REG - Cambridge Cognition - Final Results
22 March 2018
Cambridge Cognition Holdings Plc
("Cambridge Cognition" or the "Company")
Preliminary Results for the year ended 31 December 2017
Cambridge Cognition Holdings plc, the neuroscience digital health company specialising in improving brain health by developing & marketing near-patient cognitive testing technologies for pharmaceutical and healthcare industries worldwide, today announces its audited preliminary results for the year ended 31 December 2017.
Financial summary
· Total revenues of £6.73m (2016: £6.88m)
· Gross profit increased to £6.11m (2016: £5.89m)
· Adjusted* loss before tax of £0.07m (2016: profit of £0.20m)
· Loss before tax of £0.28m (2016: profit of £0.11m)
· Loss per share of 1.3 pence per share (2016: earnings of 1.4 pence per share)
· Cash balance of £1.86m (2016: £2.38m)
*Adjusted for share-based payments charge
Operational highlights
· Revenues excluding hardware up 5% at £6.62m (2016: £6.32m)
· Service revenues up 33% at £3.30m, representing 49% of group revenue
· Core business sales orders increased by 18%
· Increased number of pharmaceutical partnerships for near patient technologies centred on CANTAB Recruit and Cognition Kit
· Further investment in R&D and enhanced commercial infrastructure
· Continued investment in technology innovation underpinned by grant funding
· Launch of web based testing and CANTAB Prime 'white label' solutions
· Established new US office in Boston, MA
Commenting on the results Steven Powell, Chief Executive Officer, said:
"While revenue was broadly flat on the prior year, the growth of service revenues and the revenue generated from new products reflects the business plan implemented over the last two years. The growth in sales orders received also demonstrates that we continue to broaden our customer base.
We have increased our investment in research and development activity in the year. This has yielded significant advances in both our neuroscience programmes and our technology platforms. Our progress in both of these areas opens the possibilities of a wider range of commercial relationships than previously available to us.
With recently launched products and an exciting innovation pipeline, we expect to further develop existing partnerships and forge new ones to drive profitable revenue growth for the future."
Enquiries:
Cambridge Cognition Holdings plc
Steven Powell, Chief Executive Officer
Tel: 01223 810 700
Nick Walters, Chief Financial Officer
finnCap Ltd (Nomad and Joint Broker)
Tel: 020 7220 0500
Geoff Nash/ Simon Hicks
(Corporate Finance)
Alice Lane
(Corporate Broking)
Dowgate Capital Stockbrokers Limited (Joint Broker)
Tel: 0203 903 7715
David Poutney/ James Serjeant
IFC Advisory Ltd (Financial PR and IR)
Graham Herring / Miles Nolan / Zach Cohen
Tel: 0203 934 6630
The information communicated in this announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) No. 596/2014.
CHIEF EXECUTIVE'S REVIEW
Overview
2017 was a year of continued market development and investment in technology development for the Group. Total revenue was similar to last year despite the prior year's results including two large contracts not repeated in 2017. Sales of core software and service products were up 5% on the previous year reflecting an increasingly expanded product range and a drive towards partner income to reduce dependence on variable clinical trial revenue.
The change in the revenue mix, with service income increasing from 36% to 49% of Group revenue and a more diverse customer base, confirms that the long-term growth strategy remains on track. The number of sales orders for core products increased 18% in 2017 in comparison to 2016 demonstrating the depth and reach of our commercial team is growing as a result of the investments made in 2016.
Recruit and web-based testing product revenues and sales opportunities have continued to grow as we increasingly transition our cognitive testing nearer to patients and clinical trial subjects and position the Company's offer in all stages of the drug development process. The increased diversity of the product mix enables the Company to provide solutions to customers at all stages of clinical development and in an expanding number of disease applications and this is expected to translate into short term and medium term revenue growth.
The Group continues to expand its technology base, most recently with the commercialisation of wearable technology and the introduction of new programmes with voice technology and data analytics. This resulted in an increase in R&D costs from £0.89m in 2016 to £1.13m in 2017. Our wearables technology received an excellent endorsement with one of the initial studies reporting 95 per cent compliance and the importance of our voice technology developments was recognised by the award of an Innovate UK grant to underpin some of the costs of development.
Financial Results
Group revenues for 2017 and 2016 by product segment are as follows:
2017 £m
2016 £m
Change £m
Change %
Software
3.32
3.84
(0.52)
(13.5)
Services
3.30
2.48
0.82
33.1
Total Software & Services
6.62
6.32
0.30
4.7
Hardware
0.11
0.56
(0.45)
(80.4)
Total Group Revenues
6.73
6.88
(0.15)
(2.2)
Total revenues fell £0.15m (2%) in comparison to 2016. However, revenue from software and services grew by £0.30m (5%) in comparison to 2016. As the table illustrates, the small reduction in total revenues can be, in part, attributed to a fall in hardware sales, which is no longer a key product field following the migration to a cloud platform in 2015 but was inflated in 2016 by a single contract with a large hardware component.
As previously announced, the Company had expected to sign two large contracts with a combined value of approximately £2.3m in the last quarter of the year. The larger of these two projects is expected to commence in the first half of 2018 and we look forward to updating the market in due course.
Service revenues have grown 33% reflecting the positive strategic steps taken to diversify our product offering. Not only does this category include the traditional project and study management services but also the increasing amount of consultancy and bespoke development work being undertaken for customers for Recruit and wearable projects.
Software revenues are down 13.5% reflecting the absence of a major contract win in the year bearing in mind that software revenue is recognised at the start of any project. However, we are achieving a greater number of sales in more stages of the drug development process and across more disease areas than previously.
Gross profit grew from £5.89m in 2016 to £6.11m in 2017, a growth of 4%. Hardware is sold at a far lower gross margin than our high margin software and services, and so the reduced level of hardware sales has resulted in an increased margin of 91% (86% in 2016).
Administration costs rose from £5.86m in 2016 to £6.49m in 2017, a rise of £0.63m or 11%. As noted above, there was a £0.24m rise in research and development costs and an increase of £0.54m in our sales and marketing spend. Though changes in the sales team were substantially completed in 2016, the impact of the costs over a full year drove this increase. These increases apart, our operational and corporate costs remain under tight control.
The loss before tax in the year was £0.28m, against a profit before tax of £0.12m in 2016. The R&D tax credits available as cash was restricted this year given the profit returned in 2016. The loss attributable to shareholders after tax credit and minority interests is £0.26m, which equates to a loss per share for the year of 1.3 pence. This contrasts to a profit per share of 1.4 pence in 2016.
Despite the loss, operating cash before movements in working capital remained positive at £0.01m. Working capital movements included a small increase in receivables, payments of expenses accrued in 2016 and the depletion of deferred revenues which drove net cash from operating activities to an outflow of £0.62m (2016: £0.47m inflow). Capital expenditure remains stable at £0.05m. Cash outflow was mitigated by £0.19m of proceeds from exercised share options, and totals £0.48m. The cash balance of £1.86m at year-end means that the Group remains sufficiently resourced for its ongoing operations and implementation of the current strategic plan.
The balance sheet remains satisfactory, with the reduction in cash being more than reflected in a £0.66m reduction in current liabilities. The Group has no long-term debt.
Operational Review
As reported in last year's strategic report, we identified that we could realise efficiency gains in commercial operations by combining the previously separate business units of Pharmaceutical Clinical Trials and Academic Research into a single, product sales group. This reorganisation was completed with effect from 1st January 2017 and our Operational Review is no longer categorised along these lines.
During the year we have continued to support drug development companies in their pursuit of new treatments but with a particular focus on four disease areas, Alzheimer's disease, Parkinson's disease, Schizophrenia and Depression. Our expertise, extensive data resources and investment in R&D in these areas has maintained our position as a leading provider of cognitive assessments to the research community and pharmaceutical companies involved in drug development in these areas.
Away from our core areas of disease focus in March we announced the publication of Amgen's EBBINGHAUS study. We supported this landmark study with not only software but also data analytics. Given both the number of participants and time points and its focus in cardiovascular disease this study highlighted that use of CANTAB software is not limited to cognitive assessment in the CNS field alone.
The introduction of web based testing, also in March, has enabled researchers to run testing of trial participants remotely. A highly significant innovation, this enables 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.
From the expansion of the product range in 2016 we have had continued success with our new products, which have contributed strongly to the results for 2017 helping to diversify the product offering and reduce our exposure to the variability of revenue streams from large clinical trials.
In particular, we announced in November 2017 that in a study sponsored by Takeda Pharmaceuticals, Cognition Kit wearable technology demonstrated exceptional levels of patient compliance, with users 95% or more compliant with evaluations of their mood and cognitive function. This demonstrates that high frequency, near-patient testing will be well tolerated by patients validating our initial investment in these technologies. Revenue from wearable technology projects totalled £0.60m in 2017 compared with £0.04m in 2016 when the technology was first commercialised.
We also announced the launch of our CANTAB Prime offering during the year answering a market demand to make our technologies available in other formats; often for use in non-clinical trial applications and therefore a potential source of longer term, annuity income. CANTAB Prime uses 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 a spectrum of market segments. CANTAB Prime has already opened 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. Initial deals incorporating CANTAB Prime executed in the first year of launch have generated over £0.20m of revenue.
As part of a 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 that we have been awarded grant funding of £0.29m from Innovate UK to advance our work in biomarkers in this field. We expect this project to conclude and commence commercialisation in late 2018.
We continue to work with customers and partners to develop technologies and applications that meet the demands of the market both now and in the future. We see that these demands continually combine and cut across the traditional view of clinical, research and healthcare applications - the CANTAB Prime concept is a key example of that. Our approach of focusing on customer need and identifying the practical use of our innovations early in the research cycle is helping us drive meaningful and exciting innovation.
Innovation
Two years ago, the Group adopted a new strategy for growth which, in addition to a new market development approach, included a reinvigorated R&D programme with investment in both technology development and neuroscience. The expanded R&D group, under the leadership of Dr. Jenny Barnett, CSO, and Ricky Dolphin, CTO, has already yielded several important additions to the CANTAB estate including Cognition Kit, Recruit and Prime which are making a significant impact on revenue growth. Through this activity, the Group is also enhancing its profile as technology leader, which in turn is having a positive impact on commercial activities.
Looking ahead, the Group's key R&D activities are focussed on four main areas:
1. Continued product enhancement and database expansion in the Group's key strategic areas of Alzheimer's disease, depression, Parkinson's disease and Schizophrenia.
2. Continued development of remote, patient centric, testing solutions to support pharmaceutical partners with their digital health solutions as well as improving clinical trial efficiency. CANTAB Recruit for remote trial subject screening has already been used in two of the world's largest Alzheimer's disease studies with over 30,000 subject assessments completed and this type of solution affords the Group the opportunity to develop Software as a Service (SaaS) income.
3. Monitoring of brain health through speech. The Group has already delivered the first prototype cognitive tests delivered by an automated voice platform and this has resulted in new, filed intellectual property. The next step will be the development of voice delivered technology which incorporates artificial intelligence to provide in depth analysis of cognitive health based on voice biomarkers.
4. In parallel with enhancement of current products for cognitive assessment of patients suffering from depression, the Group is also working to bring a new package of products to market for cognitive assessment of mental health. This will incorporate new and novel tests for measurement of social cognition. We now know that aspects of social cognition - emotional processing, decision-making and recall for example - are core symptoms of not just disorders like schizophrenia and autism but are also highly prevalent in eating disorders, substance abuse, and neurological conditions like frontotemporal dementia. These types of symptoms are hugely important to patients' quality of life since they affect relationships and employment. They have been under-recognised historically because they are hard to measure. Recognising these difficulties, and potentially improving them using personalised digital tools such as the Emotional Bias Intervention which we are developing with our academic collaborators is an important new target across CNS disorders.
These four programmes are expected to deliver products and technologies for commercialisation in the next two years and will provide solutions to the increasing global appetite for digital health solutions. This in turn will have a positive impact on revenue growth and company profile and provide a rich source of news-flow.
The impact of the new accounting standard for revenues: IFRS 15
The Group is adopting the new revenue accounting standard, IFRS 15, using the prospective method with effect from 1 January 2018. While the current results are not impacted by the new standard, its impact is significant enough that we have set out an estimate of what the results would have been had the standard been adopted in the preparation of accounts in earlier years.
The main impact of IFRS 15 on the Group's accounts is that software revenue from Connect, Recruit, Mobile and Insight products will now be recognised over the period that the software is used by customers rather than recognised at the start of the contract.
In previous years, there have been fluctuations in results from one year to the next dependent on whether a year includes a large contract win or not. We believe this new standard will result in a smoother spread of revenue over the life of a contract.
As noted above, prior year results have not been restated for accounting purposes, however, our estimate of revenues on an IFRS 15 basis is as follows:
As reported previously
Estimated under IFRS 15
Difference
2015
£5.04m
£4.98m
(£0.06m)
2016
£6.88m
£5.15m
(£1.73m)
2017
£6.73m
£6.89m
£0.16m
Outlook
The challenges of global brain health continue to rise with an ever increasing economic cost. The products and technologies developed by the Group over the past five years to supplement the core technology have seen a gradual progression of our offering in line with customer needs. With a clear focus on the needs of patients and healthcare providers in our four core disease states, we have driven testing closer to the patient using wearable and voice activated technologies. This provides a data rich assessment of brain health and provides a detailed assessment of pharmaceutical and non-pharmaceutical intervention in these complex disease areas.
With growing recognition as an innovator in cognitive assessment, we are now building partnerships with our new technologies that will drive further revenue growth. With a strong sales order pipeline the Board expects further growth to be delivered this year.
Steven Powell
Chief Executive Officer
21st March 2018
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year to 31 December
Notes
Year to
31
December 2017£'000
Year to
31 December 2016
£'000
Revenue
3
6,730
6,876
Cost of sales
(622)
(986)
Gross profit
6,108
5,890
Administrative expenses
(6,485)
(5,860)
Other operating income
93
86
(Loss)/ profit before tax
(284)
116
Income tax
6
106
(Loss)/ profit for the year
(278)
222
Attributable to:
Equity holders in the Parent
(257)
272
Non-controlling interest
(21)
(50)
(278)
222
Earnings per share (pence)
4
Basic and diluted earnings per share
(1.3)
1.4
Other comprehensive income
Profit/ (loss) for the year
(278)
222
Items that may subsequently be reclassified to profit or loss
Exchange differences on translation of foreign operations
38
4
Total comprehensive income for the year
(240)
226
All items of other comprehensive income are attributable to the equity holders in the Parent.
The above results relate to continuing operations.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 31 December
Notes
At 31 December 2017
£'000
At 31 December 2016
£'000
Assets
Non-current assets
Goodwill
352
352
Property, plant and equipment
88
117
Total non-current assets
440
469
Current assets
Inventories
33
37
Trade and other receivables
2,246
2,177
Cash and cash equivalents
1,859
2,384
Total current assets
4,138
4,598
Total assets
4,578
5,067
Liabilities
Current liabilities
Trade and other payables
1,547
2,206
Total liabilities
1,547
2,206
Equity
Share capital
207
204
Share premium account
7,707
7,517
Other reserves
6,023
5,985
Own shares
(43)
(47)
Retained earnings
(10,863)
(10,748)
Equity attributable to Parent
3,031
2,911
Non-controlling interest
-
(50)
Total equity
3,031
2,861
Total liabilities and equity
4,578
5,067
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year to 31 December
Share capital
Share premium
Other reserves
Own shares
Retained earnings
Non- controlling interest
Total
£'000
£'000
£'000
£'000
£'000
£'000
£'000
Balance at
1 January 2016
170
6,412
5,981
(51)
(11,099)
-
1,413
Total comprehensive income for the year
-
-
4
-
272
(50)
226
Issue of new share capital
34
1,219
-
-
-
-
1,253
Share issue costs
-
(114)
-
-
-
-
(114)
Transfer on allocation of shares held in trust
-
-
-
4
(4)
-
-
Credit to equity for equity-settled share-based payments
-
-
-
-
83
-
83
Transactions with owners
34
1,105
-
4
79
-
1,222
Equity attributable to Parent
204
7,517
5,985
(47)
(10,748)
-
2,911
Non-controlling interest
-
-
-
-
-
(50)
(50)
Balance at
31 December 2016
204
7,517
5,985
(47)
(10,748)
(50)
2,861
Total comprehensive income for the year
-
-
38
-
(257)
(21)
(240)
Issue of new share capital
3
190
-
-
-
-
193
Transfer on allocation of shares held in trust
-
-
-
4
(4)
-
-
Credit to equity for equity-settled share-based payments
-
-
-
-
217
-
217
Transactions with owners
3
190
-
4
213
-
410
Transfer of accumulated loss on acquisition of non-controlling interest
-
-
-
-
(71)
71
-
Balance at
31 December 2017
207
7,707
6,023
(43)
(10,863)
-
3,031
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 31 December
Notes
Year to
31 December 2017
£'000
Year to
31 December 2016
£'000
Net cash flows from operating activities
5
(624)
473
Investing activities
Purchase of property, plant and equipment
(48)
(44)
Net cash flow used in investing activities
(48)
(44)
Financing activities
Proceeds from the issue of share capital net
193
1,139
Net cash flows from financing activities
193
1,139
Net increase/ (decrease) in cash and cash equivalents
(479)
1,568
Cash and cash equivalents at start of year
2,384
756
Exchange differences on cash and cash equivalents
(46)
60
Cash and cash equivalents at end of year
5
1,859
2,384
1. General information
Cambridge Cognition Holdings plc ('the Company') and its subsidiaries (together, 'the Group') is a neuroscience digital health company specialising in improving brain health by developing & marketing near-patient cognitive testing technologies for pharmaceutical and healthcare industries worldwide.
The Company is a public limited company which is 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.
In the period since the principal trading company, Cambridge Cognition Limited was formed in 2002, it has created a well-established business through sales of its proprietary CANTAB® (Cambridge Neuropsychological Test Automated Battery) software into academic and pharmaceutical research locations around the world.
2. Basis of preparation
The financial information of the Group set out above does not constitute "statutory accounts" for the purposes of Section 435 of the Companies Act 2006.
The financial information in this preliminary results announcement does not constitute the Group's statutory accounts for the year ended 31 December 2017 or the year ended 31 December 2016 but is derived from those accounts.
The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards ('IFRS') as adopted by the European Union, IFRIC interpretations and the Companies Act 2006 applicable to companies operating under IFRS. The accounting policies adopted are consistent with those followed in the preparation of the consolidated financial statements for the year ended 31 December 2016.
3. Segmental information
An analysis of the Group's revenue for each major product and service category is as follows:
2017
£'000
2016
£'000
Software
3,322
3,837
Services
3,302
2,487
Hardware
106
552
6,730
6,876
4. Earnings per share
The calculation of the basic and diluted earnings per share ("EPS") is based on the following data:
Earnings
2017
£'0002016
£'000Earnings for the purposes of basic and diluted EPS per share being net (loss)/ profit attributable to owners of the Company
(257)
272
Number of shares
2017
'0002016
'000Weighted average number of ordinary shares for the purposes of basic EPS
20,398
19,402
Weighted average number of ordinary shares for the purposes of diluted EPS
20,398
19,473
For 2017, the effect of options would be to reduce the loss per share and as such the diluted loss per share is the same as the basic loss per share.
For 2016, the impact of diluted shares is so minimal that there is no impact on EPS when rounded to 0.1 pence.
5. Notes to the cash flow statement
2017
£'000
2016
£'000
(Loss)/ profit before tax
(284)
116
Adjustments for:
Depreciation of property, plant and equipment
77
68
Share-based payment expense
217
83
Operating cash flows before movements in working capital
10
267
Decrease in inventories
4
21
(Increase) in receivables
(52)
(575)
(Decrease)/ increase in payables
(592)
567
Cash generated by operations
(630)
280
Tax credit received less tax paid
6
193
Net cash from operating activities
(624)
473
Cash and cash equivalents
2017
£'000
2016
£'000
Cash and bank balances
1,859
2,384
Cash and cash equivalents comprise cash and short-term bank deposits with an original maturity of three months or less, net of outstanding bank overdrafts. The carrying amount of these assets is approximately equal to their fair value.
6. Annual Report & Annual General Meeting
The Annual Report will be available from the Company's website from 9am on 22nd March 2018. Notice of the Annual General Meeting together with a copy of the Annual Report will be posted to shareholders by 2nd May 2018. The Annual General Meeting of the Company will be held at 10.00am on 24th May 2018 at the registered office, Tunbridge Court, Tunbridge Lane, Bottisham, Cambridgeshire, CB25 9TU.
This information is provided by RNSThe company news service from the London Stock ExchangeENDFR FKDDDPBKDANB
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