TIDMIGP
RNS Number : 8003S
Intercede Group PLC
28 December 2016
28 December 2016
INTERCEDE GROUP plc
('Intercede', the 'Company' or the 'Group')
Interim Results for the Six Months Ended 30 September 2016
Intercede, the software and service company specialising in
identity, credential management and secure mobility, today
announces its interim results for the six months ended 30 September
2016.
Highlights
-- Revenues of GBP2.8m (2015: GBP5.5m), a decrease of 49%.
-- Operating expenses increased to GBP6.4m (2015: GBP5.7m), as a
result of continuing investment in infrastructure, technology
development and sales capacity.
-- Headcount increased to 127 at 30 September 2016 (30 September 2015: 125).
-- Operating loss of GBP3.7m (2015: GBP0.4m).
-- Loss for the period of GBP2.8m (2015: profit of GBP0.5m).
-- Basic loss per share 5.7p (2015: basic earnings per share 1.0p).
-- Cash balances of GBP1.4m at 30 September 2016 (30 September
2015: GBP5.8m). Subsequently increased to GBP2.6m at 30 November
2016.
-- Approximately GBP5.0m to be raised via a Convertible Loan
Note instrument and Subscription Shares (announced separately
today).
-- New contracts, which will all contribute to revenues during
the current financial year and beyond, include:
- Initial proof of concept order from a major German car
manufacturer, targeting the provision of secure digital trust to
more than 500,000 employees and devices.
- New license sale to a subsidiary of a major aerospace and defence company.
- Initial tranche of licenses sold to a global biopharmaceutical
company serving patients in 50 countries.
- Further GBP0.7m of orders secured from a major US aerospace
company for a MyID upgrade and support contract renewal.
Richard Parris, Chairman & Chief Executive of Intercede,
said:
"The reduction in revenues in the first half of the financial
year should not mask the scale of the market opportunity which we
are positioned to exploit. We are very pleased at the support we
have received from both new and existing investors who also
understand this opportunity and are endorsing our strategy by
subscribing for convertible loan notes and equity. We remain
confident that the deferred orders which have affected the first
half of the year will soon come to fruition and the outlook for the
full year is in line with expectations. In the more medium term, we
are equally confident that the technology we have developed to
build a secure bond of trust between connected people and their
devices will assume more and more importance in the markets for
cloud-based applications, secure mobility and the Internet of
Things."
ENQUIRIES
Intercede Group plc Tel. +44 (0)1455 558 111
Richard Parris, Chairman & Chief Executive
Andrew Walker, Finance Director
finnCap Tel. +44 (0)20 7220 0500
Stuart Andrews, Corporate Finance
Simon Hicks, Corporate Finance
Bell Pottinger Tel. +44 (0)7802 442486
Archie Berens
About Intercede
Intercede is a software and service company specializing in
identity, credential management and secure mobility. Its solutions
create a foundation of trust between connected people, devices and
apps and combine expertise with innovation to provide world-class
cybersecurity. Intercede has been delivering solutions to high
profile customers, from the US and UK governments to some of the
world's largest corporations, telecommunications providers and
information technology firms, for over 20 years. Intercede's
product portfolio includes MyID, an identity and credential
management system that assigns trusted digital identities to
employees citizens and machines. In 2015, Intercede launched MyTAM,
enabling trusted applications to be loaded into a mobile device's
Trusted Execution Environment (TEE), providing hardware-level
security for Android apps. In 2016, Intercede launched RapID, a
secure, easy to implement authentication service for mobile apps
and cloud services to completely eliminate the need for
passwords.
For more information visit: www.intercede.com
The information communicated in this announcement contains
inside information for the purposes of Article 7 of the Market
Abuse Regulation (EU) No. 596/2014.
INTERCEDE GROUP plc
('Intercede', 'the Company' or 'the Group')
Interim Results for the Six Months Ended 30 September 2016
Chairman's Statement
Introduction
Intercede has benefited from six months of important strategic
progress measured in terms of new partnerships, positive market
developments and the initiation of critical proof of concept
deployments for secure mobility and the Internet of Things.
Unfortunately, during the same period we were affected by the
deferment of a small number of particularly large orders. While
none of these external delays are a comment on the fundamental
strength of the business, the short term impact of more than GBP2m
of sales being deferred is significant in terms of our ability to
continue the scale of our investment in business expansion.
The Company has therefore implemented a plan to raise additional
funding to ensure we are adequately resourced to exploit the
opportunities we have created around future looking mobile and IOT
digital trust solutions. I am pleased to say this fund raising has
been successful and the Company has conditionally secured
approximately GBP5.0m of additional cash via a conditional
convertible loan note instrument and equity. This new funding will
be principally deployed to ramp sales over the next two years in
newly emerging regulatory markets in UK, Europe, Korea and the US.
The funding has come from new institutions and seasoned technology
entrepreneurs as well as some of our major existing investors. This
demonstrates the confidence of our long term backers as well as
illustrating that our strategic story resonates strongly with a new
generation of technology and security savvy investors.
Additionally, we have removed more than GBP0.6m of annualized
costs from the business compared to the start of the financial year
without impacting our core delivery capabilities.
Financial Results
Revenues in the period totaled GBP2,828,000, a 49% reduction
compared to the corresponding period last year. For the MyID
platform, a large proportion of revenue is generated from US
Government agencies, which have stalled investment decisions while
bigger political events play out. We believe the conclusion of the
US presidential race will result in a pick-up in the revenue run
rate as business returns to normal and significant deferred orders
- which, as noted above, amount to more than GBP2m - are
realised.
For the Company's newer products, RapID and MyTAM, the work put
into business development has resulted in the identification of
target markets and talks with reference customers in each of those
markets. A RapID solution with a wealth management company is
expected to go live later in the year, along with a pilot for a
large group of Italian banks. Intercede also continues to build on
relationships with all of the major silicon designers and believes
that the combined offering of RapID and MyTAM to the Internet of
Things future is unmatched on the global stage. Both products are
expected to generate significant revenues in future periods.
Planned investment in marketing and PR and business development
of new markets, as outlined above, has resulted in a 14% increase
in operating expenses from GBP5,670,000 to GBP6,448,000. The
combined effect of planned investment and revenue deferment has
resulted in an increase in operating losses from GBP447,000 to
GBP3,678,000.
Staff costs continue to represent the main area of expense,
representing 77% of total operating costs (2015: 78%). Intercede
had 127 employees and contractors as at 30 September 2016 (30
September 2015: 125). The average number of employees and
contractors during the period has risen to 128 (2015: 121).
An GBP898,000 taxation credit for the period (2015: GBP912,000
taxation credit) primarily reflects the 2016 Research &
Development ("R&D") claim as a result of the investment
activities outlined above. Whilst the 2015 R&D claim was
received during September 2015, the 2016 claim was received during
October 2016. The Group is a beneficiary of the UK Government's
efforts to encourage innovation by allowing 130% (2015: 125%) of
qualifying R&D expenditure to be offset against taxable profits
and allowing 14.5% of the lower of R&D losses or taxable losses
to be paid as tax credits.
A loss for the period of GBP2,773,000 (2015: profit of
GBP480,000) resulted in a basic and a fully diluted loss per share
of 5.7p (2015: basic earnings per share of 1.0p and a fully diluted
earnings per share of 0.9p).
Cash balances as at 30 September 2016 totaled GBP1,377,000
compared to GBP5,289,000 as at 31 March 2016 and GBP5,767,000 as at
30 September 2015. As at 30 November 2016, cash balances had
recovered to GBP2,567,000 due to the receipt of the 2016 R&D
claim post period end and receipts from customers. Growth will
continue to be funded through a combination of existing cash
balances and the additional funding that has been announced
separately to the Stock Exchange today.
Operational Highlights
There have been key wins in respect of product development and
customer engagement, all of which will contribute to revenues in
the current financial year and beyond:
-- The successful completion of a proof of concept of a MyID
virtual smartcard solution for a major German car manufacturer.
-- Development of a RapID solution into an e-wallet application
that is currently in trial and will be used by a large group of
Italian banks.
-- RapID has been implemented into an app for a London-based
wealth management company that is expected to go live before the
end of the year. This will enable their customers to perform
transactions easily and securely, rather than calling to transact
through a broker.
-- Initial tranche of licenses sold to a global
biopharmaceutical company serving patients in 50 countries.
-- Signed memorandum of understandings with a number of silicon
and IoT IP companies to develop collaborative digital trust
solutions for connected devices.
-- Taken leadership roles in a number of industry initiatives
relating to digital trust and cyber security.
Strategy and Outlook
Intercede's strategy remains unchanged, despite the short term
challenges: to grow its digital trust service and software business
from a core of existing high value reference customers to a much
broader range of industry sectors and customer size.
Intercede plans to achieve this by continuing to generate
revenues in its historically strong markets and to reinvest in the
significantly higher growth opportunity that is anticipated in the
Cloud-enabled, application service centric, mobile and Internet of
Things markets. Intercede has already developed much of the
required core technology, such as its MyID and MyTAM platforms. The
strategic focus is now moving to packaging Intercede's portfolio of
IP assets into new combinations to provide innovative solutions to
some of the most intractable challenges of the digital economy.
In the medium term, RapID will contribute more to revenue than
MyTAM. Target markets for RapID include those that are impacted by
new regulations in the financial services and consumer sectors such
as Payment Services Directive 2 (PSD2) and the General Data
Protection Regulations (GDPR). MyTAM will be essential for
solutions to the Internet of Things market and we believe the
upside of success in this market is huge. For example, trusted
applications on mobile devices will increase convenience, privacy
and security for everyday consumer and business applications and,
by 2020, the Internet of Things market is estimated to be in excess
of 50 billion devices with each 'thing' needing to validate the
trustworthiness of its peers across a network. Each point of trust
is an opportunity for Intercede to provide an enabling service.
Our expectations are for accelerating year on year growth and
turning the tens of millions of MyID identities into hundreds of
millions of RapID/MyTAM app users. Our confidence is growing
commensurately that, in the longer term, Intercede is exceptionally
well placed to capitalise on the market for digital trust
services.
Richard Parris
Chairman & Chief Executive
28 December 2016
Consolidated Statement of
Comprehensive Income
For the period ended 30 September
2016
6 months 6 months
ended ended Year ended
30 September 30 September 31 March
2016 2015 2016
GBP'000 GBP'000 GBP'000
Continuing operations
Revenue 2,828 5,547 11,004
Cost of sales (58) (324) (410)
__________ __________ __________
Gross profit 2,770 5,223 10,594
Operating expenses (6,448) (5,670) (12,511)
__________ __________ __________
Operating loss (3,678) (447) (1,917)
Finance income 7 15 32
__________ __________ __________
Loss before tax (3,671) (432) (1,885)
Taxation 898 912 892
__________ __________ __________
(Loss)/profit for the period (2,773) 480 (993)
__________ __________ __________
Total comprehensive (expense)/income
attributable to owners of
the parent company (2,773) 480 (993)
__________ __________ __________
(Loss)/earnings per share
(pence)
- basic (5.7)p 1.0p (2.1)p
- diluted (5.7)p 0.9p (2.1)p
__________ __________ __________
Consolidated Balance Sheet
As at 30 September 2016
As at As at As at
30 September 30 September 31 March
2016 2015 2016
GBP'000 GBP'000 GBP'000
Non-current assets
Property, plant and equipment 822 835 864
__________ __________ __________
Current assets
Trade and other receivables 2,718 1,812 1,146
Cash and cash equivalents 1,377 5,767 5,289
__________ __________ __________
4,095 7,579 6,435
__________ __________ __________
Total assets 4,917 8,414 7,299
__________ __________ __________
Equity
Share capital 491 487 487
Share premium account 232 232 232
Other reserves 1,508 1,508 1,508
Retained earnings (1,441) 2,453 1,131
__________ __________ __________
Total equity attributable
to owners of the parent company 790 4,680 3,358
__________ __________ __________
Non-current liabilities
Deferred revenue 77 210 122
__________ __________ __________
Current liabilities
Trade and other payables 1,745 1,109 1,795
Deferred revenue 2,305 2,415 2,024
__________ __________ __________
4,050 3,524 3,819
__________ __________ __________
Total liabilities 4,127 3,734 3,941
__________ __________ __________
Total equity and liabilities 4,917 8,414 7,299
__________ __________ __________
Consolidated Statement
of Changes in Equity
For the period ended
30 September 2016
Share Share Other Retained
capital premium reserves earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 April 2016 487 232 1,508 1,131 3,358
Issue of ordinary shares 4 - - - 4
Purchase of own shares - - - (68) (68)
Employee share option
plan charge - - - 47 47
Employee share incentive
plan charge - - - 222 222
Loss for the period
and total comprehensive
income - - - (2,773) (2,773)
________ ________ ________ ________ _______
At 30 September 2016 491 232 1,508 (1,441) 790
__--______ ________ ________ ___________ _______
At 1 April 2015 487 232 1,508 2,257 4,484
Purchase of own shares - - - (488) (488)
Employee share option
plan charge - - - 57 57
Employee share incentive
plan charge - - - 147 147
Profit for the period
and total comprehensive
expense - - - 480 480
________ ________ ________ ________ _______
At 30 September 2015 487 232 1,508 2,453 4,680
__--______ ________ ________ ___________ _______
At 1 April 2015 487 232 1,508 2,257 4,484
Purchase of own shares - - - (610) (610)
Employee share option
plan charge - - - 115 115
Employee share incentive
plan charge - - - 334 334
Employee treasury share
transfer - - - 28 28
Loss for the year and
total comprehensive
expense - - - (993) (993)
________ ________ ________ ________ _______
At 31 March 2016 487 232 1,508 1,131 3,358
__--______ ________ ________ ___________ _______
Consolidated Cash Flow Statement
For the period ended 30 September
2016
6 months 6 months
ended 30 ended 30 Year ended
September September 31 March
2016 2015 2016
GBP'000 GBP'000 GBP'000
Cash flows from operating
activities
Operating loss (3,678) (447) (1,917)
Depreciation 103 89 186
Employee share option plan
charge 47 57 115
Employee share incentive
plan charge 222 147 334
Employee unit incentive plan
(credit)/charge (4) 15 58
Employee treasury share transfer - - 28
(Increase) in trade and other
receivables (821) (737) (100)
(Decrease)/increase in trade
and other payables (46) (32) 611
Increase/(decrease) in deferred
revenue 236 413 (66)
Interest received 9 19 36
__________ __________ __________
Cash used in operations (3,932) (476) (715)
Taxation (paid)/received (24) 912 892
__________ __________ __________
Net cash (used in)/generated
from operating activities (3,956) 436 177
__________ __________ __________
Investing activities
Purchases of property, plant
and equipment (61) (71) (197)
__________ __________ __________
Cash used in investing activities (61) (71) (197)
__________ __________ __________
Financing activities
Purchase of own shares (64) (488) (610)
__________ __________ __________
Cash used in financing activities (64) (488) (610)
__________ __________ __________
Net decrease in cash and
cash equivalents (4,081) (123) (630)
Cash and cash equivalents
at the beginning of the period 5,289 5,895 5,895
Exchange gains/(losses) on
cash and cash equivalents 169 (5) 24
__________ __________ __________
Cash and cash equivalents
at the end of the period 1,377 5,767 5,289
__________ __________ __________
Notes to the Consolidated Accounts
For the period ended 30 September 2016
1 Preparation of the interim financial statements
These interim financial statements have been prepared under IFRS
as adopted by the European Union and on the basis of the accounting
policies set out in the Group's Annual Report for the year ended 31
March 2016.
The Group is not required to apply IAS 34 Interim Financial
Reporting at this time.
These interim financial statements have not been audited and do
not constitute statutory accounts as defined in Section 434 of the
Companies Act 2006. Statutory accounts for the year ended 31 March
2016 have been delivered to the Registrar of Companies. The
Auditors' Report on those accounts was unqualified and did not
contain any statement under Section 498 (2) or (3) of the Companies
Act 2006.
The Interim Report will be mailed to shareholders within the
next few weeks and copies will be available on the website
(www.intercede.com) and at the registered office: Intercede Group
plc, Lutterworth Hall, St Mary's Road, Lutterworth, Leicestershire,
LE17 4PS.
2 Revenue
All of the Group's revenue, operating (losses)/profits and net
assets originate from operations in the UK. The Directors consider
that the activities of the Group constitute a single business
segment.
The split of revenue by geographical destination of the end
customer can be analysed as follows:
6 months 6 months
ended ended 30 Year ended
30 September September 31 March
2016 2015 2016
GBP'000 GBP'000 GBP'000
UK 139 313 462
Rest of Europe 461 570 1,312
North America 1,987 4,410 8,699
Rest of World 241 254 531
__________ __________ __________
2,828 5,547 11,004
__________ __________ __________
3 Taxation
Taxation represents the net effect of amounts receivable from
HMRC in respect of R&D claims and US corporation tax
payable.
4 (Loss)/earnings per share
The calculations of the (loss)/earnings per ordinary share are
based on the (loss)/profit for the period and the weighted average
number of ordinary shares in issue during each period. The basic
and diluted loss per share are the same as potential dilution
cannot be applied to a loss making period.
6 months 6 months
ended ended Year ended
30 September 30 September 31 March
2016 2015 2016
GBP'000 GBP'000 GBP'000
(Loss)/profit for the
period (2,773) 480 (993)
__________ __________ __________
Number Number Number
Weighted average number
of shares
- basic 48,507,555 48,426,005 48,429,489
- diluted 48,507,555 50,751,688 48,429,489
__________ __________ __________
Pence Pence Pence
Earnings/(loss) per
share
- basic (5.7)p 1.0p (2.1)p
- diluted (5.7)p 0.9p (2.1)p
__________ __________ __________
The weighted average number of shares used in the calculation of
basic and diluted earnings per share for each period were
calculated as follows:
6 months 6 months
ended ended Year ended
30 September 30 September 31 March
2016 2015 2016
Number Number Number
Issued ordinary shares
at start of period 48,735,005 48,735,005 48,735,005
Issue of ordinary shares 66,550 - -
Effect of purchase of
treasury shares (294,000) (309,000) (305,516)
__________ __________ __________
Weighted average number
of shares
- basic 48,507,555 48,426,005 48,429,489
__________ __________ __________
Add back effect of purchase
of treasury shares N/A 309,000 N/A
Effect of share options
in issue N/A 2,016,683 N/A
__________ __________ __________
Weighted average number
of shares
- diluted 48,507,555 50,751,688 48,429,489
__________ __________ __________
5 Dividend
The Directors do not recommend the payment of a dividend.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR LDLLLQLFEFBB
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