Annual Financial Report

RNS Number : 7951A

Cambridge Cognition Holdings PLC

29 March 2017

 

29 March 2017

Cambridge Cognition Holdings Plc

("Cambridge Cognition" or the "Company")

Preliminary Results for the year ended 31 December 2016

Strong growth delivers maiden profit

The neuroscience digital health company Cambridge Cognition Holdings plc, (Cambridge, UK - LSE: COG), which develops and markets software products to improve brain health, today announces its audited preliminary results for the year ended 31 December 2016.

Financial Highlights

·        Total revenues increased by 37% to £6.88m (2015: £5.04m)

·        Maiden profit for the year of £0.22m (2015: loss of £0.78m*)

·        Earnings per share of 1.4p (2015: loss of 4.6p*)

·        Operational cashflow of £0.47m (2015: outflow of £0.71m)

·        Net cash balances at 31 December 2016 of £2.38m (31 December 2015: £0.76m)

·        Successful equity placing of £1.25m (£1.14m net proceeds) in April 2016

* Loss in 2015 includes impact of £0.21m one-off exceptional item. There are no exceptional items in 2016.

Operational Highlights

·        Portfolio of products and services expanded to meet needs of wider psychiatric and neurological disease areas

·        New products to meet the needs of new healthcare economics

o  More efficient R&D (Recruit product)

o  Demonstration of treatment benefits (wearable product)

·        Software and services revenues up 35% to £6.19m (2015: £4.59m)

·        First contracts won for new wearables and Recruit products

·        Higher number of new product launches in the year despite lower R&D spend (£0.89m in 2016 compared with £1.30m in 2015)

·        Commitment made at placing to invest in sales team met and already demonstrating benefits

·        FDA clearance for CANTAB Mobile enables marketing in the US

Commenting on the results Steven Powell, Chief Executive Officer, said: 

"Our Company made significant commercial and technical progress in 2016, with record revenues and our first profit. We have delivered on commitments made last year to develop our sales team, our products and our business partnerships and these improvements are already showing benefits.

Our new business partnerships demonstrate that the pharmaceutical sector is willing to invest in the validation and adoption of digital health products. We are in a prime position to take advantage of these opportunities and indeed lead some of the thinking within the industry as to how best to deploy disruptive cognitive assessment technologies.

2017 has started promisingly with continued momentum towards both our short and long term goals. It is our aim to establish the Group as an innovative leader in cognitive neuroscience and innovation. Progress has been encouraging and we look forward to another productive and value-enhancing year."

Enquiries:

Cambridge Cognition Holdings plc	www.cambridgecognition.com
Steven Powell, Chief Executive Officer	Tel: [phone]
Nick Walters, Chief Financial Officer	[e-mail]
finnCap Ltd (Nomad and Joint Broker)	Tel: [phone]
Geoff Nash/ Simon Hicks	(Corporate Finance)
Alice Lane	(Corporate Broking)
Dowgate Capital Stockbrokers Limited (Joint Broker)	Tel: [phone]
David Poutney/ James Serjeant
IFC Advisory Ltd (Financial PR and IR)	Tel: [phone]
Tim Metcalfe/Graham Herring/Miles Nolan

The information communicated in this announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) No. 596/2014.

CHIEF EXECUTIVE'S REVIEW

Key highlights

·      Revenue growth of 37% to £6.88m and first operating profit reported

·      First contracts won for new wearable and Recruit products

·      Business now targeting every stage of the drug development cycle in multiple disease areas

·      Oversubscribed placing raised £1.14m, and investment commitments fulfilled

·      Net cash of £2.38m (2015: £0.76m)

Overview

2016 was a year of profitable growth, cash generation and strategically significant achievement in both technical and commercial development. Early in 2016 we made a number of important commitments to invest in and advance our Company; the primary commitment being to invest in our sales infrastructure to accelerate revenue growth. This was implemented to plan and resulted in an increase in both field and in-house sales personnel in Europe and the USA. In parallel we launched several new products for application in pharmaceutical clinical trials resulting in our broadest product portfolio to date.

Expansion of the sales team facilitated Group revenue growth of 37% driven by our core offerings of software and services. Throughout the year we also diversified our scientific and clinical focus across a wider range of neurological disorders, including Alzheimer's disease, Multiple Sclerosis and Parkinson's disease as well as psychiatric disorders such as Schizophrenia and ADHD. Our existing core products are supported by depth of data and peer reviewed publications across the breadth of these diseases and we have added a data analytics capability and scientific consultancy to assist both researchers and pharmaceutical companies in their clinical trials.

Another commitment was to develop and commercialise our technical innovation programmes to improve clinical trial efficiency. As a result, 2016 was our most productive R&D year to date with the highest number of new products and technologies launched into our core business areas. This was achieved despite reducing the overall R&D spend - £0.89m in 2016 compared to £1.30m in 2015.

Group financial results

£'000	2016	2015
Hardware	552	329
Software and services	6,193	4,592
Other	131	121
Group	6,876	5,042

The trading performance for the year was strong combining growth in revenue with a first reported operating profit and positive cash generated from operations.

Revenues grew across all categories by £1.84m (37%). Software and Services continued to dominate contributing 90% of total sales. Although sales of hardware increased in the year, this was attributable to one contract and the underlying shift in product mix from hardware to higher margin software and services continues in line with our long term strategy and following completion of the migration of our test products to our Cantab Connect cloud platform.

Gross margins of 86% were slightly down on the 2015 level of 88%. This was due to the large hardware sale noted above.

Despite the growth in our sales team, as well as other costs associated with a growing business, we were able to restrict increases in administrative costs to a 4% year on year increase (£5.86m in 2016 compared to £5.62m in 2015). One of the cost reductions has been in the area of R&D where spend has fallen to £0.89m in 2016 from £1.30m in 2015. This is in line with the decision taken last year to focus on commercialising our new and emerging technologies through pharmaceutical sales channels and corporate partners.

Grant income of £0.09m (2015: £0.51m) fell significantly as the innovation model moves from direct investment (even if grant supported) to collaborations and partnerships.

These factors combined to produce an operating profit of £0.12m. This contrasts with an operating loss in 2015 of £0.87m, or a £0.66m loss when the exceptional item is excluded.

The profit attributable to shareholders after tax credit and minority interests is £0.27m, which equates to earnings per share for the year of 1.4 pence. This contrasts to a loss of 4.6 pence per share in 2015, or 3.4 pence per share when the exceptional item is excluded.

Following the result of the Brexit referendum, the value of the pound fell against most major currencies. The Group generated 47% of its revenue in US dollars and 7% in Euros but has a natural hedge against dollar revenues by way of its US based office and employee costs. The post Brexit decline in the value of the pound is estimated to have increased revenue by £0.23m and increased profit for the year by £0.10m when compared to results on a constant currency basis.

The Group generates the majority of its cash from operations, further supplemented by grant income and R&D taxation credits. Accordingly, profit before tax excluding non-cash items such as depreciation and share-based payments will broadly equate to cash income, subject to working capital movements. Despite the revenue growth, working capital in 2016 was managed such that operations generated £0.28m of cash from a profit excluding depreciation and share-based payments of £0.27m. Tax credits in respect of both 2014 and 2015 were received during the year, meaning that operating activities generated £0.47m of cash. This, along with the net placing proceeds of £1.14m drove net cash to a year-end position of £2.38m, an increase of £1.62m over the previous year end.

Operational Development

Following a review of our sales and marketing resources, we identified that we could reduce future costs and realise efficiency gains in sales by combining the previously separate business units of Pharmaceutical Clinical Trials, Academic Research and Healthcare into a single Product group.

The technology and innovation team now report as a separate Innovations group and has been tasked with making a growing contribution to income via licensing and collaborative agreements.

For comparative purposes we have set out the results of the three business units as reported in the audited accounts but we will report these as a single Products division next year.

Products

£'000	2016	2015
Pharma Clinical	4,799	3,395
Academic	2,001	1,544
Healthcare	76	103
Group	6,876	5,042

During the year we announced additions to our product portfolio, based on the CANTAB cognitive assessment software, which have extended our product offer across all stages of the drug development cycle.

CANTAB Recruit is an online patient recruitment portal that accelerates the identification of qualified participants for both academic studies and clinical trials. This is key to the success of clinical trials as one-third of total trial costs are within the recruitment phase and 80% of clinical trials are delayed due to recruitment issues. The first sale of this product was secured within five months of its launch.

The 41% growth in our Pharmaceutical Clinical Trials business is a reflection of both underlying growth as well as large contract wins such as the £2.82m double success announced in September 2016. The expansion of the sales team in both the US and Europe is beginning to generate results with both the order book and pipeline of opportunities increasing over the same time last year.

The Academic Research business grew 30% this year and our products have now been used in over 800 universities and research institutions worldwide, leading to over 2,000 peer-reviewed publications and over 100,000 citations. We secured our first sale to an international biobank during the year. Biobanks collect large amounts of data which they catalogue and make available to researchers across many fields. Accordingly, they play a crucial role in biomedical research and we believe similar opportunities can be pursued. Overall, revenues in the Academic Research sector continue to be an encouraging mix of returning customers and new opportunities being developed.

Healthcare Technologies remain an important part of our business both in the UK and overseas markets. CANTAB Mobile, already a Class II Medical Device in the UK, was awarded 510(k) clearance from the United States Food and Drug Administration ('FDA'), enabling it to be marketed as a medical device in the United States. Significant interest has developed in both primary and secondary markets in the US for this iPad-based product designed to detect clinically relevant memory impairment in older adults. A follow on submission of CANTAB Insight will further add to the product suite. Our main focus continues to be near patient testing in primary care both in public service health but also in private clinics and occupational health providers.

Innovation

With the creation of the Innovation group, we have established a cross-functional activity with all R&D projects now targeted with specific, near term commercial goals. Each project is not only focused on a specific sales channel but also has to satisfy a pre-determined customer need. In prior years innovation projects were not always given such clear commercial direction with the result we have now accelerated the time to get new projects to market.

The most obvious example of the effectiveness of this is in the development of a novel digital application that provides real-time measurement of mental health. Mental health disorders are characterised by symptoms that can fluctuate regularly, which can create problems for healthcare professionals who see patients infrequently and have little insight to their patients' health in everyday life. By using wearables and smart devices to monitor patients' health more regularly, a richer and more natural profile of mental health can be developed and used to improve the understanding, diagnosis and treatment of mental health disorders. This near-user technology provides greater and more meaningful cognitive data (including, for example, sleep patterns) whilst reducing the need for clinical visits.

The original concept was conceived late in 2015, a development partner was sourced in March 2016, the feasibility study completed by August 2016 and the first commercial order for a pilot study was received as early as February 2017. The pilot study uses a specially designed application on the Apple Watch to monitor and assess cognitive function in patients with major depressive disorder and the next step is an expanded study with greater revenue potential.

However, perhaps the most disruptive technology innovation was announced in March 2017 with the launch of web based testing which enables researchers to run near-patient testing of participants remotely. The innovation will allow studies to gather digital cognitive biomarkers at frequent time-points for more accurate and rapid data to aid earlier decision-making and conduct large-scale research projects virtually, reducing the overall running costs of studies using proven neuropsychological assessments.

Current and future innovations will support one of the Group's aims of expanding our IP portfolio across disease areas and all stages of the drug development cycle. It is these IP products, along with the Group's expertise in tailoring and applying them to specific situations that will create greater value in the Group.

Outlook

Our Company made significant commercial and technical progress in 2016. The current financial year has started well, with continued progress towards both our short and long term goals. The Company is well-positioned to pursue appropriate opportunities for partnerships that drive organic growth and moves the Company into sustainable profitability.

Business partnerships, as exemplified by the recently announced collaboration with Takeda, demonstrate that the Pharmaceutical sector is willing to invest in the validation and adoption of digital health products. We are well placed to take advantage of these opportunities and lead some of the thinking within the industry as to how to deploy disruptive cognitive assessment technologies. Commercialising our IP, both through traditional sales routes and through licensing our technology and IP for use in customers' bespoke products, remains key for future growth.

There are, of course, wider macro economic uncertainties of note when planning for 2017 and beyond. The shape of the United Kingdom's future relationship with the European Union is not yet known and in the US, there is likely to be a significant impact on the pharmaceutical and healthcare sectors arising from the political change brought about by the new President.

We will continue to work closely with our customers to understand developments which should position the company well for future growth. It is our goal to establish the Group as an innovative leader in cognitive neuroscience and innovation. Whilst there is still work to do, progress has been encouraging and we look forward to another productive and value-enhancing year.

Steven Powell

Chief Executive Officer

28^th March 2017

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the year to 31 December

	Notes	2016 £'000	2015 £'000
Revenue	3	6,876	5,042
Cost of sales		(986)	(590)
Gross profit		5,890	4,452
Administrative expenses		(5,860)	(5,620)
Other income		86	509
Operating profit/ (loss) before exceptional item		116	(659)
Exceptional item	4	-	(208)
Profit/ (loss) before tax		116	(867)
Income tax		106	85
Profit/ (loss) for the year		222	(782)

Attributable to:
Equity holders in the Parent		272	(782)
Non-controlling interest		(50)	-
		222	(782)

Earnings per share (pence)
Basic and diluted earnings per share		1.4	(4.6)
Basic and diluted earnings per share excluding exceptional items		1.4	(3.4)

Other comprehensive income
Profit/ (loss) for the year		222	(782)
Items that may subsequently be reclassified to profit or loss
Exchange differences on translation of foreign operations		4	-
Total comprehensive income for the year		226	(782)

All items of other comprehensive income are attributable to the equity holders in the Parent.

The above results relate to continuing operations.

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 31 December

	Notes	2016 £'000	2015 £'000
Assets
Non-current assets
Goodwill		352	352
Property, plant and equipment		117	141
Total non-current assets		469	493
Current assets
Inventories		37	58
Trade and other receivables		2,177	1,641
Cash and cash equivalents		2,384	756
Total current assets		4,598	2,455
Total assets		5,067	2,948
Liabilities
Current liabilities
Trade and other payables		2,206	1,535
Total liabilities		2,206	1,535
Equity
Share capital	5	204	170
Share premium account		7,517	6,412
Other reserves		5,985	5,981
Own shares		(47)	(51)
Retained earnings		(10,748)	(11,099)
Equity attributable to Parent		2,911	1,413
Non-controlling interest		(50)	-
Total equity		2,861	1,413
Total liabilities and equity		5,067	2,948

 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

	Share capital	Share premium	Other reserves	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 year	-	-	-	-	(782)	-	(782)
Issue of new share capital	1	77	-	-	-	-	78
Transfer on allocation of shares held in trust	-	-	-	123	(123)	-	-
Credit to equity for equity-settled share-based payments	-	-	-	-	68	-	68
Transactions with owners	1	77	-	123	(55)	-	146
Balance at 31 December 2015	170	6,412	5,981	(51)	(11,099)	-	1,413
Total comprehensive income for the year	-	-	4	-	272	(50)	226
Issue of new share capital	34	1,219	-	-	-	-	1,253
Share issue costs	-	(114)	-	-	-	-	(114)
Transfer on allocation of shares held in trust	-	-	-	4	(4)	-	-
Credit to equity for equity-settled share-based payments	-	-	-	-	83	-	83
Transactions with owners	34	1,105	-	4	79	-	1,222
Equity attributable to Parent	204	7,517	5,985	(47)	(10,748)	-	2,911
Non-controlling interest	-	-	-	-	-	(50)	(50)
Balance at 31 December 2016	204	7,517	5,985	(47)	(10,748)	(50)	2,861

For the year to 31 December

CONSOLIDATED STATEMENT OF CASH FLOWS

For the year ended 31 December

	Notes	2016 £'000	2015 £'000
Net cash flows from operating activities	6	473	(708)
Investing activities
Purchase of property, plant and equipment		(44)	(133)
Net cash flow used in investing activities		(44)	(133)
Financing activities
Proceeds from the issue of share capital net		1,139	78
Net cash flows from financing activities		1,139	78
Net increase/ (decrease) in cash and cash equivalents		1,568	(763)
Cash and cash equivalents at start of year		756	1,519
Exchange differences on cash and cash equivalents		60	-
Cash and cash equivalents at end of year	6	2,384	756

1.   General information

Cambridge Cognition Holdings plc ('the Company') and its subsidiaries (together, 'the Group') is a neuroscience digital health company specialising in the precise measurement of clinical outcomes in neurological disorders. It develops and markets validated, near patient assessment products using cognition as a biomarker to improve understanding, diagnosis and treatment in brain health.

The Company is a public limited company which is 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.

In the period since the principal trading company, Cambridge Cognition Limited was formed in 2002, it has created a well-established business through sales of its proprietary CANTAB^® (Cambridge Neuropsychological Test Automated Battery) software into academic and pharmaceutical research locations around the world.

2.   Basis of preparation

The financial information of the Group set out above does not constitute "statutory accounts" for the purposes of Section 435 of the Companies Act 2006.

The financial information in this preliminary results announcement does not constitute the Group's statutory accounts for the year ended 31 December 2016 or the year ended 31 December 2015 but is derived from those accounts.

The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards ('IFRS') as adopted by the European Union, IFRIC interpretations and the Companies Act 2006 applicable to companies operating under IFRS. The accounting policies adopted are consistent with those followed in the preparation of the consolidated financial statements for the year ended 31 December 2015.

3.   Segmental information

The analysis of revenue by reportable business unit is as follows:

	2016 £'000	2015 £'000
Pharmaceutical Clinical Trials	4,799	3,395
Academic Research	2,001	1,544
Healthcare Technology	76	103
	6,876	5,042

The analysis of the Group's revenue for each major product and service category is as follows:

	2016 £'000	2015 £'000
Hardware	552	329
Software and services	6,193	4,592
Other	131	121
	6,876	5,042

4.   Exceptional item

In the final quarter of 2015, the Company investigated the possibility of acquiring a US based Group. The acquisition was not completed. Expenses in 2015, which principally related to professional fees, totalled £208,000. As these expenses are of a magnitude and nature that the Directors consider to be outside of the Group's normal operating business, they have been separately disclosed as an exceptional item.

5.   Earnings per share

The calculation of the basic and diluted earnings per share ("EPS") is based on the following data:

Earnings

	2016 £'000	2015 £'000
Earnings for the purposes of basic and diluted EPS per share being net profit/ (loss) attributable to owners of the Company	272	(782)
Earnings for the purposes of basic and diluted EPS excluding exceptional item	272	(574)
Number of shares
	2016 '000	2015 '000
Weighted average number of ordinary shares for the purposes of basic EPS	19,402	16,831
Weighted average number of ordinary shares for the purposes of diluted EPS	19,473	16,831

For 2016, the impact of diluted shares is so minimal that there is no impact on EPS when rounded to 0.1 pence.

For 2015, the effect of options would be to reduce the loss per share and as such the diluted loss per share is the same as the basic loss per share.

6.   Notes to the cash flow statement

	2016 £'000	2015 £'000
Profit/ (loss) before tax	116	(867)
Adjustments for:
Depreciation of property, plant and equipment	68	56
Share-based payment expense	83	68
Operating cash flows before movements in working capital	267	(743)
Decrease in inventories	21	127
(Increase) in receivables	(575)	(44)
Increase/ (Decrease) in payables	567	(168)
Cash generated by operations	280	(828)
Tax credit received	193	120
Net cash from operating activities	473	(708)

Cash and cash equivalents

	2016 £'000	2015 £'000
Cash and bank balances	2,384	756

Cash and cash equivalents comprise cash and short-term bank deposits with an original maturity of three months or less, net of outstanding bank overdrafts. The carrying amount of these assets is approximately equal to their fair value.

7.   Annual Report & Annual General Meeting

The Annual Report will be available from the Company's website from 9.00 a.m. on 29 March. Notice of the Annual General Meeting together with a copy of the Annual Report will be posted to shareholders by 3 May 2017. The Annual General Meeting of the Company will be held at 10.00 a.m. on 25 May 2017 at the registered office, Tunbridge Court, Tunbridge Lane, Bottisham, Cambridgeshire, CB25 9TU.

 

END

 

 

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