REG - Cambridge Cognition - Interim Results
20/09/2022 07:00
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RNS Number : 8974Z Cambridge Cognition Holdings PLC 20 September 2022
20 September 2022
Cambridge Cognition Holdings Plc
("Cambridge Cognition", the "Company" or the "Group")
Interim Results for the six months ended 30 June 2022
Cambridge Cognition Holdings plc (AIM: COG), which develops and markets
digital solutions to assess brain health, announces its unaudited interim
results for the six months ended 30 June 2022.
The Company followed its strong performance in 2021 with a 31% growth in
revenues to £5.9million in the first half of 2022 (H1 2021: £4.5 million).
Order intake was in line with the Board's expectations at £7.2 million, up
44% on a like-for-like basis on H1 2021 (H1 2021:£8.6 million, including
£3.6 million of one-off orders) and the Company has a growing, qualified
pipeline of opportunities for the second half of 2022.
The contracted order book was £18.6 million at 30 June 2022 increasing from
£17.1m at 31 December 2021. The order book provides the Company with
visibility over future revenues and provides a solid foundation from which the
Company can continue to invest in product and commercial development to
further expand the business.
Trading conditions continue to be positive, and the Company has high levels of
engagement with existing and potential new clients. With continued investment
in commercial activities and product development, the Company expects to
achieve further year-on-year revenue growth. The cash position continued to
grow to £8.6 million at 30 June 2022 and provides the business with the
platform to make considered investments as opportunities arise.
Financial highlights
· Growth in revenue of 31% to £5.9 million (H1 2021: £4.5
million)
· Profit after tax in line with expectations at £0.02
million (H1 2021: £0.1 million)
· Continued growth in cash balances to £8.6 million at 30
June 2022 (31 December 2021: £6.8 million)
· Increase in like-for-like sales orders of 44% to £7.2
million (H1 2021: £8.6 million including £3.6 million of one-off orders)
· Increase in contracted order book of £1.5 million to
£18.6 million (31 December 2021: £17.1 million)
Operational highlights
· Strengthened senior leadership team with the appointment of
a Chief Financial Officer and a Chief Scientist
· Entered a new therapeutic area for the Company, PTSD
· Launched an Alzheimer's validation study for the Company's
voice-based cognitive assessment solution
Commenting on the results Matthew Stork, Chief Executive Officer of Cambridge
Cognition, said: "I am delighted with our continued progress over the last six
months. Our contracted order book is at its highest level and, along with a
healthy sales order pipeline and strong cash generation, puts us in a great
position to continue to invest in strategies to grow the business further."
Enquiries:
Cambridge Cognition Holdings plc Tel: 01223 810 700
Matthew Stork, Chief Executive Officer press@camcog.com
Stephen Symonds, Chief Financial Officer
Panmure Gordon (Nomad and Joint Broker) Tel: 020 7886 2500
Freddy Crossley / Emma Earl / Mark Rodgers (Corporate Finance)
Rupert Dearden (Corporate Broking)
Dowgate Capital Limited (Joint Broker) Tel: 020 3903 7715
David Poutney / James Serjeant
IFC Advisory Ltd (Financial PR and IR) Tel: 020 3934 6630
Tim Metcalfe / Graham Herring / Zach Cohen cog@investor-focus.co.uk
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 OFFICER'S REVIEW
Overview
The Company delivered a strong financial and operational performance in the
first half of 2022, with our contracted order book growing to its highest
level at £18.6m at the end of June 2022.
Orders received totalled £7.2 million (H1 2021: £8.6 million including £3.6
million of one-off orders). These orders included a new major pharmaceutical
client for a schizophrenia contract worth £0.7m over two years, a £2.1
million contract award to provide cognitive assessments for a
neurodegenerative disease trial and a £1.0 million contract award to provide
digital cognitive assessments for a pivotal phase III autoimmune disease
trial.
Around 79% of the Company's clinical trial orders came from existing customers
(H1 2021: 66%), with the balance from new customers, reflecting excellent
customer service and the benefits of the Company's focus on
commercialisation. These sales orders cover a range of endpoints and
clinical trial phases, evidencing the Company's ability to deliver against a
spectrum of client requirements. Approximately 29% of our sales orders were
for more than one product (H1 2021: 17%), demonstrating the strength of the
Company's growing product offering to fulfil customer needs.
As well as achieving a record sales orders total in the first half, I am
pleased to report more milestones for Cambridge Cognition in the period, some
of which closed subsequent to the end of June. These include:
· Strengthened senior leadership team with the appointment of a
permanent Chief Financial Officer, Chief Scientist dedicated to R&D and a
Head of HR to manage a growing workforce
· Entered a new, high-growth therapeutic area for the Company -
PTSD - earning contracts with a top 10 pharma company and the US Department of
Defense
· Launched an Alzheimer's validation study for NeuroVocalix(®) in
collaboration with the University of Oxford and Novo Nordisk
Cambridge Cognition is focused on successful operational delivery, while
continuing to innovate, as is critical for a growing technology business to
meet future customer requirements. During the period, the business continued
to invest through R&D initiatives and increased headcount to deliver
against increased sales orders and order backlog, and to improve back-office
support to enhance the ability to deliver future growth.
Financial results
Sales orders of £7.2 million (H1 2021: £8.6 million including £3.6 million
of one-off orders) contributed to further growth in the Company's contracted
order book, which has increased to £18.6m at 30 June 2022. The contracted
order book represents confirmed orders that will be recognised as revenue in
future periods.
Revenue, recognised as our software and associated services are used, grew to
£5.9 million (H1 2021: £4.5 million), a 31% increase and continues the
consistent upward profile of our revenue over recent periods. The contracted
order book provides us with great visibility over our future revenues.
The key components of revenue are shown in the table below:
Revenue H1 2022 H1 2021 Change Increase
£m
£m
£m
%
Software 2.3 1.4 0.9 63
Services 3.1 2.9 0.2 7
Total Software & Services 5.4 4.3 1.1 25
Hardware 0.5 0.2 0.3 122
Total Revenues 5.9 4.5 1.4 31
Software is recognised over the course of the contract once the product is in
use and Services recognised from the start and throughout the contract.
Software revenue increased by 63% to £2.3 million due to the increased number
and value of contracts being delivered. Services revenue grew by 7% to
£3.1 million, more modestly than previously as studies continue to be
delivered and after an increase in the number of contracts being started early
in 2021.
Hardware revenue continues to be a small part of our revenue, though it still
doubled to £0.5 million. The trend in customers asking us to supply and
validate hardware for their studies is becoming more prevalent. We consider
each project individually on the basis of profitability and product
development opportunities, and expect there may be some dilutive impact on our
gross margin longer term if the trend continues.
Gross profit rose by £1.1 million to £4.7 million (H1 2021: £3.5 million),
with the gross profit margin of 80% flat year on year (H1 2021: 80%).
Excluding the impact of foreign currency exchange movement, administrative
expenses increased by £1.2 million to £4.6 million (H1 2021: £3.4 million)
reflecting our continued investment in commercial activities and product
development.
Profit before tax, profit for the period and adjusted EBITDA were all positive
in the first half of 2022, although reflected the increase in administrative
expenses as we expanded our headcount. Basic and diluted earnings per share
are at 0.1p, respectively (H1 2021: 0.3p profit on a basic and diluted basis).
Net cash inflow from operations of £1.7 million (H1 2021: £1.2 million),
drove an overall improvement in cash to £8.6 million at 30 June 2022; driven
primarily by invoices on order for clinical trials. The high value of sales
orders in H1 2022 has driven strong cash conversion and resulted in an
increase in cash, up £1.8 million since 31 December 2021 to £8.6 million.
This results in the recognition of deferred revenue on the balance sheet until
revenue is recognised in line with our accounting policies.
Operational Review
The Company's increasing contracted order book is underpinned by continued
strong commercial performance and significant progress against our strategic
activities, as set out in the 2021 annual report:
1. Healthy pipeline and contracted order book. With the return of
in-person conferences and a dedicated prospecting programme, we have more than
tripled the number of sales-leads. Successful commercialisation activities
resulted in a 44% increase in like-for-like sales (H1 2021: £8.6 million
including £3.6 million of one-off orders) and a £1.5 million increase in the
contracted order book since year end.
2. Developing products that secure new business. We secured contracted
development work that aligned well with our product development plans. This
synergy enables us to continue developing products while meeting client
demands and positions us well to continually meet the evolving demands of the
industry. We continue to assess new opportunities that enhance our product
offering and produce cross selling opportunities.
3. Expanding our specialist team. We are committed to having an engaged,
capable and well-resourced team and have grown our headcount during H1 2022.
This strengthened team enables us to deliver our growing number of contracts
with the same exceptional service our customers value.
4. Multi-regional data centres. We have successfully migrated our servers
to the market leaders in cloud infrastructure - Amazon Web Services (AWS) - so
we benefit from the ability for multi-regional data storage, which helps us
meet the stringent data privacy requirements in the sector. Furthermore, AWS
offer many micro-services that we can leverage for faster software
development.
5. Enabling efficient growth by software development in a lower cost
country. Having established a subsidiary in a lower cost country, this has
expanded our talent pool and we now have an office with more than 10 software
developers that will enable the continued development and improvement of our
full product set at a lower cost.
Cambridge Cognition provides digital technology solutions for clinicians and
scientists and so coverage, whether explanation or validation, in scientific
publications, conferences and exhibitions, in person or virtual, are vitally
important to success. During the period, further high-profile publications
from DiMe, 4YouandMe and Novartis were added to the Company's bibliography of
peer-reviewed papers of trials using our outcomes assessments, taking the
Company's total to over 2,600, while Cambridge Cognition scientists
represented the company at 17 conferences and exhibitions.
The business continued to provide excellent customer service through strong
operational delivery over the first half of 2022, while at the same time
managing a step-up in clinical trial volume through contracts won over 2021
and H1 2022. Compared to December 2021, the business was running nearly 10%
more clinical trials at 30 June 2022; a move made possible by configurable,
cloud-based systems.
Board Changes
As previously announced, we were pleased that Stephen Symonds, who joined the
company as Chief Financial Officer in April 2022, was appointed to the board
in August. Stephen has extensive experience in the sector and is a valuable
addition to the board.
Outlook
The Company has made a great start to 2022, and has a positive outlook that is
not only sustainable but well positioned for further year-on-year growth. The
outlook is built on the strength of an attractive contracted order book and a
qualified pipeline of opportunities, increasing investment in commercial
activities and continued product development, a rising cash balance and
supportive shareholder base.
There are possible challenges ahead with inflation increasing across global
economies. The Company has limited expenditure on gas and electricity,
though is subject to other inflationary pressures. Inflation may also impact
on pharmaceutical companies and dampen demand, though we have not seen that at
this time and our order book provides the Company with visibility over
revenues in the short to medium term.
Cambridge Cognition will continue to grow in this rapidly expanding market by
leveraging our validated portfolio of digital assessments, investing in
R&D to keep pace with the evolving demands of the industry, investing in
opportunities that enhance our product offering and safeguarding our
reputation for exceptional customer service.
Matthew Stork
Chief Executive Officer
20 September 2022
1.
https://www.grandviewresearch.com/industry-analysis/virtual-clinical-trials-market
(https://www.grandviewresearch.com/industry-analysis/virtual-clinical-trials-market)
2. GlobalData. Virtual trials run by pharma x therapeutic area Jan 2021 -
Aug 2022
3. GlobalData. 2021. Virtual Trials Research Report
CONDENSED CONSOLIDATED COMPREHENSIVE INCOME STATEMENT
For the six months ended 30 June 2022
6 months to 30 June 2022 6 months to 30 June 2021 Year to 31 December 2021
Unaudited Unaudited Audited
Note £'000 £'000 £'000
Revenue 5 5,879 4,500 10,094
Cost of sales (1,192) (885) (2,015)
Gross profit 4,687 3,615 8,079
Administrative expenses (4,673) (3,529) (7,829)
Other income 2 - 14
Finance costs - (2) (11)
Profit before tax 16 84 253
Tax - - 197
Profit for the period 16 84 450
Profit for the period 16 84 450
Other comprehensive income - items that may be reclassified subsequently to
profit or loss:
(509) 51 14
Exchange differences on translation of foreign operations
Total comprehensive (expense)/income for the period (493) 135 464
Earnings per share (pence) 6
Basic 0.1 0.3 1.4
Diluted 0.1 0.3 1.4
All amounts are attributable to equity holders in the parent
The above results relate to continuing operations
CONDENSED Consolidated statement of financial position
At 30 June 2022
At 30 June 2022 At 30 June 2021 At 31 December 2021
Unaudited Unaudited Audited
£'000 £'000 £'000
Assets
Non-current assets
Intangible assets 370 376 373
Property, plant and equipment 77 105 52
Investments 49 49 49
Total non-current assets 496 530 474
Current assets
Inventories 255 138 126
Trade and other receivables 5,611 5,025 5,130
Cash and cash equivalents 8,561 4,168 6,810
Total current assets 14,427 9,331 12,066
Total assets 14,923 9,861 12,540
Liabilities
Current liabilities
Trade and other payables 14,736 9,600 11,908
Total liabilities 14,736 9,600 11,908
Equity
Share capital 312 312 312
Share premium account 11,151 11,151 11,151
Other reserves 5,616 6,162 6,125
Own shares (78) (78) (78)
Retained earnings (16,814) (17,286) (16,878)
Total equity 187 261 632
Total liabilities and equity 14,923 9,861 12,540
CONDENSED Consolidated statement of changes in equity
Share capital Share premium Other reserve Own shares Retained earnings
Total
£'000 £'000 £'000 £'000 £'000 £'000
Balance at 1 January 2021 312 11,151 6,111 (78) (17,439) 57
Profit for the period - - - - 84 84
Other comprehensive income - - 51 - - 51
Total comprehensive income for the period - - 51 - 84 135
Credit to equity for share-based payments - - - - 69 69
Transactions with owners - - - - 69 69
Balance at 30 June 2021 312 11,151 6,162 (78) (17,286) 261
Balance at 1 July 2021 312 11,151 6,162 (78) (17,286) 261
Profit for the period - - - - 366 366
Other comprehensive expense - - (37) - - (37)
Total comprehensive income for the period - - (37) - 366 329
Credit to equity for share-based payments - - - - 42 42
Transactions with owners - - - - 42 42
Balance at 31 December 2021 312 11,151 6,125 (78) (16,878) 632
Balance at 1 January 2022 312 11,151 6,125 (78) (16,878) 632
Profit for the period - - - - 16 16
Other comprehensive expense - - (509) - - (509)
Total comprehensive expense for the period - - (509) - 16 (493)
Credit to equity for share-based payments - - - - 48 48
Transactions with owners - - - - 48 48
Balance at 30 June 2022 312 11,151 5,616 (78) (16,814) 187
CONDENSED Consolidated statement of cash flows
For the 6 months ended 30 June 2022
6 months to 30 June 2022 6 months to 30 June 2021 Year to 31 December
2021
Unaudited Unaudited Audited
Note £'000 £'000 £'000
Net cash flows from operating activities 7 1,679 1,236 3,945
Investing activities
Interest received 2 - -
Purchase of intangible assets - - -
Purchase of property, plant and equipment (43) (38) (56)
Purchase of investment - (49) (49)
Net cash flow used in investing activities (41) (87) (105)
Financing activities
Interest payments - - (11)
Lease payments - (36) (86)
Net cash flows from financing activities - (36) (97)
Net increase in cash and cash equivalents 1,638 1,113 3,743
Cash and cash equivalents at start of period 6,810 3,047 3,047
Exchange differences on cash and cash equivalents 113 8 20
Cash and cash equivalents at end of period 8,561 4,168 6,810
NOTES TO THE INTERIM FINANCIAL STATEMENTS
1. General information
Cambridge Cognition Holdings plc ('the Company') and its subsidiaries
(together, 'the Group') develops and markets digital solutions to assess 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 20 September 2022. 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 2021 were
approved by the Board of Directors on 13 May 2022 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 2022 have not been
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. Whilst having proper regard to
the continuing uncertainties brought by the pandemic, the Directors believe
that the Group will remain a going concern for the foreseeable future. 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 2021.
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
Judgements may be required in recognising revenue and cost. These judgements
include
· The extent to which, and the way in which, contracts are
separated into their component parts and the values attributed to those parts;
· Whether software licences are granted to allow the customer the
benefit of use of our intellectual property over a period of time (including
benefitting from future maintenance and improvements) or whether that right is
given as the intellectual property exists at the point of time the licence is
granted. In the case of the former, software is recognised over the period of
use, for the latter revenue is recognised when the licence commences and the
customer is able to use the software;
· The adoption of the portfolio approach for lower value sales and
the recognition criteria applied;
· Where performance obligations are satisfied over time, the length
of time remaining for performance, and whether this needs revising over time;
and
· The length of time for performance also dictates the initial
deferral and subsequent recognition of commissions in cost of sales.
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.
5. Segmental information
The analysis of revenue by product type is as follows:
6 months to 30 June 2022 6 months to 30 June 2021 Year to 31 December 2020
£'000 £'000 £'000
Software 2,240 1,374 3,609
Services 3,096 2,882 5,638
Hardware 543 244 847
5,879 4,500 10,094
6. Earnings per share
The calculation of earnings per share is based on the following profit and
numbers of shares:
6 months to 30 June 2022 6 months to 30 June 2021 Year to 31 December 2021
£'000 £'000 £'000
Earnings
Earnings for the purposes of basic and diluted earnings per share being net 16 84 450
profit attributable to owners of the Company
'000 '000 '000
Number of shares
Weighted average number of ordinary shares for the purposes of basic EPS 31,097 31,097 31,170
Effect of dilutive share options 2,154 2,177 349
Weighted average number of ordinary shares for the purposes of diluted EPS 33,251 33,274 31,519
6. Earnings per share (continued)
Pence Pence Pence
Earnings per share
Basic 0.1 0.3 1.4
Diluted 0.1 0.3 1.4
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.
The number of shares in issue at 30 June 2022 was 31,170,903 (31 December
2021: 31,170,903).
7. Reconciliation of operating result to operating cash flows
6 months to 30 June 2022 6 months to 30 June 2021 Year to 31 December 2021
£'000 £'000 £'000
Profit/(loss) before tax 16 84 253
Adjustments for:
Depreciation of property plant and equipment 18 70 142
Amortisation of software licences 3 3 6
Share-based payments charge 47 69 111
Finance costs - 2 11
Interest received (2) - -
Operating cash flows before working capital movements 82 228 523
Change in inventories (126) (86) (75)
Change in trade and other receivables (246) (2,416) (2,285)
Change in trade and other payables 1,969 3,512 5,782
Cash generated by operations 1,679 1,238 3,945
Taxation paid - (2) -
Net cash flows from operations 1,679 1,236 3,945
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
(http://www.cambridgecognition.com) .
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