Instem’s full year results did not deviate from the story that has emerged over the past 12 months in which organic growth has been missing but there were signs that the market and its prospects were starting to pick up at the end of the year.
With revenue up 7.9% to £10.8m, the applications provider to the global early development healthcare market did deliver higher revenue than the prior year but this was due to the effect of its March 2011 BioWisdom acquisition (now known as Instem Scientific). It is proving to be a good purchase so far and Instem plans that it will be the first of several acquisitions - its strategy includes growth by acquisition in what is a fragmented market. But with profit for the year of £1m (up from £0.9m) it does not have a strong base to go to the M&A market from despite being cash generative. Cash from operations was up from £0.7m to £1.4m but the cash balance at the end of the year was only marginally up - £3.4m vs £3.3m.
Revenue for the year was lower than expected due to difficult market conditions but the company says there were signs towards the end of the year that the Contract Research Organisation subsector of its market was starting to recover – two delayed contracts from H2 2011 were signed in Q1 2012. There are some positive markers for 2012 for the business as a whole. The formal adoption of the Standard for the Exchange of Non-clinical Data (SEND) by the FDA in June 2011 is expected to drive future business.
The best hopes for growth appear to lie outside its traditional markets of North America and Europe. Revenue from its emerging markets was up from 6% of total revenues in 2010, to 9% in 2011, although that translates to just £0.9m in hard numbers. It is winning contracts in Japan, Singapore and China, and plans to open an office in India. Growth in these markets will help it secure further acquisitions and build critical mass but there is a long road ahead.