 months to 30 June 2015	Year to 31 December 2015
	£'000	£'000	£'000
Earnings
Earnings for the purposes of basic and diluted earnings per share being net loss attributable to owners of the Company	(118)	(286)	(782)
Earnings for the purposes of basic and diluted earnings per share excluding exceptional item	(118)	(286)	(574)
	'000	'000	'000
Number of shares
Basic weighted average number of shares	18,644	16,739	16,831

The basic weighted average number of shares excludes shares held by an Employee Benefit Trust. Fully diluted loss per share is calculated after showing the effect of outstanding options in issue. As the effect of the options would be to reduce the loss per share, the diluted loss per share is the same as the basic loss per share.

The number of shares in issue at 30 June 2016 was 20,429,235 (31 December 2015: 17,043,124).

7. Reconciliation of operating loss to operating cash flows

	6 months to 30 June 2016	6 months to 30 June 2015	Year to 31 December 2015
	£'000	£'000	£'000
(Loss) before tax	(145)	(284)	(867)
Adjustments for:
Depreciation	32	20	56
Share-based payments charge	33	32	68
Operating cash flows before working capital movements	(80)	(232)	(743)
Change in inventories	(4)	108	127
Change in trade and other receivables	(1,142)	(201)	(44)
Change in trade and other payables	611	(66)	(168)
Cash generated by operations	(615)	(391)	(828)
Tax credit received	88	120	120
Net cash flows from operations	(527)	(271)	(708)

8. Copies of interim financial statements

Copies of the interim financial statements are available from the Company at its registered office at Tunbridge Court, Tunbridge Lane, Bottisham, Cambridge, CB25 9TU. The interim financial information document will also be available on the Company's website www.cambridgecognition.com.

 

END

 

 

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