TIDMIGP
RNS Number : 0925B
Intercede Group PLC
08 June 2021
8 June 2021
INTERCEDE GROUP plc
("Intercede", the "Group" or the "Company")
Preliminary Results for the Year Ended 31 March 2021
Intercede, the leading specialist in digital identity,
credential management and secure mobility, today announces its
preliminary results for the year ended 31 March 2021.
Financial Highlights
-- Following the successful completion of the first phase of the
Group's turnaround, Intercede has delivered its third year of
sustainable growth in revenues, profits and cash.
-- Revenue for the year ended 31 March 2021 (FY21) increased by
6% to GBP11.0m (FY20: GBP10.4m). While the COVID-19 pandemic has
adversely impacted key markets in Europe and the Middle East, US
revenues have increased by 14%, including a major new contract to
provide an innovative Identity Management System (IDMS) solution
compliant with US Federal Government Standard FIPS 201 for the US
Department of State (DoS) and its customers.
-- Operating expenses (OpEx) for the year were GBP9.1m (FY20:
GBP9.2m). Staff numbers have remained consistent during the
COVID-19 pandemic; business as usual has been maintained without
anyone being furloughed or made redundant and without any pay cuts
or reductions in working hours.
-- The Group generated a substantially increased profit for the
year of GBP1.5m (FY20: GBP1.0m), an increase year on year of 52%,
which resulted in a basic profit per share of 3.0p and a fully
diluted profit per share of 2.8p (FY20: basic profit per share of
2.0p and fully diluted profit per share of 1.9p).
-- The Group's gross cash position at 31 March 2021 was GBP8.0m
(FY20: GBP4.8m), primarily due to a net cash inflow from operating
activities of GBP4.2m (FY20: GBP1.3m inflow). The Group is now debt
free following the successful early retirement of convertible loan
notes (CLNs) totalling GBP5.0m, announced in February 2021, which
will save the Group GBP0.4m in annual interest costs.
Operating Highlights
-- This has been a year of major uncertainty and challenges.
Following the outbreak of COVID-19, Intercede was able to switch
quickly and effectively to remote working without any disruption to
customer service and project delivery.
-- The Group continues to execute its 5C strategy (Colleagues,
Customers, Channels, Code and Cash) to drive the positive trend and
momentum of the business.
-- To combat decreasing physical customer interaction during the
pandemic, Intercede has continued to push ahead with three
important customer focused initiatives: Customer Advisory Board
(CAB), Customer Satisfaction Survey and the Customer Portal. CABs
were held virtually during October and November 2020 to update
Customers in the RoW and US on MyID enhancements and provide
visibility into the product roadmap.
-- Intercede's partner-centric growth strategy remains unchanged
and, following on from the recent launch of the Connect Partner
Programme, the Group's network has continued to expand with new
agreements established with partners covering the UK, Europe, North
America, the Middle East, Latin America, Asia and Africa.
-- During the year, new versions of MyID were released which
gave our customer base the benefits of a new operator client (using
REST APIs for improved user experience and enhanced performance)
and additional functionality including Windows Hello for Business
integration (WHFB) as well as the new MyID authentication service.
Intercede is excited to announce the release of MyID v12 which
further modernises and introduces additional functionality to
expand the addressable market with the introduction of FIDO (Faster
IDentity Online) to the MyID credential management platform.
Chuck Pol, Chairman, said:
"During the COVID-19 pandemic, Intercede has maintained solid
revenue growth at 6% and delivered a substantial increase in
profitability with the levels of cash generated being well ahead of
market forecasts. I would like to commend Klaas and his management
team on the completion of the first phase of the Group's turnaround
plan. This achievement is all the more commendable having been
delivered during the biggest global pandemic of our lifetimes.
None of this would have been possible without the commitment and
dedication of Intercede's employees who have used their experience
and expertise to continue to deliver world class digital identity
solutions to our customers and partners. We are excited to announce
the release of MyID v12 which will expand Intercede's addressable
market with the introduction of FIDO to the MyID credential
management platform.
I remain confident of the Group's future prospects as we emerge
from the pandemic and Governments and commercial enterprises are
able to take the necessary steps to further improve their security
environments when taking increased remote working into
consideration."
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/Charlotte Sutcliffe 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) 596/2014 as it forms part of UK domestic law
by virtue of the European Union (Withdrawal) Act 2018 ("MAR"), and
is disclosed in accordance with the company's obligations under
Article 17 of MAR .
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/0925B_1-2021-6-7.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 2021
CHAIRMAN'S STATEMENT
I would like to commend Klaas and his management team on the
completion of the first phase of the Group's turnaround plan. This
achievement is all the more commendable having been delivered
during the biggest global pandemic of our lifetimes.
Klaas was appointed as CEO on 10 April 2018 with a remit to
return Intercede to sustainable profitable growth after four years
of losses that had seen the Group need additional funding,
comprising GBP5.0m of convertible loan notes that were issued in
2017. He quickly took control and has driven through changes in all
aspects of the business. The Group returned to break-even in his
first year and has subsequently delivered an improved revenue,
profit and cashflow performance in each subsequent reporting
period. This improved performance has enabled the Group to
successfully retire the convertible loan notes nearly a year ahead
of their maturity date saving GBP0.4m of annual interest costs and
leaving Intercede debt free with a much strengthened Balance Sheet,
ready to embark on the next phase of its strategic development.
None of the above would have been possible without the
commitment and dedication of Intercede's employees who have used
their experience and expertise to continue to deliver world class
digital identity solutions to our customers and partners. During
the past year, I am delighted to be able to report further
substantial development of our technical platform, adding further
features and functions. We are excited to announce the release of
MyID v12 in April, which will expand Intercede's addressable market
with the introduction of FIDO to the MyID credential management
platform.
During the COVID-19 pandemic, Intercede has maintained solid
revenue growth at 6% and delivered a substantial increase in
profitability with the levels of cash generated being well ahead of
market forecasts. Strong double-digit revenue growth in the US was
offset by market contraction in the regions most affected by
national lockdowns; notably Continental Europe, the Middle East and
ASEAN. However, pipeline strength has continued across all regions
and we anticipate a return to normalised trading in the next 12-24
months when COVID restrictions are expected to be materially
eased.
Good progress has also been made, notwithstanding the impact of
the pandemic, with the recruitment of new partners throughout the
world and with a number of project wins, the most notable being a
significant sale to the US Department of State (DoS) through a new
partner, Guidehouse. The ten-year, multimillion-dollar contract
will see Intercede's MyID software issuing and managing the
lifecycle of hundreds of thousands of DoS employee digital
identities.
Summary
Intercede has maintained the momentum and desire to continue to
grow and serve the burgeoning digital identity market throughout a
year of major uncertainty and challenges. I remain confident of the
Group's future prospects as we emerge from the pandemic and
Governments and commercial enterprises are able to take the
necessary steps to further improve their security environments when
taking increased remote working into consideration.
Chuck Pol
Chairman
INTERCEDE GROUP plc
Preliminary Results for the Year Ended 31 March 2021
CHIEF EXECUTIVE'S REVIEW
This has been a year of major uncertainty and challenges, with
the effects of the COVID-19 pandemic and the resulting lockdowns
having a significant impact on business operations and sales.
Thanks to decisive leadership, robust systems and highly committed
staff around the world, Intercede was able to switch quickly and
effectively to remote working without any disruption to customer
service and project delivery.
Despite this uncertainty, I am pleased to see a continuing
positive trend and momentum and, in particular, the substantially
improved cash position, which gave us the confidence to issue a
call notice in respect of the outstanding convertible loan notes
(CLNs). Twelve out of the thirteen noteholders elected to convert
their CLNs into new ordinary shares and we welcome the ongoing
support from both existing and new shareholders. The removal of
this debt from the balance sheet, and the elimination of the
associated interest cost, improves the capital structure of the
Group and Intercede is well placed to pursue its growth strategy
into 2021 and beyond.
I was appointed on 10 April 2018 and, as I come to the end of my
third year, I believe Intercede has successfully completed phase
one of its turnaround. The Group has recorded its third consecutive
year of profit and cash generation, with compound average growth in
revenues of 6% over this transformative three-year period. As I
have stated in previous Annual Reports, the challenge for Intercede
is scalability and this forms the objective for phase two where the
main aim is to drive consistent double-digit revenue growth.
The MyID platform integrates and manages a broad range of Public
Key Infrastructure (PKI) technologies, which has allowed Intercede
to build a market-leading position in a number of very attractive,
but niche, market segments. However, continued evidence that weak
or compromised passwords are a primary cause of more than 80% of
data breaches is resulting in increasing acceptance of the need for
strong authentication through crypto-based solutions such as PKI
and FIDO (Faster IDentity Online), which can provide a suitable
alternative means of strong authentication to PKI as it combines
highly secure crypto-based security with a simple standards-based
approach. FIDO is currently making an entry into US Federal
Government as well as Enterprise markets where new use cases expand
the reach of strong authentication. These use cases include, but
are not limited to, accessing modern SaaS applications, strong
credentialing of contractors and securing the supply chain. The
latter is particularly relevant for US Federal markets as well as
Aerospace & Defence contractors. On the back of extensive
development effort, the newly released MyID v12 software now
manages deployment and lifecycle events for both PKI, FIDO and
combined PKI/FIDO devices, giving consistency over policy,
reporting and user experience. MyID v12 is the first global
solution to offer a truly unified approach to credential
management.
While Intercede believes that unifying the management of PKI and
FIDO will expand the addressable market for its MyID platform there
are a number of other ways to achieve scalability. You will recall
the authentication pyramid in last year's Annual Report and moving
down this pyramid, into areas such as Mobile ID, will enable
Intercede to access an even larger addressable market. Meanwhile we
continue to investigate releasing simplified versions of MyID, such
as MyID Professional, or pre-packaging MyID with other third-party
PKI technologies. Innovation is in Intercede's DNA and, with an
exciting customer driven roadmap, new functionality will continue
to be added to further support the growth of the business.
Review of Strategy and Operations
The continuing positive trend and momentum of the Group is
directly linked to progress against our core 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
Intercede recognises that continued and sustained improvement in
the performance of the Group depends upon its ability to attract,
motivate and retain talented people of the highest calibre. Put
simply, our colleagues are the Company's most valuable asset and
the Colleague strategy therefore forms the foundation of the other
4 Cs. Over the year, staff numbers increased from 83 as at 31 March
2020 to 84 as at 31 March 2021, while the attrition rate (average
number of leavers over the year as a ratio of average headcount
over the year) fell to 0%. This is a significant drop from 33% and
9% recorded in the last two financial years respectively and is a
validation that our Colleague strategy is contributing to higher
staff satisfaction levels and market leading staff retention.
The most important aim of the Colleague strategy is to improve
communication and collaboration across teams. We actively promote
two-way communication and encourage our colleagues to share their
views and preferences, be they positive or negative, so they can be
addressed to deliver a workplace that is enjoyable and productive.
In July 2020, we invited all UK and US employees to take part in an
employee survey which resulted in the eNPS score improving by 49
points to +27. The results of the survey were shared with employees
and action plans were formulated by the self-selected Employee
Working Group (EWG) to address identified opportunities for
improvement.
With the impact of COVID-19, nearly all colleagues are currently
working remotely both in the UK and US. In these unusual
circumstances we've compensated for the lack of office-based social
interaction by introducing quiz nights, virtual bake-offs and
'Virtual Espresso' sessions in which a moderator leads a Q&A on
a work-based topic or opens the floor for a free forum chat.
We take the wellbeing of our colleagues extremely seriously and,
with the wider world emphasising the need for mental health
awareness, we have proactively trained a large group of mental
health first aiders as part of a Group-wide approach whereby line
managers as well as all employees will also receive online
training.
The MyID platform allows our colleagues to securely work
remotely with full access to systems that they would use in their
normal place of work. During this pandemic I have come to
appreciate that secure access is not only necessary to make a
business resilient but also brings opportunity. Intercede has
performed well with remote working and I believe it is a prime
opportunity to look further afield to get developer talent that
expands our skill set at the right cost.
2 Customers
To combat decreasing physical customer interaction during the
pandemic, Intercede has continued to push ahead with three
important customer focused initiatives: Customer Advisory Board
(CAB), Customer Satisfaction Survey and the Customer Portal.
Virtual CABs were held during October and November 2020 for
Customers in the RoW and US respectively, who took the opportunity
to receive an update on MyID enhancements; obtain visibility of the
product roadmap and join one of five deep dive workshop
sessions:
-- New Operator Client, improving the user experience of the MyID operator.
-- REST APIs, simplifying integration into existing environments.
-- Windows Hello for Business, extending the range of supported credential types.
-- Mobile Authentication, combining high security with convenience.
-- FIDO for the Enterprise, bringing management control to standards-based authentication.
As outlined below in the Trading Results section, we have
received significant orders from new customers, particularly in our
US markets. Whilst global revenues for the year ended 31 March 2021
(FY21) increased by 6% to GBP11.0m (FY20: GBP10.4m), the growth in
our US market was a more exciting 14%. It is also worth noting that
a very strong end to the financial year resulted in total FY21
orders being 10% higher than the previous year. This included a
number of professional services orders for which the work was
ordered in FY21 but the revenue will be recognised during FY22.
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,
L3Harris, Kuwait Public Authority for Civil Information, US
Department of State, 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
The MyID platform is architected in a way that enables it to
integrate with a broad range of third-party technologies to make up
a highly secure digital identity ecosystem in a consistent, cost
effective and efficient manner. This functionality is the bedrock
of the Group's growth strategy of expanding its addressable market
base by integrating with a broad range of technology partners that
make up a PKI infrastructure:
Technology Partners:
Sailpoint, VMware AirWatch, Centrify, Giesecke & Devrient,
Entrust Datacard, Gemalto, HID Global, IBM, Idemia, Secugen,
Microsoft, PrimeKey, Thales, Verizon, Yubico, DigiCert, Aware,
Authentrend, Feitian, Trustkey.
Intercede's partner-centric growth strategy remains unchanged.
The Group grows revenues by expanding market presence and brand
awareness through an increasing number of reseller and technology
partner relationships and building strong commercial relationships
with larger customers by serving those customers with a
feature-rich and relevant product that sits at the heart of their
cyber security needs. This enables the Group to confidently
approach its objectives in order that commercial risks can be
contained and that it has the bandwidth and resources to execute
its 5C strategy.
Our reseller partner network has continued to expand with new
agreements established with partners covering the UK, Europe, North
America, the Middle East, Latin America, Asia and Africa.
Integration & Reseller Partners
Accenture, Widepoint, Cybertech, Aurora IT Solutions, CertiPath,
Cryptas, Ensign Infosecurity, Diyar United Company, Emergent,
Esysco, Gemalto, Thales eSecuity, NextgenID, Expisoft, Salt Group
(Cyber Security), Guidehouse.
A number of new wins in the period highlight the strength of
Intercede's offering when working proactively with partners,
following on from the recent launch of our Connect Partner
Programme. Connect Partner Programme members join a strong and
growing authentication ecosystem that is integrated and managed
with MyID software. New and existing resellers and integrators 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 also have access to
support materials and products to help meet the growing demand for
strong authentication. Intercede's partner Cryptas GmbH has
recently announced the launch of its new enterprise access
management solution: Primeid PROFESSIONAL. Primeid PROFESSIONAL is
a simple to deploy, commercial-off-the-shelf (COTS) solution with
MyID credential management that also incorporates a dedicated
Certificate Authority (CA), smart cards and licenses for devices
with virtual smart card compatibility. We look forward to the
continued innovation that results from a growing number of partners
becoming familiar with the MyID platform and selling our technology
into many markets.
4 Code
Intercede has a large team of expert and experienced developers
who write the best code in the industry in support of a continuous
drive to:
a) create and maintain a modern platform based upon market leading technology;
b) broaden the addressable market with new functionality; and
c) meet constantly evolving customer needs.
During the year we have released new versions of MyID from v11.6
to v11.8 which gave our customer base the benefits of a new
operator client (using REST APIs for improved user experience and
enhanced performance) and additional functionality including
Windows Hello for Business integration (WHFB) as well as the new
MyID authentication service.
The MyID authentication service provides an easy to operate
method of authentication that enables a customer to use mobile
devices within their existing public key infrastructure (PKI) to
access the applications they need as part of their role using
fingerprint, PIN, or facial matching. This has already proved
valuable for MyID customers dealing with the challenges of a large
and dispersed workforce, who are required to sign-off high value
financial transactions and access secure applications remotely. The
ability to authorise payments by providing a digital signature
directly from a mobile device combines high security with an easy
to deploy and convenient experience for the end users.
This graphic can only be viewed by reading a PDF version of this
announcement.
The release of MyID v11.8 allowed customers to experience
Enhanced Identity Management for PIV (Personal Identity
Verification - a US Federal Government-wide credential) including
biographic data capture, facial biometric capture, 10-Slap
fingerprint enrolment, adjudication and fingerprint de-duplication
with Aware Astra ABIS and a unique user ID generation service. This
functionality forms the backbone to a major new contract ie the US
Department of State (DoS) next-generation Identity Management
System (IDMS) solution, which is compliant with Homeland Security
Presidential Directive 12 (HSPD-12)/US Federal Government Standard
FIPS 201. The MyID Identity Management System is an optional add-on
to the MyID PIV product that provides PIV applicant enrolment and
adjudication, enabling MyID to act as a full IDCMS (IDentity and
Credential Management System). This demonstrates the breadth of
functionality available from the three versions of the MyID
platform:
This graphic can only be viewed by reading a PDF version of this
announcement.
Intercede are excited to announce the release of MyID v12 which
further modernises the MyID platform and introduces additional
functionality to expand the addressable market. MyID v12 is now
64-bit software which improves performance and enables integration
with cloud-based infrastructure such as cryptography as a service.
In v11.6 customers were introduced to the new operator client,
which uses REST APIs for improved user experience and enhanced
performance, and v12 builds on this by publishing these APIs. A
fully documented API, with an inbuilt test capability, will make it
far easier for customers to integrate MyID into their systems.
MyID v12 also expands Intercede's addressable market with the
introduction of FIDO to the MyID credential management platform.
Many organisations are considering deploying FIDO across their
workforce and supply-chain and, uniquely, MyID can manage this,
along with multiple authentication technologies, enabling
organisations to mix and match technologies that best fit their
needs and required levels for security. By unifying credential
management, organisations can control policy, visibility and
lifecycle management in one place. For example, this could
incorporate PKI-based smart cards for finance staff, including
signed and encrypted email, or FIDO security keys for the supply
chain and contractors. MyID's flexibility also extends to devices
with support for a wide range of standards-based FIDO devices,
including iOS and Android mobile devices, USB tokens including
YubiKeys, and smart cards.
This graphic can only be viewed by reading a PDF version of this
announcement.
Continued R&D investment, which has resulted in the new
functionality outlined above, makes MyID the leading unified
credential management solution.
5 Cash
The Group's cash flow performance has provided another highlight
of the year resulting in gross cash balances of GBP8.0m as at 31
March 2021, an improvement of GBP3.2m from gross cash of GBP4.8m as
at 31 March 2020.
In February 2020, the Group issued a call notice in respect of
the outstanding Convertible Loan Notes (CLNs) totalling GBP5.0m.
Subsequent to this call notice, twelve out of thirteen noteholders
elected to convert their CLNs into new ordinary shares, which will
save the Group GBP0.4m in annual interest costs. The complete
conversion and redemption of all CLNs has left the Group with no
debt and a much strengthened balance sheet; better able to focus on
investing in the MyID platform to deliver future growth.
Finally, before we move on to consider the future outlook, it is
important we recognise the role of the business in the wider
community. We all have a connection with the localities where we
live and work, particularly over the last 12 months when the
pandemic has touched all of us this has been more than ever the
case.
Whilst our normal charitable fund raising activities were halted
due to remote working, we were able to maintain our support for the
local foodbank as well as assist local schools by providing surplus
PCs plus new laptops and tablets to be allocated to families who
did not have the means for their children to study remotely.
Outlook
I am optimistic for the future of Intercede, given its
compelling and relevant offering for allowing dispersed workforces
to securely work remotely and the relatively limited impact the
pandemic has had on the business thus far. The improved
performance, particularly in our US market with its 14% growth in
revenues, and a robust pipeline of new sales opportunities,
reinforces this optimism. However, COVID-19 continues to
significantly affect the broader global economic environment and it
is too early to be complacent about the impact it may continue to
have on us or our customers, particularly those still in lockdown
in Europe and the Middle East. With strong and broader customer
relationships, wider product offerings and a strong financial
position we are well placed to meet our growth expectations during
the next phase of the Group's strategic development.
Klaas van der Leest
Chief Executive Officer
INTERCEDE GROUP plc
Preliminary Results for the Year Ended 31 March 2021
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 for some of the world's largest corporations and
government agencies.
-- Intercede's product innovation roadmap leverages over 1,000
person-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 by managed service partners for
transport workers and national ID programmes.
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 citizen, 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
Intercede has delivered another year of substantially improved
financial performance.
Revenue for the year ended 31 March 2021 (FY21) increased by 6%
to GBP11.0m (FY20: GBP10.4m). Operating profit was GBP1.6m compared
to GBP1.2m last year. Profit after tax for the year was GBP1.5m
(FY20: GBP1.0m). Basic earnings per share for the year ended 31
March 2021 was 3.0 pence per share (FY20: 2.0 pence per share).
As at 31 March 2021, gross cash balances totalled GBP8.0m (FY20:
GBP4.8m) and the Group is now debt free following the successful
early retirement of convertible loan notes totalling GBP5.0m that
was announced on 4 and 16 February 2021.
Revenue Highlights:
-- A new MyID PIV deployment sale to provide an innovative
Identity Management System (IDMS) solution compliant with US
Federal Government Standard FIPS 201 for the US Department of State
(DoS) and its customers.
-- A new contract win with a large US defence contractor. The
initial order totalling $0.2m includes MyID Enterprise software
licenses plus associated support & maintenance and professional
services. This is another sale to a top 10 US defence contractor
who has selected MyID to help secure their mission critical
assets.
-- A follow-on MyID Enterprise license order from one of the
largest US wireless network operators.
-- A new MyID Enterprise license sale to a geology research institution based in Germany.
-- The first sales of MyID Professional to a branch of the US
State Government to provide a pilot solution and to a large US
Aerospace & Defence contractor who has been a MyID Enterprise
customer for many years.
-- A new MyID Enterprise deployment sale to an existing US Air
Force base customer. There is potential to package and market a
MyID solution to other similar sized US Air Force base
customers.
These orders include software licenses, associated support &
maintenance and professional services, some of which will be
recognised as revenue beyond the current financial year.
Regional Revenue
GBPm North America ROW
2017 6.4 1.9
2018 6.5 2.7
2019 7.0 3.1
2020 8.0 2.4
2021 9.1 1.9
The US continues to represent Intercede's largest market with
North America making up 83% of total revenues during FY21 (FY20:
77%). The global pandemic has had more of an adverse impact in
other parts of the world. Europe and the Middle East are key markets
for Intercede and both regions imposed lockdowns, which inevitably
slowed down new customer opportunities with the short term focus
switching to the public health emergency.
Revenue Breakdown
GBPm S&M Professional Services Software Licenses
2017 4.1 1.7 2.5
2018 4.6 1.4 3.2
2019 4.8 1.7 3.6
2020 5.5 2.3 2.6
2021 6.1 2.6 2.3
The last five years has seen progressive growth in recurring Support
& Maintenance (S&M) revenues due to a steady increase in deployments
and a loyal customer base that is resilient to churn. Software
License revenue decreased from GBP2.6m to GBP2.3m in FY21 but
this was offset by an increase in Professional Services revenue,
driven by implementations of large license orders received in
FY21 and also by upgrade activity as customers looked 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 met a series of aggressive
release deadlines.
The Group's gross profit increased to GBP10.7m (FY20: GBP10.3m)
with a gross profit margin of 97% compared to 99% for the prior
year. This slight fall in gross profit margin reflects the use of
Aware's third party biometric technology in the delivery of the
Identity Management System (IDMS) solution for the DoS, for which
orders totalling $3.9m were received in August and November 2020.
This project is very exciting for Intercede due to the
functionality and scale of the solution and the FY22 pipeline
contains opportunities of a similar scale.
Revenue, Opex, Profit/Loss & Cash
GBPm Revenue OpEx Profit/Loss Year end cash
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
2021 11.0 9.1 1.5 8.0
Operating expenses (OpEx) averaged GBP13.3m over the periods FY17
and FY18 primarily reflecting 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 substantially
reduced following the change in strategy reported in the FY18
Annual Report and has averaged GBP9.5m during the period from
FY19 to FY21. This lower cost base, when combined with increased
revenue, has enabled the Group to return to profit and cash generation.
Operating expenses (OpEx) for the year were GBP9.1m (FY20:
GBP9.2m). OpEx is in line with the prior year and the small
reduction reflects the almost complete cessation of travel during
the pandemic along with lower one-off costs such as recruitment
fees. Staff costs continue to represent the main area of expense,
representing 88% of total operating expenses (FY20: 83%). Intercede
continues to recognise the achievements of its staff with pay rises
and performance-related rewards. The average number of employees
and contractors was 83, up from the previous year's average of 81
and the number of employees and contractors as at 31 March 2021 was
84 (31 March 2020: 83). During the pandemic staff numbers have been
consistent; business as usual has been maintained without anyone
being furloughed or made redundant and without any pay cuts or
reductions in working hours.
Employees
Average Employees Year end Employees
2017 125 121
2018 119 98
2019 86 79
2020 81 83
2021 83 84
Employee numbers have stabilised and started to selectively increase
again following the substantial reductions that were made during
FY17 & FY18.
Expenditure on research and development (R&D) activities
totalled GBP2,892,000 (FY20: GBP2,778,000). 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 FY21 (FY20:
GBPnil).
GBPm R&D Expenditure R&D Tax Credit (in arrears)
2017 4.0 0.9
2018 3.7 1.1
2019 2.8 1.0
2020 2.8 0.4
2021 2.9 0.4
R&D is an important part of Intercede's investment strategy. Intercede
makes an R&D Claim as part of its annual tax return and can choose
whether to carry taxable losses forward or to request a cash repayment
from the UK government. Prior to FY20, the tax credit received
was unrestricted due to taxable losses exceeding R&D expenditure.
As that is no longer the case, the level of cash received reduced
in FY20 and FY21.
A GBP425,000 taxation credit in the year (FY20: GBP432,000)
primarily reflects cash received following the 2020 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 GBP485,000 (FY20:
GBP578,000). This includes interest in respect of lease liabilities
totalling GBP65,000 (FY20: GBP112,000) and finance costs on the
convertible loan notes totalling GBP429,000 (FY20: GBP485,000). All
of the convertible loan notes were either converted or redeemed
(repaid) in January and February 2021 so the FY21 finance cost does
not represent a full year of interest. From FY22 onwards, the
Group's finance costs will drop substantially as they will only
include interest in respect of lease liabilities.
Profit for the year was GBP1,529,000 (FY20: GBP1,006,000), an
increase year on year of 52%, which resulted in a basic profit per
share of 3.0p and a fully diluted profit per share of 2.8p (FY20:
basic profit per share of 2.0p and fully diluted profit per share
of 1.9p).
Financial Position and Cashflow
The Group's gross cash position at 31 March 2021 was
GBP8,029,000, an improvement of GBP3,271,000 from gross cash of
GBP4,758,000 as at 31 March 2020. During FY21 there has been a net
cash inflow from operating activities of GBP4,235,000 (FY20:
GBP1,297,000 inflow). In February 2021 the Group issued a call
notice in respect of the outstanding convertible loan notes (CLNs)
totalling GBP5,005,000. Subsequent to the call, all but one
noteholder elected to convert their CLNs into new ordinary shares,
which will save the Group GBP400,000 in annual interest costs
The complete conversion and redemption of all CLNs has left the
Group with a stronger balance sheet and no debt and the subsequent
increase in share capital and share premium (combined with a profit
for the year) mean that as at 31 March 2021 the Consolidated
Balance Sheet had positive total equity of GBP4,746,000 compared to
negative total equity of GBP1,381,000 as at 31 March 2020.
Non-current liabilities as at 31 March 2021 were GBP1,182,000
compared to GBP6,234,000 as at 31 March 2020, which contained
GBP4,832,000 of CLNs.
The Group remains focused on investing in the MyID platform to
deliver future growth and has no plans to commence the payment of
dividends. It will do so when the Board considers this to be
appropriate.
Section 172 Companies Act 2006 Statement
The Directors are fully aware of their duty to promote the
success of the Company, for the benefit of all stakeholders, in
accordance with Section 172 of the Companies Act 2006. A Section
172 Companies Act 2006 Statement is included within the Corporate
Governance Report section of the Annual Report.
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)
2017 2018 2019 2020 2021
Sales growth (25%) 11% 10% 2% 6%
Export sales 95% 94% 97% 99% 99%
North American
sales 77% 71% 69% 77% 83%
New deployments
with revenues over
GBP20,000 8 10 9 4 6
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 it 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 pandemic 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 will only recommence when it safe to do so and when
lockdown restrictions are lifted. All staff have been given the
capability to work from home, including appropriate support,
training and equipment. Due to the digital and physically remote
nature of Intercede's technology and solutions the Group is able to
maintain high service levels during these periods and does not need
to worry about the supply of hardware or other physical components
as they do not typically form part of MyID solutions.
-- 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
INTERCEDE GROUP plc
Consolidated Statement of Comprehensive Income for the year
ended 31 March 2021
2021 2020
GBP'000 GBP'000
Continuing operations
Revenue 10,961 10,355
Cost of sales (235) (12)
------- -------
Gross profit 10,726 10,343
Operating expenses (9,137) (9,191)
------- -------
Operating profit 1,589 1,152
Finance income 9 19
Finance costs (494) (597)
------- -------
Profit before tax 1,104 574
Taxation 425 432
------- -------
Profit for the year 1,529 1,006
------- -------
Total comprehensive income attributable
to owners of the parent company 1,529 1,006
------- -------
Profit per share (pence)
- basic 3.0p 2.0p
- diluted 2.8p 1.9p
------- -------
INTERCEDE GROUP plc
Consolidated Balance Sheet as at 31 March 2021
2021 2020
GBP'000 GBP'000
Non-current assets
Property, plant and equipment 154 119
Right of use assets 725 980
-------- --------
879 1,099
-------- --------
Current assets
Trade and other receivables 4,098 5,100
Cash and cash equivalents 8,029 4,758
-------- --------
12,127 9,858
-------- --------
Total assets 13,006 10,957
-------- --------
Equity
Share capital 571 505
Share premium 5,138 673
Equity reserve - 66
Merger reserve 1,508 1,508
Accumulated deficit (2,471) (4,133)
-------- --------
Total equity 4,746 (1,381)
-------- --------
Non-current liabilities
Convertible loan notes - 4,832
Lease liabilities 762 1,207
Deferred revenue 420 195
1,182 6,234
Current liabilities
Lease liabilities 350 316
Trade and other payables 1,920 1,632
Deferred revenue 4,808 4,156
-------- --------
7,078 6,104
-------- --------
Total liabilities 8,260 12,338
-------- --------
Total equity and liabilities 13,006 10,957
-------- --------
INTERCEDE GROUP plc
Consolidated Statement of Changes in Equity for the year ended
31 March 2021
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 2019 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)
Purchase of own shares - - - - (29) (29)
Issue of new shares on
conversion of convertible
loan notes 66 4,465 (60) - - 4,471
Reversal of equity component
following redemption of
convertible loan notes - - (6) - - (6)
Proceeds from recycling
of own shares - - - - 26 26
Employee share option
plan charge - - - - 88 88
Employee share incentive
plan charge - - - - 48 48
Profit for the year and
total comprehensive income - - - - 1,529 1,529
------- ------- ------- ------- ----------- -------
As at 31 March 2021 571 5,138 - 1,508 (2,471) 4,746
------- ------- ------- ------- ----------- -------
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
2021
2021 2020
GBP'000 GBP'000
Cash flows from operating activities
Profit for the year 1,529 1,006
Taxation (425) (432)
Finance income (9) (19)
Finance costs 494 597
Depreciation of property, plant & equipment 60 81
Depreciation of right of use assets 255 235
Exchange (gains) / losses on foreign currency
lease liabilities (74) 23
Profit on disposal of assets held for sale - (50)
Employee share option plan charge 88 99
Employee share incentive plan charge 48 144
Employee unit incentive plan charge 30 36
Employee unit incentive plan payment - (4)
Decrease / (increase) in trade and other
receivables 1,078 (356)
Increase / (decrease) in trade and other
payables 357 (299)
Increase in deferred revenue 877 299
Cash generated from operations 4,308 1,360
Finance income 12 17
Finance costs on convertible loan notes (445) (400)
Finance costs on leases (65) (112)
Tax received 425 432
------- -------
Net cash generated from operating activities 4,235 1,297
------- -------
Investing activities
Proceeds on disposal of assets held for
sale - 422
Purchases of property, plant and equipment (95) (46)
------- -------
Cash (used in) / generated from investing
activities (95) 376
------- -------
Financing activities
Purchase of own shares (29) -
Proceeds from recycling of own shares 26 38
Principal elements of lease payments (338) (236)
Repayment of convertible loan notes (450) -
------- -------
Cash used in financing activities (791) (198)
------- -------
Net increase in cash and cash equivalents 3,349 1,475
Cash and cash equivalents at the beginning
of the year 4,758 3,228
Exchange (losses) / gains on cash and cash
equivalents (78) 55
------- -------
Cash and cash equivalents at the end of
the year 8,029 4,758
------- -------
INTERCEDE GROUP plc
Preliminary Results for the Year Ended 31 March 2021
NOTES
1. While the financial information included in this annual
financial results announcement has been prepared in accordance with
the recognition and measurement principles of International
Accounting Standards in conformity of the requirements of the
Companies Act 2006, this announcement does not contain sufficient
information to comply therewith. The financial information set out
in this announcement does not constitute the Group's Statutory
Accounts for the years ended 31 March 2021 or 2020. Statutory
Accounts for 2020 have been delivered to the Registrar of Companies
and those for 2021, 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 on Wednesday 15
September 2021. 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 assets
originate from operations in the UK. The Directors consider that
the activities of the Group constitute a single business
segment.
The split of revenue by geographical destination of the end
customer can be analysed as follows:
2021 2020
GBP'000 GBP'000
UK 115 131
Rest of Europe 1,061 1,126
North America 9,095 7,958
Rest of World 690 1,140
------- -------
10,961 10,355
------- -------
3. OPERATING PROFIT
Operating profit is stated after charging / (crediting):
2021 2020
GBP'000 GBP'000
Staff costs 8,022 7,619
Foreign exchange loss 167 41
Depreciation of property, plant and equipment 60 81
Depreciation of right of use buildings 228 228
Depreciation of right of use equipment 27 7
Profit on disposal of assets held for sale - (50)
Included in the staff costs above is research and development
expenditure totalling GBP2,892,000 (2020: GBP2,778,000).
4. TAXATION
The tax credit comprises: 2021 2020
GBP'000 GBP'000
Current year - UK corporation tax - -
Current year - US corporation tax (22) (28)
Research and development tax credits relating
to prior years 447 460
------- -------
Taxation 425 432
------- -------
The Group has unused tax losses of GBP9,174,000 (2020:
GBP8,775,000) and unrecognised deferred tax assets of GBP1,743,000
(2020: GBP1,667,000) calculated at the corporation tax rate of 19%
(2020: 19%). Given the expectation that the enhanced R&D tax
credits will continue to be available, it is not considered
probable that there will be sufficient taxable profits to support
recognition of these losses as a deferred tax asset in the
foreseeable future. On 5th March 2021 the Government announced an
increase in the UK corporation tax rate from 19% to 25%, effective
from 1st April 2023. This will impact the Group's future tax charge
when it is substantively enacted.
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.
2021 2020
GBP'000 GBP'000
Profit for the year 1,529 1,006
---------- ----------
Number Number
Weighted average number of shares - basic 51,359,410 50,482,281
- diluted 54,049,938 53,232,738
---------- ----------
Pence Pence
Profit per share - basic 3.0p 2.0p
- diluted 2.8p 1.9p
---------- ----------
The weighted average number of shares used in the calculation of
basic and diluted earnings per share for each year were calculated
as follows:
2021 2020
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 877,129 -
---------- ----------
Weighted average number of shares - basic 51,359,410 50,482,281
---------- ----------
Add back effect of treasury shares 41,645 41,645
Effect of share options in issue 2,648,883 2,708,812
Effect of convertible loan notes in issue - -
---------- ----------
Weighted average number of shares - diluted 54,049,938 53,232,738
---------- ----------
The effect of issue of ordinary share capital reflects the issue
of 6,619,431 shares during the period 5 January to 19 February 2021
to facilitate the conversion of convertible loan notes into
ordinary shares (note 7).
The convertible loan notes were anti-dilutive and therefore
excluded from the calculation of diluted profit per share. Had the
convertible loan notes been dilutive in nature, this would have
increased the 2021 and 2020 weighted average number of shares by
6,295,925 and 7,273,387 respectively.
6. DIVIDEND
The Directors do not recommend the payment of a dividend.
7. SHARE CAPITAL
2021 2020
GBP'000 GBP'000
Authorised
481,861,616 ordinary shares of 1p each (2020:
481,861,616) 4,819 4,819
------- -------
Issued and fully paid
57,143,357 ordinary shares of 1p each (2020:
50,523,926) 571 505
------- -------
The increase in issued and fully paid ordinary shares of 1p each
represents the issue of 6,619,431 shares during the period 5
January to 19 February 2021 to facilitate the conversion of
convertible loan notes into ordinary shares at the fixed conversion
price of 68.8125 pence per ordinary share.
As at 31 March 2021, the Company had 41,645 ordinary shares held
in treasury (2020: 41,645). During the year 35,000 options were
exercised using treasury shares (2020: None) and the Company
purchased 35,000 ordinary shares for a consideration of GBP29,000
(2020: None).
8. CONVERTIBLE LOAN NOTES
2021 2020
GBP'000 GBP'000
Non-current
8% Convertible loan notes (29 December 2021) - 4,832
------- -------
Borrowings are repayable as follows:
2021 2020
GBP'000 GBP'000
Due within one year - -
Due between one and two years - 4,832
------- -------
- 4,832
------- -------
On 30 January 2017, the Company issued GBP4,495,000 convertible
loan notes that carried an interest coupon of 8.0% pa payable
quarterly. Holders of the convertible loan notes were able to
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 convertible loan notes have been successfully retired during
the period following ongoing discussions with the noteholders and
the issue of a call notice in February 2020. Subsequent to the
call, twelve out of thirteen noteholders elected to convert into
new ordinary shares at the fixed conversion price of 68.8125 pence
per share, as outlined in note 7. The other noteholder elected to
redeem at par and was repaid GBP450,000.
The amount recognised in the balance sheet in relation to the
convertible loan notes is as follows:
2021 2020
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 323 241
Conversion of convertible loan notes (4,473) -
Redemption of convertible loan notes (441) -
------- -------
Liability component at 31 March - 4,832
------- -------
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FR DKOBDKBKBNAK
(END) Dow Jones Newswires
June 08, 2021 02:00 ET (06:00 GMT)
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