Final Results
Intercede Group PLC
25 May 2004
INTERCEDE GROUP plc
('Intercede', 'the Company' or 'the Group')
Preliminary Results for the Year Ended 31 March 2004
Intercede, a leading developer of electronic identity management software, today
announces its preliminary results for the year ended 31 March 2004.
SUMMARY
* Pre-tax losses reduced from £1.1m to £0.6m
* Cash outflow before financing reduced from £1.4m to £0.5m
* First patent granted and issued in February 2004
* First sales of the MyID(TM) product offerings ie MyID
Corporate, MyID Campus, MyID Citizen and MyID Service
Provider
* Thales, Gemplus and Giesecke & Devrient have signed
agreements to resell the Group's technology as part of
their respective product ranges
* Good progress continues to be made in the development of
strategic relationships with a number of other product
companies and channel partners
* The Group's technology is now being bid by major industry
players on smart card related projects in all parts of the
world
Richard Parris, Chairman & Chief Executive of Intercede, said today:
'Following continued financial and commercial progress, the Group is now
exploiting its technology lead to generate revenues from customers throughout
the world.'
25 May 2004
ENQUIRIES:
Intercede Group plc Tel. 01455 558111
Richard Parris, Chairman & Chief
Executive
Andrew Walker, Finance Director
INTERCEDE GROUP plc
Preliminary Results for the Year Ended 31 March 2004
CHAIRMAN'S STATEMENT
Following continued financial and commercial progress, the Group is now
exploiting its technology lead to generate revenues from customers throughout
the world.
Introduction
Intercede is a leading developer of software for the issuance and management of
smart cards and digital identities.
Governments, financial institutions, service providers, airlines, educational
institutions, mass transit authorities and employers are starting to issue
digital identities to employees, customers, citizens and students to enhance
security, improve service levels and reduce costs. When combined with a smart
card, or similar device, digital identities can complement or replace other
forms of identification because they are resistant to fraud, require the card
holder to be present at point of use, may be used over the Internet and can be
interfaced directly to computer applications or on-line services. Furthermore,
smart cards may incorporate additional credentials such as digital certificates,
fingerprints or portable personal information in a cryptographically sealed
format that can only be read by authorised individuals.
Within the next five years most individuals in the developed world, and many in
the developing world, are likely to carry at least one digital identity on a
smart card device. This may be a national identity card, a driver's licence, a
health care card, a bank card, a travel pass, a company identity badge or a
student campus card. Each of these cards will need to be issued securely and
managed throughout its life cycle. This is a huge market opportunity for smart
card and identity management software companies, and Intercede has one of the
most advanced issuance and management product suites currently available.
Intercede's software serves as the foundation for identity solutions that are
changing the way organizations improve their security and operating efficiency.
Many global organizations - including the Amsterdam Medical Center, Barclays
Bank, COLT Telecom, the European Patent Office, Fujitsu, Lloyds TSB, the NHS,
Royal Bank of Scotland, and various US federal government agencies - utilize
Intercede's software and support services to cut costs, improve security and to
create new sources of revenue.
Results
In the year ended 31 March 2004, turnover of £1.6m was achieved at a gross
margin of 83% (compared to £1.8m at a gross margin of 71% in the previous
period).
For the second consecutive year, Intercede has virtually halved operating losses
from £1.1m to £0.6m and the cash outflow before financing has been reduced from
£1.4m to £0.5m. As at 31 March 2004, the Group had a cash balance in excess of
£1m.
I am delighted that the strategy of concentrating on the promotion of our own
products while controlling costs has brought the Group so much closer to
break-even. This has been the Board's primary objective during the year. Whilst
a further reduction in resale revenues from third party products has resulted in
a 12% fall in total sales, the favourable impact on gross margins is clear to
see.
Strategy and Outlook
In my statement last year, I highlighted that in the 2003/04 year the Group
would be focused on executing its strategy to ensure the exploitation of:
•The Company's technical product lead.
•Established distribution channels.
•Major vertical markets using Intercede's MyIDTM solutions brand.
I also remarked in the 2003 Interim Report that 'We anticipate a continuing
trend towards break-even, pending an anticipated step change in sales during
2004.'
After 12 months of continued progress, I am pleased to report success in
executing this strategy as demonstrated by the following new orders, new
partners and associated activities:
•The adoption of edeficeTM technology to drive the identity management
strategy by a major global bank.
•The deployment of edefice to enable the use of smart cards by a major
health care provider.
•The first MyID Corporate sales to prestigious European clients.
•The first MyID Campus sale to an enterprising overseas university.
•The integration of the edefice platform within the Thales e-Security
Safesign product range.
•The integration of MyID within the Gemplus SafeSite product range.
•The signing of Giesecke & Devrient, a major global smart card
manufacturer, as an Intercede partner and MyID reseller.
•The registration of a patent for our key edefice technology.
•Gross margins have continued to grow from 71% to 83% year on year.
•For the second consecutive year, Intercede has halved losses and is close
to achieving break-even operation.
Our strategy in the forthcoming year is to:
• Increase our software licence revenues from Europe and the US and to
establish distribution channels in the Asia Pacific region.
• Progress OEM partners from initial OEM licence fees through to recurring
licence revenues.
• Continue product development focused on the packaging of the MyID range
of solutions to meet a wider range of vertical markets.
• Expand the Group's turnover much faster than the associated cost base by
exploiting our technology's scalability, ease of use and global distribution
channels.
The effectiveness of this strategy is dependent on the ongoing high calibre of
our products, the dedication and professionalism of our staff, the quality of
our partners and the ongoing support of our shareholders. In all of these
respects, Intercede has an impressive track record. Furthermore, a programme of
continuous product improvement and new innovation continues to ensure that
Intercede remains a leader amongst a small number of global competitors.
The outlook for the next 12 months is one of accelerating growth in the number
of software licences sold to an increasing number of customers around the world.
After an extended period of depressed expenditure in the IT sector, there are
positive indications that customers are now starting to allocate budgets to
identity management and smart card projects. As a result, sales opportunities
are growing in both quantity and value. However, the lead time for individual
new orders continues to be long and subject to uncertainty.
Intercede is well positioned, through its established products and distribution
network, to take advantage of this emerging growth. The management team is
committed to maintaining the Group on its focused course and I look forward to
reporting further commercial progress over the coming months.
Richard Parris
Chairman & Chief Executive
25 May 2004
INTERCEDE GROUP plc
Preliminary Results for the Year Ended 31 March 2004
OPERATING AND FINANCIAL REVIEW
With current levels of pre-sales activity at an all time high, the management
focus continues to be on ensuring that the necessary support is provided to take
advantage of sales opportunities and to further develop partner relationships,
whilst maintaining tight control over costs.
Introduction
The main message of the last financial year is the recurring theme of
significant progress being made with limited funds. The Group has continued to
develop its technology and international sales channels whilst moving closer to
a break-even trading and cash generative position.
After a prolonged period of time when IT security projects have struggled to get
off the ground in all parts of the world, the start of 2004 appears to have
brought an encouraging increase in activity with a number of identity management
projects being put out to tender.
Business Development
Following the Placing, which raised £1.3m net of expenses in July 2003, the
Group has now raised £6.4m of external funding to date. The Board appreciates
the continued backing of its existing shareholders, the vast majority of whom
have provided support throughout the period since the Group's admission to AIM.
This backing has enabled the Group to develop its technology to the point where
it is now being bid by major industry players on smart card related projects in
all parts of the world.
This development has already enabled the Group to realise its vision of creating
the first web-based open platform for security management purposes. A number of
the areas of development were considered to be sufficiently innovative for
patent applications to be made, the first of which ('Secure Multipart
Authorization') was granted and issued by the UK Patent Office on 18 February
2004. Development efforts continue to be focused on further increases in the
level of interoperability of the edefice technology and additional areas of
functionality as driven by the various market sector requirements.
Partner agreements have been put in place during the past year with Thales,
Gemplus and Giesecke & Devrient. This provides a legal and commercial framework
for the increasing number of bid opportunities which we are being requested to
support throughout the world. Each of these partners is investing sales,
pre-sales and technical resource to take Intercede's technology on board. Good
progress continues to be made in the development of strategic relationships with
a number of other product companies and channel partners.
Financial Results
Further progress has been made towards profitability over the past financial
year. Whilst sales have fallen year on year, this reflects a £427,000 reduction
in the sales of third party products. The level of edefice related sales has
increased in both absolute and percentage terms (from 49% to 62%).
Historically, edefice related sales have represented a combination of advance
licence commitments from channel partners and projects completed for early
adopters, primarily in the UK Finance and Government sectors. The past year has
seen the first sales of the MyID product offerings which are targeted at
different vertical markets ie MyID Corporate, MyID Campus, MyID Citizen and MyID
Service Provider. A number of evaluation systems and proof of concept
installations have also been implemented in the US and Europe.
The level of operating losses has fallen substantially, despite the reduction in
sales, due to the combined effect of increased margins and lower operating
costs.
Year ended Year ended Change
31 March 2004 31 March 2003 %
£000 £000
--- ---
Sales 1,605 1,819 (11.8)
Gross margin (%) 1,339 (83%) 1,291 (71%) 3.7
Operating costs (1,960) (2,365) (17.1)
Operating loss (621) (1,074) (42.2)
Loss per share (2.9)p (5.6)p (48.2)
Funding
As at 31 March 2004, the Group had cash balances totalling £1,068,000 (2003:
£317,000). Whilst this clearly reflects the funds raised from the Placing, it is
encouraging to note that the net cash outflow prior to financing has been
reduced from £1,421,000 to £503,000.
Summary
The momentum is continuing to build for the Group to realise the potential of
its technology. Good progress has been made throughout the past year in
developing relationships with a number of significant global partners. This has
resulted in an increasing number of ongoing requests to support bids throughout
the world.
The short term focus is to win as many of these bids as possible, both to
strengthen our references in each market (ie MyID Corporate, MyID Campus, MyID
Citizen and MyID Service Provider) and to develop our position with the various
partners until they reach the point where they are fully trained to successfully
sell and deliver the Group's technology.
Andrew Walker
Finance Director
25 May 2004
INTERCEDE GROUP plc
Consolidated Profit and Loss Account for the year ended 31 March 2004
Notes 2004 2003
£'000 £'000
Turnover 1,605 1,819
Cost of sales (266) (528)
--------- --------
Gross profit 1,339 1,291
Other operating expenses (1,960) (2,365)
--------- --------
Operating loss (621) (1,074)
Interest receivable and similar income 34 29
Interest payable and similar charges (74) (78)
--------- --------
Loss on ordinary activities before taxation (661) (1,123)
Taxation 2 (202) 212
--------- --------
Retained loss on ordinary activities after taxation
and (863) (911)
for the year --------- --------
Basic and diluted loss per ordinary share 3 (2.9)p (5.6)p
========= ========
All operations of the Group continued throughout both years and no operations
were acquired or discontinued.
There are no recognised gains or losses in either year other than the loss for
the year.
INTERCEDE GROUP plc
Consolidated Balance Sheet at 31 March 2004
2004 2003
£'000 £'000
Fixed assets
Tangible assets 42 70
-------- --------
Current assets
Stocks - 2
Debtors 119 544
Cash at bank and in hand 1,068 317
-------- --------
1,187 863
Creditors: Amounts falling due within one (778) (887)
year -------- --------
Net current assets/(liabilities) 409 (24)
-------- --------
Total assets less current liabilities 451 46
Creditors: Amounts falling due after more
than one year
Convertible debt (1,432) (1,432)
Other creditors - (2)
-------- --------
(1,432) (1,434)
-------- --------
Net liabilities (981) (1,388)
======== ========
Capital and reserves
Called-up share capital 4,271 4,095
Share premium account 2,107 1,013
Other reserves 1,508 1,508
Profit and loss account (8,867) (8,004)
-------- --------
Shareholders' deficit - all equity (981) (1,388)
======== ========
INTERCEDE GROUP plc
Consolidated Cash Flow Statement for the year ended 31 March 2004
Notes 2004 2003
£'000 £'000
Net cash outflow from operating activities 5 (525) (1,608)
======== =======
Returns on investments and servicing of finance
Interest received 31 30
Interest paid (1) (17)
Interest element of finance lease rentals (2) (5)
-------- -------
Net cash inflow from returns on investments and
servicing 28 8
of finance ======== =======
Taxation received - 190
======== =======
Capital expenditure
Purchase of tangible fixed assets (6) (11)
======== =======
Cash outflow before financing (503) (1,421)
======== =======
Financing
Issue of ordinary share capital 1,270 7
Repayment of secured loan (10) (10)
Capital element of finance lease rentals (6) (31)
-------- -------
Net cash inflow/(outflow) from financing 1,254 (34)
======== =======
Increase/(decrease) in cash in the year 6 751 (1,455)
======== =======
INTERCEDE GROUP plc
Preliminary Results for the Year Ended 31 March 2004
NOTES
1. The financial information set out in this announcement does not constitute
the Group's Statutory Accounts for the years ended 31 March 2003 or 2004, but is
derived from those accounts. Statutory Accounts for 2003 have been delivered to
the Registrar of Companies and those for 2004, which have been approved by the
Board of Directors, will be delivered following the Group's Annual General
Meeting. Accounting policies have been consistently applied throughout both
accounting periods. The Company's auditors have reported on those accounts;
their reports were unqualified and did not contain statements under Section 237
(2) or (3) of the Companies Act 1985.
2. TAX ON LOSS ON ORDINARY ACTIVITIES
The tax (charge)/credit comprises:
Year ended 31 March
2004 2003
£'000 £'000
Current year - UK corporation tax - 201
Adjustment in respect of prior periods (202) 11
---------- ----------
(202) 212
========== ==========
No benefit has been taken in the current year in respect of the Group's claim
for a research and development tax credit. An adjustment has also been made in
respect of the prior period. The tax credit will be recognized as and when the
research and development claims have been agreed by the Inland Revenue.
3. BASIC AND DILUTED LOSS PER ORDINARY SHARE
The calculations of loss per ordinary share are based on the loss for the
financial year and the weighted average number of ordinary shares in issue
during each year.
Year ended 31 March
2004 2003
£'000 £'000
Loss for the year (863) (911)
------------ -----------
Number Number
Weighted average number of shares 29,672,863 16,372,931
------------ -----------
Pence Pence
Basic and diluted loss per ordinary share (2.9) (5.6)
============ ===========
4. DIVIDEND
The Directors do not recommend the payment of a dividend.
5. RECONCILIATION OF OPERATING LOSS TO OPERATING CASH FLOW
2004 2003
£'000 £'000
Operating loss (621) (1,074)
Depreciation charge 34 51
Decrease in stock 2 6
Decrease/(increase) in debtors 226 (119)
Decrease in creditors (166) (472)
--------- -------
Net cash outflow from operating activities (525) (1,608)
========= =======
6. ANALYSIS AND RECONCILIATION OF NET DEBT
2003 Cash Flow 2004
£'000 £'000 £'000
Cash at bank and in hand 317 751 1,068
--------- -------- --------
Debt due within one year (10) 8 (2)
Debt due after one year (1,434) 2 (1,432)
Finance leases (6) 6 -
--------- -------- --------
(1,450) 16 (1,434)
--------- -------- --------
Net debt (1,133) 767 (366)
========= ======== ========
The reconciliation of net cash flow to the movement in net debt is as follows:
2004 2003
£'000 £'000
Increase/(decrease) in cash in the 751 (1,455)
year
Cash inflow from decrease in debt and lease financing 16 41
-------- --------
Movement in net cash in the year 767 (1,414)
Net (debt)/cash at beginning of (1,133) 281
year -------- --------
Net debt at end of year (366) (1,133)
======== ========
7. ANNUAL GENERAL MEETING
The Annual General Meeting of the Company will be held at 9.00am on Wednesday 7
July 2004 at Lutterworth Hall.
8. ANNUAL REPORT AND ACCOUNTS
Copies of the full Statutory Accounts 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.
This information is provided by RNS
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