TIDMCOG
RNS Number : 3487R
Cambridge Cognition Holdings PLC
21 September 2017
21 September 2017
Cambridge Cognition Holdings plc
("Cambridge Cognition" or the "Company")
Half Yearly Report
The neuroscience digital health company Cambridge Cognition
Holdings plc, (AIM: COG, 'the Company'), which develops and markets
software products to improve brain health, announces its unaudited
Interim Results for the six months ended 30 June 2017.
Investment in commercial team reaps rewards with record sales
pipeline
These results demonstrate growth in software and service
revenues and continued advances in innovative products and
technologies in line with the plans presented to shareholders in
April 2016.
Financial Highlights
-- Total revenue GBP3.21m (H1 2016: GBP3.26m)
-- Gross profit increased by 7.4% to GBP2.90m (H1 2016: GBP2.70m)
-- Loss before tax of GBP0.39m (H1 2016: GBP0.15m loss)
-- Adjusted* loss before tax of GBP0.29m (H1 2016: GBP0.11m loss)
-- Loss per share of 1.8p (H1 2016: 0.6p loss per share)
-- Cash balance of GBP1.82m at 30 June 2017 (H1 2016: GBP1.38m)
*Adjusted for share-based payments charge
Operational Highlights
-- Quality of earnings and revenue mix improved: revenues
excluding hardware up 5% at GBP3.14m (H1 2016: GBP2.99m) Service
revenues up 57% at GBP1.79m (H1 2016: GBP1.14m)
-- Sales order pipeline increased by 65% to record levels
-- As expected, administrative expenses increased by GBP0.38m, including investment in sales infrastructure and science and development costs
-- CANTAB data used in landmark EBBINGHAUS study presented by Amgen
-- Cognition Kit joint venture successfully advanced from pilot to phase 1 study
-- New intellectual property using automatic speech recognition technology
Commenting on the results Steven Powell, Chief Executive Officer
of Cambridge Cognition, said: "These results demonstrate that our
strategic shift to providing value added services, either alongside
our core products or on a standalone basis, is gaining momentum.
Over the last two years we have renewed our commitment to invest in
our science and technology base and the resulting innovations will
meet the ever increasing demand for near patient health solutions
and drive future business growth."
Enquiries:
Cambridge Cognition Holdings www.cambridgecognition.com
plc
Steven Powell, Chief Executive Tel: 01223 810 700
Officer
Nick Walters, Chief Financial
Officer
finnCap Ltd (Nomad and Joint Tel: 020 7220 0500
Broker)
Geoff Nash/ Simon Hicks (Corporate Finance)
Alice Lane (Corporate Broking)
Dowgate Capital Stockbrokers Tel: 020 3903 7715
Limited (Joint Broker)
David Poutney/ James Serjeant
IFC Advisory Ltd (Financial Tel: 020 3053 8671
PR and IR)
Tim Metcalfe/ Graham Herring/
Miles Nolan
CHIEF EXECUTIVE OFFICER'S REVIEW
The revenue for the first half of 2017 was in line with
expectations and broadly similar to H1 2016, which included two
major contracts with a significant impact on revenue. To have
matched the 2016 result demonstrates that steps have been taken to
shape a broader revenue base and we are less dependent on one-off
large contracts as the Company has been in the past. Furthermore,
the Company is well placed to build on this solid foundation when
contracts currently in negotiation come through in the second half
and beyond.
The main area of year-on-year revenue growth is services, which
has grown 57% on the same period last year. Gross margins also
increased by 7.4% which partly offset the investment in the sales
and marketing team after the financing in H1 2016.
Our R&D teams continue to make considerable progress across
a number of projects to expand our testing capabilities and
increasingly deploy digital solutions to take testing closer to the
patient. This is exemplified through our increasing use of
wearables and web based testing and the development of novel
testing technology such as automatic speech recognition. Our
pipeline of development projects has expanded over the past year
and is focused on delivering new innovation into our commercial
offering, while continuing to be managed within the financial
constraints of the Company.
Financial Results
Our core high-margin software and services revenues grew by 5%.
The quality of earnings and revenue mix is improved. Growth in
service revenue of 57% is pleasing as this is the area of the
business that has been a particular focus for growth. These
services include contract development and data analytics. Also in
line with our stated strategy is the return to an underlying
decline in low margin hardware sales after the deviation seen in H1
2016 due to fulfillment of a single large order.
H1 2017 H1 2016 %
GBPm GBPm Change
-------- -------- -------
Software 1.36 1.84 (26.1)
Services 1.79 1.14 57.0
Hardware 0.06 0.28 (78.6)
Total 3.21 3.26 (1.5)
---------- -------- -------- -------
Software revenues declined by 26.1%. This reflects the strategic
change from a small number of large contracts to a smaller number
of earlier phase projects which will ultimately provide a firmer
foundation for consistent future revenue growth. Software revenue
will continue to exhibit some variability because it is recognised
through the implementation of a contract which varies in both size
and duration.
Service revenues increased by GBP0.65m to GBP1.79m, or 57%
compared to H1 2016. This increase is a result of a number of
factors. First, a higher percentage of the revenues from our
wearables and CANTAB Recruit products are classified as services.
Second, we are conducting more value added services within our
clinical studies as we perform more scientific analyses and trial
design work for our customers. Finally, we are being increasingly
commissioned for standalone pieces of scientific consultancy,
which, while still comparatively low in value, is exposing us to a
greater number of customers and sits well with our reputation as an
innovative partner. This shift to good quality, high margin and
repeat business is a welcome move and one which will help to drive
our recurring revenue, giving us greater visibility as we continue
to build the business.
Hardware revenues have, as expected, significantly reduced after
a one-off increase in 2016. Our cloud-based CANTAB Connect software
products can now be installed and operated on devices that
customers own or source themselves. While we remain happy to supply
hardware with software pre-installed, this is required less
frequently. We expect hardware to make a minimal contribution going
forward with only the occasional exception such as reported last
year.
Following the successful equity placing in April 2016, we
employed the funds raised to expand the sales team both in Europe
and the USA. The result of this exercise has been reflected in a
65% increase in the opportunity pipeline to record levels. We do
not expect the full benefits of this investment to materialise
until later this year and into 2018.
Gross profit grew by 7.4% to GBP2.90m (H1 2016: GBP2.70m) which
outstripped revenue growth given the increase in higher margin
services revenues and the reduction in lower margin hardware sales.
Gross margin for the period has increased to 90.3% from 82.8%.
Total administrative costs for the period (incorporating sales
and marketing, R&D and general administration) increased by
GBP0.38m (13.0%) to GBP3.31m (H1 2016 GBP2.93m). This increase is
driven by a 37% increase in sales and marketing costs and an 8.4%
increase in R&D costs. These increases in functional costs were
mitigated in part by a 13.9% reduction in general administrative
support costs. Our share-based payments expense also increased in
the period as we have widened ownership in the employee share
option scheme to ensure that all staff are properly incentivised
and focused on our longer term goals.
These investments have directly contributed to a reduced EBITDA
and pre tax result. EBITDA was a loss of GBP0.35m (H1 2016:
GBP0.11m loss). Losses before tax were GBP0.39m (H1 2016: GBP0.15m
loss). As a result, loss per share was 1.8p (H1 2016: 0.6p
loss).
Net cash outflow from operations during the period was GBP0.55m,
a small increase from a similar seasonal outflow of GBP0.53m for
the first half of the prior year. The net cash balance at 30 June
2017 was GBP1.82m (as at 31 December 2016: GBP2.38m; 30 June 2016
GBP1.38m), an increase of GBP0.44m on the same period last
year.
Operational Review
As reported in last year's strategic report, we identified that
we could realise efficiency gains in sales by combining the
previously separate business units of Pharmaceutical Clinical
Trials and Academic Research into a single product group. This
reorganisation was completed with effect from 1(st) January 2017
and our Operational Review is no longer categorised along these
lines.
Through 2016, we expanded our CANTAB range of products to
address all stages of the clinical drug development cycle from
Phase I clinical trials to post approval market analysis. This
included the introduction of CANTAB Recruit to accelerate patient
recruitment in CNS trials together with the Cognition Kit joint
venture for developing wearables for measuring cognitive
performance in everyday life.
In March 2017 Amgen published the results of their EBBINGHAUS
study. We were proud to be involved in this study both through use
of our software and also through working with Amgen on scientific
analysis. This was a landmark study, given both the number of
participants and time points and was focused on cardiovascular
disease highlighting that the use of CANTAB software is not limited
to cognitive assessment in the CNS field alone.
We also reported in March 2017 that we had added web based
testing to our product offering which has enabled researchers to
run testing of trial participants remotely. A highly significant
innovation, it allows studies to gather digital cognitive
biomarkers at frequent time-points for more accurate and rapid data
to aid earlier decision-making and conduct large-scale research
projects virtually, reducing the overall running costs of studies
using proven neuropsychological assessments.
As part of this move to patient centric technology advancements,
we also announced results of the first move away from touch screen
testing toward a new delivery format. We have an ongoing programme
to use automated voice recognition technology to monitor patient
response to pain and depression treatments. To ensure that we can
continue to innovate within the constraints of our financial
resources we were pleased to report recently that we have been
awarded grant funding of GBP0.3m from Innovate UK to advance our
work in biomarkers in this field. We expect this project to
conclude and commence commercialisation in late 2018.
While continuing to build our core product business through all
stages of clinical development we have also answered a market
demand to make our technologies available in other formats; often
for use in non-clinical trial applications. We have therefore
launched CANTAB Prime, which utilises modular software architecture
to apply existing product components within the customer framework
enabling the collection, analysis and reporting of cognitive
measures from within third party platforms. CANTAB Prime can offer
a 'white-label' solution to a multitude of users across our
spectrum of customers who wish to incorporate our products and
knowledge into their own systems for collecting and analysing data.
CANTAB Prime will open up new opportunities previously closed to us
in particular where users were not willing to adopt a product that
stood in isolation outside their core systems. This approach will
enable us to work in partnership with technology companies outside
of our core, existing pharmaceutical market to address broader
healthcare opportunities.
In order to streamline our operations in the US, the decision
was taken earlier this year to relocate our base in Salt Lake City
to a new site in Boston. Exiting our old lease was achieved with
minimal disruption and cost to the Company. Though it is early
days, the office is now in a well established knowledge quarter and
we expect to be well placed to recruit talent, as well as further
drive our sales in what will be an increasingly important market
for the Company.
Future developments aside, we have been pleased with the
progress of some of our more recent innovations. CANTAB Recruit,
web based testing and the wearables projects, notably the Cognition
Kit project with Takeda, have added over GBP0.5m to our sales since
launch, mainly as higher margin service revenues. We see this as an
important example of how the demands of the market, and our ability
to meet those demands, is evolving. The partnership with Takeda is
looking at patients with Major Depressive Disorder (MDD). This
represents a first move into this important area, and also
exemplifies the combination of clinical trial, research and
healthcare application that we believe will characterise much of
our future market.
Outlook
With modest investments in commercial infrastructure and R&D
activity we have transitioned to an improved blend of product and
service revenues. Both the sales pipeline and the innovation
pipeline are stronger than in recent history at a time when there
is substantial appetite for both neuroscience and digital health
solutions. We expect a strong second half to 2017 as we continue to
convert our order pipeline and we are confident in the growth
potential of Cambridge Cognition into 2018 and beyond.
Steven Powell
Chief Executive Officer
21 September 2017
CONDENSED CONSOLIDATED COMPREHENSIVE INCOME STATEMENT
For the six months ended 30 June 2017
6 months 6 months Year
to 30 to 30 to 31
June June December
2017 2016 2016
Unaudited Unaudited Audited
Note GBP'000 GBP'000 GBP'000
---------- ---------- ----------
Revenue 5 3,209 3,264 6,876
Cost of sales (308) (566) (986)
---------- ---------- ----------
Gross Profit 2,901 2,698 5,890
Administrative expenses (3,307) (2,925) (5,860)
Other income 20 82 86
---------- ---------- ----------
(Loss)/ Profit before
tax 5 (386) (145) 116
Income tax (3) - 106
---------- ---------- ----------
(Loss)/ Profit for the
period (389) (145) 222
========== ========== ==========
Attributable to:
Equity holders in the
parent (368) (118) 272
Non-controlling interest (21) (27) (50)
---------- ---------- ----------
(389) (145) 222
========== ========== ==========
Earnings per share (pence) 6
Basic and diluted (1.8) (0.6) 1.4
(Loss)/ Profit for the period (389) (145) 222
Other comprehensive income
- items that may be reclassified
subsequently to profit or
loss
Exchange differences on translation
of foreign operations 24 (12) 4
Total comprehensive income
for the period (365) (157) 226
====== ====== ====
Consolidated statement of financial position
At 30 June 2017
At 30 At 30 At 31
June June December
2017 2016 2016
Unaudited Unaudited Audited
Note GBP'000 GBP'000 GBP'000
---------- ---------- ----------
Assets
Non-current assets
Goodwill 352 352 352
Property, plant and
equipment 109 112 117
---------- ---------- ----------
Total non-current assets 461 464 469
Current assets
Inventories 40 62 37
Trade and other receivables 2,003 2,706 2,177
Cash and cash equivalents 1,823 1,375 2,384
---------- ---------- ----------
Total current assets 3,866 4,143 4,598
---------- ---------- ----------
Total assets 4,327 4,607 5,067
========== ========== ==========
Liabilities
Current liabilities
Trade and other payables 1,700 2,180 2,206
Total liabilities 1,700 2,180 2,206
---------- ---------- ----------
Equity
Share capital 205 204 204
Share premium account 7,552 7,517 7,517
Other reserves 6,009 5,969 5,985
Own shares (45) (49) (47)
Retained earnings (11,094) (11,187) (10,748)
---------- ---------- ----------
Equity attributable
to parent 2,627 2,454 2,911
Non-controlling interest - (27) (50)
---------- ---------- ----------
Total equity 2,627 2,427 2,861
---------- ---------- ----------
Total liabilities and
equity 4,327 4,607 5,067
========== ========== ==========
Consolidated statement of changes in equity
For the 6 months ended 30 June 2017
Share Share Other Own Retained Non-controlling
capital premium reserve shares earnings Interest Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------- --------- --------- --------- -------- ---------- ---------------- --------
Balance at 1 January
2016 170 6,412 5,981 (51) (11,099) - 1,413
Total comprehensive
income for the
period - - (12) - (118) (27) (157)
--------- --------- --------- -------- ---------- ---------------- --------
Issue of new share
capital 34 1,219 - - - - 1,253
Share issue costs - (114) - - - - (114)
Transfer on allocation
of shares in trust - - - 2 (2) - -
Credit to equity
for share based
payments - - - - 32 - 32
--------- --------- --------- -------- ---------- ---------------- --------
Transactions with
owners 34 1,105 - 2 30 - 1,171
--------- --------- --------- -------- ---------- ---------------- --------
Balance at 30
June 2016 204 7,517 5,969 (49) (11,187) (27) 2,427
Balance at 1 July
2016 204 7,517 5,969 (49) (11,187) (27) 2,427
Total comprehensive
income for the
period - - 16 - 390 (23) 383
--------- --------- --------- -------- ---------- ---------------- --------
Transfer on allocation
of shares in trust - - - 2 (2) - -
Credit to equity
for share based
payments - - - - 51 - 51
--------- --------- --------- -------- ---------- ---------------- --------
Transactions with
owners - - - 2 49 - 51
--------- --------- --------- -------- ---------- ---------------- --------
Balance at 31
December 2016 204 7,517 5,985 (47) (10,748) (50) 2,861
------------------------- --------- --------- --------- -------- ---------- ---------------- --------
Balance at 1 January
2017 204 7,517 5,985 (47) (10,748) (50) 2,861
Total comprehensive
income for the
period - - 24 - (368) (21) (365)
--------- --------- --------- -------- ---------- ---------------- --------
Issue of new share
capital 1 35 - - - - 36
Transfer on allocation
of shares in trust - - - 2 (2) - -
Credit to equity
for share based
payments - - - - 95 - 95
--------- --------- --------- -------- ---------- ---------------- --------
Transactions with
owners 1 35 - 2 93 - 131
--------- --------- --------- -------- ---------- ---------------- --------
Transfer of accumulated
loss on acquisition
of non-controlling
interest (71) 71 -
Balance at 30
June 2017 205 7,552 6,009 (45) (11,094) - 2,627
Consolidated statement of cash flows
For the 6 months ended 30 June 2017
6 months 6 months Year
to 30 to 30 to 31
June June December
2017 2016 2016
Unaudited Unaudited Audited
Note GBP'000 GBP'000 GBP'000
--------------------------------- ----- ---------- ---------- ----------
Net cash flows from operating
activities 7 (547) (527) 473
Investing activities
Purchase of property, plant
and equipment (29) (3) (44)
---------- ---------- ----------
Net cash flow used in investing
activities (29) (3) (44)
Financing activities -
Proceeds from the issue
of share capital net of
costs 36 1,139 1,139
---------- ---------- ----------
Net cash flows from financing
activities 36 1,139 1,139
Net (decrease)/ increase
in cash and cash equivalents (540) 609 1,568
Cash and cash equivalents
at start of period 2,384 756 756
Exchange differences on
cash and cash equivalents (21) 10 60
---------- ---------- ----------
Cash and cash equivalents
at end of period 1,823 1,375 2,384
========== ========== ==========
NOTES TO THE INTERIM FINANCIAL STATEMENT
1. General information
Cambridge Cognition Holdings plc ('the Company') and its
subsidiaries (together, 'the Group') develops and markets near
patient technologies for the assessment of brain health for sale
worldwide, principally in the UK, the US and Europe.
The Company is a public limited company listed on the
Alternative Investment Market ('AIM') of the London Stock Exchange
(symbol COG) and is incorporated and domiciled in the UK. The
address of its registered office is Tunbridge Court, Tunbridge
Lane, Bottisham, Cambridge, CB25 9TU.
The condensed consolidated interim financial statements were
approved by the Board of Directors for issue on 21 September
2017.
The condensed consolidated interim financial statements do not
comprise statutory accounts within the meaning of section 434 of
the Companies Act 2006.
Statutory accounts of the Group for the year ended 31 December
2016 were approved by the Board of Directors on 28 March 2017 and
delivered to the Registrar of Companies. The report of the auditors
on those accounts was unqualified, did not contain an emphasis of
matter paragraph and did not contain any statement under section
498 of the Companies Act 2006.
The condensed consolidated interim financial statements together
with the comparative information for the six months ended 30 June
2017 have been reviewed, not audited.
2. Basis of preparation
Going concern basis
The Group's forecasts and projections, taking account of
reasonably possible changes in trading performance, support the
conclusion that there is a reasonable expectation that the Group
has adequate resources to continue in operational existence for the
foreseeable future, a period of not less than twelve months from
the date of this report. The Group therefore continues to adopt the
going concern basis in preparing its condensed consolidated interim
financial statements.
3. Accounting policies
The accounting policies adopted in the preparation of the
condensed consolidated interim financial statements are consistent
with those followed in the preparation of the Group's consolidated
financial statements for the year ended 31 December 2016.
During the period, the Group purchased all of the
non-controlling interest in CANTAB Corporate Health Limited, a
company of which the Group previously owned 70%. The accumulated
losses of CANTAB Corporate Health have been bought directly into
the Group's equity.
4. Critical accounting judgements and key sources of estimation
uncertainty
In the application of the Group's accounting policies the
directors are required to make judgements, estimates and
assumptions about the carrying amounts of assets and liabilities
that are not readily apparent from other sources. The estimates and
associated assumptions are based on historical experience and other
factors that are considered to be relevant. Actual results may
differ from these estimates.
The estimates and underlying assumptions are reviewed on an
ongoing basis.
The following are the critical judgements that the directors
have made in the process of applying the Group's accounting
policies.
Revenue recognition
Trading operations within the Group recognise revenue with
regard to amounts chargeable to customers under service contracts.
In making its judgement, management considers the detailed criteria
for the recognition of revenue from the provision of continuous
services set out in IAS 18 Revenue. The directors are satisfied
that the significant risks and rewards are transferred and that
recognition of the revenue over the duration of the contractual
period is appropriate.
Goodwill
The Group reviews the carrying value of its goodwill balances by
carrying out impairment tests at least on an annual basis. These
tests require estimates to be made of the value in use of its CGUs
which are dependent on estimates of future cash flows and long term
growth rates of the CGUs.
Capitalisation of development costs
The point at which development costs meet the criteria for
capitalisation is critically dependent on management judgment of
the probability of future economic benefits.
Recovery of deferred tax assets
Deferred tax assets have not been recognised for deductible
temporary differences, share options and tax losses as management
considers that there is not sufficient certainty that future
taxable profits will be available to utilise those temporary
differences and tax losses.
Share-based payment transactions
The Group measures the cost of equity-settled transactions with
employees by reference to the fair value of the equity instruments
at the date at which they are granted. The fair value is determined
using either a Black-Scholes model or a Binomial Option model. The
accounting estimates and assumptions relating to equity settled
share-based payments would have no impact on the carrying amounts
of assets and liabilities within the next annual reporting period
but may impact profit and loss and equity.
5. Segmental information
The analysis of revenue by product type is as follows:
6 months 6 months Year to 31
to 30 June to 30 June December
2017 2016 2016
GBP'000 GBP'000 GBP'000
Software 1,357 1,847 3,837
Services 1,787 1,140 2,487
Hardware 65 277 552
3,209 3,264 6,876
============ ============ ===========
6. Earnings per share
Calculation of loss per share is based on the following loss and
numbers of shares:
6 months 6 months Year to
to 30 to 30 31 December
June June 2016
2017 2016
GBP'000 GBP'000 GBP'000
Earnings
Earnings for the purposes of
basic and diluted earnings per
share being net loss attributable
to owners of the Company (368) (118) 272
'000 '000 '000
Number of shares
Weighted average number of ordinary
shares for the purposes of basic
EPS 20,154 18,644 19,402
--------- --------- -------------
Weighted average number of ordinary
shares for the purposes of diluted
EPS 20,154 18,644 19,473
--------- --------- -------------
The basic weighted average number of shares excludes shares held
by an Employee Benefit Trust. Fully diluted earnings per share is
calculated after showing the effect of outstanding options in
issue. For both of the six month periods presented, the effect of
the options would be to reduce the loss per share, and hence the
diluted loss per share is the same as the basic loss per share. For
the full year 2016, the impact of diluted shares was so minimal
that there was no impact on EPS when rounded to 0.1 pence.
The number of shares in issue at 30 June 2017 was 20,472,735 (31
December 2016: 20,429,235).
7. Reconciliation of operating result to operating cash
flows
6 months 6 months Year to
to 30 June to 30 June 31 December
2017 2016 2016
GBP'000 GBP'000 GBP'000
(Loss)/ Profit before
tax (386) (145) 116
Adjustments for:
Depreciation 36 32 68
Share-based payments
charge 95 33 83
Operating cash flows
before working capital
movements (255) (80) 267
Change in inventories (2) (4) 21
Change in trade and
other receivables 180 (1,142) (575)
Change in trade and
other payables (467) 611 567
------------ ------------ -------------
Cash (used)/ generated
by operations (544) (615) 280
Taxation (paid)/ received (3) 88 193
------------ ------------ -------------
Net cash flows from
operations (547) (527) 473
------------ ------------ -------------
8. Copies of interim financial statements
Copies of the interim financial statements are available from
the Company at its registered office at Tunbridge Court, Tunbridge
Lane, Bottisham, Cambridge, CB25 9TU. The interim financial
information document will also be available on the Company's
website www.cambridgecognition.com.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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