TIDMIGP
RNS Number : 1507B
Intercede Group PLC
05 June 2019
5 June 2019
INTERCEDE GROUP plc
("Intercede", the "Group" or the "Company")
Preliminary Results for the Year Ended 31 March 2019
Intercede, the leading specialist in digital identity,
credential management and secure mobility, today announces its
preliminary results for the year ended 31 March 2019.
Financial Highlights
-- Revenues of GBP10.1m (2018: GBP9.2m), a 10% increase compared
to last year. This reflects growth from contract wins with new
customers as well as successfully upselling to existing customers.
While North America continues to be the Group's largest market, the
second half of the year saw the first sale of MyID to an end
customer in the region of SE Asia.
-- Last year, a cost-cutting review was introduced to remove
significant costs from the business without impacting operational
capability. The combined effect of increased revenues and a 26%
reduction in operating expenses to GBP10.1m, generated an operating
profit of GBP0.02m (2018: GBP4.5m loss) and a net profit of GBP0.5m
(2018: GBP3.8m loss), meaning that Intercede has returned to
profitability a year earlier than outlined by the Board at the time
of the FY18 results.
-- As at 31 March 2019, gross cash balances totalled GBP3.2m
(2018: GBP2.3m), following a year in which cash generated from
operating activities totalled GBP1.0m (2018: GBP5.0m used in
operating activities).
Operating Highlights
-- Significant contract wins include awards from a US Federal
agency tasked with intelligence and security services and an
intergovernmental alliance organisation. In both cases there is an
expectation of further professional services orders over the next
financial year and the potential to make further license sales to
connected departments.
-- Intercede made MyID license sales to two existing US Federal
agency customers to enable their users to issue derived PIV
credentials to their mobile devices. This utilises the investment
Intercede has made in integrating with Mobile Device Management
(MDM) systems such as AirWatch and demonstrates the market
relevance of Intercede's ability to use iOS and Android smartphones
as an identity device.
-- During the year, the Group delivered, to plan, a MyID
solution to issue mobile government identities to the citizens of a
Middle Eastern country. Intercede is targeting further future
revenue from MyID's capability to issue digital identities to
citizens of other countries on smart cards and mobile devices.
-- Launch of a new derived credential solution in collaboration
with Intel. This solution enables the issuance of PKI-based digital
identities to a user's Intel Authenticate-enabled tablet or
notebook PC, following NIST security guidelines.
-- Under the leadership of a new Chief Executive, the Group has
removed unnecessary costs and restructured and refocused the
management team. The number of employees and contractors as at 31
March 2019 has been reduced to 79 (2018:98).
Chuck Pol, Chairman, said:
"Intercede has undergone a challenging period resulting in the
Board making transformational changes to ensure a return to revenue
growth and profitability. I am pleased to announce that the Group
is reporting performance that is ahead of market expectations by
returning to profit a year earlier than expected. This represents a
significant turnaround from the losses incurred in recent years and
I would like to thank all Intercede staff across the Group for
their hard work and dedication throughout the year.
MyID is trusted within government circles and amongst some of
the world's largest security sensitive organizations and will
continue to generate opportunities for growth and improving
financial performance. The new leadership team will make employees,
customers and shareholders their priority and I am confident of the
Group's future prospects"
Contact
Intercede Group plc Tel. + 44 (0)1455 558111
Klaas van der Leest Chief Executive
Andrew Walker Finance Director
finnCap Ltd. Tel. + 44 (0)20 7220 0500
Stuart Andrews Corporate Finance
Simon Hicks Corporate Finance
About Intercede
Intercede is a cybersecurity company specialising in digital
identities, derived credentials and access control, enabling
digital trust in a mobile world.
Headquartered in the UK, with offices in the US, we believe in a
connected world in which people and technology are free to exchange
information securely, and complex insecure passwords become a thing
of the past.
Our vision is to make the highest levels of cybersecurity
available to organizations and consumers alike, solving complexity
and scalability issues by managing high volumes of digital
credentials.
We have been delivering trusted solutions to high profile
customers for over 20 years. Our team of experts has deployed
millions of identities to governments, most of the largest
aerospace and defence corporations, and major financial services
and healthcare organizations, as well as leading
telecommunications, cloud services and information technology
firms, providing industry-leading employee and customer credential
management systems.
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.
The following sections are extracted from the Group's
forthcoming Annual Report and contain graphics to support the
commentary. These graphics can only be viewed by reading a PDF
version of this announcement, which can be accessed by clicking
here.
http://www.rns-pdf.londonstockexchange.com/rns/1507B_1-2019-6-4.pdf
For those unable to access the PDF, the data represented
graphically is instead set out in tabular format below.
INTERCEDE GROUP plc
Preliminary Results for the Year Ended 31 March 2019
CHAIRMAN'S STATEMENT
In last year's Chairman's Statement, I advised that Intercede
had undergone a challenging period resulting in the Board making
transformational changes to ensure a return to revenue growth and
profitability.
Results
Led by Klaas van der Leest and a reorganized management team,
the Group is reporting performance for the 2019 financial year
("FY19") that is ahead of market expectations. The combined impact
of a 10% increase in revenues from GBP9.2m to GBP10.1m, and action
taken to reduce the cost base by approximately GBP3.6m, has
resulted in a return to profit which represents a significant
turnaround from the losses incurred in recent years. It is a
testament to the focus of the new leadership team that, even with
the organizational change at the start of the year, the Group has
returned to profit a year earlier than expected.
As I noted in the FY19 Interim Report, the Group has seen
revenue growth from contract wins with new customers as well as
successfully upselling to existing customers. The second half of
FY19 has seen a continuation of this trend with the Group's first
sale of MyID to an end customer in the region of SE Asia and the
receipt of a large US Federal Government follow on order totalling
$4.3m (FY18: $4.0m).
Our People
I would like to take this opportunity to thank Klaas, his
management team and all Intercede staff across the Group for their
hard work and dedication throughout the year. Their continued
commitment and drive to ensure the business delivers the
high-quality solutions that our customers require and expect,
operating under tight timescales, are key factors in maintaining
and enhancing the ongoing and longstanding relationships we have
with our customers.
Board Changes
The founder of Intercede, Richard Parris, ceased his role as a
Non-Executive Director of the Company on 14 December 2018. I would
like to thank Richard for his many years of service to
Intercede.
Summary
I am pleased with the healthy organic growth achieved across the
Group during FY19, following a challenging FY18 and the number of
substantive changes and re-tooling of the business.
North America continues to be the Group's largest market
contributing 69% of revenues during FY19 with the UK, the Rest of
Europe and the Rest of the World generating 3%, 17% and 11%
respectively. As we look to build on the positive momentum, we
recognize there are political and financial pressures in the US
Federal market and that prospects for both the US and the broader
global economy remain uncertain.
Intercede continues to enjoy an exceptionally strong market
position within government circles and amongst some of the world's
largest security sensitive organizations. MyID is a highly
configurable platform that integrates with a broad range of
third-party digital identity technologies and will continue to
generate opportunities for growth and improving financial
performance. The new leadership team will make employees, customers
and shareholders their priority and I am confident of the Group's
future prospects.
Chuck Pol
Chairman
5 June 2019
INTERCEDE GROUP plc
Preliminary Results for the Year Ended 31 March 2019
CHIEF EXECUTIVE'S REVIEW
I was appointed on 10 April 2018 with a remit to return
Intercede to profit and rebuild value for shareholders. With this
in mind, the business was restructured to ensure a clear focus on
the core product and staff as well as customers and partners.
The restoration of value needed to start with a "back to basics"
approach. Intercede has been successful for many years in following
a strategy of building MyID as a highly configurable platform that
integrates with a broad range of third-party technologies to make
up a highly secure digital identity ecosystem. This niche focused
strategy has allowed us to build market leading positions in a
number of very attractive market segments where we enjoy the
benefits of delivering differentiated products and services that
have tangible and lasting value. This includes Aerospace &
Defence contractors and governments who understand that replacing
passwords with strong 2-factor authentication is the single most
effective way for an organisation to protect themselves against the
number one cause of data breach ie weak or compromised user
credentials.
Some of our product development in recent years has attempted to
expand MyID into new markets, including secure cloud services and
the Internet of Things (IoT). This could have resulted in explosive
growth for Intercede, but these are very competitive markets in
which the end consumer is currently struggling to differentiate
strong 2-factor authentication from biometric security or SMS
one-time passwords. The option of trying to use marketing to
educate the market was considered to be expensive and unlikely to
deliver satisfactory shareholder value.
The investment in mobile ID and derived credentials, by
contrast, has brought some very interesting Intellectual Property
(IP) to the Group that we believe will contribute to the Group's
future growth. Investment in innovation has been targeted to expand
the Group's market coverage by developing a more standard variant
of MyID that can be sold through Intercede's global network of
authorised partners. This takes the proven core functionality of
MyID and offers it as a cost-effective solution for enterprises of
all sizes that need to comply with regulations for protecting
customer information.
Review of Operations and Future Developments
I have been impressed with both the quality and range of
solutions offered by the Group and can see we have a fundamentally
strong business offering excellent solutions to attractive core
markets. More than that, I have seen first-hand the commitment and
determination of the team here at Intercede to deliver to its
customers, shareholders and wider stakeholders. I am leading a very
capable company that is now focused on delivering tangible customer
and shareholder value, whilst providing a safe and stimulating
working environment.
Intercede is trusted by government and large enterprises
worldwide. The security, reliability and interoperability of MyID
software sets it apart and is why we are proud to help many leading
organisations around the world manage the secure digital identities
they issue to citizens and employees.
Sample Customers:
US Department of Homeland Security, Boeing, Wells Fargo,
Deutsche Telekom, Kuwait Public Authority for Civil Information,
Airbus, US Nuclear Regulatory Commission, Booz Allen Hamilton, US
Social Security Administration, Lockheed Martin, United Health
Group, Northrop Grumman, UK Government Ministry of Defence, ANZ,
Handelsbanken, REWE, BASF, Coutts, Australian Government Department
of Defence, Swedbank, RDW, US Federal Aviation Administration.
One of the Group's key deliverables during FY19 was the MyID
solution to issue mobile government identities to the citizens of a
Middle Eastern country. I am pleased to report that this was
delivered to plan. This solution will allow the citizen to use an
app to strongly authenticate to government provided services plus
potential third-party provided services such as healthcare and
banking. The success of this project provides validation that
Intercede's early investment in mobility is capable of generating
meaningful revenue from issuing digital identities to citizens and
employees on smart cards and mobile devices.
During FY19, the Group was awarded two contracts to provide
existing US Federal customers with solutions to issue a derived PIV
credential to a mobile device using the employee's original PIV
card to authenticate the user during the self-service process. This
is expected to utilise the investment Intercede has made in
integrating with Mobile Device Management (MDM) systems such as
AirWatch and demonstrates the market relevance of Intercede's
ability to use iOS and Android smartphones as an identity device.
MyID is now able to support a range of credential stores, including
the device native key store (iOS and Android), MyID protected key
store, and a range of MDM and Enterprise Mobility Management (EMM)
systems' key stores. Intercede's technology, combined with the
innovative behaviour of its employees, provides a competitive
advantage to win other mobile opportunities that are currently in
the pipeline for various US Federal agencies.
In the second half of FY19, the Group was pleased to announce
the first sale of its MyID credential management software to a
government customer in the region of SE Asia. This was received
from a new Partner with offices in Singapore, Hong Kong and
Malaysia, that does business throughout the region and should lead
on to further business in the region in future years. Intercede
utilises its global network of technology and reseller partners to
provide the expertise and global footprint to locally deliver the
cyber security solutions our customers need. Their experience in
installing, configuring and supporting Intercede products, whilst
utilising our software and services to add a higher level of
security to their solutions portfolio, is extremely important.
The establishment and further development of these and other
partner relationships is critical for the Group's future growth
prospects. MyID is a Credential Management System (CMS) which
typically forms part of a wider identity ecosystem and therefore
must be futureproofed to work with the devices and technology our
customers want to use. We were therefore pleased to recently
announce the launch of our new derived credential solution in
collaboration with Intel. This solution enables the issuance of
PKI-based digital identities to a user's Intel Authenticate-enabled
tablet or notebook PC, following NIST security guidelines. The user
can then access networks and systems using hardware protected
multi-factor authentication. This is not only secure but also
provides a better user experience as the user can use a fingerprint
or a face match in place of a PIN.
Technology Partners:
90meter, VMware AirWatch, Centrify, Citrix, Cryptovision,
DigiCert, Entrust Datacard, Gemalto, HID Global, Idemia, Intel,
Microsoft, MobileIron, nCipher Security, PrimeKey, SafeNet Assured
Technologies, Verizon, Yubico.
Reseller Partners:
Accenture, ADACOM, Carillon Information Security, Centrify,
CertiPath, Cryptas, DigiCert, Diyar United Company, Emergent,
Ensign InfoSecurity, Gemalto, NextgenID, NXP Semiconductors,
SafeNet Assured Technologies, Salt Group (Cyber Security), Thales
eSecuity.
People
Our employees remain core to our current and future business
success. Without talented people, there are no further product
innovations or technical solutions.
During FY19, we restructured the business and made a number of
strategic appointments designed to improve operational delivery and
strengthen commercial focus on organic growth including:
-- Mike Weston as Chief Operating Officer. Mike has extensive
experience around software engineering and system integration, both
for commercial off-the-shelf products as well as bespoke software
solutions. In addition, he has a track record of delivering on time
and to budget across different time zones. When at Logica, Mike was
SVP Operations for Asia and prior to that CEO for Offshore
Services. In the latter role, he grew Logica's offshore service
delivery model from a fledging business into a 2,000 strong
headcount. In growing these businesses, he introduced stronger
discipline and focus to organisational delivery and review, thereby
ensuring greater efficiency and built-in robustness into estimation
and development processes.
-- Jean Dignand as Chief Sales Officer. Jean has a wealth of
solution sales experience in hardware, software and services, as
well as cloud, with a good understanding of the wider security
space. He has worked in smaller companies as well as larger
corporates including Capita, MTI Technology, HP and
Salesforce.com.
Annual Employee Surveys have been re-instated to provide a clear
staff barometer and a platform for staff input. There is more work
to be done across the business but, with an open and transparent
top-down and bottom-up approach, staff motivation remains a
priority.
Outlook
Following actions taken at the end of last year, and throughout
the current year, the Group now has a much better framework in
place for future success. We have removed unnecessary costs and
restructured and refocused our management team. Whilst a number of
challenges remain, I now have a much clearer view of the shape and
potential of the business going forward.
As such the 'back to basics' approach, highlighted at the start
of this section, means the coming year will see a laser focus on
execution. The objectives of the business are geared towards
sustainable revenue growth and profitability which, after an
initial year of transformation, now appear within reach. Our focus
is on organic growth through the execution of the agreed strategy
which centres around colleagues, customers, channels and cash.
We need to ensure our colleagues, who have maintained an
admirable focus on supporting their customers during this difficult
period, continue to feel motivated and committed to Intercede. We
are fortunate to have so many talented people who have chosen
Intercede as their place of work, and we must make sure that
commitment is consistently rewarded and maintained.
We have an excellent customer list, which has been created by
delivering outstanding value. This will continue to be the number
one priority for everyone in our business. There have been
distractions that have interfered with this focus over the recent
past, but it will be the focus of the entire Group, at all
levels.
Channel partnerships are critical to the continued and enhanced
growth of the business both in established markets and also in new
geographies such as SE Asia. Specific investments have been and
will continue to be made in terms of people, product and marketing
to ensure the success of this go-to-market model.
And finally, we need to focus on cash. The Group has a good
record of managing working capital but we need to drive efficiency
in everything we do whilst at the same time ensuring the importance
of cash is understood in all parts of the business.
We have ended this financial year in a much stronger position
than we started it, with a strong leadership team and a clear focus
on product and operational execution. I am confident this will
continue strongly in FY20 and beyond as we deliver success.
Klaas van der Leest
Chief Executive Officer
5 June 2019
INTERCEDE GROUP plc
Preliminary Results for the Year Ended 31 March 2019
STRATEGIC REPORT
Introduction
Intercede is a cybersecurity software and services company
specialising in digital trust for a hyper-connected, increasingly
mobile world.
The Group's vision is a world without passwords and its mission
is to provide the enabling technology and services to make this
possible for people and things. Intercede's core pillars of
strength can be outlined as follows:
-- For over 20 years, Intercede has been providing trusted
identities to people, devices and apps for some of the world's
largest corporations and government agencies.
-- Intercede's product innovation roadmap leverages over 1,000
man-years of internal expertise and is underpinned by strong
customer demand and a committed set of international partners.
-- New solutions are engineered at high speed by a specialist
team with longevity of employment. Product design is also informed
by major customers and interoperability partners.
-- Intercede's MyID software is US and UK Government accredited,
which secures access to regulated markets. Traditionally it was
delivered as an on-premise solution for employee ID, but it is now
also deployed as a managed service for large scale transport worker
and citizen programs.
-- The scalability of MyID combined with its technology
independence make it well positioned to capitalise on the growing
demand for digital identities in the rapidly emerging markets of
blockchain and the Internet of Things (IoT).
These core strengths mean that Intercede is well placed to take
advantage of opportunities in the market, in particular:
-- Passwords are universally recognised as being insecure and
inconvenient by organisations and end users.
-- A growing number of governments and industry bodies are
enacting legislation to mandate enhanced levels of security by
removing passwords. This increased regulation covers a wide range
of activities including banking & finance, general data
protection and critical national infrastructure.
-- In-house cybersecurity skills are in short supply creating an
increased demand for packaged security solutions.
-- There is a growing demand for identity solutions to meet the
scalability requirements of large end user populations,
particularly in the consumer and IoT markets.
Intercede has the experience, skills and technology platform to
deliver digital identity solutions across a wide range of market
sectors and geographical regions, meeting the growing demand for a
secure and convenient alternative to passwords.
Trading Results
Last year we outlined our confidence that the cost-cutting
review and the reorganisation of the management team would provide
a firm platform to drive future growth. The cost-cutting review was
introduced with the aim of focusing Intercede on delivering core
MyID solutions and returning the Group to profit within two
years.
I am pleased to report that this confidence was well-founded as
the Group has made significant progress, delivering impressive
results and returning to profit a year earlier than planned.
Revenues for the year ended 31 March 2019 increased by 10% to
GBP10,108,000, whilst operating expenses were reduced by 26% to
GBP10,068,000, both of which combined to generate an operating
profit of GBP16,000 (2018: GBP4,506,000 loss) and a net profit of
GBP528,000 (2018: GBP3,830,000 loss). As at 31 March 2019, gross
cash balances totalled GBP3,228,000 (2018: GBP2,272,000).
Revenue Highlights:
-- A new award of a MyID contract from a US Federal agency
tasked with intelligence and security services. Orders have been
received to date for 60,000 device licenses with an expectation of
further professional services orders over the next financial
year.
-- A new award of a MyID contract from an intergovernmental
alliance organisation with the potential to roll out to other
departments following a successful implementation.
-- Two MyID license sales to existing US Federal customers to
enable their users to issue derived PIV credentials to their mobile
devices using their original PIV card.
-- A new award of a MyID contract to a government in SE Asia,
which represents the first MyID sale in that region.
-- A new award of a MyID contract to a US Mid-Western
diversified energy company to manage digital identities for 15,000
devices.
-- Follow-on MyID sales for a US Federal customer (won in FY17),
a US military shipbuilder (won in FY18) and a leading European
telecommunications company (won in FY14) for 35,000, 20,000 and
20,000 device licenses respectively.
These orders include software licenses, associated support &
maintenance and professional services, some of which will be
recognised as revenue beyond the current financial year. They have
contributed to a net growth in Intercede's worldwide deployments to
just under 90 deployments, all of which are blue chip customers.
MyID continues to be the Credential Management System (CMS) of
choice for major public key infrastructure (PKI) system
deployments.
Regional Sales
GBPm North America ROW
2015 4.5 4.3
2016 8.7 2.3
2017 6.4 1.9
2018 6.5 2.7
2019 7.0 3.1
The US represents Intercede's largest market with
sales to North America making up 69% of total sales
during FY19 (2018: 71%).
Revenue Breakdown
GBPm S&M Professional Services Software Licenses Other
2015 3.1 2.5 2.6 0.6
2016 3.5 2.6 4.8 0.1
2017 4.0 1.7 2.6 0.0
2018 4.4 1.4 3.4 0.0
2019 4.6 1.7 3.8 0.0
The last five years has seen progressive growth in recurring Support
& Maintenance (S&M) revenues due to a steady increase in deployments.
The number of new deployments (with revenues over GBP20,000) in
FY19 is consistent with FY18 but there is an increase in Software
License revenue due to higher follow-on software license sales
to existing customers and the impact of higher revenue per new
deployment. Professional Services revenue is also higher than
FY18 partly due to implementations of large license orders received
in the previous year.
Action taken to reduce the cost base is primarily responsible
for the 26% reduction in operating expenses from GBP13,669,000 to
GBP10,068,000. The Group has started the new financial year with a
similar operating cost run rate but will consider strategic
investment to exploit new revenue opportunities.
Revenue, Opex, Profit/Loss & Cash
GBPm Revenue OpEx Profit/Loss Year end cash
2015 8.8 10.2 -1.3 5.9
2016 11.0 12.5 -1.0 5.3
2017 8.3 12.9 -3.9 6.9
2018 9.2 13.7 -3.8 2.3
2019 10.1 10.1 0.5 3.2
The substantial increase in operating expenses (OpEx) over the
period to FY18 primarily reflects strategic investment in product
development to expand MyID into emerging high-volume markets to
secure mobile apps and devices, provide cloud services and protect
the Internet of Things (IoT). This expenditure was reduced following
the change in strategy reported in the FY18 Annual Report which,
when combined with increased revenue, has enabled the Group to
return to profit.
Staff costs continue to represent the main area of expense,
representing 79% of total operating expenses (2018: 76%). The
average number of employees and contractors was 86, down from the
previous year's average of 119. However, as a result of the cost
reductions referred to above, the number of employees and
contractors as at 31 March 2019 had been reduced to 79 (2018:
98).
Employees
Average Employees Year end Employees
2015 113 119
2016 125 126
2017 125 121
2018 119 98
2019 86 79
Employee numbers have been reduced back to pre-FY15 levels, ie
before the commencement of strategic investment in product development
to expand MyID into emerging high-volume markets.
Expenditure on research and development (R&D) activities
totalled GBP2,854,000 (2018: GBP3,736,000). In accordance with the
IFRS recognition criteria, the Board has continued to determine
that all internal R&D costs incurred in the year are expensed.
No development expenditure has been capitalised as at 31 March 2019
(2018: GBPnil).
Research & Development (R&D)
GBPm R&D Expenditure R&D Tax Credit (in arrears)
2015 3.6 0.4
2016 3.9 0.9
2017 4.0 0.9
2018 3.7 1.1
2019 2.8 1.0
R&D is an important part of Intercede's investment strategy. Money
spent on people qualifies, in arrears, for UK government tax credits
which are paid in cash in the following year.
A GBP979,000 taxation credit in the period (2018: GBP1,118,000
taxation credit) primarily reflects cash received following the
2018 R&D claim as a result of the investment activities
outlined above. The Group is a beneficiary of the UK Government's
efforts to encourage innovation by allowing 130% of qualifying
R&D expenditure to be offset against taxable profits.
The net finance cost for the year was GBP467,000 (2018:
GBP442,000). The increase reflects a full year of interest payable
on the additional GBP510,000 convertible loan notes that were
issued, under the same instrument, on 25 August 2017.
A profit for the year of GBP528,000 (2018: loss of GBP3,830,000)
resulted in a basic profit per share of 1.0p and a fully diluted
profit per share of 0.9p (2018: basic and fully diluted loss per
share 7.6p).
Financial Position
The Group's cash position at 31 March 2019 was GBP3,228,000
(2018: GBP2,272,000), following a year in which cash generated from
operating activities totalled GBP960,000 (2018: GBP4,978,000 used
in operating activities).
The cost-cutting review has enabled the Group to exit one of its
UK properties, which as at 31 March 2019 was classified as an asset
held for sale at a carrying value of GBP373,000 (2018: GBP373,000).
The sale of this property was completed on 5 April 2019 resulting
in net proceeds of GBP422,000 and a profit on disposal of
GBP50,000.
The Group has no plans to commence the payment of dividends and
will do so when the Board considers this to be appropriate.
Treasury
The Group manages its treasury function as part of the finance
department. Whilst the Group's operations are primarily based in
the UK it has successfully exported its technology throughout the
world for many years. This results in invoices being raised in
currencies other than sterling; the most notable being US dollars
and euros. A number of suppliers also invoice the Group in US
dollars and euros. The Group's current policy is not to hedge these
exposures and the exchange differences are recognised in the
statement of comprehensive income in the year in which they
arise.
Key Performance Indicators (KPIs)
2015 2016 2017 2018 2019
Sales growth (10%) 25% (25%) 11% 10%
Export sales 85% 96% 95% 94% 97%
North American
sales 51% 79% 77% 71% 69%
New deployments
with revenues
over GBP20,000 6 6 8 10 9
Principal Risks and Uncertainties
The principal risks and uncertainties facing the Group are as
follows:
-- The Group operates in a complex and competitive technological
environment so the business will be negatively affected if the
Group does not enhance its product offerings and/or respond
effectively to technological change. This risk is mitigated by
ongoing investment in research and development.
-- The Group operates in multiple markets, both geographically
and by sector, so there is a risk that territory and global
macro-economic conditions (including the impact of issues such as
the US China trade dispute, Brexit and the Italian banking crisis)
may result in one or more of these markets being adversely affected
and the revenues of the business impacted accordingly. This risk is
mitigated to an extent, both through the long term nature of
customer relationships and the diversification that results from
operating in multiple markets.
-- Technology companies are exposed to intellectual property
infringement and piracy. The Group rigorously defends its
intellectual property in the primary jurisdictions within which it
operates.
-- The Group's performance is largely dependent on the
experience and expertise of its employees. The loss or lack of key
personnel is likely to adversely impact the Group's results. To
mitigate this risk, the Group aims to put in place appropriate
management structures and to provide competitive remuneration
packages to retain and attract key personnel.
By order of the Board
Andrew Walker
Finance Director
5 June 2019
INTERCEDE GROUP plc
Consolidated Statement of Comprehensive Income for the year
ended 31 March 2019
2019 2018
GBP'000 GBP'000
Continuing operations
Revenue 10,108 9,204
Cost of sales (24) (41)
-------- --------
Gross profit 10,084 9,163
Operating expenses (10,068) (13,669)
-------- --------
Operating profit / (loss) 16 (4,506)
Finance income 11 10
Finance costs (478) (452)
-------- --------
Loss before tax (451) (4,948)
Taxation 979 1,118
-------- --------
Profit / (loss) for the year 528 (3,830)
-------- --------
Total comprehensive income / (expense)
attributable to owners of the parent company 528 (3,830)
-------- --------
Profit / (loss) per share (pence)
- basic 1.0p (7.6)p
- diluted 0.9p (7.6)p
-------- --------
INTERCEDE GROUP plc
Consolidated Balance Sheet as at 31 March 2019
2019 2018
GBP'000 GBP'000
Non-current assets
Property, plant and equipment 154 195
------- -------
Current assets
Assets held for sale 373 373
Trade and other receivables 4,797 4,709
Cash and cash equivalents 3,228 2,272
------- -------
8,398 7,354
------- -------
Total assets 8,552 7,549
------- -------
Equity
Share capital 505 505
Share premium 673 673
Equity reserve 66 66
Merger reserve 1,508 1,508
Accumulated deficit (4,898) (5,719)
------- -------
Total equity (2,146) (2,967)
------- -------
Non-current liabilities
Convertible loan notes 4,747 4,670
Deferred revenue 166 324
4,913 4,994
Current liabilities
Trade and other payables 1,899 1,857
Deferred revenue 3,886 3,665
------- -------
5,785 5,522
------- -------
Total liabilities 10,698 10,516
------- -------
Total equity and liabilities 8,552 7,549
------- -------
INTERCEDE GROUP plc
Consolidated Statement of Changes in Equity for the year ended
31 March 2019
Share Share Equity Merger Accumulated Total
capital premium reserve reserve deficit equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
As at 1 April 2017 499 673 60 1,508 (2,354) 386
Purchase of own shares - - - - (147) (147)
Employee share option
plan credit - - - - (19) (19)
Employee share incentive
plan charge - - - - 493 493
Issue of new shares 6 - - - - 6
Re-issuance of treasury
shares - - - - 138 138
Equity component of convertible
loan notes - - 6 - - 6
Loss for the year and
total comprehensive expense - - - - (3,830) (3,830)
------- ------- ------- ----------- -------
As at 31 March 2018 505 673 66 1,508 (5,719) (2,967)
Proceeds from recycling
of own shares - - - - 27 27
Employee share option
plan charge - - - - 17 17
Employee share incentive
plan charge - - - - 249 249
Profit for the year and
total comprehensive income - - - - 528 528
------- ------- ------- ------- ----------- -------
As at 31 March 2019 505 673 66 1,508 (4,898) (2,146)
------- ------- ------- ------- ----------- -------
All amounts included in the table above are attributable to
owners of the parent company.
INTERCEDE GROUP plc
Consolidated Cash Flow Statement for the year ended 31 March
2019
2019 2018
GBP'000 GBP'000
Cash flows from operating activities
Operating profit / (loss) 16 (4,506)
Depreciation 116 156
Employee share option plan charge / (credit) 17 (19)
Employee share incentive plan charge 249 493
Employee unit incentive plan charge 5 2
Employee unit incentive plan payment (7) (8)
Increase in trade and other receivables (131) (3,340)
Increase in trade and other payables 44 434
Increase in deferred revenue 63 1,023
Cash generated from / (used in) operations 372 (5,765)
Finance income 9 13
Finance costs on convertible loan notes (400) (344)
Taxation 979 1,118
------- -------
Net cash generated from / (used in) operating
activities 960 (4,978)
------- -------
Investing activities
Purchases of property, plant and equipment (75) (29)
------- -------
Cash used in investing activities (75) (29)
------- -------
Financing activities
Proceeds from recycling / (purchase) of
own shares 27 (141)
Proceeds from re-issuance of treasury shares - 138
Proceeds from issue of convertible loan
notes - 510
Convertible loan note issue costs - (27)
------- -------
Cash generated from financing activities 27 480
------- -------
Net increase / (decrease) in cash and cash
equivalents 912 (4,527)
Cash and cash equivalents at the beginning
of the year 2,272 6,891
Exchange gains / (losses) on cash and cash
equivalents 44 (92)
------- -------
Cash and cash equivalents at the end of
the year 3,228 2,272
------- -------
INTERCEDE GROUP plc
Preliminary Results for the Year Ended 31 March 2019
NOTES
1. The financial information set out in this announcement does
not constitute the Group's Statutory Accounts for the years ended
31 March 2019 or 2018, but is derived from those accounts.
Statutory Accounts for 2018 have been delivered to the Registrar of
Companies and those for 2019, which have been approved by the Board
of Directors, will be delivered following the Group's Annual
General Meeting. The Company's auditors have reported on those
accounts; their reports were unqualified and did not contain
statements under Section 498 of the Companies Act 2006.
The Annual General Meeting will be held at 2.00 pm on Wednesday
18 September 2019 at the registered office of the Company. Copies
of the full Statutory Accounts and the Notice of Annual General
Meeting will be despatched to shareholders in due course. Copies
will also be available on the website (www.intercede.com) and from
the registered office of the Company: Lutterworth Hall, St. Mary's
Road, Lutterworth, Leicestershire, LE17 4PS.
2. SEGMENTAL REPORTING
All of the Group's revenue, operating profits / (losses) and net
liabilities originate from operations in the United Kingdom. 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:
2019 2018
GBP'000 GBP'000
UK 331 533
Rest of Europe 1,738 963
North America 6,981 6,506
Rest of World 1,058 1,202
------- -------
10,108 9,204
------- -------
3. OPERATING PROFIT / (LOSS)
Operating profit / (loss) is stated after charging /
(crediting):
2019 2018
GBP'000 GBP'000
Staff costs 7,994 9,868
Settlement Agreement costs - 190
Compensation for loss of office paid to
directors and key management - 334
Foreign exchange (gain) / loss (25) 155
Depreciation of property, plant and equipment 116 156
Operating lease rentals 364 397
Cost of sales 24 41
Other expenses 1,619 2,569
------- -------
10,092 13,710
------- -------
Included in the costs above is research and development
expenditure totalling GBP2,854,000 (2018: GBP3,736,000).
4. TAXATION
The tax credit comprises: 2019 2018
GBP'000 GBP'000
Current year - UK corporation tax - -
Current year - US corporation tax (31) (30)
Research and development tax credits relating
to prior years 1,010 1,148
------- -------
Taxation 979 1,118
------- -------
The Group has unused tax losses of GBP8,710,000 (2018:
GBP13,854,000) and unrecognised deferred tax assets of GBP1,481,000
(2018: GBP2,355,000) calculated at 17% (2018: 17%), the UK
corporation tax rate that will be effective from 1 April 2020.
5. EARNINGS / (LOSS) PER SHARE
The calculations of earnings / (loss) per ordinary share are
based on the profit / (loss) for the financial year and the
weighted average number of ordinary shares in issue during each
year. Basic and diluted loss per share are the same as potential
dilution cannot be applied to a loss making year.
2019 2018
GBP'000 GBP'000
Profit / (loss) for the year 528 (3,830)
---------- ----------
Number Number
Weighted average number of shares - basic 50,482,281 50,212,714
- diluted 59,214,607 50,212,714
---------- ----------
Pence Pence
Profit / (loss) per share - basic 1.0p (7.6)p
- diluted 0.9p (7.6)p
---------- ----------
The weighted average number of shares used in the calculation of
basic and diluted earnings per share for each year were calculated
as follows:
2019 2018
Number Number
Issued ordinary shares at start of year 50,523,926 49,903,143
Effect of treasury shares (41,645) (115,623)
Effect of issue of ordinary share capital - 425,194
---------- ----------
Weighted average number of shares - basic 50,482,281 50,212,714
---------- ----------
Add back effect of treasury shares 41,654 N/A
Effect of share options in issue 1,417,294 N/A
Effect of convertible loan notes in issue 7,273,387 N/A
---------- ----------
Weighted average number of shares - diluted 59,214,607 50,212,714
---------- ----------
6. DIVIDEND
The Directors do not recommend the payment of a dividend.
7. ASSETS HELD FOR SALE
An office based in the UK is presented as an asset held for sale
following the commitment of the Group, on 23 February 2018, to a
plan to sell the property. The asset has been reclassified from
Property, plant and equipment into Current assets at its carrying
value of GBP373,000 (2018: GBP373,000). This is estimated to be
lower than its fair value less costs to sell, so no impairment loss
is required.
The sale of this property was completed on 5 April 2019
resulting in net proceeds of GBP422,000 and a profit on disposal of
GBP50,000.
8. SHARE CAPITAL
2019 2018
GBP'000 GBP'000
Authorised
481,861,616 ordinary shares of 1p each (2018:
481,861,616) 4,819 4,819
------- -------
Issued and fully paid
50,523,926 ordinary shares of 1p each (2018:
50,523,926) 505 505
------- -------
As at 31 March 2019, the Company had 41,645 ordinary shares held
in treasury (2018: 41,645).
9. Convertible loan notes
2019 2018
GBP'000 GBP'000
Non-current
8% Convertible loan notes (29 December 2021) 4,747 4,670
------- -------
Borrowings are repayable as follows:
2019 2018
GBP'000 GBP'000
Between two and five years 4,747 4,670
------- -------
On 30 January 2017, the Company issued GBP4,495,000 convertible
loan notes that carry an interest coupon of 8.0% pa payable
quarterly. The Company has granted security by way of a composite
guarantee and debenture in favour of Welbeck Capital Partners LLP
to secure the repayment of principal and interest due on the
convertible loan notes to the holders. Holders of the convertible
loan notes may convert into ordinary shares, at a conversion price
of 68.8125 pence per ordinary share, at any time until the final
redemption date of 29 December 2021.
On 25 August 2017, the Company issued GBP510,000 convertible
loan notes under the same convertible loan note instrument.
The amount recognised in the balance sheet in relation to the
convertible loan notes is as follows:
2019 2018
GBP'000 GBP'000
Nominal value of convertible loan note issue 5,005 5,005
Issue costs (348) (348)
Equity component at date of issue (66) (66)
------- -------
Liability component at date of issue 4,591 4,591
Effective interest rate adjustment from
date of issue 156 79
------- -------
Liability component at 31 March 4,747 4,670
------- -------
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR CKQDKDBKBNAK
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