Instem's profits soar on recurring revenue growth

The company generated profit before tax of £1.7m for 2018, up from £0.3m the year before, as revenue increased 8% to £22.7m.

This increase came as software-as-a-service revenue jumped by 25% to £5.5m, with overall recurring revenues, including support and maintenance contracts, increasing by 6% to £13.7m.

However, cash and cash equivalents stood at £3.6m at the end of the year, up from £3.1m but lower than expected due to a number of delayed customer payments that have been received since the end of the period.

Phil Reason, chief executive of Instem, said: "With increasing momentum in the business from recent contract wins and the growing pipeline, we are confident about the outlook for the group for 2019 and beyond."

New contracts included wins with two top five global non-clinical contract research organisations, which are each worth in excess of £1m, while a "leading Fortune 500 company" adopted Instem's Samarind RMS solution for its worldwide medical products regulatory tracking system.

The AIM traded company is aiming to increase SaaS revenues through a combination of new business wins directly onto its platform and accelerating the conversion of on-premise customers to SaaS, which it said will increase margins.

"While our strategy remains focused on Instem's organic revenue growth, expanding operational gearing and improving positive cashflow, management will continue to consider complementary acquisition targets to further develop our position as a market leading provider of IT solutions to the global life sciences market," said Reason.

A statement from the company also noted that the impact of Brexit, whatever the outcome, should be minimal due to its significant recurring revenues and the majority of its business taking place outside of Europe.

Instem's shares were up 7.52% at 329.00p at 0822 GMT.