Having warned on FY12 revenue and profits as early as July (see Instem warns on full year), Instem, the AIM-listed provider of IT applications to the ‘early development healthcare market’, has delivered expectedly disappointing results for the first half to 30 June. Operating profit for the period slumped 86% to £37k, giving Instem a margin of 0.8% vs. 5.6% last time, and revenue was down 0.5% to £4.87m.
Trying to put a more positive spin on things, CEO Phil Reason said the second half is in line with management expectations, and it would be ‘strongly cash positive’. The good news is that Instem has a high percentage of recurring revenue (74% today vs. 71% in H111), and high renewal rates running at 95%. SaaS revenues are also growing well, up 21% to £600k. Looking ahead, Instem claims to be working on ‘multiple contract opportunities’, from both new and existing customers. These are mostly in the US market, but Instem apparently also sees early signs of recovery in Europe, after seeing several large European research facilities close last year.
Instem is pinning its future prospects on its product suites, Provantis (for pre- and non-clinical studies) and Centrus (data access and harmonisation), which are designed to help pharma companies respond to changing laboratory working practices, such as multi-site working, outsourced R&D, and the adoption of new standards. This bodes well for the longer term. However in the near term things are far less certain, and this hasn’t gone unnoticed by investors, since Instem’s shares have fallen c35% so far this year.