Final Results

RNS Number : 7833I

Instem plc

30 March 2015

 



Instem plc

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

Unaudited Preliminary Results

Instemplc (AIM: INS.L), a leading provider of IT applications to the global early development healthcare market, announces its unaudited preliminary results for the year ended 31 December 2014.

Financial Highlights

§ Revenues increased 18% to £13.4m (2013: £11.4m)

o  Recurring revenues increased to £9.2m (2013: £8.2m), representing 69% of total revenues

o  Software as a Service (SaaS) revenues increased 20% to £1.8m (2013: £1.5m)

§ Adjusted EBITDA* for the year amounted to £1.9m (2013: £1.8m)

§ Cash balance as at 31 December 2014 of £1.7m (2013: £2.1m)

o  After £0.3m of deferred acquisition consideration paid in 2014

§ Adjusted earnings per share** of 8.4p (2013: 8.6p)

*Earnings before interest, tax, depreciation, amortisation,share based payment charges and non-recurring costs.

**After adjusting for the effect of foreign currency exchange on the revaluation of inter-company balances included in finance income/(costs), non-recurring items and amortisation of intangibles  on acquisitions.

Operational Highlights

·     Significant WIL Research contracts won in H1 and H2, with the latter valued at over $7m over four years

·     Multi-year National Institute of Environmental Health Sciences ("NIEHS") contract extended with additional sites and users

·     Further client wins extended our market leading position in China

·     US Food & Drug Administration mandating drug submissions using SEND (Standard for the Exchange of NonClinical Data)

·     Multiple orders for submit™, Instem's solution implementing SEND

·     Both 2013 acquisitions successfully integrated

Phil Reason, CEO of Instemplc, commented:

"In contrast to 2013, when the preclinical and early clinical market was generally reluctant to commit to any significant investment decisions, 2014 was a period when many of our customers revisited their near-term ambitions and began to evaluate their ongoing information management requirements. This resulted in a very strong second half performance.

"As we enter the current financial year, our order backlog is at record levels, underpinning our 2015 expectations. In addition, December's decision by the FDA to mandate the future use of SEND was a key event for which Instem has been planning and we have already begun to see increasing interest and orders for the Group's SEND compliant products across a range of customers.

"Total research and development pipelines within the pharma sector have increased by almost 9% to approximately 12,300 drug candidates during 2014, which makes us particularly positive about our outlook for the future as we can now see sustainable growth across our target markets."

For further information, please contact:

Instem plc	Tel: [phone]
Phil Reason, CEO	www.instem.com
Nigel Goldsmith, CFO
N+1 Singer (Nominated Adviser & Broker)	Tel: [phone]
Richard Lindley / Nick Owen
Walbrook PR Ltd	Tel: [phone]
Sam Allen / Helen Cresswell / Paul Cornelius	or [e-mail]

About Instem

Instem is a leading supplier of IT applications to the early development healthcare market, delivering compelling solutions for data collection, management and analysis across the R&D continuum. Instem applications are in use by customers worldwide, meeting the rapidly expanding needs of life science and healthcare organizations for data-driven decision making leading to safer, more effective products.

Instem's portfolio of software solutions increases client productivity by automating study-related processes while offering the unique ability to generate new knowledge through the extraction and harmonization of actionable scientific information.

Instem supports over 400 clients through full service offices in the United States, United Kingdom and China with an additional location in India and a full service distributor based in Japan.

To learn more about Instem solutions and its mission, please visit www.instem.com.

Chairman's Statement

As previously stated, our near term ambitions for the period were to consolidate our market position and fully integrate the recent acquisitions. I am pleased to report both of these ambitions were completed successfully during the year.

From a market perspective, Instem continues to be the leading supplier of information solutions to the preclinical and early clinical market place. Furthermore, this market is experiencing a strong recovery as global pharmaceutical organisations invest significant financial and human resources to accelerate their own drug development and acquire third party candidates for high value and high growth markets. We believe that Instem continues to be well placed to benefit from increased focus on the tools and skills required to increase the capital efficiency of these global pharmaceutical and biotechnology companies and their partners.

During the year, we achieved strong organic growth through expansion contracts with existing customers, winning contracts with new customers and successfully integrating the acquisitions of Instem Clinical Holdings Limited and Perceptive Instruments Limited, which both contributed a full-year of trading, to record a period of strong revenue growth of 18%.

From an organic growth point of view, we were particularly pleased to extend the contract with WIL Research for our Provantis and Submit solutions for their toxicology systems and processes worldwide. We also extended our Provantis contract with the National Institute of Environmental Health Sciences ("NIEHS"), which is part of the US National Institute of Health.

With regard to new clients, we won eight new contracts for our Submit suite during the period,  expanded our international revenues across Asia-Pacific with two new contracts with the National Shanghai Centre for Drug Safety Evaluation and Research, a leading Chinese Contract Research Organisation ("CRO") and a multi-year contract with a leading multi-national organisation to support its standards for the exchange of non-clinical data.

During the period, the Company was pleased to confirm that the initial earn out criteria for the Instem Clinical acquisition were successfully achieved, triggering the first two payments to the vendors. Furthermore, the recently integrated Perceptive Instruments acquisition performed well during the period making a solid contribution to revenue and profits.

We have successfully diversified our revenue base, further reducing the Group's dependence on particular products, market sectors or geographies whilst continuing to invest in the capabilities of our product portfolio and staff. Contract renewal rates remained high through the year and we ended 2014 with a record backlog of orders. Furthermore, in December 2014 SEND received final mandatory guidance from the FDA, setting the dates by which all regulatory submissions must comply with the standard; this is a key development in our market that should provide significant impetus for our products.

We therefore look forward to the future with confidence and believe Instem will become an increasingly valuable player in the field of supporting drug development through the application of leading information technology solutions.

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

David Gare, Non-Executive Chairman.

29^th March 2015

Chief Executive's Statement

The year in review represents a period of significant progress for the Group in terms of expanding the product portfolio and diversifying the revenue base by product and territory.

Instem continues to be a leading supplier to the world's largest life science organisations and laboratories, delivering solutions to streamline R&D processes, resulting in increased client efficiency and shorter product development timelines. Following a subdued first half of the year, the global pharmaceutical industry in general, and the Contract Research Organisations (CROs) that service it in particular, witnessed a strong recovery in the second half of the year.

Total Group revenue for 2014 increased approximately 18% over the previous year as a combination of 11% organic growth and 7% contribution from the Perceptive Instruments acquisition, which only contributed one month of revenue in 2013.

As a result of the improving market and our increasing industry presence, new business opportunities improved significantly in both size and quality during the year and we converted the majority of our new business using our SaaS or Hosted delivery models, helping reduce the medium-term cost of ownership for clients and the cost of client support for Instem.  The SaaS model also improves revenue visibility and quality of earnings for the Group. SaaS revenue for the year increased 20%.

Profitability of the Group also increased during the year, with Adjusted Earnings before Interest, Tax, Depreciation and Amortisation increasing 5% despite significant investment in our products and people during the period.

Operational Review

To capitalise on our increased product portfolio and market presence we added to our Sales, Marketing and Implementation Services teams during the year and made significant progress in scaling up our Pune, India operation, from where we can flexibly and cost effectively provide a range of software development, testing, client support and back-office implementation services.  To support our growth in India and elsewhere in the Asia-Pacific we extended our ISO9001:2008 accreditation to cover both our Pune and Shanghai offices.

Product Portfolio

With major version upgrades for all current Provantis and ALPHADAS clients, the increased deployment of our Submit suite and the general migration to our Software-as-a-Service and Hosted deployment models, we also invested further in the Company's data centre infrastructure across both the US and China.

PreClinical - Provantis® and Perceptive Instruments

The Group's pre-clinical software suite, Provantis, advanced its market leading position in the year with significant contracts with the National Institute of Environmental Health Sciences ("NIEHS") and WIL Research, a leading CRO, in both the first and second half of the year.

The addition of 100 additional Provantis users and two additional sites for NIEHS illustrated the compelling value proposition of the Group's SaaS delivery model and confirms it remains the leading solution in the marketplace today. Importantly, this provides further confidence that this particular customer will generate revenue at the upper end of the forecast US$6.2m to US$7.6m range over the ten-year period envisaged when the contract was initially signed in 2013. The contracts signed with WIL Research were also representative of our leading position in the CRO sector. In particular, the contract signed in the second half of the year was worth US$7.0m over four years, which is significantly larger than the average contract size for the Group.

Perceptive Instruments, acquired in November 2013 to enhance the Group's study workflow and automation solutions, won over 30 new clients in the first full year post acquisition, recorded its first sale of its new Cyto Study Manager Solution, which was also launched in the year, and achieved its first sale into Japan of its AMES Study Manager product.

Electronic Regulatory Submissions - submit™

Importantly, the Group extended its market leading position in the SEND market with its proprietary Submit solution suite. During the year, the Group hired experienced staff members from Roche, AstraZeneca and Eli Lilly to accelerate product development and penetration in this exciting space, resulting in the release of important updates and additional software modules in the Submit suite for managing and viewing SEND data sets.

The Group won eight new Submit clients during the year, including some of the world's largest pharmaceutical companies and CROs and now has the majority of those enterprises instrumental in the development of the SEND protocol over the past 10 years, representing a significant endorsement of the Group's solution. This important market is set to receive a significant boost following the issue of definitive guidance by the FDA in December 2014 as to the deadline when all regulatory submissions must be made using SEND.

Early Clinical - ALPHADAS™

Following strong order intake in 2013, Instem Clinical focused considerable attention on a series of related updates to our ALPHADAS product suite and the corresponding client implementations. With a growing client list and many more parallel implementation projects, we took the opportunity to strengthen the implementation and support team.

The Group implemented several important ALPHADAS projects during the year and continues to cycle clients onto the latest version of the product suite. New business across Europe was particularly strong for ALPHADAS, whilst several opportunities in North America were delayed as early phase clinical CROs continued to restructure and realign their resource requirements.

Instem Scientific

Instem Scientific has always had a blend of product sales for big data informatics and related consulting services in the information sciences. While recurring product support revenue from existing clients has been robust, the ongoing restructuring in big pharma has steadily reduced their internal capabilities in this area, reducing demand for additional product licenses.  However, consistent with their strategic move to an outsourcing model, there was growing client interest in our consulting expertise and particularly our capability to leverage our sophisticated technology suite.  Consequently, we have repositioned our approach to address this emerging opportunity. We expect to see the benefits of this change in the coming years, as demand for consulting expertise is usually a lead indicator for increasing demand for other products and services across this market sector.

Market Overview

Citeline®, which claims to have the world's most comprehensive source of real-time R&D intelligence for the pharmaceutical industry, recently reported that the global drug pipeline had increased by 8.8% in the past year, alongside a 27% increase in market launches of new active substances.  Supported by high capital inflows, the biggest growth segment was small to mid-tier pharma, with a year-on-year increase of more than 10% in the number of companies with an active drug development portfolio.

Following the strong growth recorded in 2013, the growth in 2014 represents the largest annual drug pipeline rise on record, in absolute terms, and there is further evidence that the global pharmaceutical market is now moving resources from late stage clinical development into early compound development work in order to refill the pipeline of preclinical candidates.

These drug development activities require specialist services and technologies with a particular focus on IT solutions which enable organisations to improve cost efficiencies and ensure they are able to meet the ever increasing regulatory demands of the industry. The regulatory bodies' preference for the electronic capture, storage and transfer of data for new drug submissions continues to grow and pharmaceutical organisations are seeking tools that can help them to identify suitable drug candidates from vast volumes of historic data, in addition to managing their compliance risk with the authorities.

PreClinical market

A sustained recovery in study volumes is currently being reported by PreClinical CROs as pharmaceutical organisations are currently seeking to replenish early stage pipelines after five years focused predominately on late stage clinical candidates. This is supported by the recent Citeline® report, which shows the PreClinical drug pipeline increased by 10.5% in the last year, with CROs accounting for the majority of the increase.

With increased preclinical study volume helping to create opportunities with the pharma sponsors, PreClinical CROs continue to report strong demand in North America, but a continuation in suppressed demand from Europe and Japan. Numerous CROs have been adding or looking to add additional capacity.

Early Stage Clinical market

The recent market study from Citeline® reported a 4.9% increase in the Early Stage Clinical pipeline, less than in 2013, and this supports anecdotal evidence that the Early Stage Clinical market is growing less consistently, with some CROs reporting marked increases in study volume and others still with capacity to spare.

The early stage clinical market is immediately downstream of preclinical and there may therefore be a delay before the increased preclinical investment delivers an improved flow of drug candidates to the clinic. The restructuring of the early phase clinical CRO market, as experienced in recent years, is expected to continue with CRO performance quite variable.

Nevertheless opportunities exist within the early stage clinical market for the deployment of Instem's software solutions. These opportunities are resulting from an increasing recognition of the need to control data quality and integrity and because levels of automation within the early stage environment remain low.

Government and Academic Research

Funding for Government/Academic institutions undertaking later stages of life sciences research in North America, China and Europe continues to grow to cover gaps that are not sufficiently attractive to commercial enterprises.  This enables them to invest in both study automation solutions and in innovative approaches to the process of R&D using novel scientific, informatics and big data approaches.

Financial Review

Instem's revenue model consists of perpetual license income with annual support contracts, professional services fees and SaaS subscriptions. Total revenue for the twelve months to 31 December 2014 increased 18% to £13.4m compared to the same period last year. From a territory perspective, demand for our products and services from customers in North America continued to increase whilst new business in Europe was more muted, reflecting the lower levels of pharmaceutical R&D activity in the region.

During the period, organic revenue increased 11% with the remaining 7% revenue growth from a full-year contribution of the Perceptive Instruments acquisition. The organic revenue growth was driven primarily from the increased sales of our Submit suite with total revenue benefiting from a full year contribution from the Perceptive Instruments acquisition, which made negligible revenue contribution in 2013.

Total recurring revenue, from support contracts and SaaS based subscriptions, increased 12% during the year to £9.2m, now representing 69% of total revenue and 79% of total operating expenses of the Group. SaaS based revenue, which provides enhanced total returns and increased revenue visibility, increased 20% to £1.8m.

Adjusted Earnings before Interest, Tax, Depreciation, Amortisation and share based payments, increased 5% to £1.9m. Development costs incurred during the period were £1.3m of which £0.3m was capitalised. The non-recurring costs included a charge of £0.06m relating to a trade dispute, net of insurance proceeds, and £0.07m of professional fees associated with the Perceptive Instruments acquisition in 2013.

Profit before tax decreased by £0.5m to £0.2m due to increased amortisation of intangibles, increased FRS17 pension charge and net foreign exchange losses.  In 2013 the acquired subsidiaries contributed £0.6m. After consolidation and IFRS adjustments, the core business before acquisitions reported a post-tax loss in 2013 of £0.05m due primarily to a delay in one particularly significant perpetual licence and non-recurring costs of £0.2m.

The Group claimed and received research and development tax credits during the year of £0.1m (2013: £0.05m).

Cash generated from operations was £0.5m (2013: £2.0m) impacted by the late WIL contract win in December 2014, the cash receipt from which is due in 2015, and late receipt of three annual fee renewals. The Group had cash reserves of £1.7m as at 31 December 2014, compared with £2.1m as at 31 December 2013, after making two deferred consideration cash payments for the Instem Clinical acquisition during the year amounting to £0.3m. In addition, cash consideration amounting to £0.3m was taken in the form of a Loan Note included within current financial liabilities at the year-end, which was paid in January 2015.

There was an increase in the funding deficit on the Company's defined benefit pension scheme during the period calculated in accordance with the provisions of IAS19 that amounted to £0.5m, net of deferred tax (2013: £0.6m), which has been recognised in Other Comprehensive Expense. This was a non-cash charge in the period and arose primarily as a result of forecast lower gilt yields, partially offset by higher expected returns on assets.  As part of the scheme's triennial actuarial valuation as at 5 April 2011, the Company agreed a schedule of payments to the scheme with the trustees and the Pensions Regulator that is designed to eliminate the funding deficit over an eight year period. The scheme's actuarial valuation as at 5 April 2014 is currently in process and will be reported in the six month results to 30 June 2015. The defined benefit pension scheme has remained closed to new members since 2000 and to future accrual since 2008.

The increase in the merger reserve of £0.6m was due to the premium arising from the issue of shares as part of the deferred consideration payment relating to the Instem Clinical acquisition.

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.

Principal risks and uncertainties

The principal risks and uncertainties remain unchanged from those described in our 2013 Annual Report.

Outlook

In contrast to 2013, when the preclinical and early clinical market was generally reluctant to commit to any significant investment decisions, 2014 was a period when many of our customers revisited their near-term ambitions and began to evaluate their ongoing information management requirements. This resulted in a very strong second half performance.

As we enter the current financial year, our order backlog is at record levels, underpinning our 2015 expectations. In addition, December's decision by the FDA to mandate the future use of SEND was a key event for which Instem has been planning and we have already begun to see increasing interest and orders for the Group's SEND compliant products across a range of customers.

Total research and development pipelines within the pharma sector have increased by almost 9% to approximately 12,300 drug candidates during 2014, which makes us particularly positive about our outlook for the future as we can now see sustainable growth across our target markets.

Phil Reason

Chief Executive

29^th March 2015

Consolidated Statement of Comprehensive Income

For the year ended 31 December 2014

Continuing Operations	Note	Year ended  31 December 2014 £000	Year ended 31 December 2013 £000
REVENUE	2	13,429	11,361
Operating expenses		(11,699)	(9,685)
Amortisation of internally generated intangibles		(297)	(226)
PROFIT FROM OPERATIONS BEFORE AMORTISATION OF ACQUIRED INTANGIBLES, SHARE BASED PAYMENT AND NON-RECURRING COSTS		1,433	1,450
Amortisation of intangibles arising on acquisition		(640)	(394)
Share based payment		(108)	(96)
PROFIT BEFORE NON-RECURRING COSTS		685	960
Non-recurring (costs)/income		(123)	(200)
PROFIT FROM OPERATIONS		562	760
Finance income		9	145
Finance costs		(359)	(207)
PROFIT BEFORE TAXATION		212	698
Taxation	4	(62)	(169)
PROFIT FOR THE YEAR		150	529
OTHER COMPREHENSIVE EXPENSE
Items that will not be reclassified to profit and loss account
Actuarial loss on retirement benefit obligations		(621)	(587)
Deferred tax on actuarial loss		124	30
		(497)	(557)
Items that may be reclassified to profit and loss account
Exchange differences on translating foreign operations		34	(90)
OTHER COMPREHENSIVE EXPENSE FOR THE YEAR		(463)	(647)
TOTAL COMPREHENSIVE EXPENSE FOR THE YEAR		(313)	(118)
PROFIT ATTRIBUTABLE TO OWNERS OF THE PARENT COMPANY		150	529
TOTAL COMPREHENSIVE EXPENSE ATTRIBUTABLE TO  OWNERS OF THE PARENT COMPANY		(313)	(118)
Earnings per share from continuing operations
Basic	5	1.2p	4.5p
Diluted	5	1.2p	4.5p

Consolidated Statement of Financial Position

As at 31 December 2014

	31 December 2014		31 December  2013
ASSETS	£000	£000	£000	£000
NON-CURRENT ASSETS
Intangible assets	12,439		12,887
Property, plant and equipment	263		265
Deferred tax assets	574		388
TOTAL NON-CURRENT ASSETS		13,276		13,540
CURRENT ASSETS
Inventories	506		307
Trade and other receivables	4,432		2,908
Cash and cash equivalents	1,676		2,053
TOTAL CURRENT ASSETS		6,614		5,268
TOTAL ASSETS		19,890		18,808
LIABILITIES
CURRENT LIABILITIES
Trade and other payables	8,175		7,236
Current tax payable	231		7
Financial liabilities	1,903		1,250
TOTAL CURRENT LIABILITIES		10,309		8,493
NON-CURRENT LIABILITIES
Financial liabilities	281		1,836
Retirement benefit obligations	3,881		3,506
TOTAL NON-CURRENT LIABILITIES		4,162		5,342
TOTAL LIABILITIES		14,471		13,835
EQUITY
Share capital	1,221		1,176
Share premium	7,892		7,892
Merger reserve	(326)		(932)
Shares to be issued	378		270
Translation reserve	228		194
Retained earnings	(3,974)		(3,627)
TOTAL EQUITY ATTRIBUTABLE TO OWNERS OF THE PARENT		5,419		4,973
TOTAL EQUITY AND LIABILITIES		19,890		18,808

Consolidated Statement of Cashflows

For the year ended 31 December 2014

		Year ended 31 December 2014		Year ended 31 December 2013
		£000	£000	£000	£000
CASH FLOWS FROM OPERATING ACTIVITIES
Profit before taxation		212		698
Adjustments for:
Depreciation		127		96
Amortisation of intangibles		937		620
Share based payments and shares to be issued		108		96
Retirement benefit obligations		(398)		(412)
Net foreign exchange gains		-		84
Finance income		(9)		(145)
Finance costs		359		207
			1,336		1,244
CASH FLOWS FROM OPERATIONS BEFORE MOVEMENTS IN WORKING CAPITAL
Movements in working capital:
Increase in inventories		(196)		(210)
(Increase)/Decrease in trade and other receivables		(1,436)		823
Increase in trade and other payables		743	(889)	31	644
CASH GENERATED FROM OPERATIONS			447		1,888
Finance costs		(65)		(9)
Income taxes		100	35	74	65
NET CASH GENERATED FROM OPERATING ACTIVITIES			482		1,953
CASH FLOWS FROM INVESTING ACTIVITIES
Finance income  received		9		61
Purchase of intangible assets		(369)		(407)
Purchase of property, plant and equipment		(124)		(171)
Payment of deferred consideration		(302)		-
Acquisition of subsidiaries		-		(2,710)
Cash acquired with subsidiaries		-		1,134
NET CASH USED IN INVESTING ACTIVITIES			(786)		(2,093)
CASH FLOWS FROM FINANCING ACTIVITIES
Loan notes repaid		-		(250)
NET CASH USED IN FINANCING ACTIVITIES			-		(250)
NET DECREASE IN CASH AND CASH EQUIVALENTS			(304)		(390)
Cash and cash equivalents at start of year			2,053		2,450
Effects of exchange rate changes on the balance of cash held in foreign currencies			(73)		(7)
CASH AND CASH EQUIVALENTS AT END OF YEAR			1,676		2,053

Consolidated Statement of Changes in Equity

		Called up 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 2013		1,176		7,892	(932)	174	284	(3,599)	4,995
Profit for the year		-		-	-	-	-	529	529
Other comprehensive expense for the year		-		-	-	-	(90)	(557)	(647)
Total comprehensive income	-		-		-	-	(90)	(28)	(118)
Share based payment		-		-	-	96	-	-	96
Balance at 31  December 2013		1,176		7,892	(932)	270	194	(3,627)	4,973
Profit for the year		-		-	-	-	-	150	150
Other comprehensive expense for the year		-		-	-	-	34	(497)	(463)
Total comprehensive income	-		-		-	-	34	(347)	(313)
Shares Issued		45		-	606	-	-	-	651
Share based payment		-		-	-	108	-	-	108
Balance as at 31 December 2014		1,221		7,892	(326)	378	228	(3,974)	5,419

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 2014 and 31 December 2013. The figures for the year ended 31 December 2013 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 2014.  The figures for the year ended 31 December 2014 are unaudited.

The preliminary financial information was approved for issue by the Board of Directors on 29 March 2015.

The statutory accounts for the year ended 31 December 2014 will be delivered to the Registrar of Companies following the Company's Annual General Meeting.  Statutory accounts for the year ended 31 December 2013 have been filed with the Registrar of Companies.  The auditor's report on those 2013 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.

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.

					2014 £000	2013 £000
	INFORMATION BY PRODUCT TYPE
	Licence fees				2,734	2,282
	Annual support fees				6,984	6,307
	SaaS subscription fees				1,822	1,543
	Professional services				1,763	1,175
	Funded development initiatives				126	54
					13,429	11,361

				2014 £000	2013 £000
INFORMATION BY GEOGRAPHICAL LOCATION
UK				2,141	2,496
Rest of Europe				2,699	1,991
USA and Canada				7,583	5,871
Rest of World				1,006	1,003
				13,429	11,361

			NON-CURRENT ASSETS EXCLUDING DEFERRED TAXATION
				2014 £000	2013 £000
INFORMATION BY GEOGRAPHICAL LOCATION
UK				12,664	13,120
USA and Canada				16	14
Rest of World				22	18
				12,702	13,152

MAJOR CUSTOMERS

No single customer generated more than 10% of the Group revenue (2013: Nil).

3. Adjusted earnings before interest, tax, share based payments, non-recurring items and depreciation and amortisation    

                                                                                                                        2014            2013

                                                                                                               £000            £000

Profit from operations before amortisation of acquired intangibles,                          1,433           1,450

share based payment and non-recurring costs

Add back

Depreciation                                                                                                        127                96

Amortisation of internally generated intangibles                                                       297              226 

1,857

1,772

4. Income Taxes

Income taxes recognised in profit or loss				2014 £000			2013 £000
	Current tax:
	UK corporation tax on profits of the year				-	42
	Foreign tax				272	147
	Foreign tax in respect of previous years				239	(227)
	Adjustments in respect of previous years				(171)	121
	Adjustments in respect of R&D tax credit				(92)	-
	Total current tax				248	83
	Deferred tax:
	Current year charge				(30)	11
	Adjustment in respect of previous years				(103)	11
	Retirement benefit obligation				(53)	64
	Total deferred tax				(186)	86
	Total income tax recognised in the current year				62	169

				2014 £000		2013 £000
	The income tax expense can be reconciled to the accounting profit as follows:
	Profit before tax				212		698
	Profit before tax multiplied by standard rate of corporation tax in the UK 23.25% (2013: 23.25%)				49		162
	Effects of:
	Expenses not deductible for tax purposes				30		50
	Fixed asset timing differences				(9)		1
	Differences in overseas tax rates				109		63
	Adjustments in respect of prior years				(35)		(95)
	Tax losses utilised in respect of subsidiaries				-		(15)
	Tax losses utilised/carried forward				(82)		3
	Total income tax expense recognised in profit or loss				62		169

5. Earnings per share

Basic and fully diluted

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) based on the monetary value of the subscription rights attached to the outstanding share options.

	2014			2013
	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	150	12,063	1.2	529	11,765	4.5
Potentially dilutive shares	-	155	-	-	15	-
Earnings per share - Diluted	150	12,218	1.2	529	11,780	4.5

Adjusted

	2014			2013
	Adjusted Profit after  tax  £000	Weighted average number of shares '000	Earnings per share  Pence	Adjusted Profit after  tax £000	Weighted average number of shares '000	Earnings per share Pence
Earnings per share - Basic	1,009	12,063	8.4	1,017	11,765	8.6
Potentially dilutive shares	-	155	-	-	15	-
Earnings per share - Diluted	1,009	12,218	8.3	1,017	11,780	8.6

Reconciliation of adjusted profit after tax:	2014 £'000	2013 £'000
Reported profit after tax	150	529
Non-recurring costs	123	200
Amortisation of acquired intangibles	640	394
Foreign exchange differences on revaluation of inter-co balances	96	(84)
Sundry expenses	-	(22)
	---------	---------
	1,009	1,017
	=====	=====

Copies of the Annual Report and Accounts are to be posted to the Company's shareholders and will be available, along with this announcement, on Instem's website at http://investors.instem.com

 

END

 

 

FR SEAESUFISEDD