TIDMIGP
RNS Number : 6071O
Intercede Group PLC
02 June 2020
2 June 2020
INTERCEDE GROUP plc
("Intercede", the "Group" or the "Company")
Preliminary Results for the Year Ended 31 March 2020
Intercede, the leading specialist in digital identity,
credential management and secure mobility, today announces its
preliminary results for the year ended 31 March 2020.
Financial Highlights
-- Results for the year ended 31 March 2020 show a continuing
trend of improved operational and financial performance.
-- Revenues of GBP10.4m (2019: GBP10.1m) primarily reflect the
impact of follow-on orders from existing customers and partners in
the US, EMEA and SE Asia. The establishment and further development
of partner relationships is critical for the Group's future growth
prospects.
-- Following a cost-cutting review introduced two years ago,
costs continue to be tightly controlled while strategic investment
and investment in staff have been maintained, both of which are
crucial to exploit new revenue opportunities.
-- The Group generated a substantially increased profit for the
year of GBP1.0m (2019: GBP0.4m).
-- Gross cash balances increased to GBP4.8m as at 31 March 2020
(2019: GBP3.2m), primarily driven by cash generated from operations
of GBP1.4m (2019: GBP0.7m).
Operating Highlights
-- Intercede reacted swiftly to the Covid-19 pandemic to
maintain business as usual with all staff working remotely from
home both in the UK and US.
-- The Group continues to execute its 5C strategy (Colleagues,
Customers, Channels, Code and Cash) and continues to be successful
in deriving a high level of recurring and follow on revenue.
Meanwhile, the value of the sales pipeline is over 40% higher than
this time last year.
-- Three new initiatives have been launched during the year to
increase customer interaction: US Customer Advisory Board (CAB),
Customer Portal and the Customer Satisfaction Survey. The US CAB in
particular was a great success and was attended by many US federal
agencies and large enterprises from across North America. When the
Covid-19 lockdowns are lifted, there are plans for a CAB in Europe,
for Intercede's European, Middle East and Asia Pacific
customers.
-- The launch of Intercede's new Connect Partner Programme. This
is a tiered channel scheme that rewards partner engagement to
extensively integrate MyID software with world-leading strong
authentication hardware and software. In particular Connect
Partners will sell the newly released MyID Professional, a
simplified and therefore more scalable version of MyID
Enterprise.
-- Strategic investment continues for the year ending 31 March
2021 with the goal of a significant release of MyID, currently
designated MyID v11.6, which is the first release of a new operator
client with an improved user experience and REST APIs for enhanced
performance. Beyond MyID v11.6 is a planned expansion into new
authentication technologies such as mobile ID and FIDO (Faster
IDentity Online), which will enable Intercede to access a larger
addressable segment of the authentication market.
Chuck Pol, Chairman, said:
"Just over two years ago a major Board reconstruction was
undertaken with the clear recognition that the Group had to get
back to sustainable revenue growth and profitability. All members
of the team have remained focused throughout the last two years and
it is to their great credit that the most difficult part of the
operational turnaround has been delivered despite the worsening
backdrop posed by the Covid-19 pandemic at the end of the period.
The Board are most grateful for the endeavours of all staff and our
immediate thoughts are focused on the safety and welfare of our
staff, partners, customers and prospects.
The Group has identified various options to simplify, scale and
expand the traditional markets of the MyID software platform,
starting with the release of MyID Professional. We have maintained
investment in Research & Development and in our operational
capabilities and have materially improved profitability - the
principal focus of our energies. The turnaround and return to
profitability has also allowed us to continue to look at exciting
technologies that will enrich the MyID software platform and
accelerate the momentum of our innovation.
We look forward to a further year of progress, particularly in
terms of revenue growth, although much currently depends on events
outside of the Company's control and the speed at which customers
return to more normal operations."
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/Simon Hicks Corporate Finance
Tim Redfern ECM
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/6071O_1-2020-6-1.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 2020
CHAIRMAN'S STATEMENT
The world situation has changed due to the Covid-19 pandemic and
as a business our immediate thoughts are focused on the safety and
welfare of our staff, partners, customers and prospects. The
Executive Management Team (EMT) has reacted swiftly to maintain
business as usual with all staff working remotely from home both in
the UK and US.
Against this unprecedented backdrop for the closing months of
the financial year, I am pleased to report another year of good
progress for the Group as we continue to execute our 5C strategy,
centred around Colleagues, Customers, Channels, Code and Cash. This
has resulted in a financial performance for the year ended 31 March
2020 ("FY20") that represents a significant turnaround from the
losses incurred in recent years.
Results
The Group is reporting a FY20 performance with profit and gross
cash balances that are substantially ahead of market expectations.
These results demonstrate the significant turnaround that has been
undertaken by Intercede. The Group is now on a sound strategic,
operational and financial footing and we have growing momentum
within the business.
The Group continues to be successful in deriving a high level of
recurring and follow on revenue from its existing customers. It is
also encouraging to note the value of the pipeline for the year
ending 31 March 2021 ("FY21") is over 40% higher than this time
last year. This includes a small number of delayed orders and
project upgrades, caused by Covid-19, that had been scheduled to
take place in the last week of March and are subsequently expected
to close and complete successfully during FY21. Clearly the timing
of execution of these orders depends upon the speed at which our
customers return to more normal operating conditions.
Our People
Just over two years ago a major Board reconstruction was
undertaken with the clear recognition that the Group had to get
back to sustainable revenue growth and profitability. The EMT and
all members of the team have remained focused throughout the last
two years and it is to their great credit that the most difficult
part of the operational turnaround has been delivered despite the
worsening backdrop posed by the Covid-19 pandemic at the end of the
period . The Board are most grateful for the endeavours of all
staff. Special thanks must be given to Klaas van der Leest (CEO),
Andrew Walker (CFO) and the wider EMT whose leadership, drive and
energy have been fundamental.
We are also pleased to welcome Rob Chandhok back to the
Intercede Board as an independent Non-Executive Director. Rob
served as a Non-Executive Director between April 2015 and January
2017 and brings more than 20 years of experience and expertise in
software and embedded systems.
Summary
With a stronger balance sheet and a focused and demonstrably
effective growth strategy, we ended FY20 in very good shape and the
Board is confident that Intercede is well placed to deliver long
term shareholder value. The Group has identified various options to
simplify, scale and expand the traditional markets of the MyID
software platform, starting with the release of MyID Professional.
We have maintained investment in Research & Development and in
our operational capabilities and have materially improved
profitability - the principal focus of our energies. The turnaround
and return to profitability has also allowed us to continue to look
at exciting technologies that will enrich the MyID software
platform and accelerate the momentum of our innovation.
At the time of writing, Covid-19 has spread rapidly across the
world forcing governments and business to take unparalleled action
to contain the spread of infection. This has resulted in the
suspension of international travel, cancellation of trade shows,
conferences and large customer events. The impact of these measures
on new business leads and the subsequent wider impact cannot be
fully quantified at this stage but never before has there been so
much technology to help with a crisis of this magnitude. We are
proud to provide a product that supports secure remote working and
working from home.
Intercede's business model, market position and financial
grounding means we are well placed to manage the impact of Covid-19
on our business; with high levels of recurring revenue, a strong
order book and FY21 pipeline, a blue chip customer base and a
strong balance sheet. We therefore look forward to a further year
of progress, particularly in terms of revenue growth, but are
mindful that this depends on our customers returning to more normal
operating conditions.
Chuck Pol
Chairman
2 June 2020
INTERCEDE GROUP plc
Preliminary Results for the Year Ended 31 March 2020
CHIEF EXECUTIVE'S REVIEW
As I said in last year's Annual Report, I was appointed with the
primary objective of implementing a strategy to bring the Group
back to sustainable revenue growth and profitability. While this is
clearly an ongoing objective, I am pleased to see a continuing
positive trend and momentum, which will enable us as a business to
drive incremental revenue growth in the coming years.
The release of MyID Professional was completed in the second
half of the year and has given us access to a new market segment,
previously not effectively addressed by MyID Enterprise. MyID
Professional is a simplified and therefore more scalable version of
MyID, combining predefined business processes and out-of-the-box
integration that protects networks, systems and cloud-based
resources with the most secure method of authenticating employees.
MyID Professional can be purchased via Intercede Channel partners
and is expected to particularly appeal to organisations who want to
obtain the enhanced security available from PKI (Public Key
Infrastructure) but are discouraged by the cost and complexity of
high-end solutions.
Over the past 18 months, the business has engaged with its
customers and partners to determine which market and solution areas
Intercede can naturally address based on its enviable position in
the strong authentication segment (PKI), which is still regarded as
the gold standard. However, new authentication solutions like FIDO
(Faster IDentity Online) are starting to complement the existing
PKI solutions, which is reflected in the authentication pyramid
below:
This graphic can only be viewed by reading a PDF version of this
announcement.
FIDO authentication provides cryptographic-grade security that
is cheaper and simpler to install than PKI. This has been taken
onboard by the US Identification standards for Federal employees
and contractors and their forthcoming FIPS 201-3 update is expected
to include FIDO as an authentication option. FIDO is currently
deployed by a number of leading organisations who want simple,
strong authentication for their supplier and customer bases but
still wish to retain their PKI infrastructure for employees. The
problems facing such organisations is how they can commonly manage
both forms of authentication and how do they apply their PKI
policies and procedures to FIDO. Intercede believes it can augment
FIDO with MyID and is currently working on a solution that will
give the market of FIDO users what it needs: a policy-driven FIDO
credential management solution. Intercede is currently working with
named customers and strategic technology partners to test the first
use cases before moving into full scale release. Moving down the
authentication pyramid will enable Intercede to access a larger
addressable market.
Review of Strategy and Operations
As with last year's Annual Report and the 2019 Interim Report, I
would like to provide an update on Intercede's 5C strategy, centred
around Colleagues, Customers, Channels, Code and Cash. This is the
core of our 'back to basics' approach and has ensured a laser focus
on execution and organic growth.
1 Colleagues
The continuing success of the Group primarily depends on its
employees across the world, who contribute daily to the achievement
of the 5C strategy. The Group respects its staff and recognises
that they are its most valuable asset.
We are committed to promoting a healthy corporate culture that
ensures staff are motivated, challenged and happy working together
for the mutual benefit of all the Group's stakeholders. Staff
engagement and ongoing satisfaction levels are routinely monitored
through regular employee surveys and suggestions are actioned by a
self-selected Employee Working Group. In addition, there is a
series of regular one-to-one meetings and quarterly company
meetings to help to ensure inclusivity and awareness of the
strategy and objectives.
Over the year, staff numbers increased from 79 as at 31 March
2019 to 83 as at 31 March 2020, while the attrition rate (average
number of leavers over the year as a ratio of average headcount
over the year) has fallen from 33% in FY19 to 9% in FY20 and
currently continues to fall. This is a validation of the focus on
creating a caring and inclusive culture and the improvements we
have made, and continue to make, in staff mentoring, training and
ongoing support mechanisms are contributory to improved skill
levels, higher staff satisfaction levels and good staff retention.
Our charity and community initiatives continue to be highly valued
and well supported by our staff and we remain keen to ensure all
staff have equal opportunity to participate in these worthwhile
activities.
2 Customers
In these challenging times we are reminded of the importance of
communication (indeed it could turn our 5C strategy into a 6C
strategy) and every interaction with our customers is a chance to
increase their advocacy. We have capitalised on this through three
main initiatives during FY20: US Customer Advisory Board (CAB),
Customer Portal and the Customer Satisfaction Survey.
This graphic can only be viewed by reading a PDF version of this
announcement.
The US CAB in particular was a great success. It was attended by
many US federal agencies and large enterprises from across North
America, who took the opportunity to get a view of upcoming updates
to the MyID software platform but more importantly contribute to
workshops on future MyID roadmap developments and innovations. When
the Covid-19 lockdowns are lifted, there are plans for a CAB in
Europe, which were already underway for our European, Middle East
and Asia Pacific customers before the outbreak of the pandemic.
As outlined below in the Trading Results section, we have
received significant follow-on orders from existing customers,
including governments and large enterprises worldwide. We have an
excellent customer list, which has been created by delivering
outstanding value. 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, Health Care Service Corporation, BASF, Coutts, US
Federal Aviation Administration, Swedbank, RDW, Telus, T-Mobile,
Singapore Government.
3 Channels
Over the past 24 months, Intercede has been on a continuous
growth path and is now looking to accelerate that growth further by
working with proactive integrator and reseller partners that are
well versed in the identity access management and PKI world. I was
therefore pleased to announce the launch of Intercede's new Connect
Partner Programme back in February 2020. This is a tiered channel
scheme that rewards partner engagement to extensively integrate
MyID software with world-leading strong authentication hardware and
software.
Connect Partner Programme members will become part of a growing
strong authentication ecosystem that is integrated and managed with
MyID software.
Technology Partners:
90meter, VMware AirWatch, Centrify, Citrix, Entrust Datacard,
Gemalto, HID Global, IBM, Idemia, Intel, Microsoft, PrimeKey,
Thales, Verizon, Yubico, DigiCert.
Integration & Reseller Partners:
Accenture, ADACOM, Carillon Information Security, Aurora IT
Solutions, CertiPath, Cryptas, Ensign Infosecurity, Diyar United
Company, Emergent, Esysco, Gemalto, Thales eSecuity, NextgenID, NXP
Semiconductors, Salt Group (Cyber Security).
Existing and new resellers and integrators within the programme
will have access to robust sales, co-marketing and technical
training that ensures members' teams are knowledgeable on the
software whilst driving incremental revenue streams. Members will
also have access to support materials and products to help meet the
growing demand for strong authentication - from deployments of 500
to millions.
4 Code
As stated in my introduction, the challenge for Intercede is
scalability and the Group is tackling this on a number of fronts,
including the release of MyID Professional (a simplified version of
MyID Enterprise) and a planned expansion into new authentication
technologies such as mobile ID and FIDO. MyID Professional is just
one member of the MyID family and all platform members have an
exciting roadmap of development ahead.
This graphic can only be viewed by reading a PDF version of this
announcement.
An extensive roadmap is crucial as 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.
Intercede has introduced a number of new releases during FY20
for the MyID software platform. These have focused on the
integration aspects of MyID with the wider PKI infrastructure and
include bringing in new CAs (certificate authorities), working with
various authenticator devices (such as smartcards from IDEMIA and
Gemalto or USB Tokens from the likes of Yubico) and HSMs (hardware
security modules), extending the range of supported MDMs (Mobile
Device Management systems) to include Microsoft Intune and ensuring
continued interoperability with new versions of operating systems
for PCs and mobiles, such as Windows and iOS. Furthermore, product
enhancements such as the Self-Service Request Portal have been
introduced, which will help our customers to reduce their system
operator costs. New releases are now scheduled for each quarter
thereby taking a more agile software delivery approach.
Investment continues as we enter FY21 with the goal of a
significant release of MyID, currently designated MyID v11.6, which
is the first release of a new operator client with an improved user
experience and REST APIs for enhanced performance. Intercede has
been working closely with Microsoft to enhance Microsoft Windows
Hello for Business (WHFB) integration, enabling it to manage
additional PKI credentials to each WHFB client in a very convenient
self-service manner. Early stage customer trials are expected
imminently.
MyID v11.6 will also introduce a new MyID authentication service
which, when combined with a new MyID Authenticator mobile app,
allows organisations to easily authenticate employees to
applications and cloud resources (such as Office 365) using a
mobile device in place of a smart card. This new capability
combines a simple experience for the end user, supporting PIN,
fingerprint and facial recognition, with the high security
PKI-based authentication our customers demand. Designed to easily
integrate into an existing infrastructure via a plug-in or
standards based REST APIs, the solution enables organisations to
step up to the highest levels of security quickly, without having
to invest in smart cards or tokens, which is particularly important
with the increased demand for home working and remote working.
Beyond MyID v11.6, the authentication service will be extended
to support FIDO and will introduce a number of elements our
customers are demanding to make FIDO work in the Enterprise,
including:
-- Policy control over who is issued which FIDO key.
-- Lifecycle management over a FIDO key including replacement and revocation.
-- Auditing and reporting, tracking which person has which FIDO key.
-- Interoperability with the MyID authentication service,
allowing one FIDO key to be used to access multiple
applications.
5 Cash
Our focus on cash is more important than ever in these uncertain
times and I am pleased to report we continue to maintain our fine
record of managing working capital. This is reflected in the level
of cash generated from operations totalling GBP1,360,000 (2019:
GBP706,000) resulting in increased year end cash balances totalling
GBP4,758,000 (31 March 2019: GBP3,228,000). The year end position
has been further strengthened by the receipt of $4.6m (GBP3.7m) on
1 May 2020 relating to a US Federal Government order that was
received on 29 March 2020.
Outlook
In comparison to many companies, Intercede is well placed to
weather the Covid-19 pandemic. Our products and services are
extremely relevant in the current climate, particularly our derived
credential and mobile technology, as they allow our customers'
staff to securely work remotely with full access to systems that
they would use in their normal place of work. While we've seen some
postponement of decisions on new sales opportunities, this has been
offset thus far by the realisation of orders delayed from March and
from existing customers preparing for their staff to work from
home.
Furthermore, as a software company, a substantial proportion of
our revenue is contracted, recurring or repeatable in nature,
thereby providing us with very good forward revenue visibility with
Support & Maintenance fees paid annually upfront. Software
businesses incur the cost of development upfront, but income is
spread over the customers' lifetime. There is therefore a balance
between investing for further customer acquisition, investment in
the product, and managing cash generation or burn. Over recent
years, Intercede has seen both extremes of the spectrum and fully
understands the importance of this balance. Needless to say, we
will continue to monitor the situation closely.
The Group enters FY21 with a stronger balance sheet and a much
stronger pipeline compared to this point last year, an enhanced
product portfolio, an expert and extremely motivated team of
colleagues, a newly launched Channel programme and a first class
customer base. We therefore expect a further year of progress,
particularly in terms of revenue growth, although we are mindful
that much depends on the speed at which our customers return to
more normal operating conditions.
Klaas van der Leest
Chief Executive Officer
2 June 2020
INTERCEDE GROUP plc
Preliminary Results for the Year Ended 31 March 2020
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 on a large scale for transport workers and national
ID programs.
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 the Group made significant progress, delivering
impressive results and returning to profit a year earlier than
planned. This was followed by a return to a first half operating
profit for the six months ended 30 September 2019, the first time
this has been achieved in six years. It therefore pleases me to
announce a continuing trend of improved operational and financial
performance. The Group generated a substantially increased profit
for the year of GBP1,006,000 (2019: GBP449,000), while as at 31
March 2020 gross cash balances totalled GBP4,758,000 (2019:
3,228,000).
Revenue Highlights:
-- Follow-on orders from an existing US Federal agency customer
for 75,000 licenses and professional and development services
across three different deployments. Part of the professional and
development services order was met with the on-time delivery of
MyID v11.5.
-- A follow-on 20,000 license sale to one of the world's largest
Aerospace & Defence contractors.
-- A new license sale and order for professional services to
provide a pilot for one of the largest US wireless network
operators. A follow-on order was received in April 2020 and there
is the potential to roll out to the wider employee base following a
successful implementation.
-- A number of smaller new license sales to the US Airforce and US Navy.
-- Follow-on order from an existing US Federal Government user
totalling $4.6m (GBP3.7m), which includes $2.05m (GBP1.65m) in
respect of software licenses.
These orders include software licenses, associated support &
maintenance and professional services, some of which will be
recognised as revenue beyond the current financial year.
Intercede is proud to say that MyID continues to be the
Credential Management System (CMS) of choice for major public key
infrastructure (PKI) system deployments, totalling approximately 90
blue chip end customers worldwide.
Regional Sales
GBPm North America ROW
2016 8.7 2.3
2017 6.4 1.9
2018 6.5 2.7
2019 7.0 3.1
2020 8.0 2.4
The US represents Intercede's largest market with sales to North
America making up 77% of total sales during FY20 (FY19: 69%).
Revenue Breakdown
GBPm S&M Professional Services Software Licenses Other
2016 3.6 2.6 4.7 0.1
2017 4.1 1.7 2.5 0.0
2018 4.6 1.4 3.2 0.0
2019 4.8 1.7 3.6 0.0
2020 5.5 2.3 2.6 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 decrease in FY20 Software License revenue is a consequence
of the reduction in the number of new deployments (with revenues
over GBP20,000) compared to FY19. This decrease is partially offset
by an increase in Professional Services revenue, driven by implementations
of large license orders received in the previous year and also
by upgrade activity as customers look to take advantage of new
product features in MyID v11. This is a validation of the investment
in the MyID platform and is a testament to the Product Development
teams who have kept to an aggressive release schedule.
Revenue, Opex, Profit/Loss & Cash
GBPm Revenue OpEx Profit/Loss Year end cash
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
2020 10.4 9.2 1.0 4.8
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.
Continued tight control of all costs has helped deliver an 8%
reduction in operating expenses from GBP10,025,000 to GBP9,191,000.
Staff costs continue to represent the main area of expense,
representing 83% of total operating expenses (FY19: 79%). The
average number of employees and contractors was 81, down from the
previous year's average of 86, which reflects the cost reductions
carried out in the first half of FY19. However the number of
employees and contractors as at 31 March 2020 increased to 83
(2019: 79), reflecting selective recruitment most notably in the
area of Sales and Marketing.
Employees
Average Employees Year end Employees
2016 125 126
2017 125 121
2018 119 98
2019 86 79
2020 81 83
Employee numbers have been reduced back to pre-FY15 levels, i.e.
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 GBP2,778,000 (FY19: GBP2,854,000). 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 FY20 (FY19:
GBPnil).
Research & Development (R&D)
GBPm R&D Expenditure R&D Tax Credit (in arrears)
2016 3.9 0.9
2017 4.0 0.9
2018 3.7 1.1
2019 2.8 1.0
2020 2.8 0.4
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 GBP432,000 taxation credit in the year (FY19: GBP979,000
taxation credit) primarily reflects cash received following the
2019 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. In recent
years, the tax credit has been unrestricted due to taxable losses
exceeding R&D losses, although this was not the case for the
2019 claim. Had the 2019 claim been unrestricted, the amount
claimed during FY20 would have been GBP717,000 which is a fairer
reflection of the Group's continued level of strategic investment
activities.
The net finance cost for the year was GBP578,000 (2019:
GBP589,000). This includes interest in respect of lease liabilities
totalling GBP112,000 (2019: GBP122,000).
A profit for the year of GBP1,006,000 (2019: GBP449,000)
resulted in a basic profit per share of 2.0p and a fully diluted
profit per share of 1.9p (2019: basic profit per share of 0.9p and
fully diluted profit per share 0.8p).
Financial Position
The Group's cash position at 31 March 2020 was GBP4,758,000
(2019: GBP3,228,000), following a year in which cash generated from
operations totalled GBP1,360,000 (2019: GBP706,000). The year end
position has been further strengthened by the receipt of $4.6m
(GBP3.7m) on 1 May 2020 relating to a US Federal Government order
that was received on 29 March 2020.
The cost-cutting review enabled the Group to exit one of its UK
properties and 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 (2019: classified as an asset held for sale
at a carrying value of GBP373,000).
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)
2016 2017 2018 2019 2020
Sales growth 25% (25%) 11% 10% 2%
Export sales 96% 95% 94% 97% 99%
North American
sales 79% 77% 71% 69% 77%
New deployments
with revenues over
GBP20,000 6 8 10 9 4
Principal Risks and Uncertainties
Like all businesses, Intercede operates in an environment that
is not free from risks or uncertainties. The nature and complexity
of the services it provides can present technical challenges that
carry a certain element of commercial risk, and the Group is
naturally exposed to external market, geo-political and compliance
related risks that are not necessarily within its control.
Intercede works diligently to identify, monitor and mitigate all
risks and uncertainties:
-- 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
Brexit and the US China trade dispute) 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.
-- The impact of the Covid-19 outbreak is causing extensive
disruption to people and economies throughout the world. The Group
has proactively implemented proportionate plans to minimise the
risk of an outbreak at our office locations, keeping employees and
customers safe. Marketing trade show events, customer events and
employee travel in general have been cancelled or postponed. All
staff have been given the capability to work from home, including
appropriate support, training and equipment. The Group continues to
monitor the situation closely to mitigate any potential impact and
have modelled a number of different possible scenarios and
identified mitigating actions that would be taken.
-- 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
2 June 2020
INTERCEDE GROUP plc
Consolidated Statement of Comprehensive Income for the year
ended 31 March 2020
2020 2019
Restated
*
GBP'000 GBP'000
Continuing operations
Revenue 10,355 10,108
Cost of sales (12) (24)
------- --------
Gross profit 10,343 10,084
Operating expenses (9,191) (10,025)
------- --------
Operating profit 1,152 59
Finance income 19 11
Finance costs (597) (600)
------- --------
Profit / (loss) before tax 574 (530)
Taxation 432 979
------- --------
Profit for the year 1,006 449
------- --------
Total comprehensive income attributable
to owners of the parent company 1,006 449
------- --------
Profit per share (pence)
- basic 2.0p 0.9p
- diluted 1.9p 0.8p
------- --------
* See note 10 for details about restatements to reflect the
impact of IFRS 16 Leases.
INTERCEDE GROUP plc
Consolidated Balance Sheet as at 31 March 2020
2020 2019 1 April
2018
Restated Restated
* *
GBP'000 GBP'000 GBP'000
Non-current assets
Property, plant and equipment 119 154 195
Right of use assets 980 1,135 1,363
-------- -------- --------
1,099 1,289 1,558
-------- -------- --------
Current assets
Assets held for sale - 373 373
Trade and other receivables 5,100 4,797 4,709
Cash and cash equivalents 4,758 3,228 2,272
-------- -------- --------
9,858 8,398 7,354
-------- -------- --------
Total assets 10,957 9,687 8,912
-------- -------- --------
Equity
Share capital 505 505 505
Share premium 673 673 673
Equity reserve 66 66 66
Merger reserve 1,508 1,508 1,508
Accumulated deficit (4,133) (5,420) (6,162)
-------- -------- --------
Total equity (1,381) (2,668) (3,410)
-------- -------- --------
Non-current liabilities
Convertible loan notes 4,832 4,747 4,670
Lease liabilities 1,207 1,404 1,587
Deferred revenue 195 166 324
6,234 6,317 6,581
Current liabilities
Lease liabilities 316 253 219
Trade and other payables 1,632 1,899 1,857
Deferred revenue 4,156 3,886 3,665
-------- -------- --------
6,104 6,038 5,741
-------- -------- --------
Total liabilities 12,338 12,355 12,322
-------- -------- --------
Total equity and liabilities 10,957 9,687 8,912
-------- -------- --------
* See note 10 for details about restatements to reflect the
impact of IFRS 16 Leases.
INTERCEDE GROUP plc
Consolidated Statement of Changes in Equity for the year ended
31 March 2020
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 2018 (Original) 505 673 66 1,508 (5,719) (2,967)
Change in accounting policy - - - - (443) (443)
------- ------- ------- ------- ----------- -------
As at 1 April 2018 (Restated
*) 505 673 66 1,508 (6,162) (3,410)
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
(Restated *) - - - - 449 449
------- ------- ------- ----------- -------
As at 31 March 2019 (Restated
*) 505 673 66 1,508 (5,420) (2,668)
Proceeds from recycling
of own shares - - - - 38 38
Employee share option
plan charge - - - - 99 99
Employee share incentive
plan charge - - - - 144 144
Profit for the year and
total comprehensive income - - - - 1,006 1,006
------- ------- ------- ------- ----------- -------
As at 31 March 2020 505 673 66 1,508 (4,133) (1,381)
------- ------- ------- ------- ----------- -------
* See note 10 for details about restatements to reflect the
impact of IFRS 16 Leases.
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
2020
2020 2019
Restated
*
GBP'000 GBP'000
Cash flows from operating activities
Profit for the year 1,006 449
Taxation (432) (979)
Finance income (19) (11)
Finance costs 597 600
Depreciation of property, plant & equipment 81 116
Depreciation of right of use assets 235 228
Profit on disposal of assets held for sale (50) -
Employee share option plan charge 99 17
Employee share incentive plan charge 144 249
Employee unit incentive plan charge 36 5
Employee unit incentive plan payment (4) (7)
Increase in trade and other receivables (356) (131)
(Decrease) / increase in trade and other
payables (299) 44
Increase in deferred revenue 299 63
Increase in lease liabilities 23 63
Cash generated from operations 1,360 706
Finance income 17 9
Finance costs on convertible loan notes (400) (400)
Finance costs on leases (112) (122)
Tax received 432 979
------- --------
Net cash generated from operating activities 1,297 1,172
------- --------
Investing activities
Proceeds on disposal of assets held for
sale 422 -
Purchases of property, plant and equipment (46) (75)
------- --------
Cash generated from / (used in) investing
activities 376 (75)
------- --------
Financing activities
Proceeds from recycling of own shares 38 27
Principal elements of lease payments (236) (212)
------- --------
Cash used in financing activities (198) (185)
------- --------
Net increase in cash and cash equivalents 1,475 912
Cash and cash equivalents at the beginning
of the year 3,228 2,272
Exchange gains on cash and cash equivalents 55 44
------- --------
Cash and cash equivalents at the end of
the year 4,758 3,228
------- --------
* See note 10 for details about restatements to reflect the
impact of IFRS 16 Leases.
INTERCEDE GROUP plc
Preliminary Results for the Year Ended 31 March 2020
NOTES
1. The financial information set out in this announcement does
not constitute the Group's Statutory Accounts for the years ended
31 March 2020 or 2019, but is derived from those accounts.
Statutory Accounts for 2019 have been delivered to the Registrar of
Companies and those for 2020, 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
16 September 2020. 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. REVENUE
All of the Group's revenue, operating profits and net
liabilities 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:
2020 2019
GBP'000 GBP'000
UK 131 331
Rest of Europe 1,126 1,738
North America 7,958 6,981
Rest of World 1,140 1,058
------- -------
10,355 10,108
------- -------
3. OPERATING PROFIT
Operating profit is stated after charging / (crediting):
2020 2019
Restated
GBP'000 GBP'000
Staff costs 7,619 7,994
Foreign exchange loss 41 68
Depreciation of property, plant and equipment 81 116
Depreciation of right of use buildings 228 228
Depreciation of right of use equipment 7 -
Profit on disposal of assets held for sale (50) -
Included in the costs above is research and development
expenditure totalling GBP2,778,000 (2019: GBP2,854,000).
4. TAXATION
The tax credit comprises: 2020 2019
GBP'000 GBP'000
Current year - UK corporation tax - -
Current year - US corporation tax (28) (31)
Research and development tax credits relating
to prior years 460 1,010
------- -------
Taxation 432 979
------- -------
The Group has unused tax losses of GBP8,775,000 (2019:
GBP8,710,000) and unrecognised deferred tax assets of GBP1,667,000
(2019: GBP1,481,000) calculated at 19% (2019: 17%), the UK
corporation tax rate that is effective from 1 April 2020.
5. EARNINGS PER SHARE
The calculations of earnings per ordinary share are based on the
profit for the financial year and the weighted average number of
ordinary shares in issue during each year.
2020 2019
Restated
GBP'000 GBP'000
Profit for the year 1,006 449
---------- ----------
Number Number
Weighted average number of shares - basic 50,482,281 50,482,281
- diluted 53,232,738 51,941,220
---------- ----------
Pence Pence
Profit per share - basic 2.0p 0.9p
- diluted 1.9p 0.8p
---------- ----------
The weighted average number of shares used in the calculation of
basic and diluted earnings per share for each year were calculated
as follows:
2020 2019
Number Number
Issued ordinary shares at start of year 50,523,926 50,523,926
Effect of treasury shares (41,645) (41,645)
Effect of issue of ordinary share capital - -
---------- ----------
Weighted average number of shares - basic 50,482,281 50,482,281
---------- ----------
Add back effect of treasury shares 41,645 41,645
Effect of share options in issue 2,708,812 1,417,294
Effect of convertible loan notes in issue - -
---------- ----------
Weighted average number of shares - diluted 53,232,738 51,941,220
---------- ----------
The convertible loan notes are anti-dilutive and have therefore
been excluded from the calculation of diluted profit per share. Had
the convertible loan notes been dilutive in nature, this would have
increased the weighted average number of shares by 7,273,387 (2019:
7,273,387).
6. DIVID
The Directors do not recommend the payment of a dividend.
7. ASSETS HELD FOR SALE
The sale of a UK based 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
2020 2019
GBP'000 GBP'000
Authorised
481,861,616 ordinary shares of 1p each (2019:
481,861,616) 4,819 4,819
------- -------
Issued and fully paid
50,523,926 ordinary shares of 1p each (2019:
50,523,926) 505 505
------- -------
As at 31 March 2020, the Company had 41,645 ordinary shares held
in treasury (2019: 41,645).
9. CONVERTIBLE LOAN NOTES
2020 2019
GBP'000 GBP'000
Non-current
8% Convertible loan notes (29 December 2021) 4,832 4,747
------- -------
Borrowings are repayable as follows:
2020 2019
GBP'000 GBP'000
Due between one and two years 4,832 -
Between two and five years - 4,747
------- -------
4,832 4,747
------- -------
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:
2020 2019
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 241 156
------- -------
Liability component at 31 March 4,832 4,747
------- -------
10. IFRS 16 TRANSITION
The Group has applied IFRS 16 retrospectively and the tables
below show the adjustments ("Adj") recognised for each line item
for 31 March 2020, 31 March 2019 and the opening Consolidated
Balance Sheet at 1 April 2018. Line items that were not affected by
the changes have not been included. As a result, the sub-totals and
totals disclosed cannot be recalculated from the numbers
provided.
Consolidated Statement of Comprehensive Income (extract)
Year ended 30 March Year ended 31 March
2020 2019
Original Adj Restated Original Adj Restated
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Operating expenses (9,281) 90 (9,191) (10,068) 43 (10,025)
-------- ------- -------- ----------- -------- --------
Operating profit 1,062 90 1,152 16 43 59
Finance costs (485) (112) (597) (478) (122) (600)
-------- ------- -------- ----------- -------- --------
Profit for the year 1,028 (22) 1,006 528 (79) 449
-------- ------- -------- ----------- -------- --------
Profit per share (pence)
* Basic 2.0p (0.0)p 2.0p 1.0p (0.1)p 0.9p
* diluted 1.9p (0.0)p 1.9p 0.9p (0.1)p 0.8p
Consolidated Balance Sheet (extract)
As at 31 March 2020 As at 31 March 2019 As at 1 April 2018
Original Adj Restated Original Adj Restated Original Adj Restated
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Non-current assets
Right of use
assets - 980 980 - 1,135 1,135 - 1,363 1,363
Total assets 9,977 980 10,957 8,552 1,135 9,687 7,549 1,363 8,912
-------- ------- -------- -------- ------- -------- -------- ------- --------
Equity
Accumulated deficit (3,590) (543) (4,133) (4,898) (522) (5,420) (5,719) (443) (6,162)
-------- ------- -------- -------- ------- -------- -------- ------- --------
Total equity (838) (543) (1,381) (2,146) (522) (2,668) (2,967) (443) (3,410)
-------- ------- -------- -------- ------- -------- -------- ------- --------
Non-current liabilities
Lease liabilities - 1,207 1,207 - 1,404 1,404 - 1,587 1,587
Current liabilities
Lease liabilities - 316 316 - 253 253 - 219 219
-------- ------- -------- -------- ------- -------- -------- ------- --------
Total liabilities 10,815 1,523 12,338 10,698 1,657 12,355 10,516 1,806 12,322
-------- ------- -------- -------- ------- -------- -------- ------- --------
Total equity
and liabilities 9,977 980 10,957 8,552 1,135 9,687 7,549 1,363 8,912
-------- ------- -------- -------- ------- -------- -------- ------- --------
Consolidated Cash Flow Statement (extract)
Year ended 31 March Year ended 31 March
2020 2019
Original Adj Restated Original Adj Restated
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Profit for the year 1,028 (22) 1,006 528 (79) 449
Finance costs 485 112 597 478 122 600
Depreciation 81 235 316 116 228 344
Increase in lease liabilities - 23 23 - 63 63
-------- ------- -------- -------- ------- --------
Cash generated from operations 1,012 348 1,360 372 334 706
Finance costs on leases - (112) (112) - (122) (122)
-------- ------- -------- -------- ------- --------
Net cash generated from operating
activities 1,061 236 1,297 960 212 1,172
-------- ------- -------- -------- ------- --------
Principal elements of lease payments - (236) (236) - (212) (212)
-------- ------- -------- -------- ------- --------
Cash generated from / (used in)
financing activities 38 (236) (198) 27 (212) (185)
Net increase in cash and cash equivalents 1,475 - 1,475 912 - 912
-------- ------- -------- -------- ------- --------
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 KKDBKBBKBQAK
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