Instem plc: Half Year Trading Update

Announcement date: 4th August 2022

Summary

Strong organic and inorganic growth with an over 60% increase in recurring software revenue

On 4th August 2022, Instem plc (AIM: INS), a leading provider of IT solutions to the global life sciences market, announced a positive trading update for the six months to 30 June 2022 ("H1 2022").

Financial Highlights

Having completed the acquisitions of The Edge Software Consultancy Ltd ("The Edge"), d-Wise Technologies, Inc ("d-wise") and PDS Pathology Data Systems Ltd during the last financial year (together, the "Acquisitions"), H1 2022 is the first reporting period in which they all contributed fully.

Combined organic and inorganic revenue for H1 2022 is expected to be in the region of £27.6m (H1 2021: £19.8m), an increase of approximately 39%. In addition, recurring software revenue grew by over 60% in the same period.

Consistent with the outlook commentary in our FY21 results, growth in H1 2022 operating profit is expected to be at a lower rate than overall revenue growth on account of inflationary pressures, which led to increased rates of remuneration for staff across the Group. This will be partially mitigated in 2022 via price increases that were announced in late April 2022.

The Group's balance sheet remains strong, with closing cash at 30 June 2022 of £10.3m and the Group retains the flexibility to execute on acquisition opportunities as they arise.

Operational Highlights

Despite wider global macro-economic challenges, Group growth was supported by a robust underlying life sciences research and development market, and we have continued to experience demand for our solutions across the entire drug development value chain .

The earn-out periods for d-wise and The Edge have now completed with both earn-out targets met in full. The integration of the Acquisitions is also now substantially complete.

Outlook

The Company remains optimistic about the wider market opportunity - especially given its broader reach following the integration of the Acquisitions. With a scalable platform in place and significant opportunities, the Board is confident that the enlarged group will continue to deliver growth across all key financial and operational metrics. We are therefore confident that the Group will deliver on the Board's expectations for the FY22 financial year.

Phil Reason, CEO of Instem, commented: "Consistent delivery is key and we are delighted with the continued successes of our organic and acquisitive growth strategies. Visibility for H2 has improved through increased recurring revenue, the value of the order backlog for professional and outsourced services and reduced growth in staff numbers which in turn reflects a higher gross margin revenue mix."

Source(s)

"Half Year Trading Update" — Instem plc, 4th August 2022.

Additional information

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