Half Year Trading Update
Instem plc (AIM: INS), a leading provider of IT solutions to the global life sciences market, announces a trading update for the six months to 30 June 2023 ("H1 2023").
Revenue for H1 2023 is expected to be in the region of £29.7m (H1 2022: £27.0m), an increase of approximately 10.2%, with recurring software revenue growing by 27%. This excludes Samarind Limited, which was sold on 1 April 2023 and will be classified as a discontinued operation in the H1 2023 results statement. Annual Recurring Revenue ("ARR") at 1 July 2023 was c.£41m (1 July 2022: £32m). Overall performance was broadly in line with management expectations.
Closing cash at 30 June 2023 was £8.4m (30 June 2022: £10.3m), after £5.8m of deferred consideration paid in H1 2023 in relation to certain of the Company's previous acquisitions. The Group's balance sheet remains strong, retaining the flexibility to execute on acquisition opportunities as they arise. The Board is currently appraising a healthy pipeline of opportunities progressed to various stages.
The Company commenced the next phase of its development, positioning itself at the forefront of the growing Artificial Intelligence ("AI") opportunity with an increased focus on in silico solutions as part of a blended growth strategy, building on the relationships and fundamentals of the established business.
The transfer of the ToxHub Platform (the "Platform") and launch of Centrus® announced in May 2023 enables existing and new clients to utilise a single repository from which to unlock new knowledge through the application and deployment of cutting-edge algorithms.
The Company also renewed its long-standing agreement with the National Toxicology Program ("NTP"), run by the US National Institute of Environmental Health Sciences ("NIEHS") during the period - providing further potential for Instem to broaden its in silico presence. The size and scale of this extension underpins increased revenue visibility.
Post period end, the Company grew its Provantis footprint further, with Altasciences signing a three-year subscription order worth $3.1m. This follows the acquisitions of Calvert Labs and Sinclair Research by Altasciences and the subsequent decision to standardise on Provantis and to transition from on-premises deployment to Instem's cloud-based solutions, increasing its Provantis user licences from 250 to more than 600.
The Company remains optimistic about the growth potential having positioned itself to provide solutions across the entire drug discovery and development life cycle. The in silico growth opportunity, in particular, is expected to increase as the Company addresses the pressing market need to reduce the cost and time of life sciences research and development, leveraging the integration of "Toxhub" data and technology into its existing Centrus suite.
As in 2022, it is expected that revenue growth will be second half weighted benefitting from increased software recurring revenue, predominantly from new business already secured and the reliable renewal of contracts with current clients.
With an increasing number of customer touch points and cross selling opportunities management is confident that Instem's performance will be broadly in line with the Board's expectations for the full year.
Phil Reason, Instem CEO, commented: "We are delighted with the continued momentum we are seeing, advocating our acquisition strategy and highlighting our standing across the drug research and development lifecycle. We believe there is significant potential to continue driving value and look forward to building on the Company's growing market reach."