The group’s RNS highlights c.10% revenue growth during H1, which maps well to our c.11% expectation for the full year. Within this mix, SaaS has taken a larger-than-expected share of new business – this clearly lowers near-term revenue and profitability, but is a major positive for long term visibility and value. Cash generation also appears to have been strong, with H1 net cash at £6.0m comparing well to our year-end estimate of £6.7m. 

H1 appears to show strength across all of the group – Data Collection (largely Provantis) has seen “increased customer wins”, which is very positive for such a mature product. Informatics (largely the KnowledgeScan product) has seen revenue up by 20%, which is good news after a long period of uncertainty. Finally, the SEND-related business continues to benefit dramatically from regulatory tail-winds, and has more than doubled year-on-year. 

We make no changes to estimates following today’s news, noting the strong H1 performance and the comments around pipeline strength going into H2. We would expect H1 performance to have been impacted in profit terms by the ramp-up in costs to deliver on SEND and Informatics opportunities, which may not have been matched by the (modest) revenue recognition on SaaS deals. Nevertheless, the outlook for the full year remains upbeat and cash generation appears well on track for our end-2019 forecast. 

Instem seems to be firing on all cylinders – the informatics-related business, the regulatory-driven areas and even the mature Provantis product. The group is benefiting from its scale and reach, the breadth of its offering, and many years of investment in sales channels and delivery to major CRO and other customers. We look forward to further positive news across H2, and to potentially very material opportunities as the SEND-related market evolves, and as China’s pharmaceuticals sector continues to grow and adopt more Western practices and technologies.