Instem has reported FY 19A results consistent with the March-20 trading statement and in line with our forecasts. Double-digit revenue growth was confirmed for the year, alongside margin improvement and cash generation. Furthermore, revenue visibility remains high and operationally, all three business areas continue to deliver. We make reductions to forecasts following the announcement (FY 20E EBITDA -8%, FY 21E -9%), reflecting a more prudent view on the medium/longer term outlook for the group. Having seen limited impact from COVID-19 to date and with £6m gross cash on the balance sheet, we retain our view that Instem is well positioned to weather macro-driven turbulence.
Double digit growth, margin improvement and cash generation: The release confirms FY 19A revenue at £25.7m (+13% YoY) and adjusted EBITDA of £4.9m (+20% YoY, margin +110bps). With a closing cash balance of £6.0m, the business continues to deliver positive cash generation and the group’s financial position remains robust.
Revenue visibility remains high: Financial performance continues to benefit from the ongoing move to SaaS* service delivery, with FY 19A SaaS revenues up 16% YoY. Revenue visibility remains high, as evidenced by 9% YoY growth in recurring revenues, which contribute 58% of the total.
Momentum across the group: Each of the three business areas continues to deliver positive momentum. Operational highlights of FY 19A include a doubling of revenues in the Informatics unit, a record number of client wins for Provantis (Study Management) and the group continuing to win the majority of new business in SEND services (Regulatory Solutions).
Positive outlook: Instem has seen limited COVID-19 impact to date. The group has remained “very busy” over the lockdown period - as evidenced by today’s announcement of a $1m contract win with Korean Clinical Research Organisation Biotoxtech in pre-clinical. Management remains confident in the longer-term outlook for the business.
Forecast revisions: Our core view remains that Instem is well-placed to weather macro-driven uncertainty. However, following the release, we take a more prudent view on the medium/ longer term outlook for the business. Our FY 20E and 21E EBITDA estimates fall by 8% and 9% respectively.